By GaBy Pena

producing a successful popular annual financial reportCOUNTY OF SAN DIEGO

February 2017 | Government Finance Review 35

In the hands of an investor, stakeholder, or rating agency,

the comprehensive annual financial report (CAFR) is, for

the most part, easily understood. But in the hands of a

citizen with no financial background, governmental report-

ing expertise, or clear understanding of generally accepted

accounting principles, it can be very intimidating. As a

result, the Government Finance Officers Association (GFOA)

encourages state and local governments to issue a popular

annual financial report (PAFR) to supplement the CAFR by

providing a less detailed overview of a government’s financial

activities. The PAFR can play an important role in making

financial information accessible to ordinary citizens and

other interested parties who may find traditional financial

reports cumbersome. The purpose of the popular report is not

to replace or to detract readers from the CAFR, but to act as

a supplement.

THE FIRST PAFR: GETTING STARTED

When the County of San Diego issued its first PAFR

in 2008, it had to determine what to

put in the book, how to organize the

data, and what design options to use.

Team members put together a work

plan that was made up of four stages,

explained below.

1. Data Analysis. The team reviewed

award-winning PAFRs to identify

what data other entities considered

important and how other entities

presented their financial informa-

tion. They focused on entities of

similar size, structure, and services

provided.

2. Data Matrix. The results of the data analysis exercise

were captured in a matrix and further analyzed to deter-

mine what information was key, interesting, and valuable

to PAFR readers. The final data the County of San Diego

approved wasn’t necessarily what other counties select-

ed, but rather what made sense based on region, size,

and customer base. Three key outcomes in this stage

included introducing a five-business group structure, a

business model (i.e., a strategic framework), and a spe-

cial page dedicated to a fun or interesting fact.

3. Data Organization. This stage was meant to determine

the order in which the data would be presented. The

PAFR team decided to present data in balance-sheet

order, emphasizing items with significant balances and

highlighting the county’s achievements throughout the

document via the use of graphics representing each of

the county’s five business groups.

4. Data Design. Next, the team decided what software

tool to use in preparing the PAFR, followed by the color

palette, page layout, theme, and usage of photographs,

charts, and diagrams. Some governments use Microsoft

Word or Microsoft Publisher to produce their PAFRs. The

County of San Diego chose to use its CAFR publishing

tool, FrameMaker, for the first three years, after which it

switched to Adobe InDesign, as staff with expertise using

this product was now available. Using a professional

design program improved the look of the report.

SEVEN STEPS TO A SUCCESSFUL PAFR

Work begins on the PAFR after

the CAFR audit is completed. GFOA

encourages PAFR Award Program

participants to be creative in decid-

ing which information to present in

these reports, and how to present it.

The following are hints designed to

assist governmental entities with their

PAFR preparation processes.

Identify and/or Update the Annual PAFR Goals and Necessary Content. Identify the report’s audi-

ence, and its needs and expectations.

Decide what you want them to know

and what they ought to know about their government, keep-

ing in mind that most of the data come from, and lead to, the

CAFR. Additional content might come from the budget report,

charter, or property tax reports. Your goals and the content

you choose to include in the PAFR will vary slightly from

year to year, based on the organization’s changing initiatives

and structure.

Make Content Decisions. Scan the CAFR and make a

list of the items that stand out, noting significant material

balances and the topics that are emphasized. Look for text

In the hands of a citizen with no financial background, governmental reporting

expertise, or clear understanding of generally

accepted accounting principles, the CAFR can be intimidating.

36 Government Finance Review | February 2017

that can be converted into graphics or illustrated with pho-

tographs. Identify the schedules, statements, and tables to

be used that best represent your government, and the level

of reporting that will provide the most value to your readers.

Cross-reference all data and make sure they balance. Select

photos and graphics that fit the style of the report. Look at

copyright rules and make sure to credit sources for data,

photos, and any other material the government doesn’t own.

Explore photo subscriptions to see if the cost and selection

make sense for you. Consider including photos that cover

areas within your government’s boundaries, landscapes, or

other interesting physical features.

Create a Structure. Decide what sections to include, in

what order, and find the areas you want to highlight. Then

create the table of contents. See Exhibit 1 for the County of

San Diego’s PAFR report structure.

Decide on a Layout. Consider how many pages the

PAFR should be, keeping in mind that the GFOA program

maximum is 20 pages. Next, determine how the data should

be displayed, identifying where photographs and graphics

should go. Choose a theme and color palette.

Create the PAFR Document. Many factors should be

considered in choosing a software tool to create the docu-

ment. These include cost, your design vision, and the avail-

ability of in-house expertise. Some decisions made in steps

1 to 4 will probably need to be reevaluated to achieve the

Exhibit 1: County of San Diego’s PAFR Report Structure

Section Contents1 to 2 About this Report Executive management introduces the report and provides a brief summary of county and About the County structure, demographics, and information about the economy and outlook.

3 Achievements Talks about awards and recognition the county received during the fiscal year.

4 to 5 Strategic Initiatives Provides information about the county’s strategic initiatives and objectives. County and General of San Diego dedicates a page to the general management system — its employee “owner’s Management System manual” — that describes the county’s business model for all operations.

6 Financials Provides the key financial statements management selects, using key terms that are easy to understand. It should give the reader a brief understanding of where the money comes from and where the money goes.

7 Key Financial Data Provides information on the largest components of the financial statements, including pooled investment information, capital assets, long-term liabilities, and credit ratings.

8 Property Tax Provides useful information about the property tax process and its components, especially collection and allocation.

9 Achievements of Note Outlines significant achievements throughout the fiscal year. Consider the government’s structure when selecting what to include. For example, the County of San Diego is divided into five business groups, so including achievements for each group is important.

10 County Page Provides a special look at something unique or interesting. Examples have included the county seal, the 100th birthday of the library, the county’s award-winning waterfront park, hidden treasures, and a change to county boundaries.

February 2017 | Government Finance Review 37

appropriate final look and content. Keep the PAFR’s audi-

ence in mind throughout the creative process. Also use as

many graphics and photographs as possible in the final prod-

uct. They will make the report interesting and easy to follow.

Print a Draft and Review. There is no such thing as too

much review. This step can take the longest; expect many

changes and updates.

Publish the PAFR. Additional changes might be necessary

to meet your printer’s requirements. Colors look different on

different kinds of paper, which will

affect the final look. Allocate time for

adjustments at this phase.

TEN DESIGN TIPS FROM LESSONS LEARNED

The PAFR comes to life with your

design decisions. A photograph, a

graphic, or the color selection may be

the one thing that makes your reader

pick up your PAFR and want to continue reading past the

first page. As previously mentioned, one of the purposes of a

PAFR is to point the reader to your CAFR. The following tips

will save you time and help you focus on what is important.

Create and Maintain an Inspiration File. Keep copies

of interesting and eye-catching page layouts or elements

to inspire your design team and communicate the look

you’re after.

Create an Idea Board. Gather ideas and put them on a

white board or other medium; this gives you an idea of how

well they fit together. Choose a theme for the reporting year,

and when possible use that same theme in both the CAFR and

the PAFR, demonstrating that the two reports belong together.

The theme can be as simple as a color palette, two or three

key photographs, or a logo.

Take Time to Plan. Analyze project requirements before

starting the design phase.

Be Creative. Graphic designer Clement Mok said “Design

makes information understandable.” Be open to new and cre-

ative ways of presenting information, but take steps to ensure

that only appropriate and practical information is presented.

Another important design tenet is “Just because you can

doesn’t mean you should.”

Brainstorm Page Layout Ideas. Use paper and pencil to quickly

arrange your text and graphics in

different ways and using different

layouts. Don’t do this on the com-

puter, as it takes longer and hin-

ders your idea generation process.

Go old school!

Use Typefaces and Styles Efficiently. Pay close attention to the

County of San Diego’s Photographs and Graphics

The county uses photographs of landscapes and people in action, and custom graphics. Approximately 25 to 40 photographs of varying sizes are distributed throughout the document.

The purpose of the popular report is not to replace

or to detract readers from the CAFR, but to act

as a supplement.

38 Government Finance Review | February 2017

typeface, type size, and type style selected. Text should be

readable and emphasize only the important elements. Avoid

italicizing and bolding everything.

Choose Colors Wisely. The color palette should provide

sufficient combinations and contrasts. Colors affect moods

and emotions, and set the tone for your readers. Don’t be

afraid to use color backgrounds, borders, shapes or designs.

Try new color palettes every year.

Appreciate the Role of White Space. Don’t crowd the

page. White space is important, helping readers rest their eyes

when reading and leading them through the pages. Place

your images in the white space strategically.

Keep Track of Design Ideas Used Previously. Change

the layout and design every year to make it interesting. The

key data content can remain the same, but the way the data

are presented should vary. For example, avoid repeating the

same graph format year after year.

Learn More about Design. Consider looking at books and

online courses and other resources that can help you bet-

ter understand design concepts. Look into training material

specific to your software tool. (See Exhibit 2.)

CONCLUSIONS

Preparing a PAFR can be a challenging project, and gov-

ernments can expect to learn many lessons throughout the

Report Evaluation Criteria

Category Weight Criteria1 Reader Appeal 10 Percent 1. Concise report 2. Logical format 3. Easy-to-read type 4. Appealing type 5. Use of photographs and other graphic elements2 Understandability 25 Percent 6. Avoidance of jargon and technical language 7. Effective use of graphs and chart 8. Effective use of narrative to explain and highlight information 9. Presentation of trend information 10. Minimization of potential for misinterpretation3 Distribution 7.5 Percent 11. Adequate number of reports 12. Adequate mode of distribution4. Other 7.5 Percent 13. Notable achievement 14. Innovation and creativity 15. Usefulness to taxpayers and others using the government’s services 16. Usefulness to a member of a legislative or oversight body 17. Usefulness in attracting new businesses and residents5. Overall Effectiveness 50 Percent Total 100 Percent

GFOA’s 16 Characteristics of an Effective CAFR

1. Extract the data presented from the CAFR. 2. Issue the report on a timely basis. 3. Clearly define the data scope. 4. Refer readers to the CAFR. 5. Make sure the report attracts and holds the reader’s inter-

est. 6. Convey financial data in an easily understandable manner. 7. Present data in an attractive and easy-to-follow format. 8. Use a clear and concise writing style. 9. Avoid technical jargon.10. Enhance the message with photographs, charts, or other

graphics.11. Highlight and explain important data.12. Include comparative data with meaningful trends.13. Make the report available on the government’s website.14. Exhibit creativity.15. Encourage feedback from readers.16. Present information in a balanced and objective manner.

February 2017 | Government Finance Review 39

process — which can also be fun and rewarding. Getting

started can be as easy as 1-2-3-4 (the four stages listed above,

that is: data analysis, data matrix, data organization, and data

design), and the approach presented in this article can help

make the ongoing report preparation less daunting.

The point of this undertaking is

meeting the organization’s reporting

needs, as well of those of its audience.

The PAFR is an excellent platform for

highlighting what makes a govern-

ment exceptional. And more impor-

tantly, the PAFR can play an important

role in making financial information accessible to ordinary

citizens and other interested parties who may find traditional

financial reports cumbersome. y

GABY PENA is an ERP system administra-

tor for the County of San Diego Auditor

and Controller’s Financial Accounting

and Reporting Division. The County of

San Diego CAFR and PAFR reports are

available at www.sdcounty.ca.gov/auditor/

cafr.html.

Exhibit 2: Various Graphic Presentations of Capital Assets

Work begins on the PAFR after the CAFR audit is

completed.

40 Government Finance Review | February 2017

Utah Retirement System’s PAFR

By Kim Kellersberger

Before the Utah Retirement Systems (URS) started preparing a

popular annual financial report (PAFR), it routinely got requests

for financial information from members (both active and retired),

participating employers, legislators, other retirement systems,

and others. When members and employers asked for the URS

comprehensive annual financial report (CAFR), we had to caution

them about its complexity. Most members and employers have

no idea what the CAFR is or why the information disclosed in it is

there. Individuals who received the CAFR

would call the office for an explanation of the

contents because they did not understand the

complex financial disclosures.

As the requests grew, URS decided that a new

approach was needed — a summary annual

report to summarize the most-requested infor-

mation and describe the nature and purpose

of the information presented. It needed to be

timely, effective, compelling to the recipient,

and inexpensive — a challenging combina-

tion. URS decided that a popular annual financial report met all those

requirements. It could be completed in conjunction with the CAFR

and distributed with newsletters the system already distributed, keep-

ing distribution costs minimal.

Each year, URS picks a theme that allows the system to address cur-

rent events that are relevant and important to its membership. The

2015 theme was “Safeguarding Your Future.”

URS includes the following in its PAFR: a letter from the execu-

tive director, the statement of fiduciary net position — pension

trust funds, statement of changes in fiduciary net position — simple

explanations of financial and other information, graphs depicting

important financial information, a statistical profile of system mem-

bers, asset allocation chart, summary of plan provisions for each

retirement system, the most recent legislation, and board and mem-

bership council profiles. The “snapshot of members” is a favorite,

allowing URS members to compare themselves.

The report was an instant success, providing members with the

information they wanted to see in a way that they could under-

stand. Information is presented and condensed in ways that help the average member understand the complex disclosures found in the more detailed CAFR, which currently has 321 pages. The PAFR is 8 pages. URS is able to print the PAFR for 13 cents per copy versus $22.60 for the CAFR.

Even though the complete CAFR and PAFR are available on the URS website, we include the PAFR with information that is already being mailed to members to ensure that they receive financial infor-mation about their retirement system. y

Kim KEllErsBErGEr is finance director of the Utah Retirement Systems.