CNCounty News

Do GASB changes impact your county?

County financial reporting at a glance in new NACo report

At NACo’s Legislative Conference in Washington, D.C., panelists from the Government Finance Officers Association (GFOA) and Arlington County, Va. discussed accounting changes issued by the Governmental Accounting Standards Board (GASB) and the challenges faced by counties in the wake of these ongoing modifications. Most state and local governments follow so-called “generally accepted accounting principles” or GAAP — standards of accounting and financial reporting developed by the GASB.

To identify the impact of GASB standards across counties, NACo recently released Counting Money: State and GASB Standards for County Financial Reporting. This study examines state requirements for county financial reporting and the types of financial statements and accounting methods county governments employ.

The report is the first in a series of research products examining trends in county financial health. Understanding the diversity of county financial reporting and data is the first step. Its analysis of 3,053 county financial reports reveals that although most states require county governments to observe GASB standards, nearly 30 percent of counties do not observe GASB standards either in terms of reporting format, accounting method or both.

Understanding county financial reporting helps comprehend how counties function and deliver services to their constituents while also evaluating the parameters of fiscal transparency placed on counties.  Counties constantly balance serving residents while meeting the demands of state and federal mandates.  The variation in financial reporting among counties nationwide shows the diversity of state regulatory requirements, county needs, and the staffing and administrative capacity of county governments. 

County governments apply GASB standards either because it’s a state requirement or to receive a favorable opinion from auditors. Thirty-two states require counties to follow GAAP, and as a result 71 percent of county governments file annual financial reports according to GASB standards.  Nine states — Arkansas, Indiana, Kansas, Kentucky, Missouri, New Jersey, Oklahoma, Vermont and Washington — regulate the measurement, recognition, presentation and disclosure requirements of the county financial reports. 

About 8 percent of counties in these states elect to follow GASB standards (both the format of the financial report and method of accounting), to increase their chances of receiving a favorable audit opinion.  The variation of state requirements adds to the diversity of county financial reporting across the country and within states.

Instead of GASB reporting principles, 19 percent of counties use a financial reporting format decided by their state and other comprehensive basis of accounting (OCBOA). Another 10 percent of county governments use basic financial statements approved by GAAP, but they do not use accrual accounting.  Most of these county governments are on the smaller side; 94 percent of them have fewer than 50,000 residents. However, 10 large counties — those with more than 500,000 residents — implement these alternative types of financial reporting due to strict state requirements. All large counties in New Jersey fit this description.   

Almost a quarter of counties following GASB standards produce Comprehensive Annual Financial Reports (CAFR).  CAFRs are financial reports that follow the GASB standards and have more information, intended to provide a more robust financial and historical context of the county government. 

A CAFR’s additional discussions and analyses of county trends and statistical data add to the picture of a county’s financial standing. CAFRs are not required, but encouraged by GASB and GFOA as a best practice. 

The 567 counties that issue CAFRs are found across 38 different states. Counties in the South and West are most likely to use a CAFR for financial reporting. Hawaii is the only state in which all the counties release a CAFR for their annual financial report.

Eighty percent of the 126 largest counties — with more than 500,000 people — report using a CAFR. CAFRs are not exclusive to large county governments, but to counties more likely to issue municipal bonds on a regular basis. 


The full analysis is available at www.naco.org/CountingMoney and the companion interactive maps on NACo’s County Explorer interactive map www.naco.org/countyexplorer.

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