Unlike most
private sector organizations, governmental entities must be responsive
to a number of different groups and organizations, including elected
officials, other units of governments, investors, creditors, and citizens
that are focused on monitoring their activities. All forms of monitoring
include collecting and interpreting data, and this oversight function
is often performed through information provided in governmental reports.
Among the most important types of communication is the annual financial
report, which presents the financial position, operating results,
and cash flows for a particular accounting period. All governments,
including school districts, develop their annual financial reports
in accordance with principles established by standard-setting authorities
to provide consistency and comparability for users.
For governments to achieve the objective of accountability, financial
information must be both relevant and reliable for reasonably informed
users. Financial reports must satisfy numerous and diverse needs
or objectives, including short-term financial position and liquidity,
budgetary and legal compliance, and issues having a long-term focus
such as capital budgeting and maintenance. Additionally, differences
exist in the amount of detail that various users need.
Following a decade of research and analysis,
the GASB recently concluded that to meet the varied needs of a wide
range of users, governmental reports must provide information regarding
the public entity as a whole in addition to the traditional fund
financial statements. Accordingly, in June 1999 GASB introduced
a new financial reporting model in Statement 34, Basic Financial
Statementsand Management's Discussion and Analysisfor
State and Local Governments. The new model integrates the traditional
focus of governmental fund financial statements relating to fiscal
accountability (and the modified accrual basis of accounting) with
new forms of reporting (e.g., governmentwide financial statements).
The two levels of financial reporting are intended to
- provide more relevant information that will
result in greater accountability by state and local governments
and
- enhance the understandability and usefulness
of the annual financial reports to users of these reports to enable
them to make more informed economic, social, and political decisions.
This chapter provides an overview of governmental
accounting and financial reporting, including the new requirements,
as well as a discussion of current approaches used in compiling financial
reports. In particular, the following elements are included:
- Governmental GAAP Hierarchy
- Measurement Focus and Basis of Accounting
- Fund Structure
- Internal Control Structure
- Other Issues Affecting Educational Entities
It is important for governments to provide
effective financial information to constituencies in a consistent
and clear format. Specifically, the information provided by governments
should contribute to accountability in the following areas:
- Financial position and results of operations
- Actual financial results compared with adopted
budgets
- Compliance with finance-related laws, rules
and regulations
- Efficiency and effectiveness of operations
- Maintenance of governmental assets
Consistency in financial reporting by governments
is provided through accounting standards. GASB is the standard-setting
authority of generally accepted accounting principles (GAAP) for state
and local governments, including school districts. In cases for which
no GASB pronouncement is applicable, other authoritative sources of
guidance exist. The following chapter presents a hierarchy of GAAP
in descending order of authoritative literature for governments. The
hierarchy was established in Statement of Auditing Standards (SAS)
69, The Meaning of Presents Fairly in Conformity with Generally
Accepted Accounting Principles in the Independent Auditor's Report,
effective March 15, 1992, and issued by the American Institute of
Certified Public Accountants (AICPA). [back
to top]
- Category (a) consists of GASB Statements and
Interpretations and AICPA and Financial Accounting Standards Board
(FASB) pronouncements that have been specifically made applicable
to state and local governmental entities by GASB Statements or
Interpretations (periodically incorporated in the Codification
of Governmental Accounting and Financial Reporting Standards).
- Category (b) consists of GASB Technical Bulletins
and AICPA Industry Audit and Accounting Guides and Statements
of Position that have been specifically made applicable to state
and local governments by the AICPA and approved by the GASB.
- Category (c) consists of AICPA Accounting Standards
Executive Committee (AcSEC) Practice Bulletins that have been
specifically made applicable to state and local governments by
the AICPA and approved by the GASB. Also included are consensus
positions of groups of accountants organized by the GASB that
attempt to reach consensus on accounting issues applicable to
statement and local governmental entities. (GASB has not organized
such a group as of the date this handbook was released.)
- Category (d) includes GASB Implementation Guides
published by GASB staff. Additionally, practices that are widely
recognized and prevalent in state and local government are included
in this category.
- In the absence of a pronouncement covered by
Rule 203 or another source of established accounting principles,
other accounting literature, such as the following, may be considered,
depending on its relevance to the circumstances:
- GASB Concepts Statements
- Pronouncements referred to in categories (a) through (d),
SAS 69, paragraph 10, of the hierarchy for nongovernmental
entities when not specifically made applicable to state and
local governments:
- FASB Concepts Statements
- AICPA Issues Papers
- Statements of the International Accounting Standards Committee
- Pronouncements of other professional associations or regulatory
agencies
- Technical Information Service Inquiries and Replies included
in AICPA Technical Practice Aids
- Accounting textbooks, handbooks, and articles
The appropriateness of other accounting
literature depends on its relevance to particular circumstances,
the specificity of the guidance, and the general recognition of
the issuer or author as an authority.
[back to top]
Traditionally, the majority of governmental
financial information has been maintained and reported in the fund
financial statements on the modified accrual basis of accounting
or the accrual basis for business-type activities. The recently
enacted GASB Statement 34 establishes additional reporting (the
governmentwide statements) that represents a major shift in the
focus and content of governmental financial statements. Collecting
and reporting additional financial information required by the governmentwide
statements add to the complexity of financial reporting activities
and have significant implications for the traditional focus and
basis of accounting used in governmental financial statements.
The new governmentwide financial statements consist
of a Statement of Net Assets and a Statement of Activities and are
prepared using the economic resources measurement focus and the
accrual basis of accounting. Thus, revenues are recognized in the
accounting period in which they are earned and become measurable
without regard to availability, and expenses are recognized in the
period incurred, if measurable.
Governmental fund financial statements continue
to be prepared using the current financial resources measurement
focus and the modified accrual basis of accounting. Revenues are
recognized in the accounting period in which they become available
and measurable, and expenditures are recognized in the period in
which the fund liability is incurred, if measurable, except for
unmatured interest on general long-term debt, which should be recognized
when due.1 Proprietary
fund financial statements continue to be prepared using the economic
resources measurement focus and the accrual basis of accounting.
Like proprietary fund financial statements, fiduciary
fund financial statements are prepared using the economic resources
measurement focus and the accrual basis of accounting. Table 1 summarizes
the measurement focus and basis of accounting for each reporting
element and type of fund.
Table 1.
Measurement Focus and Basis of Accounting for Financial Statements
|
Financial Statements |
Measurement Focus |
Basis of Accounting |
Governmentwide Financial Statements |
Economic Resources |
Accrual |
Governmental Funds Financial Statements |
Current Financial Resources |
Modified Accrual |
Proprietary Funds Financial Statements |
Economic Resources |
Accrual |
Fiduciary Funds Financial Statements |
Economic Resources |
Accrual |
GASB Statement 20, as amended by Statement 34, allows a government
the option of applying FASB Statements and Interpretations issued
after November 30, 1989, except for those that conflict with or contradict
GASB pronouncements, to enterprise funds and governmentwide financial
statements. The election is made on a fund-by-fund basis; however,
consistency in the application within a particular entity fund is
encouraged. [back to top]
For governmental entities to ensure the
proper segregation of resources and to maintain proper accountability,
an entity's accounting system should be organized and operated on
a fund basis. Each fund is a separate fiscal entity and is established
to conduct specific activities and objectives in accordance with
statutes, laws, regulations, and restrictions or for specific purposes.
A fund is defined in GASB Codification Section 1300 as a fiscal
and accounting entity with a self-balancing set of accounts recording
cash and other financial resources, together with all related liabilities
and residual equities or balances, and changes therein, which are
segregated for the purpose of carrying on specific activities or
attaining certain objectives in accordance with special regulations,
restrictions, or limitations.
Statement 34 modified the structure of two categories
of funds used by local governmental entities. Specifically, the
new reporting model introduces two new types of funds:
- Permanent funds (in the governmental
fund category). Permanent funds are required to be used to report
resources that are legally restricted to the extent that only
earnings (and not principal) may be used for purposes that support
the reporting government programs.
- Private-purpose trust funds (in
the fiduciary fund category). Private-purpose trust funds should
be used to report all other trust arrangements under which principal
and income benefit individuals, private organizations, or other
governments.
The new model eliminates expendable and nonexpendable
trust funds to focus fiduciary reporting on resources held for parties
external to the reporting government: individuals, private organizations,
and other governments. Fiduciary funds, therefore, cannot be used
to support the government's own programs.
With the incorporation of these changes, three categories of funds
remain:
- Governmental funds are those through which
most governmental functions are accounted for. The acquisition,
use, and balances of the government's expendable financial resources
and the related current liabilities-except those accounted for
in proprietary funds-are accounted for through governmental funds
(general, special revenue, capital projects, debt service, and
permanent funds).
- Proprietary funds are used to account for a
government's ongoing organizations and activities that are similar
to those often found in the private sector. All assets, liabilities,
net assets, revenues, expenses, and transfers relating to the
government's business and quasi-business activities-in which changes
in net assets or cost recovery are measured-are accounted for
through proprietary funds (enterprise and internal service funds).
Generally accepted accounting principles for proprietary funds
are similar to those applicable to businesses in the private sector;
the measurement focus is on determining operating income, financial
position, and cash flows.
- Fiduciary funds are used to account for assets
held by a government in a trustee capacity or as an agent for
individuals, private organizations, or other governmental units.
The fiduciary fund category includes pension (and other employee
benefit) trust funds, investment trust funds, private-purpose
trust funds, and agency funds.
Additional information on the governmental
fund structure may be found in chapter 5. Major
Funds
The concept of major fund reporting is introduced and defined by
GASB Statement 34 to simplify the presentation of fund information
and to focus attention on the major activities of the entity. Rather
than require each type of fund to be individually presented, Statement
34 requires the individual presentation of only major funds,
with all other funds combined into a single column. This reduces
the number of funds presented on the face of the financial statements
and directs the focus on the significant funds of the reporting
entity. Major fund reporting is applied only to governmental (i.e.,
general, special revenue, debt service, capital projects, and permanent
funds) and enterprise funds. Internal service funds are excluded
from the major fund reporting requirements. Fiduciary fund information
is presented by type of fund rather than by major funds.
GASB defines major funds as those meeting the
following criteria:
- Total assets, liabilities, revenues, or expenditures/expenses
of the individual governmental or enterprise fund are at least
10 percent of the corresponding total (assets, liabilities, and
so forth) for all funds of that category (governmental funds)
or type (enterprise funds).
- Total assets, liabilities, revenues, or expenditures/expenses
of the individual governmental fund or enterprise fund are at
least 5 percent of the corresponding total for all governmental
and enterprise funds combined.
Both criteria must be met in the same element
(assets, liabilities, etc.) for both the 10 percent and 5 percent
tests for a fund to be defined as major. However, Statement 34 permits
a government to designate a particular fund that is of interest to
users as a major fund and to individually present its information
in the basic financial statements, even if it does not meet the criteria.
However, a government does not have the option to NOT report a fund
as major if it meets the criteria above.
It should be noted that in applying the major fund criteria to enterprise
funds, the reporting entity should consider both operating and nonoperating
revenues and expenses, as well as gains, losses, capital contributions,
additions to permanent endowments, and special items. When the major
fund criteria are applied to governmental funds, revenues do not
include other financing sources and expenditures do not include
other financing uses. However, special items would be included.
[back to top]
An integral part of proper accounting procedures
rests in issues of controls and begins with internal accountability
structures. The AICPA's Statement on Auditing Standards No. 78,
Consideration of Internal Control in a Financial Statement Audit:
An Amendment to Statement on Auditing Standards No. 55, (which
incorporates the Committee of Sponsoring Organizations Report, Internal
Control Framework) indicates that the elaborateness of the system
of internal controls established within an organization is a matter
of judgment on the part of management, with careful consideration
for circumstances, such as the size of the organization and the
number of personnel available, and the relationship between the
costs and benefits of designing and implementing controls. In addition,
the nature of internal control is such that even appropriate methods
and systems will not guarantee that an entity's objectives will
be achieved.
Internal control is a process-affected by an
entity's board of trustees, management, and other personnel-designed
to provide reasonable assurance regarding the achievement of objectives
in the following categories:
- Reliability of financial reporting
- Effectiveness and efficiency of operations
- Compliance with applicable laws and regulations
As a result, internal control consists of
five interrelated components:
- Control Environment
- Risk Assessment
- Control Activities
- Information and Communication
- Monitoring
Control Environment
The control environment is established on the basis of the attitude
of management toward internal control. It is the basis for all other
elements of the system of internal control. AICPA Statement on Auditing
Standards No. 78 states that the control environment "sets the tone
of an organization, influencing the control consciousness of its people.
It is the foundation for all other components of internal control,
providing discipline and structure." As such, a management philosophy
that is dedicated to establishing a sound business process and operating
controls would tend to create a stronger internal control environment
than a philosophy that is unaware of or unconcerned with internal
controls. The collective effort of various
factors affects the control environment, including the following:
- Integrity and ethical values
- Commitment to competence
- Governing board or audit committee participation
- Management's philosophy and operating style
- Organizational structure
- Assignment of authority and responsibility
- Human resource policies and practices
The substance of internal controls is more
important than the form because of the risk that controls may not
be effectively implemented or maintained. Risk
Assessment
Risk assessment is the entity's identification and analysis of risks
relevant to the achievement of its objectives and forms a basis
for determining how the risks should be managed. Risks can arise
or change as a result of the following factors:
- Changes in operating environment
- New personnel
- New or revamped information systems
- Rapid growth
- New technology
- New grant programs, building projects, or other
activities
- Organizational restructuring
- Accounting pronouncements
- Federal regulations
- Finance-related statutes
Given the dynamic nature of governmental operating
environments, the ability to anticipate and mitigate risks from these
changes is a key factor in measuring the strength of internal controls.
To the extent that the design of controls for new operations is an
important aspect of planning efforts, an entity's level of internal
control may be enhanced. Control
Activities
Control activities are the policies and procedures that help ensure
that management directives are carried out. Control activities can
be divided into four categories:
- Performance reviews
- Information processing
- Physical controls
- Segregation of duties
The application of controls, such as the segregation
of duties, is affected to some degree by the size of the organization.
In small entities, procedures will be less formal than in large entities.
Additionally, certain types of control activities may not be relevant
in small entities. Information
and Communication
Information and communication represent the identification, capture,
and exchange of information in a form and time frame that enable
people to carry out their responsibilities. Information systems
encompass procedures and documents that do the following:
- Identify and record all valid transactions
- Describe, on a timely basis, transactions in
sufficient detail to permit proper classification for financial
reporting
- Measure the value of transactions in a manner
that permits their proper recording in the financial statements
- Permit the recording of transactions in the
proper accounting period
- Present properly the transactions and related
disclosures in the financial statements
Senior management should deliver a clear message
to employees about their responsibilities and role in the internal
control system. Employees should also have a means for communicating
the effectiveness and efficiency of these systems to upper levels
of management. Monitoring
Monitoring is a process that assesses the quality of internal control
performance over time. Ongoing monitoring activities include regular
management and supervisory activities and other actions taken during
the normal performance of management's responsibilities. Further,
periodic reviews of internal controls and related activities, performed
with internal personnel or external resources, may be undertaken.
The nature and timing of these evaluations depend on the effectiveness
of ongoing activities and the risk that internal controls are not
performing as intended by management. Deficiencies in the system
of internal controls should be reported to the appropriate level
of management.
Management should clearly assign responsibility
and delegate authority with sufficient care to ensure that
- persons who perform control procedures are
held accountable for their performance by those who monitor these
activities, and
- persons who monitor the performance of control
procedures are held accountable by senior management, the governing
board, or the audit committee.
If accounting information is routinely used
in making operating decisions, management is likely to establish effective
controls and hold lower-level managers and employees accountable for
performance. In addition, if management routinely uses accounting
information in measuring progress and operating results, significant
variances between planned and actual results are likely to be investigated.
This review may detect the causes of the variances and affect the
steps necessary to correct procedures that failed to prevent misstatements.
Common Types of Control Procedures
Numerous control procedures and monitoring activities are performed
by individuals in governmental entities to accomplish particular
objectives. All these controls, however, can be classified within
one of the basic categories of controls described below. Detailed
control procedures or monitoring activities may be included in each
of these categories, depending on the size of the entity and the
sophistication of the particular control environment.
Access Controls
Certain controls prevent access to assets by unauthorized persons.
Often these controls are physical in nature. For example, an organization
might store inventories of supplies and commodities in locked storage
areas, store currency in a vault or a locked drawer, and use alarm
systems to restrict access by unauthorized individuals. If controls
to prevent unauthorized access to assets are not effective, assets
may be lost or stolen. If detective control procedures such as physical
inventory counts are appropriately performed, shortages should be
discovered in a timely manner.
In some cases, unauthorized access to assets
may be gained through vulnerable accounting records-especially records
maintained on computer systems. For example, if warehouse requisitions
can be issued through a computer terminal, access to inventory may
be gained through the system. Controls over unauthorized access
to assets through computer records may be physical (e.g., terminals
are kept in a locked room) or logical (e.g., access to the computer
program or data files may be obtained only with the proper password
or other user-identification method). Monitoring the control procedures
that address unauthorized access includes observing physical control
procedures, reviewing established access privileges with the manager
of information systems, or reviewing reports of attempted computer
access violations. Internal auditors often perform such activities.
Access controls, however, do not prevent individuals
who have authorized access to assets from misappropriating them.
Individuals who have authorized access to both assets and related
accounting records may be in a position to conceal shortages of
assets in the records. However, if duties are properly segregated,
persons with access to assets will not have access to related accounting
records, which may be altered to conceal shortages.
Controls over authorized access to assets are
important to an organization, not only to prevent thefts, but also
to ensure that assets are committed only after proper consideration
by individuals who are knowledgeable and experienced. Authorization
and approval are types of controls designed to prevent invalid or
inappropriate transactions from occurring. An example is a procedure
designed to ensure that disbursements are made only when authorized
orders for goods and services have been received. In many systems,
access to computerized records (e.g., shipping requests) can result
in improper access to assets; therefore, procedures must be designed
to limit access to computerized records.
Reconciliation and Comparison of
Assets with Records
Reconciling and comparing assets with accounting records establish
a system of independent verification, either through preparing an
independent control document used to reconcile accounting records
and assets or by directly comparing accounting records with related
assets. Examples of these procedures include the reconciliation
of physical inventory to accounting records and the preparation
of a bank reconciliation.
Analytical Reviews
The purpose of analytical reviews is to evaluate summarized information
by comparing it with expected results. Management personnel often
perform analytical reviews to determine whether the entity is performing
as planned. For example, a common analytical review procedure is
the comparison of budgeted to actual performance, with investigation
of any significant or material variances as determined by the analyst.
Often, analytical reviews may be used to monitor other underlying
control procedures.
Authorization and Approval
Authorization and approval procedures prevent invalid transactions
from occurring. Thus, this type of control typically involves authorization
or approval of transactions at specific dollar thresholds and manual
(e.g., requiring signatures of authorized individuals) or automated
(e.g., password protected) authorizations for computer transactions.
The effectiveness of these procedures often depends on general computer
controls over information security.
Reviews of Output
Reviews of output should be performed by district personnel who
have the knowledge and experience to identify errors. Such reviews
could be performed in both computer and manual systems. These reviews
check the validity and accuracy of output by comparing it in detail
with expected results. For example, a purchasing manager may compare
recorded amounts or quantities purchased with separate records of
purchase orders.
Transactional Reviews
Transactional reviews check the validity and accuracy of transaction
processing by comparing it in detail with expected results. Reviews
often use exception reports (usually computer-generated), which
list items that failed to be processed because they did not meet
specified criteria. For example, a computer-generated check may
be rejected if it exceeds some dollar amount and requires a manual
signature. Monitoring these types of control procedures involves
reviews of results performed by management.
General Computer Controls
Computer systems frequently have common areas of control and related
control procedures referred to as general computer controls. These
controls directly or indirectly affect all systems that operate
within a computer-processing environment. General computer controls
include the usual elements of effective internal control, that is,
an individual or group responsible for control procedures and monitoring
activities. Managers of the information systems function usually
monitor the performance of general computer controls. Monitoring
activities include observation, exception reporting, reviews of
work performed, reviews of program changes, oversight by information
system steering committees, and the monitoring of user complaints.
For example, the effectiveness of programmed control procedures
such as edit checks and approvals depends on general computer controls
that ensure that program changes are not made improperly. General
computer controls include controls over computer operations; systems
acquisition, development, and maintenance; information security;
and information systems support, as detailed below:
- Computer operations. The computer
operations staff is responsible for the day-to-day processing
activities of the entity's system. It ensures that jobs are scheduled
and processed as planned, data are properly stored on the system
or tapes, and reports are distributed in a timely and accurate
fashion.
- Systems acquisition, development, and
maintenance. The systems acquisition, development, and
maintenance staff is responsible for planning, acquiring or developing,
testing, and implementing new application systems and changes
to existing application systems. Such controls are usually important
in larger processing environments where there is more development
and maintenance activity. The systems are more complex and there
is less reliance on purchased software.
- Information security. The information
security function is responsible for administering and maintaining
an entity's information security program, including both physical
and logical security. The primary goal of such a program is to
ensure that access to program data, online transactions, and other
computing resources is restricted to authorized users.
- Information systems support. Information
systems support includes such functions as system software maintenance,
database administration, communications and network management,
end-user computing, and other groups with technical and administrative
support responsibilities.
Certain governmental entities may use external
service organizations for executing and recording certain transactions,
such as payroll processing. In such situations, the entity needs to
ensure that the service organization has adequate controls over processing
the transactions. In the final analysis,
maintaining the internal control environment and related control
procedures is an integral part of management's responsibilities.
In the context of governmental accounting and reporting, the control
environment has a direct impact on an entity's ability to collect
and present accurate financial information. Thus, the internal control
environment and related procedures are key areas of concern to an
entity's external auditor.
[back to top]
School districts are the most common special
governmental units. In some states, school districts operate as
a fiscally dependent part of another local governmental entity such
as a city or county; in other states, school districts are legislatively
independent with authority to levy taxes and set budgets. School
districts may or may not have common boundaries with another political
subdivision. Regardless of whether districts are component units
of another financial reporting entity, are joint ventures of several
reporting entities (such as consolidated educational agencies),
or meet the definition in GASB Codification, Section 2100 as separate
reporting entities, many school districts prepare separate financial
statements to accomplish one or more of the following:
- Support state or federal aid applications
- Report financial activities to parent, taxpayer,
and citizen groups
- Prepare a financial report for use in an official
statement for bond issuance purposes
Although school districts are a common type
of government, they face a number of unique issues that make them
distinct from states, cities, counties, or other local governmental
entities. These issues often result in internal control and operational
challenges that district management must address. The following chapter
outlines a number of unique educational issues; however, this list
is not exhaustive.
- Attendance reporting. Most school
districts receive state aid on the basis of average daily membership
(ADM), average daily attendance (ADA), or a similar pupil count
method. ADM and ADA data typically are determined at individual
school sites and then reported to a central attendance unit. That
unit prepares reports for state aid and, in many cases, for federal
aid, such as impact aid. Incorrect attendance reporting can lead
to the allocation of too much or too little aid.
- Student activity funds. Most
school districts have cash funds or bank accounts at individual
schools under the control of school principals or club advisors.
These funds may be excluded from the district's normal accounting
controls. These funds present a unique control challenge to school
districts given their decentralized nature and the production
of financial records and reports by non-accounting personnel.
Additional guidance on these issues is given in chapter
8.
- U.S. Department of Education requirements.
Federal reporting requirements and others mandated by state-level
education agencies are typically more detailed than the account
code structures of cities and other local governments. Thus, district
accounting systems must have the ability to account for transactions
at a level of detail beyond that required by other governments.
This issue is particularly complex for school district payroll
systems, given the plurality of funding sources for district personnel
and reporting requirements for personnel costs.
- School lunch programs. Most school
districts participate in the U.S. Department of Agriculture (USDA)
free or reduced-price food programs. These programs require school
districts to segregate food service programs from other programs.
School districts that receive federal commodities during the year
should recognize the fair value as revenue in the period when
all eligibility requirements are met (typically, when the commodities
are received). (Guide to Implementation of GASB Statement 34 and
Related Pronouncements Q&A, Q152) Because the federal agricultural
commodity program involves purpose restrictions in the use of
the resources, the value of inventory remaining on hand at fiscal
year-end should be reflected as a reservation of fund balance/restriction
of net assets. (Statement 33, paragraph 14) USDA-donated commodities
may also pose accounting and reporting problems because of restrictive
federal rules regulating the use of these commodities.
- Site-based management initiatives.
Over the past decade, many states and school districts have
implemented site-based management initiatives. These initiatives
have been designed to delegate to individual schools greater levels
of authority to determine the use of financial resources. As a
result, local administrators may control and report on the use
of financial resources, even though they may lack financial management
skills. This issue creates a challenge to district management
in controlling financial resources and ensuring that reported
results are correct.
- Educational accountability. Educational
accountability has become a key policy issue at both state and
national levels and has resulted in a number of recent reforms.
Several educational accountability reforms have required school
districts to collect and present school-level financial information.
In addition, school-level financial information is often related
to non-financial information (e.g., student achievement) in published
reports and is used for comparison purposes. As a result, school
districts must increasingly focus on ensuring that financial information
reported by schools is accurate and consistent across the district.
In conclusion, school districts, like other
governmental entities, must annually compile financial data and report
on their financial position. Accounting and reporting standards for
this information are set forth by a number of oversight agencies,
including GASB, FASB, and AICPA. A major change in reporting requirements
for governments was recently established by GASB Statement 34. This
accounting standard requires governmental agencies, including school
districts, to increase their financial reporting to include governmentwide
financial statements as well as the traditional fund reporting. Although
this new reporting model does not change the basic internal control
expectations for governments, GASB Statement 34 presents new financial
reporting challenges for school districts. [back
to top]
Footnote
1 Codification of
Governmental Accounting and Financial Reporting Standards, section
1100.110. |