Governmental Accounting Standards Board (GASB): What is GASB?

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:

1. Fiduciary Fund Accounting

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.

2. Governmental Fund Accounting

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.

3. Proprietary Fund Accounting

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:

• State and local governments
• State Boards of Accountancy
• The American Institute of CPAs (AICPA)

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 FAF is essentially the “parent” organization. Its trustees oversee GASB and FASB, appointing board members and streamlining the standard-setting process, which the FAF management provides council and services to support standard setting.
• GASB and FASB are boards that set high-quality accounting and financing standards. While GASB sets these standards for state and local governments, FASB is charged with setting these standards for public companies, private companies and nonprofits in the U.S.

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:

1. Input from an GASAC advisory task force.
2. The publication of a discussion document that the public can comment on.
3. The public distribution of an Exposure Draft of proposed standards. Again, the public is open to comments.
4. Review of existing literature on related subjects.
5. Public hearings and forums on its due process documents.

Governmental Accountant Duties

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.

  1. Financial Reporting and Analysis

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.

  2. Budget Management

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.

  3. Regulatory Compliance

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.

  4. Internal Controls and Audit Facilitation

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.

  5. Fund and Grant Administration

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:

• Requires that all leases be reported as a capital lease/financing lease.
• Eliminates the classification of an operating lease unless the lease is a short-term lease, characterized as 12 months or less.
• Provides for three accounting treatments: short-term leases, contracts that transfer ownership, and contracts that do not transfer ownership.
• Requires that a lessee recognizes a lease liability and an intangible right-to-use lease asset and that a lessor recognizes a lease receivable and a deferred inflow of resources.

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.

Here's how Lx Contracts can help your lease administration process.

• Ensure and Maintain Compliance: Lx Contracts helps organizations maintain compliance with major accounting standards using Lucernex’s verified solution. This includes ASC 842 lease accounting, IFRS 16, and GASB 87.
• Simplify and Streamline Lease Management: The software offers a comprehensive view of a lease portfolio. This provides an easy understanding of strengths and weaknesses within a system. Identify underperforming assets, stay on top of expirations, and empower organizations to make intelligent and informed decisions.
• Improve Forecasting Capabilities: Prepare for and move towards future goals with robust information. Lx Contracts uses advanced reporting analytics to empower users with information. With these reports, lease administrators can forecast, budget, and allocate funds effectively. It is about strategic financial planning and resource management.
• Integrate with Other Systems: The best lease administration software can seamlessly connect with other business tools and software. Lx Contracts can connect with ERP, BI tools, CMMS, or FM systems. Take advantage of this collection of information to enhance decision-making and operations across the board.

Effective lease administration means healthy finances and operations. Lx Contracts offers simple yet advanced technology for compliance and efficiency. Think of this as an opportunity to drive an organization forward. Explore Accruent's software and take a step towards portfolio clarity and control. Learn more about Lx Contracts and schedule a demo today!

Additional Accounting Standards & Compliance Info

1. ASC 842
2. IFRS 16
3. FASB
4. IASB