There are both legal and practical answers to this question. There is virtually no way that it can be answered on a global basis for all governments and governmental entities in the United States because there is no national requirement for state, local, and other governmental entities to issue financial statements in accordance with generally accepted accounting principles. Unlike publicly traded corporations that are subject to SEC requirements that require audited, GAAP financial statements on an annual basis, there is no such requirement for governments. The SEC, because of states’ rights issues that are well beyond the scope of this book, does not have the same ability to dictate accounting requirements for governments. This is so even though governments sell their debt securities to the public. As such, there is no national, legal requirement for governments to prepare GAAP-based financial statements.

At the state or local government levels, however, many governments’ charters, constitutions, enabling legislation, and so on do require the issuance of GAAP-based financial statements. These governments would have a legal requirement to issue financial statements prepared in accordance with GAAP. In addition,
there may be instances where states or state comptrollers prescribe the accounting requirements for municipalities and other types of local governments within a state. In these cases, these municipalities and local governments would also be required to prepare GAAP financial statements.

Taken From : Governmental Accounting Made Easy

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