Chapter 7- Management’s Discussion and Analysis (MD&A)

Presented by Steve DeVetter

Partner – KPMG LLP

Presented by Steve DeVetter

Partner – KPMG LLP

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MD&A - What is it?

Required supplementary information (RSI) which precedes the audited financial statements

Management’s opportunity to communicate key financial activities of the Campus

MD&A requirements

Minimum and maximum requirements

General rather than specific

See “Guide to Preparation of MD&A” (Chapter 7, Appendix 1) for discussion of required elements (GASB 34, par. 11)

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MD&A Overview

Discussion of the basic financial statements including the relationship of the statements to each other

Analysis of financial activities based on currently known facts, decisions or conditions

Discussion of current year results in comparison with prior year, with emphasis on the current year Use of charts, graphs, and tables to facilitate

understanding of management’s analysis

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MD&A Overview (cont’d.)

Focus of analysis should be on the Campus as the primary reporting entity, with component units (auxiliary organizations) included if considered significant

Reference to the component unit’s separately issued financial statements, when appropriate

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MD&A Overview (cont’d.)

Presentation of condensed financial information comparing current year to prior year for each year presented

Overall financial position and result of operations

Description of significant capital assets and long-term debt activity

For comparative financial statements, must provide two-year comparative analysis (i.e. 2004 vs. 2003 and 2003 vs. 2002)

Description of currently known facts, decisions, or conditions that are expected to have a significant financial impact

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Preparation of MD&A “Guide to Preparation of MD&A” (refer to Chapter 7,

Appendix 1)

Starting point – comprehensive variance analysis

Identification of significant changes, and the reasons for significant changes, from the prior year

Coordination with appropriate Campus personnel to identify:

Underlying causes for the changes

Key decisions, transactions, events and conditions

Expected changes, based on existing Campus decisions and circumstances (i.e. known facts). Examples include:

Changes in enrollment

Campus master plan

Debt

New construction

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Preparation of MD&A (cont’d.)

Completion of MD&A Checklist

Helps ensure all required elements have been included in the MD&A

Review and approval signature by appropriate level of management

Other resource tools

MD&A Resource Guide (refer to Chapter 7, Appendix 2)

Pro-forma financial statements (refer to Chapter 12) - one-year and comparative presentations

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MD&A – Highlights of Significant Changes for 2004 Year 3 under GASB 34

Presentation of comparative financial statements – Must provide “comparative” MD&A that includes:

Comparative financial information and related analysis for both years presented

Three years of financial information (2004, 2003, and 2002)

MD&A Checklist – to be completed by Campus and provided to KPMG audit team along with draft MD&A

Draft MD&A (approved by Campus management and reviewed by KPMG) must be submitted to the Chancellor’s Office by November 12, 2004

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QUESTIONS?