The National Association of State Auditors, Comptrollers, and Treasurers has reaffirmed its support of the Governmental Accounting Standards Board, but made clear it will oppose any changes to a 1984 agreement that allows it and another group to appoint three of 16 trustees of the Financial Accounting Foundation, which oversees GASB and the Financial Accounting Standards Board.
NASACT detailed its views on these issues in a one-page letter sent March 30 to Robert Denham, chairman of the FAF board of trustees.
“Our members, representing the principal financial officials in the 50 states, the District of Columbia, and the U.S. territories, believe that GASB is the proper body to address the unique aspects of government accounting,” said the letter, which was signed by Jan I. Sylvis, NASACT’s president and Tennessee’s chief of accounts. “We do not favor moving the GASB function into the [FASB].”
NASACT’s support of GASB comes as the Government Finance Officers Association has urged state and local government groups to put GASB out of business and transfer governmental accounting to FASB, which sets standards for nonprofit entities as well as corporations. The GFOA claims that some of GASB’s guidance is overly burdensome and costly and is beyond the board’s jurisdiction.
But in its letter, NASACT said: “The government environment is significantly different from that of the private sector. The government financial reporting model should reflect those differences and the unique challenges of government. GASB and its staff have the experience and expertise to understand these differences, and have done an admirable job throughout the GASB’s history to establish and improve financial reporting for state and local governments.”
“This is not to imply that every member of NASACT has agreed with every GASB statement — that has not been the case,” the group said. “However, we have actively participated in GASB’s due process, which we believe is critical in an independent standards-setting process, and we will continue to do so in the future to ensure that our voice is heard.”
At the same time, NASACT said it is “very concerned with the recent recommendations from the Securities and Exchange Commission requesting that the 1984 structural agreement be renegotiated.”
The agreement, which NASACT and the GFOA entered into with the FAF to establish GASB, allows the two government groups to choose three of FAF’s 16 trustees. In all other cases, candidates for FAF trustees are nominated by constituent groups or others, but are approved by the FAF.
The SEC has been pushing the FAF to ensure that all of the trustees are selected and approved in the same manner. The commission has asked the FAF to renegotiate the 1984 agreement to limit NASACT and the GFOA to nominating three candidates for trustee positions. But the ultimate approval for the three would rest with the FAF, not NASACT or the GFOA.
The SEC made the request in a series of discussions with FAF officials that were aimed at setting up formal procedures to implement provisions of the Sarbanes-Oxley Act of 2001 that require the SEC to provide more views on the selection of FAF trustees. Under the procedures agreed upon by the SEC and FAF, the commission would be able to recommend candidates for the FAF and even interview and express views about candidates. But the FAF would ultimately be responsible for approving any candidates as trustees. As part of that agreement, the FAF said it would try to renegotiate the 1984 agreement with NASACT and the GFOA.
GFOA chief financial officer Jeffrey Esser said last month that his group would oppose any changes to the 1984 agreement. He could not be reached for comment yesterday.
But NASACT expressed similar views in its letter.
“NASACT will not support any arrangement that allows influence by the SEC over the selection of the three state and local trustees,” the letter said. “The government trustee appointment process was at the core of our agreement with the FAF and was intended to ensure that state and local governments were adequately represented on the FAF board of trustees.”
