Given the unique needs of governments, a different set of accounting standards have been developed for these organizations. The primary organization that is responsible for creating and updating these standards is the Governmental Accounting Standards Board (GASB). Government accounting observes the rules and regulations set by the government accounting standards board (GASB). It ensures that the financial policies and budgeting align with the standards, and the authority and funds are used for public service and goods. Government accountants and auditors work in the public sector to maintain and examine the records of government agencies and also to audit private businesses and individuals who pay taxes.
She earned a bachelor of science in finance and accounting from New York University. On the recommendation of the American Institute of CPAs (AICPA), the FASB was formed as an independent board in 1973 to take over GAAP determinations and updates. The board comprises seven full-time, impartial members, ensuring that it works for the public’s best interest. Without regulatory standards, companies would be free to present financial information in whichever format best suits their needs. With the ability to portray a company’s fiscal standing in a favorable light, investors could be easily misled. Specializations, location, experience, and education can affect an accountant’s earning potential.
The Focus of Governmental Financial Reporting
The majority of compliance officers in the U.S. work for federal, state, and local governments. Many also work in the corporate sector, making this specialty transferable to other industries. These professionals audit financials from various departments and programs to ensure compliance with budgets and tax codes. They may also assess financial efficiency, program effectiveness, and computer security.
- Due to the thorough standards-setting process of the GAAP policy boards, it can take months or even years to finalize a new standard.
- FASB is responsible for the Accounting Standards Codification (ASC), a centralized resource where accountants can find all current GAAP.
- Also, since government agencies use people’s taxes and revenue to provide the service, ensuring a transparent use of the funds by the officials is an important goal.
- GASB Chair Joel Black provides an update on quarterly activities as well as his reflections on Board activities and priorities.
- Although accountants work in all levels of government, one of the more high profile federal entities is the Government Accountability Office (GAO), an independent, nonpartisan agency that works as the investigative arm of Congress.
There are seven members of the board, which is headed by a chair and a vice-chair. The FAF Board of Trustees appoints board members for five-year terms, and members serve for up to 10 years. The chair serves on the board full-time, while the vice-chair and the remaining five members serve the board on a part-time basis.
Common Challenges in Government Accounting
Federal, state, and local governments are some of the United States’ top employers for accountants. Government accountants oversee public funds and investigate white-collar crime. These professionals may assess financial efficiency and perform audits within government offices and departments. Under this basis, revenues are recognized in the accounting period in which they become measurable and available for spending. In other words, decreases or increases in the financial resources will only be recorded in a financial statement when they are expected to be paid or collected within the twelve months after the fiscal period ends. Measurement focus for each government entity depends upon the resources being measured and when the effects of those transactions and events are recorded.
- In a corporate setting, the main goal is to generate profits and ensure the company’s financial health.
- Many also work in the corporate sector, making this specialty transferable to other industries.
- Major fund reporting is applied only to governmental funds (i.e., general, special revenue, debt service, capital project, and permanent funds) and enterprise funds.
- However, about one third of private companies choose to comply with these standards to provide transparency.
- These organizations are rooted in historic regulations governing financial reporting, which the federal government implemented following the 1929 stock market crash that triggered the Great Depression.
- Advanced financial information systems and big data analytics can provide more profound insights into financial data, enabling better decision-making.
- The broad range of federal administrative staff that this table covers includes accountants and auditors employed with the federal government, including with the IRS and other agencies.
No matter how much technology advances, government accounting will remain a fundamentally human endeavor. The regulatory landscape is complex and ever-changing, making it difficult for accountants to stay abreast of the latest rules and regulations. Implementing an effective accounting system can be challenging when numerous governmental bodies are involved, each following its policies and procedures.
The GASB Postgraduate Technical Assistant (PTA) Program
Becoming a Certified Public Accountant (CPA) is considered something of a gateway to government accounting work and is, in fact, required for some roles. Additional specialty credentials for government accounting are available through a number of certifying agencies. With such a prominent difference in approach, governmental accounting definition dozens of other discrepancies surface throughout the standards. The chart below includes only a couple of the variations that may affect how a business reports its financial information. While the United States does not require IFRS, over 500 international SEC registrants follow these standards.
The GASB was established in 1984 as a policy board charged with creating GAAP for state and local government organizations. Many groups rely on government financial statements, including constituents and lawmakers. To ensure that diverse opinions are considered, the GASB convenes consultative groups and task forces. Consultative groups perform research for agenda items concerning accounting and financial reporting standards. Both groups are important sounding boards to ensure that the GASB makes the best decisions for the tax payer, finance, and business communities. Adherence to these standards ensures consistency, transparency, and accountability in financial reporting.