When the Governmental Accounting Standards Board issued Statement 34, requiring government-wide accrual accounting and modified accrual accounting for governmental funds, it improved financial reporting enormously, but inevitably created some confusion.Part of that confusion was over one of the most widely used pieces of government financial information — fund balance. Grappling with vague definitions of “reserved” funds, state and local governments have been reporting restricted net assets and reserved fund balances inconsistently.
“There were problems with the way standards were being implemented, because they’re kind of vague,” explained GASB project manager Dean Mead, “and there was clearly a lack of understanding on the part of many constituents on how fund balance is supposed to be reported and what it means. Even if we were able to educate everyone so they understood what the statements required, the statements wouldn’t be giving the users what they needed.”
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