ACCOUNTABILITY FOCUS
In developing new accounting principles relative to defining the reporting entity for state and local governments, the GASB focused on the concept of “accountability.” The GASB has defined accountability as the cornerstone of governmental financial reporting because the GASB believes that financial reporting plays a major role in fulfilling government’s responsibility to the public.
Despite the outward appearance of autonomy, the organizations described above are usually administered by governing bodies appointed by the elected officials of the state or local government or by the government’s officials servicing in ex officio capacities of the created entities. These officials of the stateor local government are accountable to the citizens of the government. These officials are accountable to the citizens for their public policy decisions, regardless of whether they are carried out by the state or local government itself or by the specially created entity. This broad-based notion of the accountability ofgovernment officials led the GASB to the underlying concept of the governmental financial reporting entity. GASBS 14 states that “Governmental organizations are responsible to elected governing officials at the federal, state, or local level; therefore, financial reporting by a state or local government should reportthe elected officials’ accountability for those organizations.”
Because one of the key objectives of financial reporting as defined by the GASB is accountability, it became logical for the GASB to define the financial reporting entity in terms of the accountability of the government officials (and ultimately to the elected officials that appointed these government officials). The GASB also concluded that the users of financial statements should be able to distinguish between the financial information of the primary government and its component units (these terms are discussed in more detail below).
To accomplish the objectives and goals described above, the reporting entity’s financial statements should present the fund types and account groups of the primary government (including certain component units whose financial information is blended with that of the primary government, because in substance, they are part of the primary government) and provide an overview of the other component units, referred to as discretely presented component units.
Taken From : Governmental Accounting Made Easy