What Is the Governmental Accounting Standards Board (GASB)?
The Governmental Accounting Standards Board (GASB) is an independent, private, non‑governmental organization that establishes accounting and financial reporting standards—generally accepted accounting principles (GAAP)—for state and local governments in the United States. Founded in 1984, GASB’s standards enable clear, consistent, transparent, and comparable financial information that taxpayers, bondholders, legislators, auditors, and oversight bodies use to make decisions and evaluate public finances. (GASB; Investopedia)
Key takeaways
– GASB writes GAAP for state and local governments; the Federal Accounting Standards Board (FASB) covers federal entities.
– GASB is governed by a seven‑member board appointed by the Financial Accounting Foundation (FAF) Board of Trustees.
– Funding primarily comes from accounting support fees on municipal securities trading, a mechanism established by Dodd‑Frank.
– GASB uses an open, consultative process that includes task forces, consultative groups, and public comment periods to set standards.
– Understanding GASB standards helps stakeholders evaluate government financial statements and municipal bonds. (Investopedia; FAF; Congress.gov)
GASB’s mission and role
– Mission: To improve financial reporting by state and local governments so users can make informed decisions. GASB, FASB, and FAF together work to establish and improve accounting standards and educate stakeholders about them.
– Scope: GASB standards apply to public entities below the federal level—states, cities, counties, school districts, public authorities, etc. They cover recognition, measurement, presentation, and disclosure requirements in financial statements and notes. (GASB; FAF)
How GASB develops standards
– Agenda research and project planning: GASB staff research issues and present potential agenda items.
– Consultative groups and task forces: GASB convenes technical task forces and consultative groups to gather diverse viewpoints and technical input. These groups provide research and feedback during project development.
– Exposure drafts and public comment: Proposed standards are published for public comment (for example, GASB issued an Invitation to Comment in June 2022 on risk and disclosures). GASB reviews comments and revises proposals as appropriate.
– Final standard issuance: After deliberations, GASB issues standards with implementation timetables and guidance. (GASB; Investopedia)
Oversight and funding
– Oversight: The FAF Board of Trustees selects GASB board members and provides oversight. The FASB also interacts with and is overseen by FAF, reflecting an enterprise structure for standard‑setting organizations.
– Funding: GASB is primarily funded by accounting support fees paid by brokers and dealers that trade municipal bonds, a funding approach established by Section 978 of the Dodd‑Frank Wall Street Reform and Consumer Protection Act (2010). This model aims to provide a stable funding base tied to users of government financial information. (Investopedia; Congress.gov; FAF)
Who serves on the GASB?
– Board composition: Seven members—one full‑time chair and six part‑time members (one vice‑chair and five others). Members are appointed for five‑year terms and may serve up to ten years. Members are selected for expertise across public accounting, government finance, financial statement users, and related fields to bring a mix of perspectives. (Investopedia; GASB About)
What is GAAP for governments and why it matters
– Purpose: GAAP provides a common framework and set of rules so financial statements are reliable, comparable, and understandable. For governments, GAAP ensures consistent recognition and presentation of revenues, expenses, assets, liabilities, pensions, and other significant items.
– Users: Voters, legislators, bond investors, credit analysts, and oversight agencies rely on GAAP‑based reports (such as Comprehensive Annual Financial Reports—CAFRs) to assess fiscal health and creditworthiness. (Investopedia; GASB)
What are municipal bonds and GASB’s relevance
– Municipal bonds: Debt instruments issued by state and local governments (or their agencies) to finance operations and capital projects (e.g., infrastructure, schools). Investors receive interest payments and principal at maturity.
– GASB relevance: Governments that issue municipal debt provide GAAP‑based financial statements and disclosures that investors and rating agencies use to evaluate credit risk and financial position. Some smaller issuers may use alternative accounting bases—knowing which accounting basis a borrower uses is important for investors. (Investopedia)
Practical steps for stakeholders
For state and local government finance officers
1. Monitor GASB agenda and exposure drafts:
– Subscribe to GASB updates and review exposure drafts to anticipate forthcoming changes and timelines.
2. Plan implementation:
– Conduct gap analyses comparing current practices to proposed standards; allocate staff, systems, and training resources early.
3. Engage with consultative groups:
– Participate in or monitor task force activities and comment on exposure drafts to influence practical application and transition guidance.
4. Update policies and disclosures:
– Revise accounting policies, financial statement formats, and note disclosures per final standards; coordinate with auditors on timing.
5. Communicate with stakeholders:
– Explain changes and impacts to governing boards, bond counsel, credit analysts, and the public to maintain transparency.
For auditors and accountants
1. Stay current on standards:
– Attend GASB webinars, read implementation guides, and leverage professional organizations for practice‑level guidance.
2. Perform readiness assessments:
– Evaluate clients’ data systems and internal controls relative to new recognition, measurement, or disclosure requirements.
3. Coordinate auditor‑client expectations:
– Agree on timelines for testing, disclosures, and corrected financial statements during implementation periods.
For investors, rating agencies, and analysts
1. Verify accounting basis:
– Check whether an issuer’s financials follow GASB GAAP and review any alternative reporting methods, adjustments, and reconciliations.
2. Use GASB disclosures:
– Review CAFRs and GASB‑required notes (pension, OPEB, debt, liquidity risks) when assessing credit risk.
3. Monitor GASB standard changes:
– Understand how new standards could affect reported liabilities, revenues, or fund balances and update credit models accordingly.
For citizens, legislators, and oversight bodies
1. Request GAAP‑based reports:
– Ask for CAFRs or GAAP financial statements and plain‑language summaries that explain fiscal condition and major risks.
2. Understand key measures:
– Focus on trends in fund balances, long‑term liabilities (pensions, OPEB), debt service requirements, and pension disclosure changes driven by GASB standards.
3. Participate in public comment:
– When GASB issues exposure drafts or invitations to comment, provide local perspective if proposed rules materially affect your jurisdiction.
How to respond to GASB proposals (practical steps for submitting comments)
1. Read the exposure draft and basis for conclusions thoroughly.
2. Identify local impacts—quantify costs, system changes, or timetable issues if possible.
3. Draft a concise comment letter: state support or concerns, provide examples, and propose practical alternatives.
4. Coordinate with professional associations (e.g., GFOA—Government Finance Officers Association) to amplify common issues.
5. Submit comments by the deadline and track GASB responses in final standards.
The bottom line
GASB plays a critical role in ensuring state and local government financial reporting is consistent, transparent, and useful for decision‑making. Its standards affect how governments account for debts, pensions, revenues, and risks—information that directly impacts taxpayers, investors in municipal bonds, legislators, and oversight bodies. Stakeholders should proactively monitor GASB activity, participate in consultations, and take practical steps to prepare for and implement new standards.
Sources and further reading
– GASB. About the GASB. https://www.gasb.org
– Investopedia. “Governmental Accounting Standards Board (GASB).” https://www.investopedia.com/terms/g/government-accounting-standards-board-gasb.asp
– Financial Accounting Foundation (FAF). News and About pages. https://www.accountingfoundation.org
– Congress.gov. H.R.4173 – Dodd‑Frank Wall Street Reform and Consumer Protection Act. https://www.congress.gov/bill/111th-congress/house-bill/4173
Editor’s note: The following topics are reserved for upcoming updates and will be expanded with detailed examples and datasets.