Meeting and Exceeding Minimum GAAP Financial Reporting Requirements
Prepare GAAP financial statements, maintain an adequate accounting system, issue timely financial statements, and have said financial statements independently audited.
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 generally accepted Government Auditing Standards (GAGAS). 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 an annual comprehensive financial report.
GFOA recommends that individual state and local governments prepare their annual external financial statements in accordance with GAAP and 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;
- Hiring, training, developing, and retaining accounting staff with the knowledge and capability to produce GAAP financial statements and other related financial management documents;
- Issuing timely financial statements for the entire financial reporting entity in conformity with GAAP as part of an annual comprehensive financial report; and
- Having those financial statements independently audited in accordance with GAGAS.
- Utilizing GFOA’s Certificate of Achievement for Excellence in Financial Reporting award criteria report checklists as a tool to ensure consideration of required and recommended elements of the annual comprehensive financial report.
Furthermore, GFOA recommends that state legislatures and, where applicable, the governing boards of local and special purpose governments enact legislation or otherwise set requirements that local governments maintain an accounting system adequate to provide the data to prepare timely financial statements in conformity with GAAP, and to prepare and have those financial statements independently audited in accordance with GAGAS.
- Small governments that cannot hire someone with this expertise could hire a consultant or an accounting firm, other than their independent auditor, to produce GAAP financial statements and other related financial management documents,
- See GFOA’s best practice on timely financial reporting: https://www.gfoa.org/materials/timely-financial-reporting
This best practice was previously titled GAAP Financial Reporting as the Base Line for State and Local Governments
- Board approval date: Friday, October 1, 2021