Explanatory brief of significant problems in accounting, reporting, and management of governmental utilities with revenue bonds outstanding;

              Explanatory Brief of Significant Problems in Accounting, Reporting, and Management of Governmental Utilities With Revenue Bonds Outstanding
Distributed at Annual Meeting of Municipal Finance Officers Association of United States and Canada, Chicago — June 1960; subsequently distributed to liaison committees to MFOA, namely, Municipal Section of American Bar Association, Investment Bankers Association, and Municipal Forum of New York; also distributed to certain bond attorneys and municipal-bond dealers.
THERE APPEAR to exist two separate problems respecting the effective use of revenue bonds that should engage the attention of individuals or agencies interested in such sources for the financing of govern­mental
improvements. Interested parties would include the govern­mental
bodies, bond dealers, bond attorneys, investors, governmental organizations, and auditors of such utilities engaged in the practice of public accounting. The problems that should engage their atten­tion
are described briefly as follows:
Actual conflicts appear to exist between the provisions in the typical revenue-bond ordinance and generally accepted accounting principles; the latter require that the accounts of governmental utili­ties
(such units generally include all issuers of revenue bonds) be kept on the accrual or modified accrual basis.
For the purpose of preliminary explanation, it should be stated that generally all revenue-bond ordinances, by express or implied terms, do provide for one or the other of two distinct bases of ac­counting—
References in various ordinances to the applicable basis are fre­quently
ambiguous, occasionally obscure, and subject to opposite in­terpretations
by equally interested persons, such as bond investors and certified public accountants auditing the accounts of govern­mental
units with revenue bonds outstanding. For example, a typical ordinance may provide that the utility shall "keep proper books,
BY FEED M. OLIVER Partner, Salt Lake City Office
PROBLEM NO. 1
a) Cash basis
b) Accrual (or modified) basis
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