GASB reporting model may need more time.

Governmental Accounting Standards Board Chairman Tom L. Allen said the board likely would extend the effective date for the implementation of the financial reporting model for government agencies. In a speech to members of the American Institute of CPAs National Government Accounting and Auditing Update Conference in Denver, Allen said the proposed two-year implementation period and June 15, 2000, effective date may not be met even if the GASB went forward with its proposal with no modifications.

"We have come to realize, based on the 385 comments received, that we must `redeliberate' many of the issues," said Allen. "We will do that whether we maintain the model the way it currently is exposed or we have to reexpose it."

The GASB issued in January its long-awaited exposure draft on the new reporting model for government agencies and issued a similar draft proposal for colleges and universities in April. The models have raised a lot of questions among preparers and users of government financial reports, and it is the GASB's most controversial project since the board was formed in 1984.

Perhaps the most significant proposal of the new model is the requirement that governments present their financial information from both a short-term funding perspective and a long-term entity-wide perspective. The model also requires a management discussion and analysis supplement intended to give readers, especially users who are less familiar with government financial reports, a brief, objective and easy-to-read analysis of the government's financial performance.

Allen said many of those commenting, especially financial statement preparers, saw the proposed model as too complex. Allen acknowledged that additional efforts would be needed to prepare and audit the proposed financial statements, but he said that improvements in the exposure draft were necessary to meet the needs of the governmental financial statement users.

"There have been a number of negative responses," said Allen. "We have to go back and do what we think is a better job of justifying what it is we are proposing. Then we must either move forward with what we have or modify it."

The AICPA's position

In its comment letter to the GASB, the AICPA opposed the proposed dual-perspective model because of its complexity. Instead, it recommended that the entity-wide perspective be the only basic financial statement required and that major fund information, if required, be considered "required supplementary information." The AICPA strongly supported the proposal for a management's discussion and analysis.

FASAB Prepares Social Insurance Standard

The Federal Accounting Standards Advisory Board (FASAB) is developing a standard on financial reporting for social insurance programs such as Social Security and Medicare. According to Wendy M. Comes, FASAB executive director, a proposal for a social insurance standard will be issued by 1998.

Norwood J. Jackson, deputy controller of the Office of Federal Financial Management in the Office of Management and Budget, told attendees at the AICPA National Government Accounting and Auditing Update Conference in Denver that federal financial reports for social insurance programs should provide information on the programs' long-term health. "Financial reports should show the extent to which over time social insurance programs are able to meet their obligations to taxpayers when they come due," said Jackson.

The FASAB agreed that the standard would focus on whether future budgetary resources are likely to be sufficient to sustain public services and to meet obligations when they are due. According to Comes, the board likely will limit the scope of the standard primarily to social insurance programs that meet certain criteria--for example, Social Security, Medicare, Railroad Retirement, unemployment and, perhaps, even black lung disability benefits.

For more information on the FASAB project, contact Richard Fontenrose, FASAB project manager, at 202-512-7358 or by e-mail at [e-mail].