Standard-setter looks back - and forward to major innovations

Dark economic clouds may be swirling over governments large and small, but at the Governmental Accounting Standards Board, 25 candles on a birthday cake may help light the way out of the financial turmoil.

GASB, now a quarter-century old, has no power to meddle with the economic woes of governments, of course, but Chairman Robert H. Attmore said that its arsenal of standards makes clarity and transparency possible and thus lights the way toward economic recovery.

"Financial reporting has the potential to provide better public accountability and better transparency," said Attmore. "These are words that politicians are throwing around pretty freely right now, but these terms really do mean something, and that's what standard-setters are all about."

It was in 1984 that GASB first convened and appointed James F. Antonio chairman. The board had a lot of work to do, and in the next 25 years, it would accomplish quite a bit, including hammering out a conceptual framework that defines the fundamentals of government accounting. It would also grapple with pensions and other post-employment benefits. It would deal with derivatives. And perhaps most important, it would revolutionize government financial reporting when Statement 34 established a new accounting model requiring government-wide financial statements prepared on a full accrual economic resources basis.

In all, the board has issued 54 statements, lifting governmental financial reporting to new levels of transparency, precision and comparability.


Speaking for himself rather than the board, Attmore said that he believes the accounting model is much improved, but still needs work - perhaps in a radical new direction. "Traditional financial statements consist of a statement of financial position, or balance sheet, and a statement of operations," he said. "The balance sheet is a point in time ... and the operating statement is a look back. [But] the accounting model doesn't fulfill all our needs [because] it doesn't provide a look forward. I think we may be looking more at what we can do to address forward-looking information."

GASB has already been researching this as part of its project on reporting economic conditions. One big concept is fiscal sustainability - a government's ability to continue to provide its current level of services under its current fiscal policy. This would not be a matter of prediction but of projection, especially of expected revenues and expenditures.

The Federal Accounting Standards Advisory Board is finishing up a standard on fiscal sustainability that will require the federal government to issue statements of long-term projections. It would not be surprising to see GASB consider going in the same direction.

The U.S. Treasury Department warns that the federal government cannot sustain its current fiscal trajectory. This may be true of some local and state governments as well, a possibility that might be confirmed if these governments have to produce statements of sustainability.

Attmore also believes that GASB should consider looking into the potentials of digital reporting, and not just to improve the timeliness of information.

"If we take away the physical restraints of a financial report printed on paper, there's a lot more that can be done and can be communicated, and we can get more folks involved in the process," he explained. "My vision would be to have some kind of high-level summary report, some kind of popular report that would appeal to non-technical people, people who just want to know how their government is doing ... . That would be the top of a pyramid of information. The electronic report would allow other people to drill down into lower levels of detail. That could be some kind of combination of our current financial reports and some kind of performance or service efforts and accomplishments reporting."


Attmore stated that one of the board's most significant challenges has been to maintain its independence: "There are always folks who want to help us and point us in the right direction and exert influence, but we've done our darnedest to avoid that and maintain our independence. Our existence as part of the Financial Accounting Foundation helps us do that."

Case in point: When the board took on a project on reporting service efforts and accomplishments - the actual results of government activity - the Government Finance Officers Association objected and called for the elimination of GASB, asking to have governmental accounting rolled into the purview of the Financial Accounting Standards Board. The FAF backed GASB, recognizing the special nature of governmental accounting, and the GFOA later backed away.

The need to raise revenues also puts the board's independence on the line. Major contributors have sometimes thought that their support of the board implied that the board should support them and their positions on certain issues.

Concerned about ensuring independence by providing adequate funding for the board, the FAF issued a call to state governments, asking them to contribute. States, strapped by their own budget problems, did not rise to the call. An FAF spokesperson said that the foundation is looking at other options.

(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.

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