Which section of the CAFR contains the letter of transmittal?

The correct answer is the Introductory Section, as it is the designated part of the Comprehensive Annual Financial Report (CAFR) that includes the letter of transmittal. This letter serves as a communication tool from the government’s financial management to the report's users. It typically contains insights regarding the organization's financial status, the economic environment, and significant achievements, as well as intentions for the future.

Including the letter of transmittal within the Introductory Section helps establish a context for the financial statements and provides a narrative that enhances the understanding of the financial data that follows. The Basic Financial Statements and Required Supplementary Information (RSI) focus on the core financial documents such as the statement of net position and the statement of activities, thus excluding narrative elements like the transmittal letter.

The Statistical Section contains various statistical data and trend information but does not have narrative or introductory elements. Lastly, the Audit Report Section is dedicated to the auditor’s opinion on the financial statements and does not include the letter of transmittal, which is more about the organization than the audit itself. Therefore, the Introductory Section is the appropriate location for the letter of transmittal in the CAFR.