Accrual basis – the method of accounting under which revenues are recorded when they are earned (whether or not cash is received at that time) and expenditures are recorded when goods and services are received (whether cash disbursements are recorded for those goods and services at that time).

Annual Report of Agreed-Upon Procedures – local governments with less than $550,000 in expenditures may elect, in place of a biannual audit, to provide for an annual report of agreed-upon procedures. The agreed-upon procedures shall include as a minimum: proof and reconciliation of cash, confirmation of cash balances, a listing of bank balances by bank, a statement of cash receipts and cash disbursements, a review of compliance with state law, and a report of agreed-upon procedures.

Assessed valuation – the value placed on a property for the purpose of distributing the tax burden.

Assets – resources owned or held by a government that has a monetary value.

• Current assets – assets which are available or can be made readily available to finance current operations or pay current liabilities (e.g., cash, accounts receivable which will be collected within one year).
• Fixed assets – long-term assets intended to continue to be held, such as land, buildings, machinery, and equipment.
• General fixed assets – fixed assets used in the operations accounted for by governmental funds. General fixed assets include all fixed assets not accounted for in proprietary funds or in Trust and Agency funds.

Audit – an examination of the government’s accounting records by an independent auditor.

Audit report – the report prepared by an independent auditor covering the audit work. The auditor’s opinion is included in the audit report, usually in the back of the report.

Balance sheet – the basic financial statement which discloses what a government owns (assets), what it owes (liabilities), and its equity (net worth or the difference between assets and liabilities) at a specified date in conformity with GAAP.

Basic financial statements – those financial statements, including notes, which are necessary for a fair presentation of the financial position and results of operation of a government in conformity with GAAP.

Basis of accounting – the point in time when revenues, expenditures, or expenses (as appropriate), and the related assets and liabilities are recognized in the accounts and reported in the financial statements.

Budgetary Level of Control – the level of accounts within the budget for which expenditures may not legally exceed appropriations. For example, if the function is the legal level of budgetary control, appropriations for each function may not be exceeded without incurring a legal violation. O.C.G.A. § 36-81-2 states that the Legal Level of Control shall be, at a minimum, expenditures for each department for each fund for which a budget is required.

Comprehensive Annual Financial Report (CAFR) – a detailed, standardized report that includes each individual fund and account group of the government and all financial transactions during the year. The report should include:

• An introductory section to describe the government’s organizational structure, services provided, departments included in the report, a summary of financial activities, and information about its legal operating environment.
• A financial section that includes the independent auditor’s report, financial statements, and notes. This is the most detailed section of the CAFR.
• A statistical section with tables that provide a detailed, broad picture of the financial condition of the government.

Depreciation – the portion of the cost of a fixed asset charged as an expense during a particular accounting period.

Encumbrance – financial commitment related to an unperformed contract for goods and services (e.g., a purchase order). Encumbered funds may not be used for any other purpose.

Finding – findings include criteria or basis for determining that a problem exists, a condition or situation that was observed, the effect or impact of the condition, and the root cause of the problem to the extent that it can be determined. Findings should result in recommendations that resolve the issue and are helpful to management. Findings are usually found in the back of the audit report. A finding may be reported as a material weakness, which is a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Fund balance – the difference between assets and liabilities for each fund. The fund balance is required to be reported in five components:  

1. Non-spendable fund balance – non-cash assets such as inventories or prepaid items.
2. Restricted fund balance – funds with limitations imposed on their use by external restrictions imposed by creditors, grantors, or laws or regulations of other governments.
3. Committed fund balance – amounts that can only be used for specific purposes pursuant to a majority vote of the governing authority by resolution or contractual obligation. Commitments may only be modified or rescinded by a majority vote of the Council.
4. Assigned fund balance – amounts intended by the governing body for specific purposes that may be assigned by the city manager/administrator under the authorization of the governing body. Equity amounts reported in special revenue funds, capital projects funds, and debt service funds not otherwise classified as non-spendable, restricted, or committed shall constitute assignments of fund balance.
5. Unassigned fund balance – residual spendable fund balance after subtracting all the above amounts.

Generally Accepted Accounting Principles (GAAP) – uniform minimum standards of and guidelines to financial accounting and reporting. The GAAP governs the form and content of the basic financial statements of a reporting entity.

Generally Accepted Auditing Standards (GAAS) – measures of the performance quality of auditing procedures and the objectives to be attained through their use. The GAAS is concerned with the auditor’s professional qualities and with the judgment exercised in the performance of an audit.

Governmental Accounting Standards Board (GASB) – a private, non-profit organization that is responsible for establishing and improving accounting and financial reporting standards for more than 84,000 state and local governments. While GASB is not a governmental agency, its rules are required in most states for financial reporting at the state and local level. Governments are required to follow GASB standards in order to obtain clean opinions from their auditors.

General obligation bonds – bonds for the payment of which the full faith and credit of the issuing government are pledged.

General Purpose Financial Statements (GPFS) – those basic financial statements which comprise the minimum acceptable fair presentation in conformity with GAAP.

Government Finance Officers Association (GFOA) – a professional association of state/provincial and local finance officers in the United States and Canada dedicated to the sound management of government financial resources. The GFOA has many helpful resources available at no cost on the association’s website.

Independent auditor – an independent auditor is a Certified Public Accountant (CPA) who examines the financial records and transactions of a city with which they are not affiliated. The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An independent auditor is typically used to avoid conflicts of interest and to ensure the integrity of performing an audit.

Interim financial statements – a financial statement prepared before the end of the current fiscal year and covering only financial transactions during the current year to statement date.

Interfund transfers – any revenue transferred from other funds of the local government. These operating transfers, although included in estimated revenues, are considered a financing source. Transfers should be based on management’s decisions and be within the applicable legal authority. Budget transfers should be guided by a long-term financial strategy. Transfers should also be guided by a policy that governs the length of interfund loans and the interest rate.

Measurement focus of accounting – the accounting convention which determines (1) which assets and liabilities are included on a government’s balance sheet and (2) whether its operating statement presents “financial flow” information (revenues and expenditures) or “capital maintenance” information (revenues and expenses).

Millage rate – the tax rate expressed in mills per dollar, i.e., one (1) mill equals $1 per $1000 of assessed valuation.

Modified accrual basis of accounting – the accrual basis of accounting adapted to the governmental fund-type measurement focus. Revenues and other financial resource increments are recognized on this basis when they become susceptible to accrual, that is when they become both “measurable” and “available to finance expenditures of the current period.”

Notes to the financial statements – the summary of significant accounting policies and other disclosures required for a fair presentation of the basic financial statements of a government in conformity with GAAP.

Operating statement – the basic financial statement which discloses the financial results of operations of a government during an accounting period in conformity with GAAP.

Revenue bonds – bonds whose principal and interest normally are payable from the financial resources of an enterprise fund.

Revenue sources – specific areas from which revenue is derived (e.g., property taxes, franchise fees, building permit fees).

Single audit – an expanded financial and compliance audit that includes standardized program compliance audit elements. Single audits are required for governments receiving certain levels of federal aid.

Sinking fund – a fund or account into which the city deposits money regularly to repay debt or other liability that will come due in the future.

Spending measurement focus – the accounting convention requiring that only current assets and current liabilities generally are included on a government’s balance sheet.

Statement of changes in financial position – the basic financial statement which presents information on the amount of the sources and uses of a government’s cash or working capital during an accounting period in conformity with GAAP.

Statistical tables – financial presentations included in the statistical section of the CAFR which provide detailed data on the physical, economic, social, and political characteristics of the reporting entity.

Uniform Chart of Accounts (UCOA) – state-mandated financial reporting format for governments (the most recent, 4th edition is available here). Includes a numbering system that assigns a unique number to each type of transaction and to each budgetary unit in the organization.