The User's Perspective

December 2008

How Financial Report Users Have Their Say in Standards Setting

            The GASB understands that you are busy. 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 responsibilities to your place of worship and the organizations you belong to. When, exactly, will you have the time to participate in standards setting?

            Responding to a GASB survey or commenting on a proposed standard is pretty far down the list of many people’s priorities. But standards setting is vitally important to you, whether you realize it or not, in both your professional and personal lives. Standards determine in many ways what information you will receive to support making important business 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. Clearly, you have a lot at stake in the process.

            That process works best when the users of governmental financial information participate. 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 users in standards setting to the level of its other main constituencies—preparers and auditors of government financial statements. Although to some degree 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 the difficulty in finding time to participate.

            In light of this situation, the GASB has taken the initiative to make it easier for users, and constituents in general, to get up to speed on standards setting issues and get involved. This article highlights the ways in which having your say in the standards setting process has gotten a lot easier. It is our hope that, after reading this article, you will be motivated to play a (more) active role. 

Speaking Plainly

            For two reasons, it can be difficult to read GASB’s pronouncements. First, their subject is accounting and financial reporting, which can be highly technical. Second, the standards are written in a manner that is intended to ensure that the specific requirements are clearly delineated. Neither characteristic recommends GASB’s standards as summer beach reading.

            That is why the GASB has made a priority of communicating as plainly as possible about its proposed and final pronouncements. Virtually every document that the GASB issues is accompanied by a brief, plain-language article that summarizes the issue that the proposal or final pronouncement is intended to address and its key requirements. For more complex proposals, such as derivatives, the GASB has prepared a “plain-language supplement” specifically for users. These documents review the main provisions of the proposed standards 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 also keeps an archive of its plain-language materials that you can access at any time.

            When governments began issuing the new financial statements under 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. The GASB ultimately published seven “user guides” to financial reports, written especially for non-accountants and with a minimum of accounting jargon. Two of the guides are ideal for the layperson, three are very brief summaries of the larger guides and are intended for elected officials and board members, and the remaining two are directed at persons with some experience using financial reports. More information about the user guides is available and the guides can be purchased on 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 on line. Almost all of the GASB’s surveys offer an Internet-based form as one method of response.

            The GASB has allowed comment letters on its proposals to be submitted by email for some time now. For the past couple of years, when questions have been posed to constituents in a proposal, the survey software has been used so that people wishing to comment on the proposal may submit their input via an Internet form.

            The goal of these efforts is to offer quicker, easier options for constituents to offer feedback to the GASB. It is worth remembering, too, that constituent comments need not be academic masterpieces. What the GASB needs to hear from users boils down to answers to these questions: Would the information that would result from this proposal be valuable to the work you do or to your interest in government finances? How valuable would it be? How would you use it?

Roundtables and Public 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 in earnest during the development of Statement 34. The GASB held more than two dozen “focus groups” with users to obtain their views on the proposals for revamping the financial report.

            More recently, the GASB conducted roundtables as part of its research on pension accounting and financial reporting (see the article in this issue). Roundtables were held in New York City, Chicago, San Francisco, and Austin and included a wide range of constituents—preparers from governments and pension plans, actuaries, auditors in and out of government, and a variety of types of users.

            The GASB has used similar arrangements for obtaining comments on due process documents as well. As a supplement to the traditional public hearing format, the GASB has held public forums comprising a range of users of various types. User forums were held on the Invitation to Comment issued on fund balance reporting and on the both the Preliminary Views and Exposure Draft on derivatives. A public forum was conducted in November as part of the due process on the Request for Response on suggested guidelines for voluntary reporting of service efforts and accomplishments information (see the article in this issue).

            The common elements in the roundtables and forums are that they 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. In the case of public forums, the format also allows for exchange between the participants and the GASB members.

            In recent years, the GASB has made both public hearings 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.

Concluding Comments

            If just a fraction of the users of governmental financial information completed just one survey, or commented on one proposed standard, or participated in one roundtable discussion or interview—and if current participants did just one more of any of those things—then the level of user involvement would grow significantly. And, conceivably, 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 should know 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 much easier.

            Think about making participation in standards setting one of your New Year’s resolutions for 2009.

Further Reading