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What Is the Governmental Accounting Standards Board?

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  • Written By: C. Daw
  • Edited By: O. Wallace
  • Last Modified Date: 01 April 2014
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The Governmental Accounting Standards Board (GASB) is an organization that sets guidelines for accounting and financial reporting in US state and local government institutions. GASB provides the standards for financial reports. This ensures that these reports are useful and reliable official documents that serve and guide, or educate the public, auditors, issuers, and all individuals or groups that make use of government financial reports.

The Board was established in 1984 primarily by the Financial Accounting Foundation (FAF), in coordination with ten national organizations of federal and local government officials. Neither GASB nor FAF is a government entity; they are independent non-profit organizations in the private sector. Nonetheless, the Governmental Accounting Standards Board is the duly recognized, official issuer of generally accepted accounting principles (GAAP) that guide state and local governments. This authority of GASB is acknowledged widely by the accounting industry, all state and local government bodies, and the capital markets.

While it is subject to oversight by the Board of Trustees of FAF, the Governmental Accounting Standards Board is an independent and autonomous body. This means that the board cannot be influenced by people in the government or by stakeholders in the business and accounting sectors. It is impartial and objective, and seeks to be transparent and open as it encourages public participation in the formulation of its standards and the GAAP in particular.

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It hears out the points of view of constituents and recommendations from other standards setters, which are carefully considered in a series of thorough, impartial deliberations. Afterwards, guided by useful findings from credible research, GASB comes up with its final recommendations. These due-process activities of the Governmental Accounting Standards Board are outlined in its published Rules of Procedure, which the Board strictly follows.

The GAAP standards are necessary because the government operates in fundamentally different ways from profit-driven businesses. People who use or consult financial reports from the government have different information needs compared to those who study the financial statements of private business companies. This means that the basic accounting rules and regulations do not effectively set standards that are needed for governmental entities, so GASB is responsible to ensure that guidelines are set that apply to all government institutions, as well as the users of the reports.

When the Governmental Accounting Standards Board publishes its standards, they do not automatically become federal laws or regulations. However, many state laws, as well as the audit process, do require compliance to these standards. Auditors require that a financial statement must be consistent with GASB standards and the GAAP before they render it to be fair and sound. The Governmental Accounting Standards Board is funded partly by sales from its own publications, and partly by federal and local governments.

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