4.1 Reporting Principles and Requirements
4.1.7 GAAP Versus Cash Basis Reporting
220.127.116.11 Approximately 20 percent of local governments – the largest and most complex in the state – report financial information in accordance with generally accepted accounting principles (GAAP). All other local governments report on a cash basis as prescribed in the Budgeting, Accounting, and Reporting System (BARS) Manual.
18.104.22.168 Under authority of RCW 43.09.200, the Washington State Auditor’s Office allows local governments the option to report on either a GAAP or cash basis. However, while the State Auditor’s Office does not require reporting on a GAAP basis, it may be a requirement of federal grants, bonds, contracts, or other oversight agencies.
22.214.171.124 As discussed in the BARS Manuals, the design of a government’s accounting system and controls for financial reporting is a management decision – including the selection of the basis of reporting. Adequate accountability, oversight and control can be achieved whether reporting on a cash or GAAP basis.
126.96.36.199 The most appropriate basis of reporting for a particular government is a matter of judgment based on the needs, activity and resources of that government. Each method has advantages and disadvantages. We recommend that governments carefully consider the costs verses benefits. To assist governments in this decision, a summary of common benefits and drawbacks of different reporting options is provided below.
188.8.131.52 GAAP basis reporting
184.108.40.206 Cash basis reporting
220.127.116.11 Governments should evaluate these general benefits and costs in relation to their specific situation, including their personnel, software systems, organizational structure and activities. Other factors that may be specifically considered include:
- Accounting and reporting basis used by the government’s fiscal agent or by entities for which the government acts as the fiscal agent;
- Accounting and reporting basis used by other entities with which the government engages in joint ventures or service contracts;
- Familiarity of management and the governing body with a particular basis of reporting;
- Importance and amount of the government’s non-cash assets;
- Importance and amount of the government’s liabilities not reported on Schedule 09;
- Whether there is uncertainty about future reporting needs, as it is easier to convert from GAAP to cash basis than the other way;
- Needs and expectations of external users of the government’s financial statements.