Municipalities could file their annual audit with the Comptroller’s Office using a far easier method, saving them time and taxpayer dollars, under legislation filed at the Statehouse.
Senate Bill 2258 would allow municipalities to prepare their annual financial audit through either an accrual basis or cash basis accounting practices. In June, the Comptroller’s Office sent a letter requiring municipalities use only the accrual basis accounting practice, a method that is more complicated, time-consuming, and costly because oftentimes, an accounting firm has to be hired by the municipality to conduct the audit.
Many rural municipalities want to use cash basis accounting because their budgets are basic, small, and don’t justify them using accrual basis accounting.
According to accountingcoach.com, under the accrual basis method of accounting, revenues are reported on the income statement when they are earned and expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid. Under the cash basis method of accounting, revenues are reported on the income statement when the cash is received.