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Accounting and Financial Reporting

The Financial Accounting Foundation Board of Trustees Should Provide Governmental Trustees and State and Local Government Associations with Meaningful Input on GASB Appointments

The Government Finance Officers Association (GFOA), on behalf of its 21,000 members, urges the Financial Accounting Foundation (FAF) to reform its appointments process to the Governmental Accounting Standards Board (GASB). The reforms should promote transparency and insure state and local government associations and the FAF governmental trustees have input into the selection of GASB members, as was provided for in the 1984 agreement creating the GASB.

The Issue

In December 2019 the private sector members of the FAF Board of Trustees overrode the unanimous opposition of its own Governmental Trustees in voting to appoint an individual with no prior service in government to be the incoming Chair of the GASB. This was an unprecedented decision that will result in the GASB not being led by a representative from state or local government for the first time in its history. The FAF, in not honoring the spirit of the 1984 agreement, has broken trust with state and local government associations who founded the GASB.

Background

The following background highlights are explained in more detail in the attachment.

  • Under the US Federal system of government, the states have sole authority to establish accounting and financial reporting standards.
  • The GFOA and other state and local government associations created the GASB in 1984, under general oversight of the FAF.
  • The GFOA and states were significant funders of the GASB until 2010 when they supported more sustainable funding as part of the Dodd-Frank Act.
  • The important role of the FAF governmental trustees has been diminished over time.

Recommendation

GFOA strongly supports reforms of Financial Accounting Foundation governance to promote transparency and insure the knowledge and expertise of the governmental trustees and state and local government associations are considered in any appointment to the GASB, particularly to the position of chair.