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What do small governments want?

The Governmental Accounting Standards Board has published a comprehensive overview of the small government financial reporting environment. Small Government Financial Reporting, examines issues such as how to define small governments and whether generally accepted accounting principles should be modified for these entities.

What is a small government?

The report found that there was no simple definition of small governments. Many states used criteria other than population, such as total revenues or expenditures. "Defining small governments can be a nightmare," said Penny Wardlow, GASB research manager. "What defines small in Connecticut is vastly different from what is small in Wyoming." Wardlow said GASB may consider differentiating smaller governments based on the frequency with which they enter the bond market. "If it issues long-term debt, the government would have to comply fully with GAAP; if it does not, other criteria would apply," said Wardlow. The report examined small municipalities and small counties chosen based on population and small school districts chosen by enrollment.

Changes in GAAP will not come soon The report discusses preparers' and users' perceptions of GAAP as well as of the nature and extent of state regulation of financial reporting. It found that the reporting problems of small governments were similar with problems found in private-sector studies on small business, such as standards overload and issues of big GAAP versus little GAAP. The survey also asked respondents to consider five potential alternatives to GAAP, such as fund-by-fund or standard-by-standard accounting.

In general, only the very small counties, and some municipal preparers, were unsatisfied with current GAAE Users, however, were less satisfied. "The burden that rests on small governments rests on the auditors and users," said Wardlow. "By the same token, the small government preparers thought that anything that increased workload or audit load increased costs and they did not see the benefit of some of the information in current reports or in the proposed modifications."

The report concluded that modifications to GAAP could address only some of the many different needs of small governments, and few respondents said they would modify GAAP with one of the five modifications offered in the survey. With such inconclusive results, the report said the GASB would require additional research before it considered any modifications to current GAAP for small governments.

Copies of the report (product code GR20) are available for $15 each from the GASB order department by calling (203) 847-0700, ext. 555.
COPYRIGHT 1996 American Institute of CPA's
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Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Aug 1, 1996
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