Audits of State and Local Governments

Chapter 4 FUND FINANCIAL STATEMENTS AND THE REPORTING UNIT

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

• Identify what must be included in the management discussion and analysis (MD&A) and required supplementary information (RSI).
• Identify major funds for reporting purposes.
• Recognize format and requirements of funds' financial statements.
• Identify the reporting entity of a government.

What a Government Reports

Governments are required to include certain minimum information in their external financial reports. The requirements are designed to meet the basic needs of a broad group of external users. A government's general purpose external financial statements contain, at a minimum, the following items: management's discussion and analysis, basic financial statements, and required supplementary information.

Fund Financial Statements

The financial statements for governments include both fund-based and government-wide statements. GAAP requires that the general purpose external financial statements contain at a minimum, the following:

• Management discussion and analysis (MD&A)
• Basic Financial Statements

—     Government-Wide Financial Statements

—     Fund Financial Statements

—     Notes to the Financial Statements

• Required Supplementary Information (RSI) (other than MD&A)

The relationship of the different elements that are required for general purpose financial statements can be seen in the following chart. This chapter ...