Governments typically maintain their accounts on a fund basis. At year end they convert the accounts from a fund (modified accrual) basis to a government-wide (full accrual) basis.
According to GASB, a primary government should include a potential component unit in it’s reporting entity if the unit is financially accountable to it.
The Comprehensive Annual Financial Report (CAFR) has three sections: Introductory, Financial and Statistical.
The Basic financial statements consist of the two government-wide statements (the statement of net assets and statement of activities) and the fund statements for each of the three group of funds.
Special-Purpose governments must prepare the same financial statements as general-purpose governments.
In assessing a city’s fiscal condition, analysts should consider the current environment in which a government operates.