Government financial reports

Government financial reports

Government financial reports are an important part of democracy ( or a constitutionally limited republic) but, often not widely read or discussed. Online reporting by governments makes these government financial reports more accessible, but not necessarily more understood by the general citizenry.

Governmental financial reports can include not only the budget or "Budget Book" or "general fund" as often referred to, but also several other types of government financial reports, financial statements, performance reports, Comprehensive Annual Financial Reports(CAFR), and audits. Many governmental financial reports are online and opened to critical review by constituents (expert or not), taxpayer groups, bond rating firms and creditors. Online sources for state (and local financial reports, down to local entities like the water board, school board and government corporations including "Comprehensive Annual Financial Reports" or CAFRs) can be found using Internet search engines or through professional organizations like Governmental Accounting Standards Board (GASB), as one example. Ratio analysis is one of the ways to examine the financial conditions of a government from a revenue potential for generating bond ratings, for instance. This gives a comparative or relative status of a government to sell bond debt instruments to fund projects without raising by abrupt tax increases or selling surplus assets (which could be returned to the citizens) any of which might adversely affect an economy and a political career.

One of the key elements in a financial statement is the Management Discussion and Analysis (MD&A). The MD&A is designed to provide a readable version of the technical financial statements. In June 1999, the Governmental Accounting Standards Board adopted standard 34. Standard 34 requested all cities and states in the US to include an MD&A in their financial statements like a CAFR.

CAFR vs. Budget

The CAFR shows more comprehensive accounting entries that budget reports do not. However, the budget book or genneral fund as oft referred to by politicos, typically includes performance measures, goals, objectives, discussion of initiatives, and other non-financial data. The CAFR draws a clear line of distinction between "restricted" and "unrestricted" reserves, while the budget book tends to group all reserves together or not mention them at all. (In general, reserves should not be confused with "rainy day funds" or required pension surplus holdings that are generally included in many government budgetary reports, process and media reports.) The CAFR is prepared in accordance with GAAP, as defined by the Government Accounting Standards Board (GASB). The budget books typically look more toward the Government Finance Officers Association (GFOA) for guidance.

:: A budget is typically prepared for each fund operated by the government. Special purpose funds might include business-type funds (called "Enterprise Funds") or dedicated purpose funds (Called "Special Revenue Funds"). All activities that do not belong in any special purpose funds are budgeted and accounted for in the "General Fund". Every government is required to have one, and one, general fund. There are a number of older local governments that persist in calling this the "Corporate Fund", which dates back to the British corporate form of county government. This term can be confusing, since technically, only Enterprise Funds are "corporate" in nature, meaning that their accounting is similar to corporate accounting whether or not a government entity is incorporated or in operation as a corporation non-profit or for profit.

The CAFR includes a comparison of budget to actual, which usually will show how well the budget was followed during the year. Since the budget is the authoritative document in most states, it is not legally permitted for any government to over-spend their budget. (The Federal Government, of course, has their own accounting systems and rules.) The comparison of budget to actual is a good place to find out the differences between government accounting and government budgeting. In general, budgets are prepared using "cash-flow" type assumptions, and the CAFR is prepared using assumptions that are similar to full accrual accounting. One of the obvious differences is that few governments bother to budget for asset balances (other than cash). The other differences are reconciled in the CAFR.

Comprehensive Annual Financial Report

A "Comprehensive Annual Financial Report" or "CAFR" is a government book keeping practice which started in the post WWII economic boom and replaced what was regularly an "off-the-books" practice called the "general fixed asset account group". The various levels of government; "general government" or the federal United States, individual state governments and government agencies each began producing a CAFR in the late 1940s to early 1950s to catalog an accurate picture of institutional funds, or financial holdings, assets and total investment incomes for those government and non-governmental entities using the report, which is above and beyond the budget process. In 1945, the Government Corporation Control Act, began the auditing of wholly owned government corporations and mixed ownership corporations, (those that government may have controlling holdings in but operate as private corporations) all of which may come under the term "enterprise funds".

While a budget might indicate that the government or agency has financial trouble and debt, (because of excess spending within the select grouping of "general fund" accounts presented), the CAFR will normally indicate that government possesses large holdings considerably over what is shown in a budget report or "general fund" alone. Examples from recent history include, Jesse Ventura's career, punctuated by his returning some of the government surpluses to voters as governor of Minnesota. Other rare news events have highlighted the off-the-budget holdings and "enterprise funds" of government. One widely reported example in 1994 (Los Angeles) Orange County California lost about $1.5 Billion on investments in the derivative (finance) market. The University of Kentucky's holdings 85% of CHA Health insurance stock was exposed in 2005 in the Lexington Herald Leader newspaper when CHA was sold to Anthem Blue Cross as part of the UK president's effort to raise a billion dollars to fund becoming a top 20 research university an ongoing effort; to name a few examples.

ee also

*Single Audit
*Government Accountability Office,
*Working Group on Financial Markets
*Revenue (bottom line vs. "top line")
*Government-owned corporation
*Budget theory
*Comprehensive income
*Permanent fund
*Public company
*Crony capitalism
*Business Plot
*Government Accountability Office investigations of the Department of Defense
*Financial statements
*Derivative (finance)

*Federal Accountability Act(Canada)

External links & reliance documents

* [ Treasury Direct FedInvest site]
* [ General Fixed Asset Account Group]
* [ - Capital Asset Accounting System (another link subject to change without notice]
* [ Derivatives and Bankruptcy in Orange County ]
* [ GAO History Government Accounting Office]
* [ 65 years of the Blue Book]
* [$FILE/Capital%20Asset%20Acct%20System%20bw.pdf. PDF - Capital Asset Accounting System] (Permission to 'cite' or quote granted in the document)
* [ - Above Document must now be purchased]
* [ - State of New York Updates]

Wikimedia Foundation. 2010.

Игры ⚽ Поможем решить контрольную работу

Look at other dictionaries:

  • Government financial statements — are annual financial statements or reports for the year. The financial statements, in contrast to budget, present the revenue collected and amounts spent. The government financial statements usually include a statement of activities (similar to… …   Wikipedia

  • Financial statements — (or financial reports) are formal records of a business financial activities. In British English, including United Kingdom company law, financial statements are often referred to as accounts, although the term financial statements is also used,… …   Wikipedia

  • Certified Government Financial Manager — A Certified Government Financial Manager (CGFM) is a professional certification issued by the Association of Government Accountants (AGA). It was created in 1994 to provide a professional standard of financial expertise and ethics in government… …   Wikipedia

  • Government performance auditing — was developed in the late 1960s and shepherded by the United States Government Accountability Office, (the chief audit arm of the US federal government). Government performance auditing has since spread to most state governments and many closely… …   Wikipedia

  • Government procurement in the United States — is based on many of the same principles as commercial contracting, but is subject to special laws and regulation as described below. Persons entering into commercial contracts are pretty much free to do anything that they can agree on. Each… …   Wikipedia

  • Financial intelligence — (FININT) is the gathering of information about the financial affairs of entities of interest, to understand their nature and capabilities, and predict their intentions. Generally the term applies in the context of law enforcement and related… …   Wikipedia

  • Financial audit — A financial audit, or more accurately, an audit of financial statements, is the examination by an independent third party of the financial statements of a company or any other legal entity (including governments), resulting in the publication of… …   Wikipedia

  • Government of Croatia — Croatia This article is part of the series: Politics and government of Croatia …   Wikipedia

  • Government of Maryland — The Flag of Maryland …   Wikipedia

  • Government of New South Wales — Emblem of the New South Wales Government and its agencies Coat of Arms of the State of New South Wales, used for formal and ceremonial purposes The form of the Government of New South Wales is …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”