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accounting records to determine financial resources required to implement program

Following a decade of research and analysis, the GASB recently concluded that to meet the varied needs of a wide range of users, governmental reports must provide information regarding the public entity as a whole in addition to the traditional fund financial statements. Accordingly, in June 1999 GASB introduced a new financial reporting model in Statement 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. The new model integrates the traditional focus of governmental fund financial statements relating to fiscal accountability (and the modified accrual basis of accounting) with new forms of reporting (e.g., governmentwide financial statements). The two levels of financial reporting are intended to

  • provide more relevant information that will result in greater accountability by state and local governments and
  • enhance the understandability and usefulness of the annual financial reports to users of these reports to enable them to make more informed economic, social, and political decisions.

This chapter provides an overview of governmental accounting and financial reporting, including the new requirements, as well as a discussion of current approaches used in compiling financial reports. In particular, the following elements are included:

  • Governmental GAAP Hierarchy
  • Measurement Focus and Basis of Accounting
  • Fund Structure
  • Internal Control Structure
  • Other Issues Affecting Educational Entities

It is important for governments to provide effective financial information to constituencies in a consistent and clear format. Specifically, the information provided by governments should contribute to accountability in the following areas:

  • Financial position and results of operations
  • Actual financial results compared with adopted budgets
  • Compliance with finance-related laws, rules and regulations
  • Efficiency and effectiveness of operations
  • Maintenance of governmental assets

Consistency in financial reporting by governments is provided through accounting standards. GASB is the standard-setting authority of generally accepted accounting principles (GAAP) for state and local governments, including school districts. In cases for which no GASB pronouncement is applicable, other authoritative sources of guidance exist. The following chapter presents a hierarchy of GAAP in descending order of authoritative literature for governments. The hierarchy was established in Statement of Auditing Standards (SAS) 69, The Meaning of Presents Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor’s Report, effective March 15, 1992, and issued by the American Institute of Certified Public Accountants (AICPA).