Several months ago, the Governmental Accounting Standards Board (GASB) issued two new Exposure Drafts for proposals that would lead to a new government accounting concept statement and related standard. GASB invited comment on those proposals, a process in which Truth in Accounting participated directly and also encouraged others to participate.
GASB will begin to hold hearings on these proposals tomorrow, March 23. Truth in Accounting will be participating in those hearings.
Below are selected segments from a five-page comment letter by TIA board member John Kayser on GASB’s proposals. You can see the full letter here.
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“It is of the utmost ethical and moral importance that the accounting and reporting standards for state and local governments be of higher quality than those for non-governmental organizations (corporations, partnerships, non-profits, etc.).
… The changes called for in No. 3-20 and No. 3-25 go nowhere near what is needed to give many users the information they need to determine the financial sustainability and the sustainability of services. The citizens, voters, taxpayers and investors who provide the revenue and capital for the state and local governments to operate absolutely need truthful, relevant, transparent and trustworthy information. The GASB should not proceed with the changes as outlined in the Exposure Drafts. To not require fund balance accounting using total financial resources measurement focus and accrual basis of accounting because it is expensive is not prudent.
… While the Board concluded on page 48 of the Exposure Draft that individual funds should be identified as self-sustaining or requiring subsidization. Inexplicably, this is not applied to the government wide entity overall (the general fund). How can individual funds be subsidized if the entire entity is not sustainable?
… The following information is on the State of Illinois, the city of Chicago and the Chicago Public School (“CPS”) system … The severe financial decline in those three entities have not been at all adequately communicated to the various users of the information. The accounting standards and reporting have not required it. Those governmental units are financially unsustainable and their services to their citizens have not been sustained. The financial accounting standards have been fundamentally flawed for decades and border on gross negligence.
... The GASB must have a higher level of accounting standards. There are no independent third parties overseeing their government accountings standards like there is with FASB and nongovernmental entities. The financial and service sustainability of State and local entities are in question. The services they provide are of the utmost importance to the public and their citizenry. … Requiring fund balance accounting using total financial resources focus measurement and accrual basis of accounting is the tool necessary for the political system and the public to successfully address these issues.
… The importance of the services that state and local governments provide to the voters, citizens, their families and future generations is incredibly high. It is unethical and immoral not to have accounting and reporting standards that do not present the financial viability/sustainability of the entities and their ability to provide the services as expected.”