The standards issued by GASB during the past 30 years have given users of governmental financial statements unprecedented insight into how U.S. state and local governments use the money entrusted to them.

A recent CPA Journal article—“Deficiencies in Accounting and Financial Reporting of State and Municipal Governments” (James Naughton and Holger Spamann, June 2015, p. 16)—suggests that the time has come to replace those standards with public company accounting rules, an accounting regime not intended for governments or developed with their unique circumstances in mind. In the same issue, Editor-in-Chief Richard H. Kravitz calls for CPAs to insert themselves into this matter in order to ensure trust in our government institutions (“Accounting for State and Municipal Government,” p. 8).

We wholeheartedly agree that CPAs—and, in fact, all state and local government stakeholders—should become more involved in the standards-setting process. We also agree that high-quality financial reporting is essential to fostering trust in our government institutions. We disagree, however, that adopting public company accounting standards will achieve these results.

Governments are fundamentally different from public companies in a number of important ways—not the least of which is that they are designed to provide services to taxpayers rather than to deliver returns to investors. This fact was recognized more than three decades ago by the Financial Accounting Foundation (FAF)—the independent, not-for-profit organization that oversees both FASB and GASB—when, in 1984, it created GASB to set GAAP specifically for U.S. state and local governments.

Like FASB—which the SEC has designated to set public company accounting standards—GASB sets standards through an independent process designed to hear and consider a broad range of views from its state and local government stakeholders throughout the country. While often lengthy, GASB's process ensures that we have carefully evaluated potential outcomes of a standard prior to its issuance. This is done to ensure that a standard will provide financial statement users with the information they need, while avoiding any unintended consequences that might render it more costly or complex than the value of that information to citizens, investors, and other users.

I'd also like to clear up misconceptions about the role of GASB standards in the examples presented in the articles. In support of a call for a change in the standards-setting structure, Naughton and Spamann cite alleged reporting deficiencies in current governmental standards. We agree that the need to highlight severe fiscal stress should be explored—a topic that GASB is currently researching and which looks beyond the going-concern literature—because governments rarely go out of business. However, based on current state and local government standards, a knowledgeable financial statement user can identify situations where severe fiscal stress exists. For example, the 2006 comprehensive annual financial report for Jefferson County, Alabama, reflects a significant deficit in “sanitary operations.” Moreover, the financial statements in the years leading up to the 2011 bankruptcy clearly reflected significant, growing annual and cumulative deficits.

Kravitz cites the Chicago parking meter sale to argue in favor of adopting public company accounting rules. It is important to point out that the valuation of those assets (noted as a reporting deficiency) would have been the same under private sector accounting standards. Similar clarifications could be presented for each case noted in the Naughton and Spamann article and Kravitz's editorial.

While there's always room for improvement, we believe that GASB standards yield information that helps citizens, investors, and other financial statement users reach informed decisions and enhance governments' accountability to their stakeholders. Replacing standards that have been developed with more than 30 years of input from state and local government financial statement users, preparers, and auditors is not an advisable course—it would not bring about the results imagined by the authors.