How to Make Your MD&A Simple and Effective

Preparing a Management Discussion and Analysis (MD&A) can be difficult and time-consuming. It should introduce the basic financial statements and provide an objective and easily readable analysis of the government’s financial activities, including a comparison of the year-over-year change for the years presented in the basic financial statements. If comparative financial statements are presented, then three years of comparison and commentary should be included in the MD&A.

Per GASB Statement No. 34, the MD&A should include the following information:

  1. A brief discussion of the basic financial statements, including the relationships of the statements to each other and the significant differences in the information they provide.
  2. Condensed financial information derived from the basic financial statements comparing the current year to the prior year(s).
  3. An analysis of the overall financial position and changes in financial position, including reasons for significant changes from the prior year(s) and important economic factors that significantly affected operating results.
  4. An analysis of balances and transactions of individual funds.
  5. An analysis of significant variations between original and final budget amounts.
  6. A description of significant capital asset and long-term debt activity, including a discussion of commitments made for capital expenditures, changes in credit ratings, and debt limitation that may affect the financing of planned facilities or services. Reference should be made to the capital assets and long-term debt footnotes as applicable.
  7. A description of currently known facts, decisions, or conditions that are expected to have a significant effect on financial position, including any items subsequent to the date of the financial statements.

The MD&A should be brief yet effective. So you may be asking yourself “how do we do that?” Here are several tips to help you create a quick, effective, and informational MD&A:

  1. Give a high-level overview of the activities before getting into the detail.
  2. Clearly explain why the results are what they are.
  3. Identify accounts or groups of accounts with major changes from year to year.
  4. Use charts and graphs!  They can be a more effective way to show fluctuations among the years.
  5. Keep it simple and to the point!

Writing a meaningful MD&A can be challenging! However, by using the helpful tips above, it can become an easier task. The MD&A is an opportunity for management to tell the facts behind the numbers in the basic financial statements. It should provide a more comprehensive analysis of the entity and not solely repeat the numbers. The MD&A does not need to be long or consume a lot of time to prepare.


Carrie Rice
Carolyn Rice | Partner