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It Figures: The CRI Podcast

S3:E13 – An Inside Look at The GASB

In this episode of It Figures: The CRI Podcast, we take a deep dive into all things GASB. Listeners will hear insights from CRI Partners Rob Lemmon, April Shuping, and Dean Michael Mead – who spent over two decades with the GASB in various senior leadership positions. Tune in to find out more about the current and future GASB standard-setting practices, changes to the accounting industry after Statement 34, and potential guidance on upcoming standards.

Intro:

From Carr, Riggs & Ingram, this is It Figures: The CRI Podcast, an accounting, advisory, and industry-focused podcast for business and organization leaders, entrepreneurs, and anyone who is looking to go beyond the status quo.

Rob Lemmon:

Hello and welcome to another episode of The CRI, It Figures Podcast. My name is Robert Lemmon. I’m one of the governmental partners at CRI. Today’s topic is a governmental one. I’m very excited to be joined with a couple of fantastic presenters here today, April Shuping, another governmental partner from Carr, Riggs & Ingram. She’s going to be talking with me and she’s been on a number of episodes before, so you may recognize her.

Rob Lemmon:

We’re going to be speaking with Dean Mead. Now, Dean has over 25 years of experience working with the GASB and he recently joined CRI and we’re going to be picking his brain about all things GASB-related. A little bit of insider scoop, if you will, on things about the GASB. I keep saying that word, GASB. For those who aren’t too familiar with it, what that means is that’s the Government Accounting Standards Board.

Rob Lemmon:

They are the guys who set the standards for all the governmental entities to follow, all of their governmental accounting standards. Let me just give April and Dean a quick chance to introduce themselves here. I did a quick intro, but April, do you want to say hello?

April Shuping:

Hi. I’m April Shuping, and thanks, Rob. I’m excited to be back on the podcast and very excited to have Dean as part of our team. Quick intro, I’ve got way more years than I want to admit of experience specializing in government, specifically about half of it with public accounting doing audits and consulting for governments, and the other half actually working in the government finance offices. So I have a vested interest in this topic.

April Shuping:

Definitely have been dealing with GASB implementations of new standards since way before 34, so I’m excited to have some input on these hot burning questions we’ve got for Dean Mead from the GASB.

Rob Lemmon:

Excellent. Thank you, April. Dean, do you want to introduce yourself? I said 25 years with the GASB, was that right? I can’t remember exactly how long it was, but I know it was a long time. Dean, do you want to tell us how long you were there and a little bit about yourself, please?

Dean Mead:

Yes. When I want to be dramatic Rob, I refer to it as a quarter century of standard-setting, but it was just a couple days longer than 24 years that I worked for the Governmental Accounting Standards Board, most of that time, as part of the senior leadership of the GASB, and toward the end there, as assistant director of research and technical activities. I was also the coordinator for the Governmental Accounting Standards Advisory Council, which is GASB’s primary advisory group.

Dean Mead:

I come from an academic background and a financial statement user background. So during the time I was at the GASB, I was also adjunct member of the faculty at the Rutgers Business School Department of Accounting and Information Systems from about 2008 to 2020.

Rob Lemmon:

Fantastic. Let me say again that we are so pleased to have Dean join CRI as part of our team. Just been a few months with us, I think Dean and I know I’ve asked you many, many technical questions and you’ve always had fantastic answers and guidance on the GASB topic. I look forward to diving into a few more GASB-specific questions with you today.

Rob Lemmon:

With that, I’m going to go ahead and dive in with the first question that I think might be useful for the audience to hear, and it’s a very general question. It’s just to ask him, will you describe for us the role of the GASB? Just for anyone who’s not too familiar, explain to the audience what does the GASB do?

Dean Mead:

Well, the GASB, since it was created in 1984, has been recognized by the American Institute of Certified Public Accountants and the rest of the accounting industry as the setter of generally accepted accounting principles or GAAP for the approximately 90,000 governments below the federal level in the United States.

Dean Mead:

We’re talking about the 50 state governments, counties, parishes, townships, towns, cities, villages, school districts, special districts that do a variety of things from fire protection to mosquito abatement. A lot of governmental business enterprises like public colleges and universities, public hospitals, airports, public utilities and so on, and even including the US territories like Puerto Rico and Guam.

Dean Mead:

For those who don’t know GAAP, generally accepted accounting principles, is the body of rules that those types of governments follow when reporting their finances and preparing their audited annual financial statements for the public. When the GASB was created, the states were a part of that agreement to create it and effectively were designating the GASB with their sovereign power over the accounting rules for the governmental entities and their jurisdictions.

Rob Lemmon:

This is obviously a very big deal. You said 90,000-ish governments who have to follow these rules that are all accounting rules that are all set by the GASB standard-setters. That’s a great intro and I want to give April a chance if she has any specific questions to jump on the back of that intro you’ve given there. April, what questions does that spring to mind for you?

April Shuping:

Yeah. That’s a pretty big job the GASB has there. From my background in working in local government finance offices, it seemed like a lot of times we’d be just plugging along through our year and suddenly we got another standard that we have to implement. I wonder what is… We’re so busy on the day to day, a lot of times we don’t think about how these standards come to pass. They just surprise us out of nowhere it seems. Dean, can you help me understand how does the GASB go about setting those standards?

Dean Mead:

Sure. I’m not surprised by what you say, April, because I remember being at the GASB and of course my focus is on standard-setting all the time, but people who are working in CPA firms or in government have a lot of other things to do other than keep track of what GASB’s doing. So when GASB does finally get to the point where it releases a new statement of governmental accounting standards, it catches some people off guard.

Dean Mead:

I think the best way to describe what GASB does, the way it sets standards, is deliberate. It also brings to mind the words open and transparent. GASB makes sure that they’ve taken enough time to get the right answer to whatever accounting or reporting issue they’re working on, and that results in some people thinking the GASB is not nimble and doesn’t move quickly enough, whereas others wish the GASB wouldn’t move at all. They wish the GASB would just take a hiatus and not set any new standards for a while.

Dean Mead:

There’s a trade-off there between speedy standard-setting on the one hand and thorough objective and visible standards on the other. Clearly the GASB can move quickly when it needs to. GASB Statement 95, which postponed the effective dates of other GASB pronouncements during the pandemic and Technical Bulletin 2020-1, which provided some pandemic-related accounting guidance both were issued in about a month, and half that time was the public comment period.

Dean Mead:

Most of the time when dealing with something that’s complex or fundamental like pensions or revenue recognition, the GASB is typically going to take a few years to study that issue and conduct research before it even starts to set standards. Then likely will publish two or three documents for public comment during the process of developing new or revised standards.

Dean Mead:

Most issues are less complicated and don’t require as much research and tend to only involve putting out a single proposed version for public comment. But no matter how big the issue is, the unifying theme is that regardless of what type of topic you’re working on, the GASB does all of this work in the full view of governments and auditors and financial statement users and actively seeks to get them involved in the process.

Dean Mead:

Because that’s what makes standard-setting work, is getting people who are out in the field actively applying or auditing against or using the information that results from these accounting standards on a day-to-day basis. As much as the folks at the GASB know about accounting standards and they obviously know them better than anyone, they’re not on the implementation side, they’re not on the using side of the standards.

Dean Mead:

They need lots of people to get involved and to let them know what they think about their proposals and how standards are working once they get put into practice and implemented. I’ve often said that the thing that makes GASB standards generally accepted is not that everyone loves them. Far from it. I think it’s more common that everybody has something they don’t like about every GASB pronouncement.

Dean Mead:

What makes those standards accepted is the process that the GASB follows to create those standards and that it is above reproach. It is objective. It’s visible. It’s open to participation and it’s even-handed. Even if you don’t like what the GASB has decided you have to do, you have to acknowledge I think that they gave you plenty of opportunity to share your views and that they considered that input seriously.

Rob Lemmon:

Yeah. I certainly would agree with that. For many years I know in part of my team we’ve always tried to participate in comment periods and review standards prior to issuance, the proposed drafts of standards. It is something I would encourage anyone who deals with GASB standards to make sure you’re keeping your eye on the ball and participating and giving feedback to proposed standards or recently issued standards. I think you said it very well there, Dean.

Rob Lemmon:

Yeah, definitely a collaborative process to get the standards as good as possible. I’d say it that way but that was an excellent summary. Thank you. Thank you for that, Dean. I want to dig in on a little something different as well. Because you mentioned earlier that you were there almost a quarter of a century and that got me thinking, obviously that’s a huge amount of time.

Rob Lemmon:

Think of all the stuff that has changed in the last quarter of a century and there’s lots of talk as well about how the accounting profession has been changing and continues to change. Change was the question that it brought to mind for me. From your 25 years there with the GASB… almost 25, what changes did you see during your time there?

Dean Mead:

I think I can say the one thing that hasn’t changed, if I could flip that on its head a little bit, is that the procedures the GASB follows continue to be the same and if anything the GASB finds ways to improve upon them based upon its experience with setting other standards. What has changed somewhat is the types of projects and topics that populate the GASB’s current technical agenda, the things that it set standards on.

Dean Mead:

Way back in 1998 when I joined the GASB, they were at that point a year away from issuing Statement 34, which was pretty much the biggest thing they had ever done. It was 15 years in the making at that point. They’d been working on it right from the start of the organization. A lot of the initial focus at that point was on supporting governments in the implementation of that pronouncement, which stretched over five or six years.

Dean Mead:

Then with the introduction of government-wide accrual-based financial statements for all governments from Statement 34, as governments started to do them, it became apparent that there were some big-ticket items on both the asset and liability side that weren’t appearing in these government-wide accrual-based financial statements because there hadn’t been any accrual standards for reporting them up to that point.

Dean Mead:

Things like pension liabilities, other post-employment benefit liabilities such as for retiree health insurance, obligations related to pollution remediation and asset retirement, intangible assets like trademarks and copyrights and easements, and even most recently, as recently as a few years ago when Statement 87 came out, leases and similar transactions that result in significant assets and significant liabilities on the books, depending upon whether a government’s a lessee or a lessor.

Dean Mead:

That was the first big shift in focus, was really plugging these holes that became apparent once everyone was following accrual accounting. The second gradually occurred as the GASB was filling in those GAAPs in the standards and began to reexamine prior standards that had been in effect for a long time, some of them older than the GASB itself. Standards that had been inherited from the National Council on Governmental Accounting or from the Financial Accounting Standards Board or the AICPA.

Dean Mead:

In the process of shifting toward reexamination of existing standards more commonly or more often than tackling entirely new areas. The GASB significantly improved upon how it reexamines those existing standards to ensure that they’re continuing to work the way they’re supposed to work in practice, that they are accurately and fully capturing the economic substance of the transactions that they deal with and most importantly that they continue to provide information that people need to make decisions and to hold governments accountable.

Dean Mead:

That includes relatively recent changes to GASB’s, what it calls the post-implementation review process or PIR in order to accelerate it so that the GASB’s collecting information about implementation efforts and costs as governments are putting into place these standards that require a significant amount of time and effort and dollars.

Rob Lemmon:

That’s really interesting that you joined at such a crucial moment, like you said, right around the implementation and issuance of GASB 34, which funnily enough was the standard April mentioned earlier. I think she was saying she has been doing GASB stuff since before GASB 34. Yeah, it’s interesting to see that you came in right when there was that overarching standard that impacted everything and everyone and since then there’s been more of a filling of the holes, if you will, in terms of the standards.

Rob Lemmon:

I think we might be getting back to another big overarching standard in the future, but that’s one for another moment. For now, I guess I want to put it back to April. You said, April, that you had seen pre-GASB 34 and then since then you’ve been working with GASB standards the whole time.

Rob Lemmon:

What Dean says there, is that consistent with what you’ve experienced, that since 34 came out there was the big overarching standard there and then since then it’s been more dealing with filling the holes, the one-off topics? Is that how you feel you’ve seen it, April?

April Shuping:

Yeah. Definitely is. It’s what I’ve seen, things that if you cut your teeth in governmental accounting pre-GASB 34, stuff you never really had to think about. I’ve seen more and more things that maybe were just standard practice or most people did it that way, being actually codified in GASB standards as in here’s the actual right way to do these things, which is I think really helpful to not have to reinvent the wheel when you’re trying to figure out something like, when do I recognize this grant revenue from, say GASB 33?

April Shuping:

I’m really excited to hear that GASB’s working on getting a little more feedback about and really considering those costs and time and effort and actual literal costs sometimes when we think about things like GASB 68 for pension liabilities and the extra actuarial work you have done. GASB really taking a look at what those costs are for implementation and ongoing standard compliance, I think that’s really helpful to hear as someone who was a practitioner.

April Shuping:

That leads me to another thought, which is, Dean, in my time helping different governments implement standards, a lot of times we talk to our peers in other areas, maybe the Government Finance Officers Association helps with some implementation guidance.

April Shuping:

If I’ve got a really weird situation or if I’ve got really strong opinions on something the GASB’s doing, what are some ways that I, as a government auditor, or someone who’s a government accountant or government finance officer, what are some ways they could give some feedback to GASB or ask questions or maybe even point out a, “Hey, here’s a situation that a lot of us are dealing with and we don’t really have any guidance on?” Is there a good method to communicate with the GASB or are they closed door?

Dean Mead:

Oh no, they are definitely open door and eager to hear about the kinds of things that you’re talking about. Just in listening to you ask the question, I started to get a shiver that reminded me of how excited I used to get when somebody would call up or send us an email and say, “Hey, I’m seeing this weird thing and I’m not sure what we’re supposed to do about it.”

Dean Mead:

GASB wants to hear about those kinds of things because that’s one of the ways that they learn that there’s something that might require their attention, that something may have developed out in the field that they weren’t aware of or that wasn’t anticipated by the existing standards.

Dean Mead:

I know that there are some people who think that the GASB spends 24/7 coming up with new and interesting ways to torment them with new standards, but I promise you that a significant amount of time of the GASB staff is spent trying to help governments and other stakeholders understand and apply the standards that are already existing. They do that by publishing implementation guidance and speaking at conferences and answering questions from stakeholders.

Dean Mead:

I continue to be surprised when I do presentations at conferences and I ask, “How many people know that you can ask the GASB a question and that they will answer it often very quickly?” And only have few hands will go up. I find that remarkable because that is a service that is available to everybody. There’s a form on GASB’s website gasb.org just for submitting these types of questions to the GASB and it directs that question to the right person on the staff to answer it, often the person who wrote the statement that you’re asking the question about.

Dean Mead:

The email addresses and the phone numbers of the GASB staff are on the website as well. They are very accessible. They are happy to receive phone calls or emails or questions through that website. Anyone can share their views with the GASB at any time. Anybody is allowed to email or send a letter to the board requesting that the board reconsider an existing pronouncement and hopefully making a good case for doing so.

Dean Mead:

The board members and the staff are both available to talk about existing standards or ongoing projects or issues that you think they should be working on. They are regularly reaching out to get people to participate in their research and their post-implementation reviews. For example, there are a bunch of surveys on capital asset accounting and reporting that are just wrapping up and they’re going to be followed by surveys on the existing pension standards as part of that PIR.

Dean Mead:

Then later this year there’ll be surveys about the existing subsequent event standards and some round tables to conclude that capital asset research, which has been going on for a couple of years. Of course, what the GASB really wants the public to do is to take a look at its proposed standards and to provide feedback on them.

Dean Mead:

Once you’ve interacted with the GASB in a substantive manner, either through its research or through due process and standard-setting, the feedback you provide is recorded in their constituent feedback database and then you automatically hear about new opportunities to participate in the future as they come about.

Rob Lemmon:

Excellent summary and that is my experience as well. GASB from my side has always been very open door as you put it, very willing to address technical questions. The form you mentioned, I hope everyone picked up on that. On gasb.org there is a form to submit technical questions and like you said, Dean, I have always experienced a quick, thorough and effective response and it’s been a very valuable tool.

Rob Lemmon:

Yeah. For anyone who didn’t realize or doesn’t have the perception that GASB is open door, I encourage you to get more familiar with them and especially the website and all of the tools and communication methods available through the website. I’ve found it to be very valuable. I’m going to ask you one more question then I’ll turn it over to April, see if she’s got any final ones. We’re on the home stretch here. We’re going to start wrapping it up.

Rob Lemmon:

My last question is something I touched on earlier about, you talked about we had the one overarching standard and then there was some plugging of the holes since GASB 34. I’m curious what’s coming down the pipe? Whatever you can tell us from an insider perspective, what should we expect to see coming down the pipe from the GASB?

Dean Mead:

Well, this was alluded to earlier that the GASB has been for several years now been reexamining Statement 34 and the related standards that govern the financial reporting model, which is the blueprint for the audited annual financial report. They’ve also more recently tried to tackle the narrow topic of revenue and expense recognition. Both of those projects are ongoing, though neither of them is exactly right around the corner.

Dean Mead:

Based on the technical plan that the GASB has on its website, a final statement in the reporting model project is at least 15 months off and that presumes that the board hasn’t made changes that are so significant since the exposure draft that it believes it needs to do another round of public feedback. That will only push it out further. For the revenue and expense recognition project, a proposed statement is not expected until March of 2025.

Dean Mead:

They are very deliberately moving through that topic, which is moderately fundamental to everything that we do in the accounting profession with governments and making sure that each of the aspects of the feedback that they received from the last due process document in that project is fully addressed so that when they do propose new standards, they’ve answered the questions that people had and what they’re proposing will be as clear as possible.

Dean Mead:

There’s one other major project that’s not quite as substantial as those, but still a pretty big deal that’s going concern uncertainties and severe financial stress disclosures, but that only started deliberations in July after something like five and a half or six years’ worth of research. There’s a lot of work left to be done there before the first due process document comes out.

Dean Mead:

The other main focus that I expect to see for the GASB is that now that it’s published Concept Statement 7 on note disclosures, sometime in the next year or so it’ll begin to reconsider the body of disclosure requirements prior to GASB Statement 67 for pension plans. They conducted about two and a half years’ worth of reexamination research on that entire body of standards from about 2016 to 2018.

Dean Mead:

Then rather than jump right into improving upon those existing standards, the board wanted to build upon its conceptual framework that guides how it decides what government should disclose and what they shouldn’t disclose. They’ve now finished that and they’ve got this much more robust description of how disclosure requirements are arrived at.

Dean Mead:

I expect them to now turn their attention to applying that set of concepts to the existing disclosure requirements and determining if there are some that can go away or there are some that can be improved on or some that aren’t required yet but that research suggests that financial statement users need. If I could summarize that two and a half years’ worth of research in a couple of points, the first would be that most people think the notes are too long cumulatively.

Dean Mead:

But the second point is that no one seems to know where to start cutting. When asked, “Well, which note disclosure should the GASB get rid of first?” No one could really agree on what didn’t need to be reported. The board’s got a real challenge ahead of it, I think, to apply that new set of concepts and to identify the kinds of things that governments are already reporting that might not be as important to financial statement users and that might lessen the disclosure burden that governments are dealing with.

Dean Mead:

That being said, there are plenty of opportunities for improvement that were identified by stakeholders in that research for a wide variety of existing note disclosures. I expect the board will have a lot in front of it to deal with, a lot to chew on and that stakeholders will have a lot of opportunity to provide their input on that as well.

Rob Lemmon:

Wow. We do have a lot to be looking out for from the GASB. The one I was alluding to, the big overarching, I assume being that financial reporting model reexamination, but in addition to that, like you said, the revenue and expense recognition, then there’s the going concern uncertainties as well as the disclosure concept statement.

Rob Lemmon:

Like you said, not coming out in the next year or so, but shortly thereafter we’re going to start seeing a lot of big stuff coming through. Definitely in the next few years we need to be keeping a close eye on everything the GASB’s got coming out. That’s been excellent. Thank you, Dean. I’ve got all more questions, but April, do you have any final questions for Dean?

April Shuping:

Yeah. I’m excited to hear some of the things that are being revisited. I think if I recall correctly, the last note standard that was said, it was very exciting because they actually took away some required notes. As an ex-practitioner that was a beautiful moment from the GASB and I look forward to that, although I’m sure it is always a balance between preparers and the users on what we do disclose.

April Shuping:

I just had one last thought if we can pick your brain, Dean, with this exciting opportunity. With all that time at the GASB, seeing how the sausage is made, so to speak, is there anything that you really learned during that times that’s probably unique to the position you held? Anything that maybe would be helpful to government accountants or auditors that might be listening? Just some special insights from the insider view at the GASB. I’d love to hear that from you.

Dean Mead:

Sure. The one thing that is funny to me is that you realize that you’ve been around for a long time when something as momentous as GASB Statement 24 happens while you’re in the industry and you’re still around when the GASB is going back and looking at reexamining something that monumental that required so much effort. You know that you’ve been in the job for a really long time.

Dean Mead:

There are a couple of things that your question jogs in my mind that I think maybe a lot of people don’t know and would be surprised by. Now, the first is that GASB listens to everyone who takes the time to share their views, and those views are considered with equanimity. By which I mean the input of a concerned parent of children in a public school is given the same level of attention and same consideration as input from a state governor or a member of Congress.

Dean Mead:

The second thing that I think people might find surprising is that standard-setting is not a popularity contest. The most votes do not win. The position with the most support from stakeholders is not necessarily the one that will become the final guidance. The GASB is attempting to get the best answer possible, not necessarily the one that people like the most.

Dean Mead:

Over the years there were a few projects that generated letter writing campaigns that ended up sending a slew of form letters to the GASB, which may emphasize the importance of the issue to certain stakeholders, but it doesn’t have any impact really on what the board members decide to do.

Dean Mead:

For example, the exposure draft that led to Statement 34 prompted something like 1500 form letters from government finance officers, the main point of which was opposition to the reporting of general capital assets and infrastructure as a part of what had been proposed for Statement 34. In my opinion, it could have been a million letters and it still wouldn’t have been tenable for the board to require accrual-based financial statements for the entire government and leave out what tends to be a government’s most valuable assets.

Dean Mead:

I think I can sum up the board’s decision-making and what I have to say in this podcast with a quote from the animated version of Mulan in which the emperor of China said, “A single grain of rice can tip the scale.” Believe it or not, a single convincing argument can win the day with the GASB.

Dean Mead:

It doesn’t matter if 1500 people say one thing, if somebody else makes a lucid and convincing argument to the board about how an accounting issue ought to be dealt with, the board may very well choose that point of view as the basis for its standards and not the one that the noisiest part of the stakeholder community said they wanted. Honestly, I can’t think of anything else that works that way.

April Shuping:

That’s really exciting to hear, Dean, and I appreciate that insight and inspires me a little bit. Those of you who’ve heard me speak before, know that I have a handful of soapboxes, so it does inspire me to maybe think about making that convincing argument about getting rid of deferred inflows and outflows. You just inspired me to annoy the GASB, Dean. Thanks for that.

Dean Mead:

Well, that’s a whole nother podcast, April, to talk about the merits of deferred inflows and deferred outflows.

Rob Lemmon:

Yeah. I think we could be here for a while if we get into that one, and we’ve had a long discussion already, but that is a fantastic point you make, Dean. It emphasizes again the importance of participating in the standard-setting process and being in that collaborative effort with the GASB, especially on standards that people have strong passions about and strong feelings about. It’s important that they get their voices heard because the GASB is listening.

Rob Lemmon:

That’s excellent. I think that’s where we’re going to wrap it up. Like I said, this has been quite a long episode already, but I just want to thank you, Dean and April, both for all your help and taking the time to discuss today. Dean, especially, it’s been great since you’ve joined CRI. I know you’ve added a lot of value to our audit team on the governmental practice as well as our governmental clients as well. I know you’ll continue to do so. Thanks for joining us.

Rob Lemmon:

I’ll just sign off here and tell our audience, please do feel free to follow us on any and all social media sites that we’re on, and check out our website, cricpa.com. On there, you’ll find a lot of links to our podcasts and useful articles, especially on the governmental page. I know Dean writes some articles for us and you’ll find them on that website I just mentioned.

Rob Lemmon:

Yeah, please do followers on social media and check out our website and keep following our podcasts. That’s all I’ve got for today. I will thank you again for listening and wish you all a very good day. Bye-bye.

Outro:

If you want more CRI insights or are interested in learning about our firm, please visit our website at cricpa.com. Thanks for listening to this episode of It Figures: The CRI Podcast. You can subscribe to It Figures on iTunes, Spotify, or wherever you prefer to listen to your podcasts. If you liked what you heard today, please leave us a review.

 

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