The User's Perspective

Summer 2012

How Financial Report Users Have Their Say in Standards Setting

            The GASB understands that you are busy. Often very busy. If you are a municipal bond analyst at a rating agency, underwriter, bond insurer, or mutual fund or other institutional investor, then using financial information about state and local governments is a demanding, full-time occupation. If you use financial information as a city council or school board member or as a volunteer in a taxpayer association, then you also have a separate day job. And you have a family. And there is that home project you keep meaning to tackle. When, exactly, will you have the time to participate in standards setting?

            Responding to a GASB survey or commenting on a GASB proposal may be pretty far down the list of many people’s priorities. But standards setting is vitally important to you, whether you realize it or not—both professionally and personally. Standards help determine what information you will receive to assist you in making important financial decisions—assessing the credit-worthiness of a government selling bonds, allocating a town’s budget resources—and personal decisions—where to buy a home or send your child to school, how to vote on a public referendum (some of which may also have a financial impact on your life). You may not always see the direct correlation, but you have a lot at stake in the process.

            And the process works best when the users of governmental financial information participate in it. After all, who knows best what information is most crucial for making decisions and assessing governmental accountability than the people actually using the information? Traditionally, though, it has been difficult for the GASB to engage financial statement users in standards setting to the level of its other main constituencies—preparers and auditors of government financial statements. While part of the problem may be a lack of awareness of the standards-setting process or of the opportunity to take part in it, the more likely culprit is simply that it is tough to find the time.

          The GASB has endeavored to make it easier for users, and constituents in general, to stay up to speed on standards-setting issues and to make your point of view heard. This article highlights just how easy it is to have your say in the standards-setting process. After reading it, we hope you will be motivated to play an active role in the process.

Plain Language

            Reading GASB proposals and pronouncements can be difficult for a couple of reasons. First, they address highly technical accounting and financial reporting issues. Second, although principles based, they often present proposals of detailed requirements. Neither of these characteristics recommends GASB literature as good beach reading.

            That is why the GASB has made a priority of communicating in plain language about its proposals and final pronouncements. Almost every major document that the GASB issues is accompanied by a plain-language article summarizing the issue that the proposal or final pronouncement is intended to address and its key requirements. For more complex issues, such as derivative instruments and pensions, the GASB releases a “plain-language supplement” with the proposed accounting and financial reporting standards.  This supplement is intended specifically for users. They review the main provisions of the GASB’s proposals with nontechnical wording. They focus on the information that would result from the standards if implemented as proposed, rather than on the technical aspects of how the standards work. The supplements are available to download free along with the main proposal.

            The GASB keeps an archive of its plain-language materials that you can access at any time.

Revamped and Updated User Guide Series

          With new editions of the original user guides now published and a brand new guide on the way, the GASB staff has nearly completed the process of fully updating and expanding the user guide series, which introduces state and local government financial reports to a broad, non-accountant audience using a minimum of accounting jargon.

            When governments began issuing new financial statements following the requirements of GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, the GASB took the initiative to assist users in understanding the information contained in the revamped financial reports by publishing the original editions in its user guide series. These highly popular guides quickly became essential reading for financial analysts and other users. Now about a decade later, the GASB has revamped, updated, and expanded the series, which now includes the following titles:
  • What You Should Know about Your Local Government’s Finances

  • What You Should Know about Your School District’s Finances
  • What You Should Know about the Finances of Your Government’s Business-Type Activities
  • An Analyst’s Guide to Government Financial Statements

            The three What You Should Know guides offer users a comprehensive, easily digestible introduction to the annual reports of local governments, school districts, and—new for 2012—business-type activities such as public utilities, hospitals, and colleges. The new editions of these guides cover more note disclosures and supporting information and include the major new pronouncements issued since the publication of the original guides.

            An Analyst’s Guide is geared toward more experienced and frequent users of governmental financial statements. In addition to introducing and describing the information that can be found in governmental reports, the newly expanded 2012 edition explores how basic analytical techniques may be applied to assess such issues as economic condition, financial position, liquidity, solvency, fiscal capacity, and risk exposure. The new edition updates and combines the current guide with the GASB’s guide to notes and supporting information to create a comprehensive, updated guide to the whole comprehensive annual financial report.

            More information about the user guides is available and the guides can be purchased through the GASB website.

Internet Participation

            The GASB has taken advantage of Internet-based survey software to allow respondents to research surveys to submit their answers online. Many of the GASB’s surveys offer an Internet-based form as one method of response. The GASB also allows comment letters on its proposals to be submitted by email and posts them on its website almost immediately.

            These efforts offer quicker, easier options for constituents to offer feedback to the GASB. What the GASB needs to hear from users boils down to answers to these questions:

  • Is this particular issue important to you?
  • What information do you need about the issue?
  • How valuable would the information proposed by the GASB be to you?
  • How would you use it?

User Roundtables and Forums

            In addition to employing surveys and interviews and conducting archival research, the GASB has increasingly conducted roundtable discussions as part of its research. These began during the development of Statement 34 when the GASB held more than two dozen “focus groups” with users to obtain their views on the proposals for revamping the financial report.

          The GASB conducted a series of roundtables in cities around the country as part of its research on pension accounting and financial reporting. These roundtables included participants from across the spectrum of users of financial reports, as well as preparers, auditors, and actuaries.

            User participation is also of great importance to the Board once the research phase of a project has been completed. Last year, the GASB conducted user forums in three cities to hear input on its proposed revisions to the pension standards. In May, the GASB conducted discussions with users regarding its proposals for reporting financial projections at the annual conferences of two user organizations—the National Federation of Municipal Analysts and the Governmental Research Association.

            The three pension user forums drew participants including representatives of citizen groups, research organizations, legislative/oversight groups, bond rating agencies, academics, and financial analysts. The two discussions of financial projections drew participants including municipal analysts and representatives of taxpayer associations and citizen groups.

           Roundtables and forums allow constituents to offer feedback in a more relaxed setting and do not require the preparation of formal testimony. A valuable aspect of such discussions is that they allow for dialogue among the participants, which tends to raise issues that otherwise might not have been mentioned. When held as part of the formal due process on a GASB proposal, this format also allows for exchange between participants and the Board members.

            In recent years, the GASB has made both roundtables and forums more accessible to its constituents by allowing participation by telephone. Now you can take part, with a minimal time commitment, no matter where in the country you are located.

A Call to Action

            During the comment period on the GASB’s Exposure Draft, Accounting and Financial Reporting for Pensions, which was issued in July 2011, the Board received 650 comments, but only about 40—just over 6 percent—of these were submitted by those in the user community. Similarly, during the comment period on the Preliminary Views, Economic Condition Reporting: Financial Projections (issued in December 2011), only 14 of 171 comment letters—just over 8 percent—were submitted by users. While users were instrumental during the research phase of both of these major initiatives, and did participate in the user forums and discussions mentioned above, the user community was surprisingly quiet at the moment when the GASB needed confirmation that what it proposed was what you need—or, that it fell short of the mark.

            Again, we understand how busy you are. Just as your input is critical to guide the GASB during the research phase, it is equally indispensable during the actual standards-setting process to see your formal comment on whether the GASB got the right answer.

            If just a fraction of the users of governmental financial information completed a single survey, commented on one proposal, or participated in one roundtable discussion, user forum, or interview each year—and if current participants did just one more of any of those things—then the level of user involvement would grow significantly. And, quite possibly, the GASB’s standards would lead to even more useful information as a result.

            If you did not realize that you can help to shape the type of information you receive in state and local government financial reports, then you might be interested to learn that a single, convincing argument from any quarter can influence the decisions made by the GASB members. If you thought sharing your views is too time consuming, then we encourage you to take advantage of the changes the GASB has made to make your participation easier.

          It you would like to discuss how you can become more involved in the GASB process, contact Kip Betz at the GASB, either by email ( or by telephone at (203) 956-5201.