Accounting and Financial Reporting

Establish audit committees, made up of appropriate audit committee members, that are responsible for review, oversight, establishing procedures, and providing a written report.

Governments should undertake a full-scale competitive process for selecting independent auditors in which the principal factor is the auditor’s ability to perform a quality audit.  Governments should enter into multiyear agreements for audits to be performed in accordance with Generally Accepted Government Auditing Standards and consider risks to the auditor’s independence before engaging the same firm to provide significant nonaudit services.

GFOA recommends that every government should consider the feasibility of establishing a formal internal audit function to help management maintain a comprehensive framework of internal controls.

Governments should determine whether it is involved in a group audit, ensure that communication is timely and appropriate among group and components auditors, and determine how subsequent events will be addressed.

The government should feel free to use audited financial statements as appropriate, should not permit auditors to create an artificial "involvement", take steps to avoid unwarranted delays and costs, and clarify publishing permission within audit contract

Prepare GAAP financial statements, maintain an adequate accounting system, issue timely financial statements, and have said financial statements independently audited.

Document accounting policies and procedures, have an appropriate level of management and authority, and documentation of policies and procedures should be readily available to all employees.

Ensure control normally occurring at departmental level, responsibility of control assigned within each department, and aspects of the central accounting function are correct.

State and local governments should adhere to appropriate guidelines for capitalization thresholds.

Inventory tangible capital assets at least no less often than once every five years

Governments should use the appropriate style of full-cost accounting to municipal solid waste management activities.

Governments should calculate the full cost of the different services that they provide.

GFOA recommends governments allocate their indirect costs and address factors described in this best practice to prepare indirect cost allocation plans

GFOA recommends governments to take all necessary steps to ensure that they will be able to collect and maintain adequate documentation on disaster-related costs to support maximum reimbursement from all levels of government.

Government policies and procedures for computer disaster recovery should formally assign a disaster recovery manager and coordinators, require the creation and preservation of back-up data, make provisions for alternative data processing methods, provide detailed instructions, and establish guidelines. As it relates to this best practice, a disaster is defined as an event that causes a significant disruption to services, including but not limited to, natural disasters and cyberattacks.

GFOA recommends that governments establish processes to promote awareness throughout the government that grants normally come with significant requirements.

Identify, locate, review, assess, and communicate various aspects relevant to agreements, leases, and contracts.

GFOA recommends that governments demonstrate a commitment to the COSO framework, assume responsibility for overseeing internal control, develop organizational structures and accountability, commit to attracting and retaining competent employees, and hold individuals accountable.

GFOA recommends governments adopt the COSO’s Internal Control—Integrated Framework (2013) as the conceptual basis for designing, implementing, operating, and evaluating internal control so as to provide reasonable assurance that they are achieving their operational, reporting, and compliance objectives.

GFOA recommends that governments adhere to a comprehensive framework of internal control for grants that includes the components of: control environment, risk assessment, control activities, information and communication, and monitoring.

GFOA recommends that financial officers obtain the information and education needed to meaningfully take responsibility for internal control.

Governments should craft an effective strategy for minimizing any potential negative effect resulting from the communication of internal control related matters identified in an audit.

Governments should establish policies and procedures to encourage and facilitate the reporting of fraud, waste or abuse and questionable accounting or auditing practices.

Governments should consider the contents of the Certificate of Achievement for Excellence in Financial Reporting Program Requirements – Non-GAAP Item list of non-authoritative suggestions when preparing their reports.

Prepare GAAP financial statements, maintain an adequate accounting system, issue timely financial statements, and have said financial statements independently audited.

Every state or local government that uses fund accounting should establish clear criteria for determining whether a given fund in its accounting system should be treated as a fund for purposes of external financial reporting.

GFOA recommends that governments improve the timeliness of financial reports.

Governments should consider the contents of the Certificate of Achievement for Excellence in Financial Reporting Program Requirements – Non-GAAP Item list of non-authoritative suggestions when preparing their reports.

Management’s Discussion and Analysis (MD&A) and Required Supplementary Information (RSI) content should be presented in conjunction with departmental reports.

Governments should include a letter of transmittal and trend data as supplementary information in separately issued reports for departments of the general fund.

GFOA encourages governments to supplement their annual comprehensive financial report with simpler, "popular" reports designed to assist those who need or desire a less detailed overview of a government's financial activities.

Governments subject to SEC Rule 15c2-12 should consider using the annual comprehensive financial report (ACFR) as their disclosure document for providing information useful to existing and potential investors in the secondary market and meeting their obligation to provide annual disclosure for the secondary market, as required by Rule 15c2-12

Governments should disclose the appropriate information and adhere to the correct guidelines in its letter of transmittal, have finance staff initiate appropriate communication and relationships, and establish same relationships with other appropriate entities.

Identify, locate, review, assess, and communicate various aspects relevant to agreements, leases, and contracts.

Begin discussions, identify all potential fiduciary activities, identify types of fiduciary funds, determine when to recognize a fiduciary fund liability, and apply the Standard retroactively and prepare the disclosures.

Governments should maintain separate information on each legally mandated special revenue system and provide schedules for each legally mandated special revenue fund.

Assets, liabilities, income and expenses related to securities lending transactions should be reported in the financial statements in the manner that best reflects the true nature of these transactions, consistent with the provisions of GASB Statement No. 28.

GFOA recommends that governments establish processes to promote awareness throughout the government that grants normally come with significant requirements.

GFOA recommends governments allocate their indirect costs and address factors described in this best practice to prepare indirect cost allocation plans

GFOA recommends that governments adhere to a comprehensive framework of internal control for grants that includes the components of: control environment, risk assessment, control activities, information and communication, and monitoring.

GFOA recommends that governments that are subject to the single audit act (and are required to prepare a schedule of expenditures of federal awards (SEFA)) implement procedures to ensure an accurate and complete SEFA.