Best Practices

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.

Most governments report multiple departments within the General Fund. It is common for governments to issue a separate financial report for one or more of these departments. In that case, the information presented in the separate departmental report is drawn directly from the General Fund financial statements. No government-wide financial information is presented. Independent auditors render an opinion on the fair presentation of departmental reports based on their conformity with all generally accepted accounting principles (GAAP) applicable to the data presented (e.g., relevant note disclosures).

To  date, authoritative accounting and  financial reporting standards have not specifically addressed the  contents of separately issued  financial reports of  units  that  are  not legally separate  (e.g., departmental  reports  and   reports  of   individual funds). As a result, there has been uncertainty about what additional information such reports should contain. It would appear that the presentation of certain supplementary information would benefit the users of departmental reports, just as it does the users of the entity’s financial report and the separately issued reports of component units.1

GFOA recommends that the following be included as supplementary information in separately issued reports for departments of the general fund:

Letter of transmittal. The contents should include the following five sections and adhere to certain formating and presentation guidelines:

  1. Formal transmittal. This section  should include all of the following:
  2. Departmental profile.  This section should include all of the following:
  3. Information useful in assessing economic condition. This section should include all of the following items:
    a. Discussion of financial trends (last 5 to 10 years) for the largest own-source revenue. If nearly as significant, the second-largest own-source revenue should also be discussed.   Avoid duplication of trend data information.
  4. Acknowledgments. Acknowledge those who played a significant role in preparing the departmental report or developing/managing the department’s internal control.
  5. Format and presentation. The department should apply the following guidelines for the preparation and presentation of the letter of transmittal:

Trend data. The GFOA recommends that all of the following data, drawn from the reporting entity’s CAFR (i.e., the entity that includes the department as part of its legal entity), be included in a separate departmental report:

  1. Ten-year information on the department’s net program cost;
  2. Ten-year information on the number of departmental employees;
  3. Ten-year information on departmental operating indicators;
  4. Ten-year information on departmental capital assets; and
  5. Ten-year information on the department’s largest own-source revenue, the second-largest own-source revenue if it is nearly as significant and other sources believed to be particularly relevant.


1 The inclusion of management's discussion and analysis (MD&A) in departmental reports is addressed in a GFOA best practice (BP) titled Including Management’s Discussion and Analysis in Departmental Reports (approved by GFOA's Executive Board in March of 2004). That BP recommends that governments present MD&A " conjunction with departmental reports, individual fund reports, and similar reports."

This best practice was previously titled Additional Supplementary Information for Departmental Reports.