GASB may provide guidance on country’s financial position

If someone is asked what they think is the economic condition of government, any government, it wouldn’t be surprising to get a one-word answer: lousy. Often that just seems like the thing people want to say about local, state or national government even if they don’t exactly have facts to back it up.

The reality is that anyone who pays taxes, does business with government, or who just wants to know how their government is anticipating its future obligations and resources needs to get solid, credible information on these five words: economic condition and financial projections.

In short, where is a government now, financially speaking, and where is it going to be?

Financial projection – a forecast of future financial activity or standing – is a crucial component of a government’s economic condition. Decisions – often very expensive decisions - will be made based on forecasting information. That’s why the Government Accounting Standards Board (GASB) is at this moment working in a project to decide if,

“guidance or guidelines should be provided for additional information about economic condition, particularly financial projections, as part of general purpose external financial reporting (GPEFR).”

The GASB defines economic condition reporting as:

“the communication of financial position, fiscal capacity, and service capacity information to assist users in assessing a government’s economic condition.”

In other words, important stuff.  Faulty economic position or forecasting information puts political leaders and entire populations at risk of cascading financial problems, each component potentially worse than the one that came before it.

At its July meeting, the following were among the decisions reached by the board:

• Tentative reaffirmation that projections of total and major individual cash inflows, projections of total and major individual cash outflows, and projections of total and major individual financial obligations are necessary to help users assess a government’s economic condition including, according to the GASB meeting minutes “fiscal sustainability.”
• Tentative agreement adding a proposed requirement that cash inflow and outflow projections  include beginning and ending cash and cash equivalent balances for all projection periods.
• Tentative agreement that “clarification is needed as to what a financial obligation is, and what total financial obligations encompass.”
• Tentative agreement that annual debt service payments would be included within the projections of cash outflows, and thus removed as an “individual component of fiscal sustainability information...”

All information related to this project is found on the GASB website. If you’re in government, or are really interested in government financial information, here’s how to find it: www.gasb.org, then click on “Projects.”