State and Local Government Accounting

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State and Local Government Accounting

All organizations need accountants to manage their financial activities, and state and local governments (SLG) are no exception.

All organizations need accountants to manage their financial activities, and state and local governments (SLG) are no exception. Accounting positions with governmental organizations can be reliable career choices because cities, counties, and states will always need accountants, regardless of the economy’s ups and downs.

Like all accountants, SLG accountants need a strong background in accounting methods and principles. The education to perform these duties can be obtained through programs such as the University of North Dakota’s Masters in Accountancy online. Offering the knowledge needed for state and local government accounting work, this program can put candidates on the road to a rewarding and successful SLG accounting career.

 

Basic Accounting Duties

Like accountants in private organizations, SLG accountants must perform some basic accounting duties. According to accounting consultants Pacific Crest Group, these responsibilities fall into five categories:

  • Accounts Payable (money out) – The accounting department makes sure employees and vendors get paid on time. Accountants are also tasked with finding opportunities to save money, for example, determining whether discounts or incentives are available for paying certain vendors more quickly.
  • Accounts Receivable and Revenue Tracking (money in) – The accounting department tracks receivables, including outstanding invoices and any required collection actions. It creates and tracks invoices and issues reminders when necessary.
  • Payroll – Payroll includes making sure all employees are paid accurately and promptly and that the proper tax is assessed and that tax payments are on time with state and federal government agencies.
  • Reporting and Financial Statements – Accountants collect and track data all year long and use it to prepare financial reports that can be used for budgeting, forecasting, and other decision-making processes. Reports are also needed for communication to investors, banks, and other financial professionals.
  • Financial Controls – Financial controls include reconciliations ad division of responsibilities, as well as determining whether proper accounting standards are in place.

 

What is GAAP?

In following these duties, SLG accountants are usually expected to follow a protocol called GAAP, which stands for “generally accepted accounting principles.” GAAP was instituted in 1936 after irregular accounting practices contributed to the Great Depression of 1929. The goal of GAAP is to create standards for the ethical and accurate reporting of financial information.

U.S. law requires businesses that release financial statements to the public and companies that are publicly traded on stock exchanges and indices to follow GAAP guidelines, which incorporate 10 key concepts:

  • Principle of regularity: GAAP-compliant accountants strictly adhere to established rules and regulations.
  • Consistency: Consistent standards are applied throughout the financial reporting process.
  • Sincerity: GAAP-compliant accountants are committed to accuracy and impartiality.
  • Permanence of methods: Consistent procedures are used in the preparation of all financial reports.
  • Non-compensation: All aspects of an organization’s performance, whether positive or negative, are fully reported with no prospect of debt compensation.
  • Prudence: Speculation does not influence the reporting of financial data.
  • Continuity: Asset valuations assume the organization’s operations will continue.
  • Periodicity: Reporting of revenues is divided by standard accounting time periods, such as fiscal quarters or fiscal years.
  • Materiality: Financial reports fully disclose the organization’s monetary situation.
  • Utmost good faith: All involved parties are assumed to be acting honestly.

 

Why is GAAP Important?

GAAP compliance is important because it makes the financial reporting process transparent and standardizes assumptions, general accounting terminology, definitions, and methods. External parties can easily compare financial statements issued by GAAP-compliant entities and safely assume consistency, which allows for quick and accurate cross-company comparisons.

Without standards such as GAAP, organizations would be free to present financial information in whatever format best suited their needs. They would have carte blanche to portray their fiscal standing in the most ideal light, and as a result, investors or the public could be easily misled.

To avoid this type of financial free-for-all, today all 50 state governments prepare their financial reports according to GAAP. While a little less than half of U.S. states officially require local governments to adhere to GAAP, the Governmental Accounting Standards Board (GASB) estimates that approximately 70% of county and local financial offices do so anyway. Because such a large majority of SLG accountants adhere to GAAP, accountant candidates should be well grounded in this methodology.

 

Changes Coming

GAAP has served the accounting industry well since the 1930s. In recent times, however, changes have occurred that affect the accounting profession in general and GAAP compliance in particular. One such change, known as “new GAAP,” changed the way organizations were required to recognize revenue starting in late 2017. Other ongoing shifts revolve around the rapid pace of technological change and the increasing global connection of all organizations, even the most local ones. To play on this field, SLG accountants must remain up to date on the industry’s changing standards through continuing education.

These are challenging days for the accounting industry—but they are exciting ones, too. The times are changing, and fledgling SLG accountants have an advantage in many ways over their old-school counterparts. With fresh education and the most up-to-date techniques and knowledge in their repertoire, they stand ready to tackle the challenges of accounting in today’s world.

 

University of North Dakota’s Master of Accountancy online degree

University of North Dakota’s Master of Accountancy (M.Acc.) online program helps students master accounting principles as well as related necessary skills, such as GAAP compliance, for a successful career in accounting at the highest levels.

UND is accredited by the Association to Advance Collegiate Schools of Business International, which only recognizes about 30 percent of business programs in the United States. The Master of Accountancy online program offers practitioner and fundamentals tracks. Coursework is done online, which allows busy professionals to study accountancy and earn their degree without disrupting their work or personal lives. For more information, contact UND today.

 


Sources:

Basic accounting duties – Pacific Crest Group

10 key GAAP concepts – Accounting.com

Why is GAAP important? – Accounting.com

Changes coming – Lexology