What We Do: GASB

The independent, non-political organization dedicated to establishing rules that require state and local governments to report clear, consistent and transparent financial information to their constituents is the Governmental Accounting Standards Board (GASB).

In the early 1980s, market participants decided that the U.S. needed an autonomous, authoritative body to build an effective structure for creating and implementing consistent accounting standards for state and local governments. The goal was to promote financial reporting that would provide reliable, transparent and comparable government financial data to taxpayers and other stakeholders. In 1984, this effort resulted in the creation of the GASB.

The GASB’s mission is to establish standards for financial reporting that provide decision-useful information to assist individuals in assessing a government’s financial condition and performance. Today, taxpayers, holders of municipal bonds, members of citizen groups, legislators and oversight bodies rely on this financial information to shape public policy and make investments. These standards also help government officials demonstrate to their constituents their accountability and stewardship over public resources.

“Most people would agree that there is a need to standardize state and local pension reporting and make it more transparent and that process already is underway. Extensive work has been done on these matters by GASB, which is an expert, non-political board appointed by the independent foundation that oversees both private and public accounting standards in the country. The GASB board is comprised of accountants and financial analysts, many of whom have served as state or local auditors or comptrollers; the board enjoys substantial respect in financial markets.” – Testimony by Iris J. Lav, Senior Advisor, center on Budget and Policy Priorities, May 5, 2011

The GASB also works to educate the public, including financial statement preparers, auditors, and users, about its standards and the information those standards require governments to present in their financial reports.

The GASB meets the needs of taxpayers and other financial statement users by helping them decipher and understand financial statements issued by state and local governments through discussions, speeches, roundtables, and issuing easy-to-understand User Guides.

The GASB’s mission is achieved through an open and independent process that encourages broad participation from all stakeholders and objectively considers and analyzes all their views. The GASB’s due process is subject to oversight by the Financial Accounting Foundation (FAF) Board of Trustees.

GASB standards are recognized by governments and the accounting profession as the official source of U.S. Generally Accepted Accounting Principles (U.S. GAAP) for state and local governments.

Structure of the GASB

The GASB is one component of a non-profit standard-setting group that is autonomous of any corporate or government body. This group includes the FAF, the Financial Accounting Standards Board (FASB), the Financial Accounting Standards Advisory Council (FASAC), and the Governmental Accounting Standards Advisory Council (GASAC).

The GASB is composed of a total of seven board members, including the chairman. Six board members are appointed by Trustees of the FAF for five-year terms; they may serve up to 10 years. The chairman, who serves a single, seven-year term, is a full-time employee. The other six other members serve on a part-time basis. The members of the GASB are required to have knowledge of governmental accounting and finance and a concern for the public interest in matters of accounting and financial reporting.

The GASB staff supports the Board’s work. The staff is drawn from government, public accounting and the user community. The staff works directly with the board and its task forces, conducts research, participates in public hearings, analyzes oral and written comments received from the public on GASB proposals, and prepares drafts of GASB documents for consideration by the board.

The GASAC is a key part of the GASB’s work. The GASAC is comprised of approximately 30 experts, including local and state government accountants, public retirement fund executives, representatives of industry groups, and senior members of the academic and analyst communities. The council advises the GASB on accounting and financial issues, new agenda items, and other matters.

The GASB is funded primarily by accounting support fees paid by brokers and dealers who trade in municipal bonds. The funding mechanism was established by Section 978(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).

The GASB’s Standard-Setting Process

Before issuing its standards, the GASB follows the due process activities described in its published Rules of Procedure. The GASB’s stringent due process activities are designed to encourage broad public participation in the standard-setting process. These activities promote timely, thorough and open study of financial accounting and reporting issues by the preparers, auditors, and users of financial reports.

For many of the issues it addresses, the GASB:
  1. Appoints an advisory task force of outside experts
  2. Studies existing literature on the subject and conducts or commissions additional research if necessary
  3. Publishes a discussion document for public comment setting forth the issues being addressed and possible solutions
  4. Broadly distributes an Exposure Draft of a proposed standard for public comment
  5. Conducts public hearings and forums on its due process documents
Significant steps in the process are announced publicly. The GASB’s meetings are open for public observation and a public record is maintained.

The GASB’s Current Priorities

While the GASB’s ongoing mission remains constant, the group’s projects change with the times. The GASB works continually to keep accounting standards out in front of municipal finance trends. This helps ensure that financial reports reflect current realities.

For a complete list of GASB projects underway, visit www.gasb.org.

In 2013, the GASB is continuing to focus on improving accounting and financial reporting and expects to issue two Exposure Drafts addressing (1) measurement approaches in a Concepts Statement and (2) fair value measurement and application. The first project is ultimately expected to set in place a fundamental building block of the GASB’s conceptual framework, which supports consistency in approach to the Board’s standard-setting work. The second project will propose guidance addressing how governments determine fair value measures for investments and certain other assets.

The GASB has engaged in significant deliberations on other postemployment benefits (OPEB), the companion project to the pension standards issued last summer. An Exposure Draft on OPEB is expected to be issued in 2014 resulting from this reexamination of how retiree healthcare and other retiree benefits are reported.
The GASB project on the hierarchy of generally accepted accounting principles is also receiving significant consideration as a part of the Board’s 2013 current technical agenda. A proposed Statement intended to simplify the hierarchy is expected in early 2014.

For almost 30 years, the GASB has undertaken these and many other projects with one goal in mind: the continual improvement of accounting standards to provide decision-useful information to investors, taxpayers and other users of governmental financial reports. In a world where governments’ finances are coming under increasing scrutiny, the GASB’s singular dedication to this goal is more important than ever.