New certificate of conformance program for small government financial reports.

• Author: Gauthier, Stephen J.
• Position: The Accounting Angle

In late 2012, the Government Finance Officers Association's Executive Board approved a new professional recognition program for small governments that prepare their financial report on a modified cash basis.

BACKGROUND

For many small governments, the preparation of financial statements in accordance with generally accepted accounting principles is not a viable option. Instead, such governments often prepare their annual financial reports on a modified cash basis (which auditors describe as a special purpose framework (1)). There currently is little guidance available for governments that prepare their financial statements on a modified cash basis, which has significantly affected the quality and consistency of these reports.

PURPOSE

The GFOA's new Certificate of Conformance Program for Small Government Financial Reports (Certificate of Conformance Program) is designed to help small governments that cannot prepare GAAP financial statements improve the quality and consistency of their financial reports. The Certificate of Conformance Program will do so by:

* Providing guidelines to help standardize the format and content of financial reports prepared on a modified cash basis,

* Encouraging governments to follow those guidelines by offering public recognition to those that successfully do so.

* Assisting governments in implementing the guidelines by providing technical materials and training.

The Certificate of Conformance Program is designed to encourage compliance with basic norms of sound financial reporting in situations where GAAP financial reporting is not practical. The Certificate of Achievement for Excellence in Financial Reporting Program (Certificate of Achievement Program) recognizes outstanding achievement in financial reporting, which presupposes financial reporting in conformity with GAAP. For some governments, participation in the Certificate of Conformance Program may be a first step toward GAAP financial reporting and participation in the Certificate of Achievement Program.

PROGRAM DETAILS

The GFOA has established the following guidelines for its new Certificate of Conformance Program.

Eligibility. Any government, regardless of type, that reports $25 million or less in government-wide revenues (either for the current year or the average of the five most recent years) will be eligible to participate in the Certificate of Conformance Program unless it is required to prepare a GAAP financial report or has done so at any time in...