Regulation: Cox: GASB Should Stay in Business

Published March 28, 2007, 2:00 a.m. EDT

Updated August 25, 2007, 1:08 p.m. EDT

2 Min Read

The Governmental Accounting Standards Board should continue to be the accounting and financial reporting standards-setter for state and local governments, Securities and Exchange Commission chairman Christopher Cox said yesterday.

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Cox made the remark after being asked about the Government Finance Officers Association's recent bid to put GASB out of business and transfer governmental accounting standards-setting to the Financial Accounting Standards Board, which sets accounting standards for corporations and non-profit organizations.

The GFOA detailed its complaints against GASB in a notice posted on its Web site earlier this month and urged state and local government groups to support its proposal to shift governmental accounting to FASB. The finance officers contend that GASB has been trying to impose guidance or standards on governments that are overly burdensome and that go beyond its jurisdiction.

But Cox, who recently announced an SEC initiative to improve muni disclosure and accounting, said after a House Appropriations Committee panel hearing yesterday: "Our expectation is, given the expertise that GASB has developed and the important distinctions between municipal finance and the rest of accounting and reporting, that GASB should continue to play a leadership role."

GASB officials claim the GFOA has no authority over GASB and warn that its proposal threatens the independent standards setting process.

Cox said yesterday that the SEC has been "working very closely with ... FASB and GASB" as well as the Financial Accounting Foundation, the group that oversees them, "on a variety of fronts."

The GFOA and SEC appear headed toward butting heads over another issue that has risen from these discussions -- the way in which three FAF trustees representing governments are selected. A 1984 "structuring agreement" that helped establish GASB allows the GFOA and the National Association of State Auditors Comptrollers and Treasurers to select three of the FAF's 16 trustees.

For the remaining 12 positions, individuals are nominated by constituent groups or others but are approved as trustees by the FAF members.

The SEC wants all of the trustees selected in the same way, with FAF members having final approval over all candidates. The FAF recently agreed to try to persuade the GFOA and NASACT to amend the 1984 agreement to limit their role to nominating rather than actually selecting three of the FAF's 16 trustees.

The FAF and SEC also recently agreed to formalize procedures that would allow the commission to recommend individuals for the FAF as well as to interview and express views about all trustee candidates. The procedures would implement provisions of the Sarbanes-Oxley Act that requires the SEC to provide more views about the election of FAF trustees.

The SEC reviews the level of mandatory "accounting support fees" that FASB, under Sarbanes-Oxley, is authorized to charge public companies to pay for "recoverable expenses."

But GFOA chief executive officer Jeffrey Esser said this week that GFOA is completely opposed to giving up any of its authority to select FAF trustees.

"We have no intent of changing," he said. "We only have three out of 16 trustees."

Esser suggested the FAF, instead, make eight of its trustees representatives of governments since it oversees both GASB and FASB.