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Learn about the Governmental Accounting Standards Board (GASB) and its pivotal role in shaping government accounting standards. Stay updated with the latest developments in GASB standards and learn how to keep up with the right software.
Governmental accounting refers to the specialized field of accounting that focuses on financial management and reporting in the public sector. It involves the recording, analysis, and reporting of financial transactions activities undertaken by government entities. These include federal, state, and local governments, as well as other organizations and agencies.
The primary objective of governmental accounting is to provide accurate financial information to support decision-making, demonstrate accountability, and ensure proper stewardship of public funds.
Unlike private-sector accounting, governmental accounting has some unique characteristics and reporting requirements due to the nature of government operations and the various stakeholders involved.
The three types of governmental accounting are:
Fiduciary funds accounting focuses on tracking and reporting financial information for specific funds or account groups. Each fund is treated as a separate accounting entity with its own set of self-balancing accounts.
Fiduciary accounting is used to ensure the proper management and accountability of public funds, as well as to comply with legal and regulatory requirements.
Governmental accounting, also known as government-wide or entity-wide, provides a view of the financial activities and position of the entire government entity. It consolidates the financial information from all funds and accounts into a single set of financial statements.
Government-wide accounting is designed to provide a broader perspective on the financial performance and overall financial health of the government. It includes statements of net position, activities, and cash flows, which are prepared using the accrual basis of accounting, similar to the private sector.
This ensures that all of the government's assets and liabilities, including long-term and capital assets and liabilities, are accounted for in the financial reports.
Proprietary accounting is used for government-owned business activities that are operated similar to commercial enterprises. This type of accounting is used for activities such as utilities, transportation systems, and other revenue-generating operations.
Proprietary accounting follows accounting principles similar to those used in the private sector, focusing on the measurement of revenues, expenses, assets, and liabilities associated with these business-type activities.
These three types of accounting work together to provide a comprehensive financial picture of governmental entities, allowing for effective financial management, accountability, and reporting.
Established in 1984, the Governmental Accounting Standards Board (GASB) is an independent, private-sector organization that develops and issues accounting and financial reporting standards for U.S. state and local government.
The GASB is overseen by the Financial Accounting Foundation (FAF), an independent, not-for-profit organization that oversees and finances both the GASB and the Financial Accounting Standards Board (FASB).
The GASB is also advised by the Governmental Accounting Standards Advisory Council (GASAC), an organization that was established by the FAF’s Board of Trustees to advise the GASB on its agenda, priorities and procedural matters. The GASAC doesn’t vote on board matters or make decisions about standards.
Instead, it provides the GASB with contextual information about the diverse individuals that GASB may impact. This empowers the GASB to understand diverse views and make informed decisions accordingly.
The collective mission of the GASB, the FASB and the FAF, according to the FASB website, is, “to establish and improve financial accounting and reporting standards to provide useful information to investors and other users of financial reports and educate stakeholders on how to most effectively understand and implement those standards."
Learn more about the difference between GASB vs. FASB. Need help with GASB 87 compliance? Check out our comprehensive GASB 87 Implementation Guide.
The GASB board includes seven diverse board members – including a chairman and a vice chairman –all of whom are expected to have a deep understanding of governmental accounting and finance. Each board member is appointed by the FAF Board of Trustees for a 5-year term, and the chairman is the only full-time member of this board.
In addition to these board members, the GASB also assembles expert consultative groups and task forces to help them research standards and execute major projects.
GASB standards are recognized by:
Many individuals and organizations – including taxpayers, legislators, holders of municipal bonds and oversight bodies – use this information to make investments and shape public policy. Government officials can also use GASB standards to demonstrate their financial accountability and responsibility.
GASB, FASB and FAF trustees all relate to one another in the following way:
The goal of the GASB is to provide reliable, transparent and comparable government financial data. To help ensure that this happens, the GASB follows many due process activities before issuing new standards. These activities are announced publicly, and broad public participation is encouraged. They include:
Governmental accountants play a crucial role in ensuring the financial health and transparency of public sector entities. Their duties encompass a wide range of responsibilities, from financial reporting to compliance and budget management.
Governmental accountants are responsible for preparing accurate and timely financial statements and reports that comply with governmental accounting standards. They analyze financial data to identify trends, discrepancies, and areas for improvement, providing valuable insights to decision-makers.
Assisting in the development and monitoring of government budgets, accountants track expenditures and revenues to ensure fiscal responsibility. They analyze budgetary variances and provide explanations for significant differences, helping to optimize resource allocation.
Ensuring that all financial activities adhere to relevant laws, regulations, and policies is a key responsibility. Accountants stay informed about changes in financial regulations and implement necessary adjustments to maintain compliance.
Establishing and maintaining internal controls to safeguard financial assets is critical. Accountants also coordinate with auditors to provide necessary information and support during audits, ensuring transparency and accountability.
Managing and reconciling various government funds to ensure proper use of resources is another vital duty. Governmental accountants oversee grant-related financial operations, including compliance with reporting requirements, to ensure funds are used effectively and efficiently.
The current lease accounting standard is GASB No. 87.
The standard specifically:
You can learn more about GASB 87 and how to find a software that can facilitate GASB 87 compliance here.
Accruent's Lx Contracts is a lease accounting software that helps organizations comply with accounting standards, including the Governmental Accounting Standards Board (GASB) standards.
It allows you to centralize and organize all lease-related information, such as lease terms, payment schedules, and critical dates. This ensures that the necessary data is readily available for compliance with GASB standards.
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The Governmental Accounting Standards Board sets standards that follow Generally Accepted Accounting Principles (GAAP).These standards are intended to promote financial reporting and provide useful information to groups and individuals who use financial reports, including public officials, investors and taxpayers.
The GAAP, or Generally Accepted Accounting Principles, are the standards set by GASB, FASB, the American Institute of Certified Public Accountants (AICPA)and the United States Securities and Exchange Commission (SEC).
The GASB is funded primarily by accounting support fees paid by brokers and dealers who trade in municipal bonds. The funding mechanism was established by Section 978(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).
GASB stands for the Governmental Accounting Standards Board, which establishes accounting and financial reporting standards for U.S. state and local governments.
An example of government accounting is the preparation of a municipality's Comprehensive Annual Financial Report (CAFR), which includes financial statements and disclosures in accordance with GASB standards.
GAAP (Generally Accepted Accounting Principles) is a broad set of accounting standards for all entities in the U.S., including public companies and nonprofits.
Meanwhile, governmental accounting refers specifically to practices for state and local governments, following standards set by GASB, which sometimes diverge from GAAP to address public sector needs.
The purpose of a governmental accounting system is to provide a framework for managing public finances with transparency and accountability. It ensures fiscal responsibility and compliance with legal and regulatory standards, facilitating the reporting and monitoring of governmental financial operations.
In governmental accounting, a fund represents a separate fiscal and accounting entity. It consists of a self-balancing set of accounts that detail cash, resources, liabilities, and equities specific to certain activities or objectives.
These funds are segregated to ensure compliance with legal restrictions and to manage finances for designated purposes effectively.
