CPAs play an important role in shaping federal financial policy. But to shape any type of policy, you need to understand the basics underlying the current structure. One way to do this is to review the 10-K of an organization. Surprisingly, the federal government files a 10-K. Citizens can review it, and CPAs should also review it for a peek behind the curtain of the often-misunderstood government agencies and bureaus.
The Government’s 10-K Report: What You Need to Know
The government’s 10-K report includes financial reporting for 150 government entities. Some of these entities may impact your nonprofit organization, which is yet another reason why nonprofit financial managers and accountants should note the reports and make it a point to look at them.
The reports include:
- Financial position and condition
- Revenue and costs
- Assets and liabilities
- Financial obligations and commitments
- Analysis of important financial issues
- Significant conditions that impact future events
This should be enough information to provide a comprehensive and detailed picture of the government entity’s financial picture. The Federal Reserve and a few other entities are excluded from reporting.
These reports are either traditional, accrual-based accounting, such as you will see in the corporate sector, or nontraditional sustainability reports. Each report includes eight basic financial statements, with details on many aspects of the current and future budget.
What’s at Stake – and What You Need to Know
The complete analysis of these reports is available in the Journal of Accountancy. What CPAs and nonprofit financial management experts need to know is this: many of the budgets show disturbing fiscal gaps that, if left unchecked, can be dangerous for the economy.
The AICPA discusses the use of the U.S. government’s financial statements as they pertain to the nation’s fiscal health in a paper entitled “What’s at Stake? The CPA Profession on Federal Fiscal Responsibility”. Greg Anton, CPA, CGMA, a past chairman of the AICPA board of directors explains the far-reaching consequences if current policy is kept in place.
Although CPAs can probably understand the technical aspects of the document, reviewing eight statements from 150 federal agencies would take a considerable amount of time. There’s a layperson’s guide which might come in handy: the Guide to Understanding the Financial Report of the United States. This may prove easy reading, from which to grasp key insights useful for CPAs.
One of the most troubling aspects of this report is that, despite 19 years of releasing the report, the GAO has been unable to release an audit opinion. Many of the agencies included within the report have been audited, but certain groups like the Department of Defense remain an exception.
The AICPA urges CPAs to become better informed and to raise questions and concerns with local elected officials. CPAs are in a unique position to understand and explain these policies to local business leaders and others. As a nonprofit financial management leader, you are also in a special position of responsibility to your constituents, and some of this information may have deeper meaning for your nonprofit.
Understanding the information and taking the appropriate actions through your local elected officials is one way that CPAs can demonstrate important leadership skills in the nonprofit sector. Citizens and policymakers look to CPAs for guidance on important matters. Elected officials too need guidance on the technical aspects of federal budgeting, and concerns from local taxpayers. CPAs play an important role in this process.
At Beck & Company, we offer CPA services, nonprofit accounting, and business advisory functions for nonprofit organizations. Contact us today if you would like more information about our services or help with your nonprofit business needs.