GFOA, GASB Again Find Themselves at Loggerheads

The executive board of the Government Finance Officers Association is again engaging in a spirited dispute against the Governmental Accounting Standards Board, this time arguing that it should cease its work on a project that aims to set standards for forward-looking statements in government financial documents.

In a one-page resolution that was approved at the GFOA’s executive meeting March 5 but not released on the group’s Web site until last week, the GFOA warns that GASB’s development of its “fiscal sustainability” project goes beyond the accounting standard-setter’s mandate. It “exceeds its legitimate authority and expertise and constitutes an inappropriate use of scarce resources,” the issuer group said.

“The GFOA believes that the issue of assessing a government’s future fiscal sustainability clearly is beyond the scope of accounting and financial reporting as they have traditionally and universally been understood,” the resolution said, adding that the GFOA board is “adamantly opposed” to the project.

GFOA executive director Jeffrey Esser was more pointed. In a brief interview, he said it is “totally inappropriate” for a standard-setting body to get into “the forecasting business and to require governments in their annual financial reports to do forecasting.”

“GASB has neither the expertise nor capability to set standards in that area,” he said. “To us, it’s an example of the board and staff making work because they don’t have enough real work to keep themselves busy.”

GASB declined to respond directly to GFOA’s resolution. Instead, a board spokeswoman forwarded a four-page summary of the program that said GASB officials moved the project to its “current agenda” from its research agenda in December. Staff are working on the project now and the board is expected to deliberate on the matter in August.

GASB said there are two primary reasons for moving forward with the project. One is that research and findings of other standard setters show that users of state and local government financial reports consider it important to understand a government’s past and current economic condition, “including how the government arrived at its current status, with an eye toward assessing a government’s future financial viability and sustainability.”

In addition, GASB said it was reacting to “increasing calls” from citizens and their elected representatives for greater transparency and accountability from all levels of governments.

“Considering the current economic downturn, which has created a growing national concern with fiscal sustainability issues at the federal, state and local levels of government, this is an especially appropriate time to consider the issue of economic conditions and fiscal sustainability,” the group said.

The spat between the GFOA and GASB comes about two years after the association abandoned its push to put the board out of business and transfer its accounting standards-setting to the Financial Accounting Standards Board, which establishes standards for corporations and nonprofit organizations. That effort stemmed in part from the GFOA’s concerns that GASB would not abandon another project on nonfinancial performance-measurement reporting called “Service Efforts and Accomplishments Reporting.”

The GFOA argued the project needlessly replicated a similar one it had already established. Last July, GASB suggested guidelines for voluntary reporting of so-called SEA performance information.

Also this month, the GFOA executive board approved a new advisory on issuing Build America Bonds, a revised public policy statement on taxable tax-credit bonds, and an updated advisory on the use of debt-related derivatives and an accompanying checklist. In addition, it approved two best-practices documents, a new one on continuing disclosure obligations and a revised one on the payment of the expense component of underwriters’ discounts.

The advisories, public policy statements and best-practices documents were all approved by the group’s debt committee at its winter meeting here in late January.

The revised policy on tax-credit bonds marks a departure from the group’s earlier policy, which dated back to the late 1970s  and staunchly opposed them. The updated document acknowledges that BABs have emerged as a significant sector in the municipal market.

The advisory document on BABs highlights topics issuers should consider when preparing to issue taxable bonds, when actually issuing them, and after they are sold. For example, it recommends issuers determine exactly how much in subsidy payments they are due to receive over the life of the bonds so they can be aware of how much monetary risk would exist if Congress were to retroactively modify the program.

The document says issuers should create a process ensuring paperwork requesting subsidy payments is sent in on time as well as one that verifies those payments were received.

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Washington
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