The scope of financial reports presented in conformity with generally accepted accounting principles (GAAP) is broad and data is usually presented at a high level of detail. Such comprehensive and detailed presentations are needed to meet the needs of decision-makers and to demonstrate compliance with legal requirements to oversight bodies and others. Annual financial reports issued in conformity with GAAP are essential if governments are to meet their obligation to be accountable to their citizens. Unfortunately, the comprehensive level of detail found in many GAAP reports may confuse or discourage those unfamiliar with accounting and financial reporting. A popular annual financial report (PAFR) is a way to communicate selected financial data to a broad audience (some governments issue annual reports that focus on the results of operations and services provided, not financial information, therefore, should not be confused with PAFRs).
GFOA encourages governments to supplement their comprehensive annual financial report with simpler, "popular" reports designed to assist those who need or desire a less detailed overview of a government's financial activities.
GFOA has long been on record as encouraging every state and local government to issue a comprehensive annual financial report in conformity with GAAP. GFOA also encourages governments to supplement their comprehensive annual financial report with simpler, "popular" reports designed to assist those who need or desire a less detailed overview of a government's financial activities. Such reporting can take the form of consolidated or aggregated presentations, or a variety of other formats. Moreover, by preparing a popular report, governments will gain a deeper understanding of the jurisdiction and its environment, and it forces staff to formulate and evaluate material that would not otherwise exist. It can unleash large amounts of creativity, which is so often suppressed by routine and the need to respond to crisis. GFOA recommends that popular reports exhibit the following characteristics to be most effective:
- The data in the popular report should be extracted from the comprehensive annual financial report and use the same measurement focus and basis of accounting as that used in the comprehensive annual financial report;
- The popular report should be issued on a timely basis, no later than six months after the close of the fiscal year, so that the information it contains is still relevant;
- The scope of the popular report should be clearly indicated (i.e., does the popular report include component units as well as the primary government?);
- The popular report should mention the existence of the comprehensive annual financial report for the benefit of readers desiring more detailed information;
- The popular report should convey financial information in a short, condensed and easily understood manner, present information in an attractive and easy-to-follow format and be written in a concise and clear style;
- The popular report should provide demographic information and economic indicators of the government or service area to allow readers to gain context of the environment in which the government operates;
- The popular report should avoid technical jargon to meet the needs of a broad, general audience and the report's message should be underscored, as appropriate, by photographs, charts, or other graphics;
- The narrative should be used, as appropriate, to highlight and explain items of particular importance;
- Comparative data should be used constructively to help identify trends useful in the interpretation of financial data;
- Governments should use their available resources to make the popular report available to the community. GFOA encourages governments to post the popular report on the government’s website. The government should notify the public about the availability of the popular report on its website through appropriate channels (e.g., email blast, newsletter, press release, notifications on utility or property tax bills, and social media accounts). Hardcopies, when issued, should be distributed in a number and manner appropriate to their intended readership (e.g., libraries, direct distribution);
- Popular report preparers should strive for creativity;
- Users of popular reports should be encouraged to provide feedback and the popular reports should provide information on how they may do so; and
- Most important, the popular report should establish its credibility with its intended readers by presenting information in a balanced and objective manner.
1. This best practice references the article written for the Government Finance Review by Keith Herrmann titled "How to Create an Excellent Popular Financial Report" (August 2019).
2. Please see additional information in GFOA's best practice: Posting of Financial Documents.