GASB EXPANDS ITS ROLE
The Governmental Accounting Standards Board (GASB) has recently ramped up the development of standards that would influence the way in which local governments report on performance and service outcomes. For example, if a city plans on reporting that emergency response times have improved in the city over the past decade, new GASB standards may attempt to tell the city how to go about such reporting.
City officials may well ask what that has to do with financial accounting. Good question. GASB is intended to be an organization that tells accountants and auditors how to do their jobs with respect to governmental finances. Somewhere along the way, though, GASB has expanded into other areas. Many organizations, including the Government Finance Officers Association (GFOA), have objected that performance and service standards are outside GASB's "jurisdiction." No matter: GASB's parent organization ruled in November 2006 that GASB may indeed branch out into the area of performance and service efforts and accomplishments (SEA). (It probably didn't hurt that GASB previously received grant money, in 1997, to do just that.)
While GASB standards are not laws, cities can be negatively affected in two ways by the publication of an onerous GASB standard: (1) it's possible that states could enact legislation that mandates the new standard; or (2) as has happened with GASB 45 (post-employment benefits reporting), failure to follow GASB standards can lead to poor audits or lower credit ratings.
There's some potential good news on the horizon, though. The National League of Cities (NLC) is participating in a joint program with the GFOA to develop alternative, voluntary service reporting guidelines that are intended to be less prescriptive than the path that GASB is expected to take. City officials with questions about the NLC/GFOA alternative to GASB SEA standards should contact NLC's Cathy Spain at spain@nlc.org, or at (202) 626-3123.