Uniform Chart of Accounts for Texas Counties
Uniformity in accounting systems and reporting has long been a goal of government officials. A uniform chart of accounts and financial reporting for Texas counties will provide valuable information that can be used by both the state and counties to make their service delivery more efficient and effective as well as provide state government with the data it needs to address local needs.
Local governments increasingly are pressured to develop and use sophisticated accounting systems. The development of such systems can be costly, which—though perhaps affordable to the largest government entities—can be prohibitive to the smaller governments. With a proliferation of individual systems for each governmental entity, taxpayers may also be supporting unnecessary, costly efforts.
Individual systems often are not developed in a manner that enables financial comparisons. Successful benchmarking projects across levels of government have highlighted the difficulty of benchmarking accounting information when uniformity does not exist. Successful benchmarking requires a comprehensive accounting system.
There are other driving forces for standardization. Taxpayers want accountability, data is needed for management analysis and improvement, and local governments are subject to a myriad of reporting requirements.
National efforts at uniformity
Nationally, the effort for uniformity has fallen on the Government Accounting Standards Board (GASB). Since 1984, the GASB has issued a series of pronouncements aimed at improving financial reporting and accountability.
A recent major pronouncement by GASB brings an added impetus to uniformity in accounting practices. The new requirements imposed on local governments by GASB 34 will require many local governments to implement wholesale revisions to their accounting systems. Participating governments with revenues of $100 million or more should have complied by June 15, 2001. Entities with revenues between $10 million and $100 million should have been in compliance with GASB 34 by June 15, 2002. Governments with revenues under $10 million have until June 15, 2003 to comply.
What other states are doing
A growing number of states have adopted and require uniform accounting systems for their local governments. Among this growing list are California, Georgia, Indiana, Michigan, New York, Ohio, Oregon, Utah and Washington.
The state auditor of Ohio has, for example, implemented a Uniform Accounting Network (UAN) that provides local governments with a complete computer system, along with training and support. Software, hardware, installation, training and support are provided by the State Auditor’s Office. In addition to a central accounting system, the network provides payroll, inventory, cemetery, budget, word processing, spreadsheets and database applications.
New York and Iowa have begun implementing online, Web-based accounting systems that address the needs of local governments. The Office of the New York State Comptroller is providing counties with free, easy-to-use software that will assist them in preparing their Annual Financial Reports. Iowa, through its IOWAccess Project 5, has implemented an electronic system that helps counties create budgets, property valuations and annual reports. The system also helps counties submit those items to the state and makes state financial information available on the Internet.
The most recent convert to uniform accounting for local governments is the state of Georgia. Their efforts deserve a closer look because of the care and planning that went into implementation. In response to the Georgia Future Communities Commission’s legislative package, the Georgia Legislature adopted the Local Government Uniform Chart of Accounts and Reporting Act.
Beginning in fiscal 2001, all Georgia cities and counties must use the new Uniform Chart of Accounts. Georgia “undertook the most inclusive processes . . . in preparing the chart,” according to the Georgia Municipal Association. Both the Georgia Association of County Commissioners and the Georgia Municipal Association were a part of the process. An advisory committee was formed in conjunction with these two associations and held meetings throughout the state. Input was sought from the Georgia Government Finance Officers Association, the Municipal and County Clerks Associations and the Georgia Sheriffs Association.
The state enlisted the help of the Carl Vinson Institute on Government and conducted training seminars across the state. A provision was made for “crosswalking,” which allowed entities with existing accounting systems to request a variance to convert their financial data to the prescribed reporting formats.
Early efforts in Texas
Since 1933, the Texas Comptroller of Public Accounts has had the authority to prescribe and prepare the forms and manner in which local governments collect revenues and keep their accounts.
It was not until 1977 that the Comptroller began to provide counties with direction consistent with this provision of the law. That year, the Comptroller published and issued the Standard Financial Management System for Texas Counties, commonly known as the “Red Book,” to Texas counties. While the Red Book sought to provide counties with a “how-to-do-it” guide, it emphasized that it was not intended as uniform procedures to be followed by Texas counties. The standards in the Red Book were intended as a yardstick and guide to meet minimum requirements.
Two surveys conducted by the Comptroller's Office in 1991 showed widespread familiarity and use of the Red Book by local governments. All respondents were familiar with the Red Book, and 67 to 71 percent were still using it at some level. In a survey conducted by the FDAC, 46 percent of respondents indicated that they developed their current chart of accounts from the Red Book. Another 29 percent used what was included with their software program. At least one software provider indicated that they used the Red Book in developing their chart of accounts.
In a more recent effort, the Texas Association of Counties (TAC) developed a uniform reporting methodology designed to fulfill the requirements of the U.S. Census Bureau’s “Survey of Local Government Finances.” TAC hopes this system will gather data that can be used by counties, the Legislature and others. As a result of this effort, TAC developed a Manual of Accounts for Texas Counties. In a preliminary report to the House County Affairs Committee, TAC pointed out that there is “a total lack of any comprehensive source of ‘apples-to-apples’ financial data . . . this lack of reliable data will continue to be a problem.”
After reviewing this history, the Comptroller recommended the Legislature amend state law to authorize the Comptroller’s office to adopt a uniform chart of accounts for county financial data and other pertinent information.
H.B. 2869, enacted by the Texas Legislature in 2001, established the FDAC and gave it a mandate to study county financial reporting requirements and systems and to make recommendations to the Comptroller and the Legislature for improving the collection and use of county financial data without additional costs to counties.
The FDAC was asked by the Legislature to look at the following issues:
- duplicative reporting requirements;
- the Government Accounting Standards Board’s most recent reporting standards;
- electronic filing; and
- costs associated with meeting the requirements.
The committee was directed to develop and recommend a consolidated uniform financial reporting procedure that would not impose a greater reporting burden on counties than current practices, and it was also charged with developing a voluntary uniform chart of accounts for counties.
Once the FDAC has adopted its recommendations, the Comptroller may implement the recommendations of the committee for reporting financial data and other pertinent information to the state. The Comptroller, however, is required to adopt the Uniform Chart of Accounts approved by the committee. The Uniform Chart of Accounts was adopted by the Comptroller in September 2002.
Counties are encouraged to use the Uniform Chart of Accounts developed and recommended by the FDAC to report financial data or other pertinent information to the state.
The FDAC recommended that the Comptroller use the high-level chart of accounts described in the succeeding chapters to allow Texas counties to utilize a uniform system without significant revisions to their current financial systems.
The “office/department” column on the chart of accounts matrix (Appendix C) represents the various departments/activities found in most counties. The FDAC recommends that counties do not change budget practices solely for the purpose of adhering to this Uniform Chart of Accounts. Counties should continue to use their current departments/activities; however, they should be able to group or roll up current departments/activities into the uniform sub-function/sub-program. The “uniform” sub-function/sub-program is to then roll up to the higher-level “uniform” function as shown on the chart of accounts.
For example, if a county does not break down civil and criminal courts within county courts, then it simply develops an approximate percentage between civil and criminal for the Uniform Chart of Accounts.
This initial Uniform Chart of Accounts represents Phase I of the FDAC’s work. Upon completion of Phase II, all reports currently required by the state will be identified. Phase II will also result in a more detailed chart of accounts to supplement this initial framework.