Mandated Transparency Disclosures
Because public revenues rely heavily on coercion (taxation) and external generosity (grants), financial statement users require detailed contextual notes to assess the sustainability of the government’s funding model. Standard disclosure packages must include:
- The primary accounting policies adopted for the recognition of major revenue streams.
- Detailed breakdowns of major tax classes recognized in the statement of financial performance (e.g., separating corporate tax from personal income tax).
- The nature and type of major government grants received, along with a statement of any outstanding conditions that could force a refund to donors.
Reporting Tax Expenditures
A Tax Expenditure is a revenue foregone by a government due to specific tax exemptions, deductions, rebates, or credits written into the law to achieve social or economic goals (e.g., tax holidays granted to tech companies, or income tax deductions for historic home renovations).
- The Disclosure Mandate (GASB 77): GASB Statement 77 requires US governments to explicitly disclose the financial magnitude of these tax abatement agreements. This note reveals exactly how much potential tax revenue was given away through special political deals, allowing citizens to evaluate the true financial cost of economic development policies.