Unrest in Government Accounting

CPA Journal, The, Mar 2008 by Foltin, Craig

GASB Chairman Robert Attmore has responded to the criticism: "I think [the GFOA is] misguided and misinformed and I think they have a different agenda than what they're conveying on their website. I don't think they enjoy dealing with an independent standards setter."

GASB contends that many issues need to be addressed and that there is a need to move forward. When it comes to SEA reporting, GASB argues that two decades of research show that SEA reporting provides useful information that helps officials and citizens better operate and assess their governments' performance. GASB further asserts that because there is no profit motive as there is in the private sector, this is the only way to understand and evaluate how a government performs.

GASB bolsters its position with information available from its website (www.gasb.org), the publication in August 2003 of "Reporting Performance Information: Suggested Criteria for Effective Communication," and a listing of more than 100 government entities that have implemented performance measurement initiatives. GASB's bottom line is that SEA is part of its mission, SEA is essential for good government, GASB's standards will continue to be subject to due process with public comment, and that, after 20 years of discussion and research, it is finally time to move forward. Exhibit 2 provides an outline of the GFOA's and GASB's points of view.

The Controversy Continues

In another recent development the SEC may be getting more involved in the operation of the FAF and its subordinate organizations, GASB and FASB. It has suggested that the 1994 structural agreement be renegotiated. Beginning in 2007, the SEC has interviewed and reviewed GASB appointments. The Wall Street Journal quoted former SEC Chairman Arthur Levitt as saying, "FASB and GASB must be reconfigured to keep our markets healthy. These boards have fallen captive to constituent groups, slowing their progress or even diverting their efforts to keep pace with critical issues" (David Reilly and Kara Scanneil, "SEC Is to Get More Sway Over FASB," Wall Street Journal, March 28, 2007). Levitt called for public, rather than private, funding of GASB. Greater potential SEC involvement with GASB, along with the GFOA's call for reassessment, will make for challenging times ahead.

Where does this leave GASB and the SEA project? For starters, implementing the GFOA's call to disband GASB will be difficult. The GFOA has far to go and hasn't built a consensus for opposition. The GFOA's alternative-shifting governmental accounting standards setting to FASB-does not include a plan, a study, or a platform detailing how this transition will take place. Further research and specific proposals would provide better justification for the GFOA's position. Public dialogue and input from the GFOA's counterparts prior to its condemnation of GASB would also have been helpful.

Another prominent cofounder of GASB that has appointments to FAF and has traditionally allied with the GFOA, NASACT, has crossed sides and aligned with GASB on the SEA issue. On March 30, 2007, NASACT wrote a letter to the FAF stating: "We believe that GASB is the proper body to address the unique aspects of government accounting. We do not favor moving the GASB function into the FASB. GASB and its staff ... have done an admirable job throughout the GASB's history to establish and improve financial reporting for state and local governments." For its biggest collaborator to be on record disagreeing with the GFOA's position is a setback to the GFOA.