Government-wide Financial Analysis. Condensed government-wide financial information from the comprehensive annual financial report for the Commonwealth of Pennsylvania for the fiscal year ended June 30, 2007, is provided below.
Required
a. Identify significant trends that appear in the condensed statement of net assets and statement of activities that are useful in analyzing the financial condition of the commonwealth (or state). Comment on whether these changes appear to be positive, negative, or neutral.
b. Write a brief memo to a state legislator from the perspective of a staff assistant that discusses the financial position and results of operations for FY 2006 and FY 2007 for the commonwealth based on these two government-wide financial statements. Use ratios in your memo to support your positions where appropriate given the limited set of information provided in this problem.
The following presents condensed financial statement information from the statement of net assets (amounts in billions):

The following presents condensed financial statement information from the statement of activities (amounts inbillions):

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Governmental Business-type Total Activities Activities Change 2007 2006 Change 2007 2006 Change 2007 2006 Assets: Cash and investments $12.6 $11.1 $1.5 $7.0 $6.2 $17.3 $2.3 $0.8 $19.6 Capital assets (net) 24.0 22.8 23.9 22.8 1.1 0.1 0.1 1.2 All other assets (0.1) 6.2 6.1 0.1 1.3 14 7.5 7.5 Total assets 42.7 40.0 51.1 47.6 2.7 8.4 7.6 0.8 3.5 Liabilities: 4.5 Accounts payable All other current liabilities 0.1 0.1 4.6 4.1 0.4 0.6 0.5 5.1 0.5 4.3 4.0 0.3 1.5 1.4 5.8 5.4 0.4 Total current liabilities 8.8 8.1 0.7 2.1 1.9 0.2 10.9 10.0 0.9 Bonds payable All other long-term liabilities Total long-term liabilities 7.7 7.1 0.6 7.7 7.1 0.6 (0.3) 1.9 2.2 2.7 24 0.3 4.6 4.6 9.6 9.3 0.3 2.7 2.4 0.3 12.3 11.7 0.6 Total liabilities 18.4 17.4 21.7 1.0 4.8 4.3 0.5 23.2 1.5 Net assets: Invested in capital assets, net of related debt 0.1 20.0 19.1 0.9 0.1 20.1 19.1 1.0 Restricted 4.0 3.9 0.1 3.5 3.3 0.2 7.5 7.2 0.3 Unrestricted (deficit) (0.4) (0.4) 0.3 0.7 0.3 0.7 Total net assets $24.3 $22.6 $1.7 $3.6 $3.3 $0.3 $27.9 $25.9 $2.0