News Release 10-20-06


GASB Invites Public Comment on Accounting Issues Related to Fund Balance Reporting and Governmental Fund Type Definitions


Norwalk, CT, October 20, 2006—An Invitation to Comment (ITC) was issued today, and the Governmental Accounting Standards Board (GASB) is seeking constituent comments and perspectives on issues currently being addressed in the Board’s project on fund balance reporting and governmental fund type definitions.

Fund balance is the difference between assets and liabilities in governmental funds. It is among the most universally used metrics in state and local government external financial reports. Ideally, this information allows financial statement users to identify resources that are available to finance the activities, programs, or projects with which they are most concerned, whether it be making debt service payments, reducing taxes, or beginning a new service or expanding an existing one.

However, GASB research has identified several issues that may significantly diminish the usefulness of fund balance information reported to users of governmental financial statements, including:

  • The actions taken to set aside fund balance for specific purposes vary from government to government making it difficult to assess the likelihood that resources will be used for the purposes that are reported.
  • Some governments transfer resources from the general fund to other governmental funds without an intention to use the resources in the receiving fund—a practice which may mislead financial statement users regarding the amount of available resources and the purposes for which those resources can be used.
  • Some governments report fund balance as reserved for specific purposes when, in fact, it should be unreserved, perhaps because the current standards are not sufficiently clear. 

"Each of these factors has created significant diversity or inconsistency in the manner in which governments report their fund balance information," said Robert Attmore, GASB Chairman. "Our research suggests that the comparability of this information has been undermined and that it does not sufficiently address the needs of taxpayers, elected representatives, and many other users of governmental financial statements." The ITC provides greater insight into these issues and lays out potential remedies. The document considers possible revisions to the definitions of governmental fund types that would clarify their intention and sets forth three alternative models of classifying the components of fund balance.

Seeking Constituent Perspective

An ITC is a staff document designed to set forth opinions about accounting practice and seek comments at a relatively early stage of a project before the Board has reached a consensus view. This ITC is a step toward an Exposure Draft (ED) of a Statement of Governmental Accounting Standards but is not an ED, nor does it represent a preliminary view of the Board.

The public is encouraged to comment on the questions presented in the ITC. Those individuals or organizations that wish to submit a comment on the ITC can do so through an Internet-based form at Alternatively, comments should be emailed to the Director of Research and Technical Activities at or mailed to: 

Governmental Accounting Standards Board
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116

The ITC is available to download for free from the GASB Web site, The deadline for comments is January 31, 2007.

Public Meetings

In line with the Board’s commitment to rigorous and open due process, the GASB will hold a roundtable for external financial statement users and a public hearing on the issues raised in the ITC. These meetings will be held in New York City on February 1 and 2, 2007, respectively.

About the Governmental Accounting Standards Board

The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board's diverse constituency, including preparers and auditors of government financial statements, users of those statements, and members of the academic community. More information about the GASB can be found at its Web site,