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American Institute of Certified Public Accountants. Committee on State and Local Government Accounting

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Accounting and financial reporting by governmental units : amendment to AICPA Industry audit guide, Audits of state and local governmental units; Statement of position 80-2;

In March 1979, the NCGA (now known as the National Council on Governmental Accounting) published a document entitled Governmental Accounting and Financial Reporting Principles (Statement 1). That document defines combined columnar financial statements by fund types and account groups as basic financial statements rather than financial statements of individual funds and account groups and also updates, clarifies, amplifies, and reorders other portions of GAAFR. Since the guide recognizes GAAFR, it is necessary to amend the guide to recognize Statement 1 as an authoritative modification of GAAFR.https://egrove.olemiss.edu/aicpa_sop/1406/thumbnail.jp

University of MississippieGroveStatements of Position American Institute of Certified Public Accountants(AICPA) Historical Collection1979Proposed statement of position : Accounting andfinancial reporting by governmental units :amendment to AICPA Industry audit guide, Auditsof state and local governmental units ;Accountingand financial reporting by governmental units :amendment to AICPA Industry audit guide, Auditsof state and local governmental units; Exposuredraft (American Institute of Certified PublicAccountants), 1979, May 22American Institute of Certified Public Accountants. Committee on State and Local GovernmentAccountingFollow this and additional works at: https://egrove.olemiss.edu/aicpa_sopPart of the Accounting Commons, and the Taxation CommonsThis Book is brought to you for free and open access by the American Institute of Certified Public Accountants (AICPA) Historical Collection ateGrove. It has been accepted for inclusion in Statements of Position by an authorized administrator of eGrove. For more information, please contactegrove@olemiss.edu.Recommended CitationAmerican Institute of Certified Public Accountants. Committee on State and Local Government Accounting, "Proposed statement ofposition : Accounting and financial reporting by governmental units : amendment to AICPA Industry audit guide, Audits of state andlocal governmental units ;Accounting and financial reporting by governmental units : amendment to AICPA Industry audit guide,Audits of state and local governmental units; Exposure draft (American Institute of Certified Public Accountants), 1979, May 22"(1979). Statements of Position. 407.https://egrove.olemiss.edu/aicpa_sop/407EXPOSURE DRAFT PROPOSED STATEMENT OF POSITION ACCOUNTING AND FINANCIAL REPORTING BY GOVERNMENTAL UNITS Proposal to Amend AICPA Industry Audit Guide Audits of State and Local Governmental Units May 22, 1979 Prepared by the AICPA Committee on State and Local Government Accounting For comment from persons interested in accounting and reporting by governmental units Comments should be received by July 23, 1979 and addressed to Paul Rosenfield, Director, Accounting Standards Division, File 3460, AICPA, 1211 Avenue of the Americas, New York, N.Y. 10036 AICPA American Institute of Certified Public Accountants 1211 Avenue of the Americas, New York, New York 10036 (212) 575-6200 AICPA. State and Local Government Accounting Committee. Accounting and financial re-porting by governmental units. 1979. ref. May 22, 1979 To those interested in accounting and reporting by governmental units: An exposure draft of a proposed statement of position entitled Accounting and Financial Reporting by Governmental Units accompanies this letter. Comments and suggestions on any aspect of the enclosed draft are sought and will be appreciated. They should be addressed to Paul Rosenfield, Director, Accounting Standards Division, File 3460, at the AICPA by July 23, 1979. The AICPA Committee on State and Local Government Accounting will be particularly interested in the reasoning underlying comments and suggestions. Sincerely yours, Frank S. Belluomini, Chairman Committee on State and Local Government Accounting Paul Rosenfield, Director Accounting Standards Division ACCOUNTING AND FINANCIAL REPORTING BY GOVERNMENTAL UNITS An Amendment to Industry Audit Guide on Audits of State and Local Governmental Units BACKGROUND 1. The AICPA industry audit guide, Audits of State and Local Governmental Units, published in 1974, acknowledged Governmental Accounting, Auditing, and Finan-cial Reporting (GAAFR), a 1968 publication of the National Com-mittee on Governmental Account-ing (NCGA), as an authoritative source in the area of accounting for local governmental units. The guide states that "GAAFR's prin-ciples do not represent a complete and separate body of accounting principles, but rather are a part of the whole body of generally ac-cepted accounting principles which deal specifically with governmental units. Except as modified in this guide, they constitute generally accepted accounting principles" (p. 9) . 2. In March 1979, the NCGA (now known as the National Coun-cil on Governmental Accounting) published a document entitled Governmental Accounting and Fi-nancial Reporting Principles (State-ment 1). That document defines combined columnar financial state-ments by fund types and account groups as basic financial statements rather than financial statements of individual funds and account groups and also updates, clarifies, amplifies, and reorders other por-tions of GAAFR. Since the guide recognizes GAAFR, it is necessary to amend the guide to recognize Statement 1 as an authoritative modification of GAAFR. RECOMMENDATION 3. The committee believes that Audits of State and Local Govern-mental Units should be amended throughout to refer to Statement 1 rather than GAAFR. The follow-ing paragraphs amplify that con-clusion. 4. Presentation of aggregate data by fund type and account group in the statements of rev-enues, expenditures, and changes in fund balance (retained earnings) and of changes in financial position of the individual funds in each fund type and account group, in the manner recommended in Statement 1, is an extension of the conclusion in the guide that "Homogeneous funds may be consolidated in a single balance sheet, but it is not appropriate to consolidate funds of different types or to consolidate account groups." Accordingly, pre-sentation in accordance with State-ment 1 should be considered to be in conformity with generally ac-cepted accounting principles. 5. When combining statements, individual fund and account group statements, and supporting sched-ules are presented with the basic financial statements for the various fund types and account groups, the auditor should report on those statements and schedules as supple-mental data.1 6. Statement 1 identifies the fol-lowing basic general purpose fi-nancial statements (GPFS) as necessary for fair presentation of financial position and operating re-1. See SAS 1, section 610, (AICPA, Professional Standards, vol. 1, AU sec. 610) and Auditing Interpretation 9610, "Reports on Consolidated Financial State-ments That Include Supplementary Consolidating Information" (AICPA, Pro-fessional Standards, vol. 1, AU sec. 9610). suits in conformity with generally accepted accounting principles: a. Combined balance sheet—all fund types and account groups. b. Combined statement of reven-ues, expenditures, and changes in fund balances—all govern-mental fund types. c. Combined statement of reven-ues, expenditures, and changes in fund balances—budget and actual—general and special rev-enue fund types (and similar governmental fund types for which annual budgets have been legally adopted). d. Combined statement of reven-ues, expenses, and changes in retained earnings (or equity)— all proprietary fund types. e. Combined statement of changes in financial position—all pro-prietary fund types. f. Notes to the financial state-ments, including segment in-formation for major nonhomo-geneous enterprise funds. (Trust fund operations may be re-ported in statements b, d, and e above, as appropriate, or sep-arately. ) 7. If any individual funds or account groups or any fund types or account groups that should be included in the combined financial statements are omitted (such as the general fixed asset account group or an enterprise fund), the auditor should consider the need to qualify his opinion in accordance with the guidance provided by SAS 2, para-graphs 15 through 17. However, the auditor is not precluded from is-suing a report on separately pre-sented financial statements of a fund or account group that are pre-3 4 E X P O S U R E D R A F T pared in conformity with generally accepted accounting principles. 8. Combined financial state-ments may have a "total" column, which aggregates the columnar statements by fund type and ac-count group. If such a total column is shown, it should be captioned "Memorandum Only." The total column on a combined financial statement is not comparable to a consolidation. It does not present financial position and results of operations in conformity with gen-erally accepted accounting prin-ciples because the same basis of accounting is not used by all funds, and interfund transactions and bal-ances and account group balancing accounts may not be eliminated. 9. The recommendations of this statement of position should be adopted for financial statements and auditors' reports for years end-ing after June 30, 1980. Early adop-tion is encouraged. If these recom-mendations are adopted early, conformity with principles in State-ment 1 should be disclosed. AICPA American Institute of Certified Public Accountants 1211 Avenue of the Americas New York, New York 10036 Non-Profit Org. U. S. POSTAGE PAID New York, N. Y. Permit No. 3681 

Proposed statement of position : Accounting and financial reporting by governmental units : amendment to AICPA Industry audit guide, Audits of state and local governmental units ;Accounting and financial reporting by governmental units : amendment to AICPA Industry audit guide, Audits of state and local governmental units; Exposure draft (American Institute of Certified Public Accountants), 1979, May 22

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Accounting and financial reporting by governmental units : amendment to AICPA Industry audit guide, Audits of state and local governmental units; Statement of position 80-2;

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