What should governments include in their financial reports?

The International Federation of Accountants released a study that examines the definition of the government financial reporting entity and the variety, of ways governments construct financial reports. IFAC Study no. 8, The Government Financial Reporting Entity, describes the broad characteristics government reporting entities should possess and how they should be accountable for the resources they control.

Governments control significant resources and a wide range of users are dependent on their financial reports. "The definition of the government reporting entity is crucial for good accountability," said Bruno Chiomento, IFAC technical manager. "A poor definition gives governments plenty of opportunity to leave important agencies or departments with large liabilities, such as Social Security, off the balance sheet."

Donald H. Chapin, chief accountant of the General Accounting Office and a member of the IFAC public sector committee, told the Journal that setting a standard for consolidated financial statements for governments was a serious problem that is not easily resolved. "First, governments must decide the basis of consolidation, whether it is the allocation of funds or majority control or ownership," said Chapin. "For example, the United States has a good statement on the reporting entity, but compared to other governments there are some real anomalies in its definition." Chapin said the U.S. definition of federal government excludes the federal reserve banks. "Those issue approximately $400 billion of currency in circulation that many think should be in the consolidated financial statements."

The study lists examples of rules in different countries for identifying the boundaries of reporting entities and the definition of ownership and control and the criteria for combining separate financial statements from entities or funds operated by a government. It is designed to contribute to the policy debate on the relevance, understandability and comparability of financial reporting by governments.

Copies of the study can be obtained for $10 by calling the IFAC at [phone].

FYI 

* The Department of Education (DOE) postponed until June 30, 1997, its deadline for compliance audits required of lenders with student loan portfolios of $5 million or less under the Federal Family Education Loan Program. The DOE said Congress was considering a permanent legislative change to modify or eliminate the audit requirement for smaller lenders.

* President Clinton awarded a White House Fellowship to Kevin Monroe, senior audit manager of Deloitte & Touche in Omaha, Nebraska. White House fellows spend a year working as special assistants to senior officials in the White House and Cabinet agencies. Ten women and eight men were selected as fellows. It is the first time in the program's 32-year history that women make up the majority of fellows.

* The Government Finance Officers Association (GFOA) published guidance on how to prepare financial reports for public employee retirement systems. The report, Pensions CAFRs: Guidelines for the Preparation of a Public Employee Retirement System Comprehensive Annual Financial Report, incorporates recent pension guidance from the Governmental Accounting Standards Board and updates previous GFOA pension guidelines. The report is available for $18 each to GFOA members and $25 to nonmembers. To order, call the GFOA at 312-977-9700.

* The Pension Benefit Guaranty Corporation (PBGC) streamlined its regulations for ease of use. They are now part of the Code of Federal Regulations. Obsolete regulations were eliminated. The July 1 Federal Register cross-referenced old and new regulation numbers.

* The PBGC recommended doubling the maximum annual guarantee paid to employees stuck in insolvent multiemployer pension plans, saying it could do so without raising the current $2.60 per participant annual premium or affecting its own financial soundness. Currently, less than 1% of workers and retirees would get their full benefits if their plans became insolvent; with the doubling, nearly 75% would be covered.

* The Institute of Management Accountants elected new officers at its annual conference: Clair M. Raubenstine, CPA, CMA, is president, and Clark H. Johnson, CMA, is president-elect. Outgoing president William J. Ihlanfeldt, CPA, is now the IMA chairman.