Definition of a Comprehensive Annual Financial Report
A comprehensive annual financial report is a common requirement imposed on governments from the local to the federal level by the National Council on Government Accounting. As the name implies, this type of accounting is only for government agencies and does not apply to businesses.
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History
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Local government corruption in cities throughout the United States towards the end of the 1800s and early 1900s coincided with the development of compelling government accounting theories that prevail in some form to this day.
Trust
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Comprehensive annual financial reports are public government accounting reports that show how civic leaders spend government money. Elected officials are bound to execute their duties according to law and therefore not easily susceptible to corruption. According to a 2009 joint report by the Governmental Accounting Standards Board and the Financial Accounting Standards Board, building public trust "creates investor confidence...which leads to robust and deep markets...resulting in a strong economy."
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Government Transparency
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Comprehensive annual financial reporting is also a way to monitor the financial stewardship of elected leaders. Citizens can decide if the money is spent properly or improperly.
Sound Public Finance
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Like most organizations, governments engage in financial forecasting and investment, and they take on debt. The comprehensive annual financial report is a mechanism to maintain healthy public bookkeeping to help avoid fiscal crises in states and cities.
Public Accountability
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Since public officials are accountable to voters, officials are bound to protect public interests. The comprehensive annual financial report helps hold public officials accountable to their constituents.
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