An independent study of the Governmental Accounting Standards Board commissioned by its parent organization finds opinions divided on what GASB’s responsibilities should include as a standard-setter for state and local government accounting.

GASB’s parent organization, the Financial Accounting Foundation, commissioned the study to provide insights to the FAF board of trustees on how GASB can best serve stakeholders within the context of its mission. Three independent researchers from three universities, working as a team, conducted the study. They included Donald R. Deis, Marc A. Rubin and Kenneth A. Smith of the University of Washington.

The research was intended to provide greater understanding of the needs and expectations of governmental financial report stakeholders – preparers, auditors, and users.

The study also sought to examine stakeholders’ understanding and expectations of the role of financial accounting and reporting standards in enabling users of financial reports to assess the “accountability” of reporting governments.

The research indicated that GASB is widely accepted as the appropriate organization to set financial accounting standards for state and local governments. However, the study found disagreement over two aspects of GASB’s scope: topics and process.

“Many of the disagreements center on the notion of accountability and whether the GASB’s efforts should be more narrowly focused on accounting and financial reporting of historical information or more broadly focused on areas beyond historical financial information,” said the report.

The study found a mix of both support and opposition for active GASB involvement in areas such as performance reporting, financial projections, financial sustainability, budgeting and cost reports, and cost accounting. For each of these topics, there appears to be greater support for GASB to provide voluntary guidance as opposed to mandatory reporting standards.

In addition, for the standard-setting process, the study found that auditors and preparers generally prefer a system that is slower, offers more opportunities for input, and reduces the cost and complexity of implementation. “Users of accounting reports strongly prefer a system that leads to reports being issued more timely,” said the report. “The GASB is perceived by some constituents to not adequately consider costs/benefits, to not conduct sufficient pilot testing or provide enough implementation guidance and to not adequately consider the input received from constituents. These views are correlated across constituent types where users are the most supportive of the GASB processes, preparers are the least supportive, and the auditors are either in the middle or similar to the preparers or users, depending on the procedural issue.”

"While largely supported as the legitimate institution for setting accounting standards, GASB is under criticism for the costliness, complexity and slow timeliness of their financial reporting model," said the study.

Over the next few months, the FAF trustees plan to review the study’s findings and explore the possibility of better defining the nature of GASB’s authority in setting standards for financial accounting and reporting for state and local governments. The trustees also intend to consider whether process or procedural enhancements would help clarify GASB’s scope of authority and better enable GASB to serve stakeholders within the context of its mission.  The trustees’ evaluation will include pursuing further opportunities to engage with stakeholders on these matters.

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