The Governmental Accounting Standard Board (GASB), which is the national committee that establishes and works to maintain accounting standards for local governments across the country, reported last week that it was looking into the possibility of generating a “strict framework” for governments in their reporting on activities that are business-like in nature.
Activities like operating utilities and the like are what the GASB had in mind when it spoke about its plan to implement the regulatory guidelines. The Board released a statement regarding the level and nature of the scrutiny it is giving to local governments in the US and how they undertake their accounting practices in areas where they have trustee or custodial control over assets that belong to other entities.
Trustee or custodial control over assets by local governments is considered by the GASB to be a fiduciary duty. The proposal it is laying out would provide those who use financial statements with the information they need. This would include accounting practices in business-like activities such as operating utilities. It would also impact hospitals, public universities, and others that – generally speaking – have not made it a habit to report their fiduciary activities.
The proposal is in its earliest stages and the GASB will continue to develop it in 2015. Once it is complete, it could set a definitive standard as to when a particular local government will be mandated to present financial statements about a specific activity and what information those statements need to include.
The proposal boils down to what governments will be required to report and what they will not, but the focus is likely to be centered on the inflow and outflow of funds.