Looked at our annual town report for Charlestown, NH but never with
the lens I did today. Looking at the financials and the many reports used
to present the data to the residents of the town, I could see many
differences. The town reports listed salaries by departments and many
by individual job positions (no names were used). It also reported all
income and expenses relative to the related budgeted amounts. Every
department and sub-department had sections of their own. This is very
different from regular financials you look at. I believe it is relative to the
focus of the financials. A business is a for profit entity selling a good or
service to the public and have stakeholders. A government (in this case
my town) is not a for profit entity, it isn't in the business of selling goods
or services, and it has a very wide and diverse group of stakeholders. i
The financials for the government needs to inform the taxpayers where
exactly their taxes, registrations and any other fees they pay have gone.
The town needs to answer to the people as to whether they have
followed the budgets that were voted on. This is very different from
what stakeholders looking at a business's financials wants to see. They
want to see the revenue that was generated from their specific
investment and the investment of others. They want to know how well
the company has generated profits and what kind of net operating
margins they had, if they could pay dividends, if they increased or
decreased leverage, how well they managed to generate contribution
margins to provide for overhead and growth, and basically the general
financial health of the company. Because the focus of the two different
entities is different, it explains the difference in their reporting. Each is
providing its stakeholders with what they want and need to know, and
in the case of the local government, have a legal right to know.
Christensen, T., Cottrell, D., & Budd, C. (2019). Advanced Financial
Accounting, Twelfth Edition. Retrieved from https://prod.reader-
ui.prod.mheducation.com/epub/sn_33530/data-uuid-
fa2d6d0c43f04ae9b79f83570e0bd6db
