Since its inception early in the last century, the Government Finance Officers Association (GFOA) has been committed to the transparency and reliability of public-sector financial reports. As a result, GFOA has long been at the forefront of efforts to promote the highest standards of accounting, auditing, and financial reporting as represented by generally accepted accounting principles (GAAP), generally accepted auditing standards (GAAS), and Government Auditing Standards (GAS). GFOA also believes that state and local governments should not be satisfied with issuing only the basic financial statements required by GAAP, but should instead publish a comprehensive annual financial report.
GFOA urges individual state and local governments to fulfill their financial reporting responsibilities by:
- Maintaining an accounting system adequate to provide all of the data needed to allow for the timely preparation of financial statements for the entire financial reporting entity in conformity with GAAP;
- Issuing timely financial statements for the entire financial reporting entity in conformity with GAAP as part of a comprehensive annual financial report; and
- Having those financial statements independently audited in accordance with either GAAS or GAS, as appropriate.
For some small governments, the preparation of GAAP financial statements may not be feasible. The GFOA urges that such governments, at a minimum, issue timely financial statements prepared on a modified cash basis and independently audited in accordance with either GAAS or GAS, as appropriate.
Furthermore, GFOA recommends that state governments enact legislation requiring local governments to maintain an accounting system adequate to provide all of the data needed to prepare timely financial statements in conformity with GAAP (or the modified cash basis of accounting, for small governments for which the preparation of GAAP financial statements is not feasible) and to have those financial statements independently audited in accordance with GAAS or GAGAS.
This best practice was previously titled Conforming to Governmental Accounting, Auditing, and Financial Reporting Standards.