According to Figure A-1, Major Features of Columbus Consolidated Government's Government-Wide and Fund Financial Statements, the accrual accounting method is the city's preferred form of accounting, in accordance with the guidelines set forth by the Governmental Accounting Standards Board (GASB). Accrual accounting is used within all of Columbus' citywide bookkeeping because the GASB has issued clear mandates as to the Generally Accepted Accounting Principles (GAAP) that municipal governments can implement. As the CAFR states, "the government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements" (Hodge, 2012). The stated reason for using this accounting method is that "under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows" (Hodge, 2012). Accrual accounting is the preferred form of accounting used by municipal governments because it provides a more accurate representation of a city's financial situation, with the formerly typical practice of transferring one year's debts to the next fiscal year curtailed entirely.
GASB Statement 34, Basic Financial Statements and Management Decisions
Select a local government in your state and review the financial statements and audit report for the county or municipality. The financial statements of the government selected should have at least three funds.
Located in Muscogee County, the city of Columbus, Georgia is the state's third-largest city with over 194,000 residents. The Consolidated Government of Columbus, Georgia recently released its latest Comprehensive Annual Financial Report (CAFR) for the 2011 fiscal year. Among the various funds for which this report records accounting practices are the city's General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds.
Analyze the method of accounting used for the general fund and all other funds in existence by the government. Evaluate the reasoning for the use of the method of accounting for each of the funds as required by GASB.
According to Figure A-1, Major Features of Columbus Consolidated Government's Government-Wide and Fund Financial Statements, the accrual accounting method is the city's preferred form of accounting, in accordance with the guidelines set forth by the Governmental Accounting Standards Board (GASB). Accrual accounting is used within all of Columbus' citywide bookkeeping because the GASB has issued clear mandates as to the Generally Accepted Accounting Principles (GAAP) that municipal governments can implement. As the CAFR states, "the government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements" (Hodge, 2012). The stated reason for using this accounting method is that "under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows" (Hodge, 2012). Accrual accounting is the preferred form of accounting used by municipal governments because it provides a more accurate representation of a city's financial situation, with the formerly typical practice of transferring one year's debts to the next fiscal year curtailed entirely.
3.) Assess the application and compliance of GASB Statement 34, Basic Financial Statements and Management Decisions and Analysis for State and Local Governments to each of the funds.
According to a Summary of GASB Statement 34, which provides the framework for Basic Financial Statements -- and Management's Discussion and Analysis -- for State and Local Governments, "financial managers also will be in a better position to provide this analysis because for the first time the annual report will also include new government-wide financial statements, prepared using accrual accounting for all of the government's activities" (1999). This appears to be true in the case of Columbus Consolidated Government's CAFR for fiscal year 2011, as the method of accrual accounting is used in comprehensive fashion to prepare financial statements for every aspect of the government's financial activity. According to several footnotes contained in the CAFR, "information has been provided beginning with the year of implementation of GASB Statement 34, June 30, 2002" (Hodge, 2012), which effectively documents the CAFR's adherence with GASB Statement 34 and the applicable provisions contained therein.
4.) Evaluate management's discussion and analysis (MD&A). In your evaluation, analyze the significant information in the MD&A and how the information contributed to the clarity of the financial statements. From your analysis of financial statements, identify and analyze information that should be included in the statements.
The CRAF released by Columbus Consolidated Government includes a comprehensive Management's Discussion and Analysis (MD&A) section, which "immediately follows the independent auditor's report and provides analysis of the past year's operations of general government and major enterprise activities, and an overview of the Consolidated Government's current and future economic picture" (Hodge, 2011). This particular MD&A portion of the CRAF is extremely informative and navigable even for financial laymen, containing Financial Highlights section to describe a broad review of the report's most salient data, and an Overview of the Financial Statements which provides detailed descriptions of each of the various fund statements used to construct the entire citywide budget.
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