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Government accounting in the US involves specific accounting functions for public sector entities. Federal entities follow guidelines from FASAB, while state and local governments follow GASB. Fund accounting, budgets, appropriations, and levies are used to record financial information.
Government accounting is a broad-based term that describes the specific accounting functions of public sector entities in the United States (US). Government accounting principles are used by federal, state, and local agencies that are in the public sector. Federal government entities generally follow accounting principles or guidelines developed by the Federal Accounting Standards Advisory Board (FASAB). State and local governments may be required to follow accounting principles and guidelines developed by the Government Accounting Standards Board (GASB).
According to its website, FASAB was established in 1990 to develop specific accounting standards and principles for the United States government. FASAB works in conjunction with the Congressional Budget Office, the Secretary of the Treasury, the Director of the Office of Management and Budget, and the Comptroller General of the United States in developing government accounting standards. These agencies may also help elect the board members who direct the specific accounting activities of FASAB.
GASB is an extension of the Financial Accounting Foundation (FAF) and the Financial Accounting Standards Board (FASB). GASB is responsible for providing guidance to state and local government entities regarding the application of Generally Accepted Accounting Principles (GAAP). GASB also seeks to improve the reporting capacity for state and local entities with respect to important financial information. Providing audit guidance for finance functions is another important part of government accounting.
Government accounting generally uses funds, budgets, appropriations, or encumbrances when recording and reporting financial information. Fund accounting separates money received by government entities into separate accounts for use in government operations. These funds are typically tied to government projects such as infrastructure, maintenance, school services, utilities, or other miscellaneous government spending. Budgets are developed to help federal, state, and local government entities determine financial means for future time periods. These budgets are generally created from information from the previous year. Government entities also try to project the money needed to pay for future services and determine if tax increases are needed to pay for these services.
Appropriations occur when government entities specifically set aside money for certain purposes. These credits generally represent a specific use for funds received by a government entity. Once a government entity takes money for a specific use, it is generally not allowed to change the appropriation request.
Levies are specific uses for receipts collected by the government, and generally occur before the government collects income or tax receipts from citizens. Governments often use liens for business contracts, equipment purchases, payroll, or other items specifically needed to run the government entity.
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