Accounting and Financial Reporting
Accounting and Financial Reporting Best Practices
Best Practices
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Audit Committees
Establish audit committees, made up of appropriate audit committee members, that are responsible for review, oversight, establishing procedures, and providing a written report.
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Audit Procurement
Select services that include a broad scope of financial presentations and perform their audits in accordance with the Generally Accepted Government Auditing Standards. Governments should enter into multiyear agreements and undertake a full-scale competitive selection process.
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Internal Audit Function
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.
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Multiple Auditors
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.
Advisories
Policies
Capital Assets
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Control Over Items That Are Not Capitalized
Ensure control normally occurring at departmental level, responsibility of control assigned within each department, and aspects of the central accounting function are correct.
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Capitalization Thresholds for Capital Assets
State and local governments should adhere to appropriate guidelines for capitalization thresholds.
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Inventories of Tangible Capital Assets
Inventory tangible capital assets at least no less often than once every five years
Cost Accounting
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Municipal Solid Waste Management and Full-Cost Accounting
Governments should use the appropriate style of full-cost accounting to municipal solid waste management activities.
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Measuring the Full Cost of Government Service
Governments should calculate the full cost of the different services that they provide.
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Indirect Cost Allocation
GFOA recommends governments allocate their indirect costs and address factors described in this best practice to prepare indirect cost allocation plans
Disaster Recovery
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Disaster Recovery Cost Documentation
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.
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Disaster Recovery for Technology
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.
Grants
Advisories
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Internal Control Environment
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.
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Internal Control Framework
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.
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Internal Control for Grants
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.
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Internal Control and Management Involvement
GFOA recommends that financial officers obtain the information and education needed to meaningfully take responsibility for internal control.
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Internal Control Deficiencies in Audits
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.
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Whistleblowing
Governments should establish policies and procedures to encourage and facilitate the reporting of fraud, waste or abuse and questionable accounting or auditing practices.
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Nonauthoritative Considerations in the Preparation of an Annual Comprehensive Financial Report
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.
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Website Posting of Financial Documents
Targets and Guidelines
Financial Statement Preparation
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Fund Accounting Applications
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.
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Timely Financial Reporting
GFOA recommends that governments improve the timeliness of financial reports.
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Nonauthoritative Considerations in the Preparation of an Annual Comprehensive Financial Report
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.
Department Reporting
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Departmental Reports and Management's Discussion and Analysis
Management’s Discussion and Analysis (MD&A) and Required Supplementary Information (RSI) content should be presented in conjunction with departmental reports.
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Departmental Reports and Supplementary Information
Governments should include a letter of transmittal and trend data as supplementary information in separately issued reports for departments of the general fund.
Non-GAAP Reporting
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Popular Reporting of Financial Information
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.
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Periodic Disclosure and the Annual Comprehensive Financial Report
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
Specific Applications
Advisories
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Accounting for Leases
Identify, locate, review, assess, and communicate various aspects relevant to agreements, leases, and contracts.
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Accounting and Financial Reporting for Fiduciary Activities
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.
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Special Revenue Funds Used for Budgeting, but Not Financial Reporting
Governments should maintain separate information on each legally mandated special revenue system and provide schedules for each legally mandated special revenue fund.
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Securities Lending Transactions in Financial Statements
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.
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Grants Administration
GFOA recommends that governments establish processes to promote awareness throughout the government that grants normally come with significant requirements.
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Indirect Cost Allocation
GFOA recommends governments allocate their indirect costs and address factors described in this best practice to prepare indirect cost allocation plans
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Internal Control for Grants
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.
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SEFA Preparation
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.