The Governmental Accounting Standards Board (GASB) was created in 1984 by the Financial Accounting Foundation (FAF) to set accounting and financial standards for local and state governments.
Even though business accounting standards are already in place through the SEC, the government has different accounting standards. Truth in Accounting does not understand or support this position.
Who is FAF, and why were they created? The Financial Accounting Foundation was created in 1972, driven by accounting-related lawsuits presented in a report by Francis M. Wheat to the American Institute of Certified Public Accountants. The AICPA recommended the creation of the Financial Accounting Standards Board (FASB) to set financial accounting and reporting standards for not-for-profit organizations and public and private companies. FAF was created to choose those board members.
According to the GASB, its standards aim to provide a clear, comprehensive, and accurate picture of government financial health, supporting informed decision-making by stakeholders, including taxpayers, legislators, and public officials.
However, our yearly research repeatedly shows cities and states lack significant money to pay their bills, making us question if the GASB’s aim is being met.
Therefore, Truth in Accounting's next goal is pushing the GASB to eliminate modified accrual accounting in government reporting. This hybrid method combines cash and accrual accounting elements with different approaches for long-term assets like fixed assets and debt and short-term items like accounts receivable and inventory. It is not the most transparent method of accounting. It confuses citizens and elected officials about a government entity's truthful financial state. We advocate for full accrual accounting, or the name we coined, FACT-based accounting [Full Accrual Calculations Technique].
Transitioning to FACT-based accounting will be a pivotal advancement in enhancing government financial reporting and ensuring sound fiscal management, ultimately giving citizens across the nation a brighter future. After all, if the government can’t count, we can’t count on the government.