Accounting and Financial Reporting

• Best Practices

  Audit Com­mit­tees

  Estab­lish audit com­mit­tees, made up of appro­pri­ate audit com­mit­tee mem­bers, that are respon­si­ble for review, over­sight, estab­lish­ing pro­ce­dures, and pro­vid­ing a writ­ten report. 

• Best Practices

  Audit Pro­cure­ment

  Gov­ern­ments should under­take a full-scale com­pet­i­tive process for select­ing inde­pen­dent audi­tors in which the prin­ci­pal fac­tor is the auditor’s abil­i­ty to per­form a qual­i­ty audit. Gov­ern­ments should enter into mul­ti­year agree­ments for audits to be per­formed in accor­dance with Gen­er­al­ly Accept­ed Gov­ern­ment Audit­ing Stan­dards and con­sid­er risks to the auditor’s inde­pen­dence before engag­ing the same firm to pro­vide sig­nif­i­cant nonau­dit services.

• Best Practices

  Inter­nal Audit Function

  GFOA rec­om­mends that every gov­ern­ment should con­sid­er the fea­si­bil­i­ty of estab­lish­ing a for­mal inter­nal audit func­tion to help man­age­ment main­tain a com­pre­hen­sive frame­work of inter­nal controls.

• Best Practices

  Mul­ti­ple Auditors

  Gov­ern­ments should deter­mine whether it is involved in a group audit, ensure that com­mu­ni­ca­tion is time­ly and appro­pri­ate among group and com­po­nents audi­tors, and deter­mine how sub­se­quent events will be addressed. 

Advisories

• Advisories

  Offer­ing State­ments and the Inde­pen­dent Audi­tor’s Role

  The gov­ern­ment should feel free to use audit­ed finan­cial state­ments as appro­pri­ate, should not per­mit audi­tors to cre­ate an arti­fi­cial ​“involve­ment”, take steps to avoid unwar­rant­ed delays and costs, and clar­i­fy pub­lish­ing per­mis­sion with­in audit contract 

• Best Practices

  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.

Policies

• Best Practices

  Poli­cies and Pro­ce­dures Documentation

  Doc­u­ment account­ing poli­cies and pro­ce­dures, have an appro­pri­ate lev­el of man­age­ment and author­i­ty, and doc­u­men­ta­tion of poli­cies and pro­ce­dures should be read­i­ly avail­able to all employees. 

Capital Assets

• Best Practices

  Con­trol Over Items That Are Not Capitalized

  Ensure con­trol nor­mal­ly occur­ring at depart­men­tal lev­el, respon­si­bil­i­ty of con­trol assigned with­in each depart­ment, and aspects of the cen­tral account­ing func­tion are correct. 

• Best Practices

  Cap­i­tal­iza­tion Thresh­olds for Cap­i­tal Assets

  State and local gov­ern­ments should adhere to appro­pri­ate guide­lines for cap­i­tal­iza­tion thresholds. 

• Best Practices

  Inven­to­ries of Tan­gi­ble Cap­i­tal Assets

  Inven­to­ry tan­gi­ble cap­i­tal assets at least no less often than once every five years

Cost Accounting

• Best Practices

  Munic­i­pal Sol­id Waste Man­age­ment and Full-Cost Accounting

  Gov­ern­ments should use the appro­pri­ate style of full-cost account­ing to munic­i­pal sol­id waste man­age­ment activities. 

• Best Practices

  Mea­sur­ing the Full Cost of Gov­ern­ment Service

  Gov­ern­ments should cal­cu­late the full cost of the dif­fer­ent ser­vices that they provide. 

• Best Practices

  Indi­rect Cost Allocation

  GFOA rec­om­mends gov­ern­ments allo­cate their indi­rect costs and address fac­tors described in this best prac­tice to pre­pare indi­rect cost allo­ca­tion plans

Disaster Recovery

• Best Practices

  Dis­as­ter Recov­ery Cost Documentation

  GFOA rec­om­mends gov­ern­ments to take all nec­es­sary steps to ensure that they will be able to col­lect and main­tain ade­quate doc­u­men­ta­tion on dis­as­ter-relat­ed costs to sup­port max­i­mum reim­burse­ment from all lev­els of government.

• Best Practices

  Dis­as­ter Recov­ery for Technology

  Gov­ern­ment poli­cies and pro­ce­dures for com­put­er dis­as­ter recov­ery should for­mal­ly assign a dis­as­ter recov­ery man­ag­er and coor­di­na­tors, require the cre­ation and preser­va­tion of back-up data, make pro­vi­sions for alter­na­tive data pro­cess­ing meth­ods, pro­vide detailed instruc­tions, and estab­lish guide­lines. As it relates to this best prac­tice, a dis­as­ter is defined as an event that caus­es a sig­nif­i­cant dis­rup­tion to ser­vices, includ­ing but not lim­it­ed to, nat­ur­al dis­as­ters and cyberattacks.

Grants

• Best Practices

  Grants Admin­is­tra­tion

  GFOA rec­om­mends that gov­ern­ments estab­lish process­es to pro­mote aware­ness through­out the gov­ern­ment that grants nor­mal­ly come with sig­nif­i­cant requirements.

Advisories

• Advisories

  Account­ing for Leases

  Iden­ti­fy, locate, review, assess, and com­mu­ni­cate var­i­ous aspects rel­e­vant to agree­ments, leas­es, and contracts. 

• Best Practices

  Inter­nal Con­trol Environment

  GFOA rec­om­mends that gov­ern­ments demon­strate a com­mit­ment to the COSO frame­work, assume respon­si­bil­i­ty for over­see­ing inter­nal con­trol, devel­op orga­ni­za­tion­al struc­tures and account­abil­i­ty, com­mit to attract­ing and retain­ing com­pe­tent employ­ees, and hold indi­vid­u­als accountable.

• Best Practices

  Inter­nal Con­trol Framework

  GFOA rec­om­mends gov­ern­ments adopt the COSO’s Inter­nal Con­trol — Inte­grat­ed Frame­work (2013) as the con­cep­tu­al basis for design­ing, imple­ment­ing, oper­at­ing, and eval­u­at­ing inter­nal con­trol so as to pro­vide rea­son­able assur­ance that they are achiev­ing their oper­a­tional, report­ing, and com­pli­ance objectives. 

• Best Practices

  Inter­nal Con­trol for Grants

  GFOA rec­om­mends that gov­ern­ments adhere to a com­pre­hen­sive frame­work of inter­nal con­trol for grants that includes the com­po­nents of: con­trol envi­ron­ment, risk assess­ment, con­trol activ­i­ties, infor­ma­tion and com­mu­ni­ca­tion, and monitoring.

• Best Practices

  Inter­nal Con­trol and Man­age­ment Involvement

  GFOA rec­om­mends that finan­cial offi­cers obtain the infor­ma­tion and edu­ca­tion need­ed to mean­ing­ful­ly take respon­si­bil­i­ty for inter­nal control. 

• Best Practices

  Inter­nal Con­trol Defi­cien­cies in Audits

  Gov­ern­ments should craft an effec­tive strat­e­gy for min­i­miz­ing any poten­tial neg­a­tive effect result­ing from the com­mu­ni­ca­tion of inter­nal con­trol relat­ed mat­ters iden­ti­fied in an audit.

• Best Practices

  Whistle­blow­ing

  Gov­ern­ments should estab­lish poli­cies and pro­ce­dures to encour­age and facil­i­tate the report­ing of fraud, waste or abuse and ques­tion­able account­ing or audit­ing practices.

• Best Practices

  Nonau­thor­i­ta­tive Con­sid­er­a­tions in the Prepa­ra­tion of an Annu­al Com­pre­hen­sive Finan­cial Report

  Gov­ern­ments should con­sid­er the con­tents of the Cer­tifi­cate of Achieve­ment for Excel­lence in Finan­cial Report­ing Pro­gram Require­ments – Non-GAAP Item list of non-author­i­ta­tive sug­ges­tions when prepar­ing their reports. 

• Best Practices

  Web­site Post­ing of Finan­cial Documents

Targets and Guidelines

• Best Practices

  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.

Financial Statement Preparation

• Best Practices

  Fund Account­ing Applications

  Every state or local gov­ern­ment that uses fund account­ing should estab­lish clear cri­te­ria for deter­min­ing whether a giv­en fund in its account­ing sys­tem should be treat­ed as a fund for pur­pos­es of exter­nal finan­cial reporting.

• Best Practices

  Time­ly Finan­cial Reporting

  GFOA rec­om­mends that gov­ern­ments improve the time­li­ness of finan­cial reports.

• Best Practices

  Nonau­thor­i­ta­tive Con­sid­er­a­tions in the Prepa­ra­tion of an Annu­al Com­pre­hen­sive Finan­cial Report

  Gov­ern­ments should con­sid­er the con­tents of the Cer­tifi­cate of Achieve­ment for Excel­lence in Finan­cial Report­ing Pro­gram Require­ments – Non-GAAP Item list of non-author­i­ta­tive sug­ges­tions when prepar­ing their reports. 

Department Reporting

• Best Practices

  Depart­men­tal Reports and Man­age­men­t’s Dis­cus­sion and Analysis

  Management’s Dis­cus­sion and Analy­sis (MD&A) and Required Sup­ple­men­tary Infor­ma­tion (RSI) con­tent should be pre­sent­ed in con­junc­tion with depart­men­tal reports.

• Best Practices

  Depart­men­tal Reports and Sup­ple­men­tary Information

  Gov­ern­ments should include a let­ter of trans­mit­tal and trend data as sup­ple­men­tary infor­ma­tion in sep­a­rate­ly issued reports for depart­ments of the gen­er­al fund.

Non-GAAP Reporting

• Best Practices

  Pop­u­lar Report­ing of Finan­cial Information

  GFOA encour­ages gov­ern­ments to sup­ple­ment their annu­al com­pre­hen­sive finan­cial report with sim­pler, ​“pop­u­lar” reports designed to assist those who need or desire a less detailed overview of a gov­ern­men­t’s finan­cial activities.

• Best Practices

  Peri­od­ic Dis­clo­sure and the Annu­al Com­pre­hen­sive Finan­cial Report

  Gov­ern­ments sub­ject to SEC Rule 15c2-12 should con­sid­er using the annu­al com­pre­hen­sive finan­cial report (ACFR) as their dis­clo­sure doc­u­ment for pro­vid­ing infor­ma­tion use­ful to exist­ing and poten­tial investors in the sec­ondary mar­ket and meet­ing their oblig­a­tion to pro­vide annu­al dis­clo­sure for the sec­ondary mar­ket, as required by Rule 15c2-12

Specific Applications

• Best Practices

  Tax Abate­ment Transparency

  Gov­ern­ments should dis­close the appro­pri­ate infor­ma­tion and adhere to the cor­rect guide­lines in its let­ter of trans­mit­tal, have finance staff ini­ti­ate appro­pri­ate com­mu­ni­ca­tion and rela­tion­ships, and estab­lish same rela­tion­ships with oth­er appro­pri­ate entities. 

Advisories

• Advisories

  Account­ing for Leases

  Iden­ti­fy, locate, review, assess, and com­mu­ni­cate var­i­ous aspects rel­e­vant to agree­ments, leas­es, and contracts. 

• Advisories

  Account­ing and Finan­cial Report­ing for Fidu­cia­ry Activities

  Begin dis­cus­sions, iden­ti­fy all poten­tial fidu­cia­ry activ­i­ties, iden­ti­fy types of fidu­cia­ry funds, deter­mine when to rec­og­nize a fidu­cia­ry fund lia­bil­i­ty, and apply the Stan­dard retroac­tive­ly and pre­pare the disclosures.

• Advisories

  Spe­cial Rev­enue Funds Used for Bud­get­ing, but Not Finan­cial Reporting

  Gov­ern­ments should main­tain sep­a­rate infor­ma­tion on each legal­ly man­dat­ed spe­cial rev­enue sys­tem and pro­vide sched­ules for each legal­ly man­dat­ed spe­cial rev­enue fund. 

• Advisories

  Secu­ri­ties Lend­ing Trans­ac­tions in Finan­cial Statements

  Assets, lia­bil­i­ties, income and expens­es relat­ed to secu­ri­ties lend­ing trans­ac­tions should be report­ed in the finan­cial state­ments in the man­ner that best reflects the true nature of these trans­ac­tions, con­sis­tent with the pro­vi­sions of GASB State­ment No. 28. 

• Best Practices

  Grants Admin­is­tra­tion

  GFOA rec­om­mends that gov­ern­ments estab­lish process­es to pro­mote aware­ness through­out the gov­ern­ment that grants nor­mal­ly come with sig­nif­i­cant requirements.

• Best Practices

  Indi­rect Cost Allocation

  GFOA rec­om­mends gov­ern­ments allo­cate their indi­rect costs and address fac­tors described in this best prac­tice to pre­pare indi­rect cost allo­ca­tion plans

• Best Practices

  Inter­nal Con­trol for Grants

  GFOA rec­om­mends that gov­ern­ments adhere to a com­pre­hen­sive frame­work of inter­nal con­trol for grants that includes the com­po­nents of: con­trol envi­ron­ment, risk assess­ment, con­trol activ­i­ties, infor­ma­tion and com­mu­ni­ca­tion, and monitoring.

• Best Practices

  SEFA Prepa­ra­tion

  GFOA rec­om­mends that gov­ern­ments that are sub­ject to the sin­gle audit act (and are required to pre­pare a sched­ule of expen­di­tures of fed­er­al awards (SEFA)) imple­ment pro­ce­dures to ensure an accu­rate and com­plete SEFA.