1.4 Objectives of Financial Reporting by State & Local Governments Flashcards
Identify the 8 characteristics of the governmental environment
- the representative form of government and the separation of powers
- national, state, county and city governments and the interflow of revenues
- expectations of taxpayers about the services they receive
- budget as a policy decision and a legally binding control
- use of fund accounting
- governments at the same level with dissimilar functions
- assets, e.g., highways & bridges that do not earn revenue
- citizens who want the maximum services for the minimum taxes
Identify 2 inherent control characteristics of the governmental environment
- budget as policy decision and legally binding control
- use of fund accounting
Identify the users of financial reporting for governmental-type activities
- citizens (those to whom the government is directly accountable)
- legislative & oversight bodies (representatives of the citizenry)
- investors and creditors (providers of financing)
Identify the 4 uses of governmental reporting
- comparing actual results with budgeted amounts
- assessing financial condition and operating results
- determining compliance with laws, rules and regulations
- evaluating efficiency and effectiveness (assessing service efforts & accomplishments)
Define business-type activities for state and local governments
- involve exchange transactions
- have large investments in revenue producing capital assets (e.g. toll roads)
- often have one function
- may still be influenced by the political process (e.g. rate setting)
- may have budgets that lack legal force
What is the result of business-type activities often having only one function for state and local governments?
- comparisons among governments are simpler
- fund accounting is less likely to be used
What is the primary objective or reasoning of all governmental financial reporting?
Accountability which is based on the public’s right to know
Identify the 3 levels of accountability in governmental financial reporting?
- fiscal accountability
- operational accountability
- interperiod equity
Define fiscal accountability
responsibility of a government to justify that its actions comply with public decisions about obtaining and expending public resources in the short term
Define operational accountability
- responsibility to report the extent to which accounting objectives have been met efficiently and effectively using variable resources
- responsibility to report whether those objectives can be met for the foreseeable future
Define interperiod equity (3)
- part of accountability
- financial resources received during a period should suffice to pay for the services provided during that period
- debt should be repaid during the period of usefulness of the assets acquired
True / False:
Governmental reporting should help users to make economic, political and social decisions
True
True / False:
Governmental reporting should help users assess whether future taxpayers must pay for services already provided
True
Identify the 3 objectives or purpose of governmental financial reporting
- public accountability
- evaluating operating results
- assessing services provided
What information should the government provide in fulfilling its duty of public accountability? (3)
- whether current revenues suffice to pay for current services
- compliance with the budget and other requirements
- service efforts, costs and accomplishments
