Proposed changes to governmental accounting standards would increase complexity and costs for local governments

Cities are encouraged to review and submit comments to the Governmental Accounting Standards Board (GASB) on newly proposed GASB statements that could significantly change requirements and increase costs for financial reporting by February 26. GASB is responsible for setting rules for accounting on a Generally Accepted Accounting Principles (GAAP) basis for state and local governments.

The State Auditor’s Office (SAO) sent a letter earlier this month to its national association expressing concerns with the timing, potential costs, and increased complexity of the proposed changes. SAO is also expected to provide comments to GASB on the changes.

Concerns related to the proposed changes include changing the timing and method for how capital projects are accounted for in the reporting model, changing the recognition of revenue for taxes with delayed collection such as the property tax, increasing the amount of explanation for unusual transactions, and changing how short-term financial resources are reported.

The changes are reflected in three proposed draft statements:

• Financial reporting model improvement – Project 3-25
• Preliminary views revenue and expense recognition – Project 4-6P
• Recognition of elements of financial statements – Project 3-20

City finance staff are encouraged to review the proposed changes and provide comments to AWC and to provide direct input to GASB by the February 26 deadline.