ABCD: ACFRs, Budgets, Civics, and Democracy

Government financial reporting is different. It’s different because democracy demands transparency and accountability for public resources of a whole different order of magnitude than in any other sphere of financial reporting. This essential truth arises from the power of governments to levy and enforce taxes. It is also the foundational supposition of financial reporting in accordance with generally accepted accounting principles (GAAP) state and local governments in the United States.

While measurement and reporting of actual results of operations on a budgetary basis is essential for legal compliance and those stated principles of democracy just discussed, the bespoke nature of each government’s budgetary basis means they are inherently noncomparable between governments. Moreover, they require detailed knowledge of the specific set of laws, regulations, and policies that are applicable to the budget practices of each government to be fully understood.

As readers of the articles in this space well know, I am very much part of, and steeped in, the language and customs of the GAAP-governmental-accounting-and-financial-reporting “tribe.” Less well known is that the largest portion of my professional career was spent among the members of the neighboring governmental-budgeting “tribe.” Questions about the value of GAAP and budgetary bases of financial reporting are regularly raised between the two, sometimes giving rise to “broader disputes.” Let’s address head-on some of those territorial issues, in my opinion.