A question of value.

• Author: Bruebaker, Gary H.
• Position: Editorial

In case you missed the annual business meeting in Nashville, the members of GFOA made it clear that the infrastructure requirement that GASB is trying to implement is widely opposed and, in many cases, will not be followed by state and local governments.

As I sat next to the podium and watched my good friend, President Doug Ellsworth, try to bring order to the chaos on the floor of the business meeting, I reflected on what had brought us to this sharp disagreement with the independent standard-setting board that we helped create. Certainly we have had disagreements with GASB before, but up until this point we have always thought that their decisions were both rational and practical in the real world. So what is it about reporting on the historical cost of infrastructure that has so frustrated the members of GFOA?

As I have traveled to state association meetings and talked to our members, I sense a level of frustration over gathering totally useless information and putting bad information in our financial reports. Clearly, information on what a government once paid to acquire an infrastructure asset is of no practical value to decision makers. What decision could possibly be made today based upon what a mile of road cost in 19817 How would knowing the past costs incurred for infrastructure assets help anyone evaluate a government's financial well-being or its infrastructure needs, let alone the condition of those assets today? Furthermore, allocating the historical cost of infrastructure assets to subsequent periods (i.e., depreciation) provides information of little, if any, practical value, because price increases over time inevitably render such data irrelevant and potentially misleading. Is one sixtieth the original cost of a mile of pipe placed in the ground in 1981 really a useful measure of the cost of using that pipe today in 1999? If so, for what purpose?

I also sense a level of frustration with the costs that are being imposed on state and local governments. Gathering the required infrastructure information would be expensive, involving significant systems modifications, increased staff, and consulting fees. Because governments have only limited resources, any money spent on capitalizing and depreciating infrastructure assets will not be available for other vital government services, such as educating our children and providing necessary police and fire protection. Accordingly, finance officers have a professional duty to keep...