AICPA Recognizes FASAB as GAAP Standard Setter
The AICPA governing council last fall formally named the Federal Accounting Standards Advisory Board the accounting standard setter for the federal government. Amid controversy over its action, the council elevated FASAB to the level of FASB and GASB, which set standards for nongovernment entities and for state and local governments, respectively.
Future FASAB statements of federal financial accounting standards, as well as those it issued since March 1993, now have the authority of GAAP. Formerly, FASAB’s guidance was considered to be an “other comprehensive basis of accounting” (OCBOA), which is not as widely recognized in the United States as GAAP. The secretary of the Treasury, the director of the Office of Management and Budget (OMB) and the comptroller general established FASAB in 1990.
The AICPA said FASAB’s new authority means that, for the first time, the federal government will be able to report its financial position according to accounting standards widely recognized by CPAs.
Supporters of the council’s action believe this advantage outweighs any misgivings voiced by critics. “This is another marker in the progress of the federal government toward improving its financial management and accountability,” said Robert K. Elliott, chairman of the AICPA board of directors.
Four pieces of legislation provided the impetus for stronger federal financial management: the Chief Financial Officers Act of 1990, the Government Performance and Results Act of 1993, the Government Management Reform Act of 1994 and the Federal Financial Management Improvement Act of 1996. In particular, these laws mandated annual independent audits of federal government agencies’ financial statements.
The council’s decision worried some observers. Among them was FASB Chairman Edmund L. Jenkins, who questioned whether FASAB is sufficiently independent for its new role. Several of its nine members are currently employed by federal agencies, including the Congressional Budget Office, the Department of Defense, the GAO, NASA, the OMB and the Treasury. Jenkins said that FAF Chairman Manuel Johnson and GASB Chairman Tom Allen share his concern.
“The Treasury is subject to the standards promulgated by FASAB, yet it has a veto power over those same standards,” Jenkins said, adding that the Treasury, the GAO or the OMB can unilaterally terminate FASAB’s authority with 120 days’ notice. “Where is the independence under this veto power and termination arrangement?” he asked.
But Elliott expressed confidence in FASAB’s impartiality. “FASAB has committed to replace any members who are not materially independent, and the AICPA can rescind its recognition if FASAB does not, in fact, act independently,” he said. “This small risk must be balanced against a probable large gain: a better-informed U.S. government and citizenry.”
In making its decision, the council had to determine whether FASAB satisfied the requirements of Rule 203 of the AICPA Code of Professional Conduct. Earlier, the council had approved criteria on which such a determination should be based: independence, due process and standards; domain and authority; human and financial resources; and comprehensiveness and consistency.
An AICPA-appointed task force weighed FASAB’s compliance with these measures and recommended remedial changes in its memorandum of understanding and rules of procedure. Upon completion of those modifications, the council approved FASAB’s new designation.
CPAs Get an Extra 30 Days to File HUD Reports
In response to the AICPA’s expressed concerns about CPAs’ heavy auditing workloads, the Department of Housing and Urban Development extended the deadline for filing audited financial statements for multifamily housing projects. Formerly, such statements were due 60 days after a project’s fiscal year ended; effective immediately, that time frame is increased to 90 days. Details of the new requirements are available at www.hud.gov/reac/secondcycle.pdf .