AN INTRODUCTION TO ACCOUNTING FOR STATE AND LOCAL
Answers to Questions
The Governmental Accounting Standards Board has primary responsibility for setting standards that
provide GAAP for state and local governmental units. The most authoritative literature includes GASB
Statements of Standards and GASB Interpretations. The second level of authoritative literature includes
GASB Technical Bulletins and those AICPA audit and accounting guides and statements of position that
the AICPA intended to make applicable to governments
that the GASB has cleared.
Before 1984, the Municipal Finance Officers Association (MFOA) and its National Committee
on Governmental Accounting provided guidance via the publication of
Municipal Accounting and
in 1951 and
Governmental Accounting, Auditing, and Financial Reporting
(GAAFR) in 1968.
Since 1974, the AICPA has also issued industry audit guides for audits of state and local governmental
The Municipal Finance Officers Association (MFOA), now referred to as the Government Finance
Officers Association (GFOA), first issued
Governmental Accounting, Auditing, and Financial Report
For many years, this resource book – often referred to as the Blue Book due to its
distinctive blue cover -
constituted the most complete frameworks of accounting principles specific to
governmental units, and provided standards for preparing and evaluating the financial reports of
Updated periodically to reflect changes to governmental accounting, the 2005
GAAFR is the most recent version.
In 1974 the AICPA issued its industry audit guide,
Audits of State and Local Governmental Units
which it noted that GAAFR’s accounting and reporting principles constituted GAAP except where they
were modified by the audit guide. The AICPA’s endorsements was important to the GAAFR’s authority
and general acceptance by preparers, auditors, and users of governmental financial statements.
AICPA’s 2005 version of the industry audit guide reflects changes under GASB 34.
is a separate fiscal and accounting entity with a self-balancing set of accounts, “segregated for the
purpose of carrying on specific activities or attaining certain objectives in accordance with special
regulations, restrictions, or limitations.” [
] Fund accounting facilitates budgetary
A governmental unit may have hundreds of funds, but only eight
discusses three fund categories (governmental, proprietary, and fiduciary) and eight fund types (general,
special revenue, permanent, capital projects, debt service, internal service, enterprise, and trust and