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“Now this is not the end.It is not even the beginning of the end.
But it is, perhaps, the end of the beginning.”
bodies, the citizenry, and financial statement preparers and
auditors — to create the standards that now exist.
Winston Churchill, in a November 1942 speech
Since its inception, the GASB has issued 54 statements, six
interpretations, 14 technical bulletins, and five concepts statements. The first 25 years of the GASB can be viewed in many
ways,but one perspective is to consider the significant improvements to governmental financial reporting that have occurred
during the tenures of each of the three GASB chairmen.
T
he Governmental Accounting Standards Board
(GASB) observes its 25th anniversary this year. The
organization was created in 1984 as the authoritative
body to establish financial reporting standards — generally
accepted accounting principles (GAAP) — for state and local
governments.This is a brief story of the first years of the GASB,
including its major standards and the people who have done
the work—the board and staff members.
THE ANTONIO ERA
The GASB, as originally constituted, was composed of five
board members: four part-time members and a full-time chairman.Jim Antonio,the board’s first chairman,presided over the
GASB during its formative years from its inception until June
Before the GASB was formed, the long-standing National
1995. He and Marty Ives, the board’s first vice-chairman and
Council on Governmental Accounting
director of research and technical activ(NCGA) established financial reporting
The original agenda primarily ities, worked with constituent groups to
standards for state and local governdevelop and prioritize the original GASB
ments. The NCGA was a 21-member
included projects on topics that agenda,which has essentially been comboard that was created and supported by
governmental accountants had pleted.1 David Bean has served as the
the Municipal Finance Officers
Association (renamed the Government
discussed for many years — director of research and technical activities since 1990; Jay Fountain was assisFinance Officers Association in 1984).
those subjects included financial tant director of research from 1986 until
Although the NCGA had issued six statereporting for pensions, the 2004.
ments, 11 interpretations, and one conThe original agenda primarily includcepts statement that had advanced govfinancial reporting entity, and
ed
projects on topics that governmental
ernmental accounting, it was not considthe overall financial reporting accountants had discussed for many
ered an independent standards-setting
years — those subjects included finanmodel.
body because most of its members came
cial reporting for pensions, the financial
from state and local governments,includreporting entity, and the overall financial
ing many from management.
reporting model. The Antonio era was
During the late 1970s and early 1980s, parties who were
marked by completion of some of the major projects on the
interested in governmental financial reporting debated
original agenda and the development of standards that reactwhether the NCGA or another body such as the Financial
ed to standards issued by the FASB or to economic events.
Accounting Standards Board (FASB) should establish GAAP
One of the GASB’s early issues arose because the initial
for state and local governments.The GASB was the answer to
GAAP hierarchy — effective from 1984-1989 — required state
that debate.
and local governments to follow FASB guidance in situations
The GASB is an independent standards-setting body that is
where there was no GASB guidance.Thus,in several instances
overseen by the Financial Accounting Foundation,which also
when the GASB was planning to issue guidance on a topic, it
oversees the FASB. GASB Statement No. 1, Authoritative Status
issued standards that essentially stated,“Do Not Apply FASB
of NCGA Pronouncements and AICPA Industry Audit Guide, was
Statement No. XX.” For example, GASB Statement No. 4,
issued in July 1984. It recognized the NCGA Statements and
Applicability of FASB Statement No. 87,“Employers’ Accounting
Interpretations as the authoritative standards starting point for
for Pensions,” to State and Local Governmental Employers,effecstate and local government GAAP. Through the years, the
tively made FASB Statement No. 87 inapplicable to governGASB has built upon this base with input from its constituent
ments while the GASB was developing pension guidance for
groups — investors and creditors, legislative and oversight
state and local governments.
April 2009 | Government Finance Review
21
Exhibit 1: GASB Member History
Current Board Members
Robert H. Attmore, Chairman | 2004-2009 | former deputy
state comptroller, state of New York
Michael D. Belsky | 2008-2012 | mayor of Highland Park, IL
and former managing director, Fitch
William W. Holder | 2000-2010 | professor of accounting,
University of Southern California
Jan I. Sylvis | 2007-2012 | chief of accounts, State of Tennessee
Marcia Taylor | 2005-2010 | assistant manager, Mt. Lebanon,
Pennsylvania
Richard C.Tracy | 1999-2006 | retired director of audits,
Portland, OR
James M. Williams | 2002-2012 | retired partner, Ernst & Young
Former Board Chairmen
James F. Antonio, Chairman | 1984-95 | former Missouri state
auditor
Tom L. Allen, Chairman | 1994-2004 | former Utah state auditor
Former Board Members
Martin Ives | 1984-94 | former first deputy comptroller, New
York
Philip L. Defliese | 1984-90 | retired chairman and managing
partner, Coopers & Lybrand (now PriceWaterhouseCoopers)
Elmer B. Staats | 1984-90 | former comptroller general of the
United States
W. Gary Harmer | 1984-91 | retired business administrator, Salt
Lake City School District, Utah
Robert J. Freeman | 1990-2000 | distinguished professor of
accounting emeritus,Texas Tech University
Anthony M. Mandolini | 1990-92 | retired partner, KPMG Peat
Marwick (now KPMG)
Barbara A. Henderson | 1991-99 | retired director of finance,
Fullerton, California
Edward M. Klasny | 1992-2002 | retired partner, Ernst &
Whinney (now Ernst & Young)
Paul R. Reilly | 1995-2005 | retired finance director and
comptroller, Madison, Wisconsin
Cynthia B. Green | 1997-2007 | former vice-president for state
studies, Citizens Budget Commission
Edward B. Mazur | 1997-2007 | retired vice-president for
administration and finance,Virginia State University (also
former comptroller, Commonwealth of Virginia)
Girard C. Miller | 2007-2008 | retired president of Janus Funds
and chief operating officer of Janus Capital Group
22 Government Finance Review | April 2009
The best method for governments to report pensions was a
major source of disagreement among accountants before the
GASB was established, and this dispute was one of the primary factors leading to the conclusion that an independent
standards-setting body was needed for state and local government. The GASB immediately began work on a pension
disclosure project that was completed in November 1986 with
the issuance of GASB Statement No. 5, Disclosure of Pension
Information by Public Employee Retirement Systems and State
and Local Governmental Employers. It was not until near the
end of the Antonio chairmanship — and after much deliberation — that the board issued three pension related standards
in 1994 (GASB Statement No. 25, Financial Reporting for
Defined Benefit Pension Plans and Note Disclosures for Defined
Contribution Plans; Statement No. 26, Financial Reporting for
Postemployment Healthcare Plans Administered by Defined
Benefit Pension Plans; and Statement No. 27, Accounting for
Pensions by State and Local Governmental Employers) that
established comprehensive guidance on pension recognition, measurement, display, and disclosure.
The board members who worked on these and more recent
standards are listed in Exhibit 1. In addition to the board, several GASB staff members — particularly Penny Wardlow and
Lorraine Kremer — also were instrumental in developing this
series of pension standards. Exhibit 2 lists the key staff members who have worked for the GASB.
Other major financial reporting standards issued during the
Antonio era include Statement No. 3, Deposits with Financial
Institutions, Investments (including Repurchase Agreements),
and Reverse Repurchase Agreements; Statement No. 9,
Reporting Cash Flows of Proprietary and Nonexpendable Trust
Funds and Governmental Entities That Use Proprietary Fund
Accounting; and Statement 14, The Financial Reporting Entity.
Statement No. 3 and Statement No. 9 could be considered
reactive standards,but for different reasons.The former,issued
in 1986,provides disclosure requirements regarding risks associated with a government’s deposits and investments. This
project, which was led by staff member Venita Wood, was
added to the GASB agenda as a result of the banking failures
during the mid-1980s. GASB Statement No. 9 was issued in
September 1989 to provide a format for the statement of cash
flows that fits proprietary funds of governments better than
the format the FASB adopted in its Statement No.95,Statement
of Cash Flows, issued in November 1987.
GASB Statement No. 14 was issued after a reexamination of
the financial reporting entity standards developed by the
NCGA. The underlying principle of Statement No. 14 —
accountability — was developed in the first of two concepts
statements issued during the Antonio era. Paragraph 12 of
Statement No. 14 explains that the financial reporting entity
consists of the primary government and its component units
— organizations for which the primary government is primarily accountable and certain other organizations that, if
excluded, would cause the reporting entity’s financial statements to be misleading. Ken Schermann, one of the original
GASB staff members, was the lead project manager on
Statement No. 9 and Statement No. 14; Barb Chaney also was
instrumental in their development.
THE ALLEN ERA
Tom Allen served as the Board’s chairman from July 1995
until June 2004. Bob Freeman served as vice-chairman from
1998 to 2000. In 1997, the GASB’s part-time membership was
increased from four to six board members — for a total of
seven board members — to be consistent with the FASB
membership at that time. The Allen era may be best remembered for completing the financial reporting model and
postemployment benefits other than pensions (OPEB)
projects, although many other standards were issued during
his tenure.
The Financial Reporting Model Project. The financial
reporting model project was a complete reexamination of the
content and format of state and local government financial
reports, including required supplementary information (RSI).
Many of the issues addressed in the project had been debated by accountants for years. For example, should governmental financial statements be aggregated, or is disaggregated
fund and fund type information adequate? Should fund financial statements and budgetary comparison information be
retained? Should all of a government’s economic resources,
including its capital assets and long-term liabilities, be reported as part of its governmental net assets and activities? Should
the modified accrual basis, the accrual basis, or another basis
be used?
The issues addressed in the project were pervasive, contentious, and of such great importance to the GASB’s constituents that the reporting model project took 15 years to
complete. The GASB issued numerous due process documents,read nearly 800 comment letters from constituents,and
conducted 25 user focus groups and 15 public hearings. The
due process leading to the adoption of Statement No.34,Basic
Financial Statements — and Management’s Discussion and
Analysis — for State and Local Governments, even included
both the 1990 adoption of Statement No. 11, Measurement
Focus and Basis of Accounting — Governmental Fund
Operating Statements and its rescission in 1993.
The GASB issued Statement No. 34 in June 1999 to provide
a comprehensive model for state and local governmental
financial reporting. Allen characterized the standard as “the
most significant change in the history of governmental
accounting.”2 Statement No. 34 requires presentation of two
types of financial statements — government-wide financial
statements and fund financial statements. The governmentwide statements present consolidating aggregated information, while the fund financial statements present disaggregated information. Generally, the traditional fund financial statements are retained and improved — major funds are reported individually — because readers of governmental financial
statements found the additional, detailed major fund information more useful for making decisions than the fund-type
information presented in pre-Statement No. 34 financial statements.
The government-wide financial statements present governmental and business-type activities of the primary government and discretely presented component units in separate
columns. These statements are prepared using the economic
resources measurement focus and accrual basis of accounting. Thus, both capital assets (including infrastructure and
April 2009 | Government Finance Review
23
intangible assets) and long-term liabilities are reported in the
government-wide statement of net assets. The governmentwide statement of activities provides a measure of the cost of
a government’s services, which allows readers of the financial
statements the opportunity to assess whether the net costs of
providing current year services are borne by past, current, or
future taxpayers.
GASB Statement No. 34 reaffirmed the board’s belief that
budgetary comparison reporting is necessary for external
financial reporting. Governments must present budgetary
comparisons for their general fund and major special revenue
funds as part of their basic financial statements or as RSI
schedules.
nizing nonexchange transactions in government-wide and
fund financial statements.
Other Projects. The last remaining major liability not
reported in the government-wide financial statements after
Statement No. 34 was the OPEB liability. The framework used
for reporting OPEB was that developed for the pension standards several years earlier, and in 2004, the GASB issued
Statement No. 43, Financial Reporting for Postemployment
Benefit Plans Other Than Pension Plans, and Statement No. 45,
Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pensions, which provide
guidance on recognition, measurement, display, and disclosure for OPEB plans and employers. These two statements,
plus the pension standards and two minor statements issued
in 2005 and 2007,provide comprehensive guidance for reporting all postemployment benefits. Karl Johnson and Michelle
Czerkawski are the GASB staff memreporting model bers primarily responsible for developing the OPEB standards.
Statement No. 34 also adds an important component to RSI
— management’s discussion and analysis (MD&A) — which
precedes a government’s basic financial statements. MD&A is intended to
The financial
be an objective,easily readable analysis
project was a complete reexamiof a government’s financial activities
One other standard developed durand status that provides readers with an
nation of the content and format
ing the Allen era should be noted.
overview of a government’s financial
of state and local government GASB Statement No. 40, Deposit and
statements. Readers of financial statefinancial reports, including required Investment Risk Disclosures — an
ments have been particularly pleased
amendment of GASB Statement No. 3,
with the MD&A requirements, no doubt
supplementary information.
issued in 2003,requires governments to
in part because its explanations and
disclose the risks — such as credit risk,
analyses of state and local governinterest rate risk,concentration of credit
ments’ financial statements and other
risk, and foreign currency risk — associated with their
information help readers understand the financial statements
deposits and investments.This standard, unlike Statement No.
and why a government’s financial position has improved or
3, was not issued in response to a financial crisis. Instead, it is
deteriorated as a result of its current year’s operations.
a proactive standard that was developed because of needs
In summary, Statement No.34 provides answers to questions
expressed by those in the investor and creditor community.
that had been subject to debate for many years. Its development required tremendous effort by the board and its entire
THE ATTMORE ERA
staff. Senior staff members who made major contributions
Bob Attmore joined the board as chairman in July 2004 and
include David Bean, Ken Schermann, Suesan Patton, Bob
was recently reappointed through June 2014. Thus far, the
Buckham, Jay Fountain, and Penny Wardlow. Joe Blythe
Attmore era has not resulted in many major new financial
was the project manager on a related standard, GASB
reporting standards. Rather, his term reflects the maturity of
Statement No. 35, Basic Financial Statements — and
the GASB as a standards-setting body and has been marked
Management’s Discussion and Analysis — for Public Colleges
by an emphasis on completing a conceptual framework for
and Universities — an amendment of GASB Statement
governmental financial reporting and a proactive approach to
No. 34, which provides guidance on applying the reporting
setting standards.
model to colleges and universities. Another related standard,
GASB Statement No. 33, Accounting and Financial Reporting
GASB Concepts Statement No. 1, Objectives of Financial
for Nonexchange Transactions, provides guidance for recogReporting, and Concepts Statement No. 2, Service Efforts and
24 Government Finance Review | April 2009
Accomplishments Reporting, were issued during the Antonio
era. No concepts statements were issued during the Allen era,
though Statement No. 33 and Statement No. 34 were developed using an informal conceptual framework that is
described in the basis for conclusions section of those statements. In 2004, the board decided that completing a conceptual framework for financial reporting would be a priority.
Concepts Statement No. 3, Communication Methods in
General Purpose External Financial Reports That Contain Basic
Financial Statements — the first in an anticipated series of
three concepts statements — was issued in 2005. This statement provides a communication methods conceptual framework to assist board decisions about where information
should be placed in general purpose external financial
reports that contain basic financial statements, notes to basic
financial statements, and supporting information — required
supplementary information and supplementary information.
Concepts Statement No. 4, Elements of Financial Statements,
issued in 2007,identifies and defines the elements of financial
statements: assets, liabilities, deferred outflows of resources,
deferred inflows of resources,outflows of resources,inflows of
resources, and net position. Currently, the board is working on
the final concepts statement in this series. It will provide a
conceptual basis for recognizing elements in financial statements and determining the appropriate measurement attribute (e.g., initial value or remeasured value) for each element.
The GASB issued Concepts Statement No. 5, Service Efforts
and Accomplishments Reporting — an amendment of GASB
Concepts Statement No. 2, in 2008. Concepts Statement No. 5
clarifies that it is beyond the scope of the GASB to develop
specific nonfinancial measures or indicators of service or to
establish performance benchmarks. It is also intended to
serve as a framework for the board to consider in developing
suggested guidelines for the voluntary reporting of performance information. Through the years, many staff members
have contributed to the GASB’s conceptual framework.These
include Penny Wardlow, Terry Patton, Roberta Reese, Jay
Fountain, and Ken Schermann.
The GASB has issued important standards during the
Attmore era. These include Statement No. 51, Accounting and
Financial Reporting for Intangible Assets, to clarify questions
raised about intangible assets after the issuance of Statement
No. 34, which required reporting intangible assets that are
used in operations. Greg Driscoll was project manager on the
intangible assets project. Randy Finden was project manager
Exhibit 2: Key Current and Former
Staff Members of the GASB
Current Technical Staff
David Bean
Kip Betz
Michelle Czerkawski
Randy Finden
Wesley Galloway
Karl Johnson
Dean Mead
Lisa Parker
Roberta Reese
Ken Schermann
Current and Former Practice Fellows
Lisa Avis*
Harriett Commons
Donna Cullen
Greg Driscoll
Dan Kolvak
Andy Richards*
Bob Scott
Jaimie Soulvie
Former Technical Staff
Joe Blythe
Bob Bramlett
Bob Buckham
Sue Budak
Wilson Campbell
Barb Chaney
Jim Davis
Judy Doneiko
Jay Fountain
Dick Haas
Aarne Hartikka
Israel Herskowitz
David Jones
Lorraine Kremer
Jake Lorentz
Suesan Patton
Terry Patton
Rob Stout
Tom Strayer
Penny Wardlow
Venita Wood
Administrative Staff
Greta DeAngelis*
Ellen Falk
Mary Milligan*
Ragan Vincent*
Patti Waterbury*
* Current GASB staff
on Statement No. 53, Accounting and Financial Reporting for
Derivative Instruments, a proactive standard that was issued in
2008.Statement No.53 was not issued as a result of a failure of
derivative instruments used by governments.Rather,the board
concluded that the users of governmental financial statements needed more information about the risks associated
with derivative instruments and that recognition of such
instruments in financial statements should be improved.
April 2009 | Government Finance Review 25
The best method for governments to report
pensions was a major source of disagreement
among accountants before the GASB was
established, and this dispute was one of the
primary factors leading to the conclusion that an
independent standards-setting body was needed
for state and local government.
THE FUTURE
The GASB has accomplished much during its first 25 years.
The formative years have ended, the initial major projects
have been completed, and the GASB has reached a state of
maturity.This does not mean that the need for state and local
government financial reporting standards-setting has ended.
Governments continue to enter into transactions such as public private partnerships that have not been independently
considered, and Concepts Statement No. 3, No. 4, and No. 5
should be applied. In addition, the recognition and measurement concepts statement needs to completed and applied,
several GASB pronouncements need to be revisited, international issues may need to be considered, and practice issues
will arise from time to time.As long as governments are innovative in their efforts to finance services provided to their constituents,an independent standards-setting body will be needed to develop financial reporting guidance.Thus,there will continue to be a role for the GASB into the foreseeable future. ❙
Notes
1.Terry K. Patton and Robert J. (Bob) Freeman,“Governmental Accounting
Standards Come of Age: Highlights From the First 20 Years,” Government
Finance Review,April 2005.
2. Governmental Accounting Standards Board,“GASB Releases New
Standard That Will Significantly Change Financial Reporting by State and
Local Governments,” news release, June 30, 1999.
TERRY K. PATTON, Ph.D., CPA, CGFM, is the Robert Madera
Distinguished Professor of Accounting at Midwestern State
University. He was a project manager for the GASB from 1997 to
1999 and research manager from 2001 to 2007. ROBERT J. FREEMAN, Ph.D., CPA, is the Distinguished Professor of Accounting
Emeritus at Texas Tech University. He was a member of the GASB
from 1990 to 2000 and served as vice chairman from 1998 to 2000.
26 Government Finance Review | April 2009