Internal and External Users to Governmental Statements

Internal and External Users to Governmental Statements

1. The objectives of government and not-for-profit (GNP) are different than for business. The objective for business is to make a profit and grow with increasing profits over time while they are governed by the marketplace and its owners or stockholders. In contrast, GNP’s are governed by their budget and are accountable to its governing body. “Governing boards cannot neatly be categorized as either internal or external users” (Granof & Khumawala, 2013, p. 14). Internal users for business are the decision makers for the business, while the decision makers for GNP’s are external users. According to Granof and Khumawala (2013) regarding GNP’s, “The distinction between internal accounting and external accounting is often blurred” (p. 28). There are many different financial report user groups in GNP’s, and each may have different needs for the information provided. Although the general financial reports are used by external users, the non-principal users (internal user’s in management) may rely on the data to make decisions in order to assure they are in compliance with their budgets.

2. There are two reporting models under Governmental Accounting Standards Board (GASB). The first model is the government-wide statements; the second, fund financial statements. Users of government-wide model prefer a broad perspective or overall aggregate picture of the government’s economic resources and capital assets. In contrast, the fund financial model is a collection of separate funds and is preferred by users that want or need to analyze particular funds.

Government-wide statements have two required statements, the statement of net position and the statement of activities. However, fund financial statements there are three main sets of statements, governmental, proprietary and fiduciary funds. Government-wide statements are accrual based in comparison