GFOA responds to GASB reporting model initiative.

• Author: Gauthier, Stephen
• Position: Government Finance Officers Association; Governmental Accounting Standards Board

Recently, the Government Finance Officers Association (GFOA) formally responded to the Governmental Accounting Standards Board's (GASB) invitation to comment (ITC) document on a proposed new Governmental Financial Reporting Model. The GFOA's response was prepared by the Committee on Accounting, Auditing and Financial Reporting and was approved by the GFOAs Executive Board. This article will discuss some of the key positions taken by the GFOA on proposals contained in the GASB's ITC document.

Overview

The GASB's ITC document presents two different approaches that the board could follow in changing the current governmental financial reporting model. These approaches are referred to in the ITC document as Model 1 and Model 2. While both models share many common features, they differ substantially on a number of key issues. The GFOA supports the basic concepts and approach of Model 1 of the ITC document. At the same time, the GFOA believes a number of important changes should be made to that model.

Aggregated Reporting

Under current generally accepted accounting principles (GAAP), financial data are never aggregated beyond the fund-type level. That is to say, data from one fund type (e.g., the general fund) are never combined in a single column with data from another fund type (e.g., special revenue funds). Both Model 1 and Model 2 propose to change current practice by adding a new, highly aggregated level of reporting to the existing combining/individual fund and combined financial statements. This new level of reporting would be known as top-of-the-pyramid (TOP) financial statements. Model 1, for example, would use just two columns to report all of an entity's governmental and proprietary activities at the TOP level. Model 2 proposes a single column for this purpose.

GFOA supports the introduction of TOP-level financial statements but believes these should replace rather than supplement the combined financial statements. In other words, the GFOA believes a comprehensive annual financial report should include only TOP-level financial statements and combining/individual fund financial statements.

General Purpose Financial Statements

The GFOA believes that the fundamental concept of "liftable" general purpose financial statements (GPFS) is flawed and detracts from the primacy of the comprehensive annual financial report (CAFR). Accordingly, the GFOA does not believe that any portion of the CAFR should be separately designated as the GPFS. Instead, if less detailed information is needed in...