Discussion Two Professionals Beard

The popular annual financial report is the antidote to the complexity of the CAFR and can make your government’s financial data more transparent and accessible.

Regulations

The PAFR Program Can Help State and Local Governments Engage Stakeholders

  • Dennis Maschke
  • 11/12/2018

State and local governments are called to be more transparent about their resources and spending, but reading a comprehensive annual financial report (CAFR) is not for the faint of heart. Sure, governments can be complex entities with a wide array of required disclosures, but if industry professionals struggle to interpret dozens of pages of financial disclosures, then surely the average reader or constituent must be overwhelmed and confused.

But there’s a remedy available to help simplify the information for the average citizen: the popular annual financial report (PAFR) program. The Government Finance Officers Association (GFOA) offers the PAFR program to help state and local governments extract data out of their CAFRs and into a more readable format. Its objective is to facilitate an accessible design and make financial information easier to understand. And there’s a bonus: If your government prepares a PAFR, you’ll be eligible for a GFOA-issued award, which can help with your public outreach, communications, and transparency efforts.

PAFR award program criteria

The PAFR award program is open to any state or local government at the state or local level that makes a PAFR available to the general public in either electronic form (usually a website) or hardcopy. As with the CAFR program, the PAFR should be submitted within six months of the fiscal year-end to ensure the timeliness of the information.

The program has five essential criteria:

  • The government must first submit its CAFR and be awarded the related certificate of excellence in financial reporting.
  • The PAFR must clearly advise readers of the availability of the CAFR.
  • If the PAFR contains information from only selected funds, or if the PAFR does not include all component units, that fact must be disclosed.
  • The financial information within the PAFR must be derived from actual GAAP data presented in the CAFR.
  • Some form of appropriate narrative or graphic analysis must be provided to explain items of potentially significant interest or concern.

The PAFR will be reviewed by four judges, who will grade it based on designated qualities and weighted by corresponding percentages:

  • Overall quality and usefulness (50 percent)
  • Reader appeal (10 percent) • Understandability (25 percent)
  • Distribution methods (7.5 percent)
  • Other; e.g., creativity, notable achievement, etc. (7.5 percent)

Once reviewed on a percentage scale, the lowest score will be eliminated, and if the average score is greater than 75 percent, an award will be issued.

Typical PAFR format

Your PAFR should be visually engaging and easy to read. Most include pictures, graphs, charts, and illustrations and are typically about seven to 14 pages long. They should feature your entity’s annual highlights, accomplishments, and major milestones.

It should be explicitly clear that the data within the PAFR come directly from the comprehensive annual financial report so readers can be confident they are reviewing current, audited information. Many PAFRs include a summary of the government’s strategic vision or a section on external factors affecting the data (such as the economy or a major event) to help readers put the information in context and gauge what might be hot topics in the upcoming years.

How we can help

The PAFR program is a great way to engage your stakeholders and be more transparent with the public. But in 2017, only about 400 governments submitted one, so many are not taking advantage of this communication tool. As CAFRs become more complex and require increasingly more disclosures, their users struggle to comprehend them. CLA’s state and local government professionals can help you through every step of the PAFR process to help keep you engaged with those you serve and are accountable to.