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Maintaining Government Financial Reporting with Workforce Shortages

October 25, 2022

By Dean Michael Mead, Partner, Carr, Riggs & Ingram, LLC, and formerly Assistant Director of Research and Technical Activities at the Governmental Accounting Standards Board

There is a moment in every Governmental Accounting Standards Advisory Council meeting during which members can bring emerging issues to the attention of the Governmental Accounting Standards Board (GASB). Invariably, one of the members will alert the GASB to the dire staffing situation in government offices responsible for preparing audited financial statements according to generally accepted accounting principles (GAAP).

They typically attribute the workforce shortages to several factors including the loss of staff to a combination of retirement and the attraction of better-paying jobs in the private sector. What’s more, finding qualified candidates can be difficult. Among other things, potential hires may have been accounting majors in college, but they’re not knowledgeable about governmental accounting. That’s no surprise because few colleges and universities offer governmental accounting courses, and the licensing exam for CPAs deemphasizes it.

Why bring this predicament to GASB’s attention? After all the Board has no explicit role in developing the staff necessary to deal with GASB standards (although it has made efforts to partner with academia in a variety of ways for the benefit of all concerned). The answer is that governments are concerned that GASB standards can potentially create a greater workload for overburdened staff, and they want the Board to make work simpler by:

  1. Not issuing new standards for a while
  2. Delaying the effective dates of recent standards
  3. Making the standards less complex
  4. Copying Financial Accounting Standards Board (FASB) standards, which are used in the private sector
  5. Reducing the requirements for small governments.

Those suggestions may seem attractive to the people making them, but I’d argue that each is full of their own flaws and complications.

Suggestion 1 implies GASB is setting superfluous rules; one wag called it “a hammer looking for a nail.” A quick look at the issues that have accumulated on GASB’s to-do list suggests the opposite: There is an overabundance of nails and GASB’s hammer is small. GASB continues to set standards because (a) the public still needs information to make decisions and hold governments accountable and (b) government finance keeps changing—new laws and regulations, new kinds of transactions, new variations on old transactions, and so on.

I recently made the point that governments should not focus on the number of GASB Statements but on which governments they  apply to, the level of effort needed to implement them, and when they have to be implemented. GASB takes into consideration the complexity of its standards when setting effective dates, spreading them out to avoid making governments apply more than one complex pronouncement at a time.

Suggestion 2 is untenable because the public is waiting for the information (a need GASB weighs against the cost to produce the information) or governments are waiting on the guidance to resolve difficulties in practice. Delay would serve neither.

Regarding suggestion 3, to the extent GASB standards are complex, it is because they address complex transactions. When governments stop engaging in complex transactions, GASB will stop issuing complex accounting rules.

Suggestion 4 has been brought up repeatedly since GASB was first created. There are many good reasons why there are separate governmental accounting standards. As a GASB white paper explains, “Governments are fundamentally different from for-profit business enterprises in several important ways. Their organizational purposes, processes of generating revenues, stakeholders, budgetary obligations, and propensity for longevity differ.”

Suggestion 5 is what some call “big GAAP/little GAAP.” GASB considers the particular concerns of small governments when it sets standards and has on several occasions provided them with additional time to implement more complex requirements. However, when it comes to reducing the requirements, GASB is confronted with the reality that the information needs of people who use small-government or big-government financial statements are the same. Municipal bond analysts, for instance, analyze the creditworthiness of governments the same way regardless of their size.

After spending the first decade of my career at a good-government group, it is written in my DNA that any government getting public tax dollars, no matter its size, must publicly demonstrate its accountability for those dollars. But the vast majority of governments are relatively miniscule—combined, the smallest 90% of governments raise just 5% of all state and local government revenue—making GAAP reporting a gold standard they may not be able to afford. For smaller governments that do follow GAAP, their ability to continue publishing trustworthy audited financial reports with their limited resources may depend on GASB performing the colossal task of developing standards that are both easier for governments to apply and informative for making decisions and holding governments accountable.


The contents of this blog post reflect those of the author, and not necessarily those of the GFRC or Carr, Riggs & Ingram, LLC