Governmental Accounting

Fund-Based vs. Government-Wide
Financial Statements

Actions of one or more governments affect every individual. As of 2007 local governments reached to 89,476, these are broken down into, 39,044 were general purpose local governments 36,011 subcounty and 3,033 county; also including 19,492 municipal and 16,519 township governments.”(pg.478) A little more than half the totals were special purpose local governments of 14,561 school districts and school system governments and 37,381 special district governments. State and local governments employed more than 14.7 million people. We are affected every day by at least one government; do you pay Income or sales taxes, maybe even property taxes? Perhaps put your garbage cans out to be collected or drive on the roads that are paved. Governmental activities are essential to our daily lives and we give money to the government, therefore it is important to understand how a government reports there expenses and revenues to see where the money is actually going. Therefore we will be discussing fund-based accounting vs. government-wide accounting and the difference between the two.

State and local governments want to portray financial stability when making long-term decisions which was difficult because historically they “focused on identifying the methods used to generate financial resources and the uses made of those resources.”(pg.478) To try and satisfy both needs governments started reporting two sets of financial statements. It is vital to understand that each set of financial statements have unique principles and objectives per state and local government. The most significant step that has transpired in generally accepted accounting principles used by the state and local governments is the creation of this dual reporting system. The American Institute of Certified Public Accountants (AICPA) and the National Council on Governmental Accounting (NCGA) establishing sound accounting principles in earlier years, but in...