The Government Finance Officers Association's Recommended Practices

Article excerpt

Over the years, the membership of the Government Finance Officers Association (GFOA) has approved a set of Recommended Practices to be followed by finance officers in their application of the various disciplines involved in public finance. These Recommended Practices represent official GFOA policy positions and affect the operations of state and local governments.

To enhance and promote the professional management of governmental financial resources, GFOA has prepared this summary of its Recommended Practices. The descriptions of the recommended practices are organized by subject matter, with the date of adoption noted parenthetically, under the headings of 1) accounting, auditing and financial reporting; 2) cash management; 3) tax-exempt financing and debt management; 4) budgeting and financial management; and 5) public employee pensions and benefits.

Accounting, Auditing and Financial Reporting

Audit Coverage of Individual Funds. Recommends governments give consideration to subjecting their individual fund financial statements to a full-scope audit similar to the audit required of Combined Statements-Overview. (1983)

Governmental Accounting, Auditing and Financial Reporting Practices. Recommends specific actions governmental entities should take, and laws state governments should enact, to insure that all governmental entities prepare comprehensive annual financial reports in conformity with generally accepted accounting principles and obtain independent annual financial and compliance audits conducted in accordance with generally accepted auditing standards. (1983)

Strengthening the Independent Financial and Compliance Audit. Specifies recommended steps governmental entities should take in selecting independent auditors of financial statements and certain additional standards such auditing firms should meet in order to improve the quality of audits of governmental units. (1986)

Popular Reporting. Encourages governments to supplement their comprehensive annual financial reports/component unit financial reports (CAFRs/CUFRs) with simpler, "popular" reports designed to assist those who need or desire a less detailed overview of a government's financial activities than the necessarily broad and detailed presentations contained in the CAFR/CUFR. (1991)

Cash Management

Governmental Relationships with Securities Dealers. Sets forth recommended practices for governmental investors to follow in selecting depositories and securities dealers for purposes of investment transactions. Recommended practices address method of selection, assurance of capital adequacy of securities dealers, acknowledgment from depositories and dealers of receipt of information about governmental investors, risk awareness by investors and unreasonable risk disclosure by securities dealers, and price and yield quotations prior to executing transactions. (1986)

Repurchase Agreements. Encourages public finance officers to develop policies and procedures to insure the safety of repurchase agreements and sets forth recommendations relating to selection of parties to such transactions and proper collateralization practices. Recommends general use of master repurchase agreements, subject to appropriate legal and technical review, and recommends that governments using the prototype agreement developed by the Public Securities Association should include appropriate supplemental provisions regarding delivery, substitution, margin maintenance, margin amounts, seller representations and governing law. (1986)

Use of Various Types of Mutual Funds by Public Cash Managers. Clarifies the GFOA's endorsement of the use of money market mutual funds by public cash managers through the association's model investment legislation for state and local governments by setting forth information that investors should seek through study of a fund's prospectus and statement of additional information. Specifies special care cash managers should use when investing in bond mutual funds. …