The purpose of financial reports is to report an entities financial performance for a period and the financial status at a given point in time. In order for the information to be useful, it needs to reach the user in a timely manner. For many, the year process is a task that requires a lot of time and energy to complete, especially as staff sizes may have been reduced in recent years.
For governmental entities who wish to receive the GFOA’s Certificate of Achievement for Excellence in Financial Reporting award, the required deadline is December 31. In order to meet this deadline, or another that may be imposed by a different agency, there are several steps that an entity can take to help reduce the time required to prepare the financial statements.
One such step would be to record activity throughout the year instead of simply recording the information at year end. Governments should record information at least quarterly and reconcile the information at that time. Often, many governmental entities wait until year end to record some items such as the activity related to capital assets. The year-end process would be improved if this activity was recorded and reconciled throughout the year.
In addition, the entity should develop accounting policies and procedures to assist in ensuring a timely closing process. This should include specific steps to be followed in identifying and preparing each estimate. The policies and procedures should also include steps related to the annual closing process and should extend beyond the Finance department. All departments within the entity should be aware of required deadlines for information related to the financial reporting process. As part of this process, it may be useful to create checklists to ensure that nothing is forgotten.
By recording activity throughout the year and properly planning for the year-end process, an entity can help ensure that the financial reports are completed in a timely manner and hopefully reduce some of the stress at year-end.
Jeff Patterson, CPA