Josh Thompson presentation to Governmental Accounting Standards Board (GASB)
Article Table of Contents
- Josh Thompson’s Testimony
- Finance-related things
- Proposed Concept Statement
- Short-Term Financial Resources Measurement Focus and Accrual Basis of Accounting*
- Related Reading
Here’s a very important one-hour video that is highly relevant to GASB.
If my testimony accomplishes nothing but encouraging members of the GASB board (Joel Black, Jeffrey Previdi, James Brown, Brian Caputo, Kristopher Knight, Dianna Ray, and Carolyn Smith) to spend 15 minutes watching the following video, I will have considered my time to have been well-spent.
It’s worth watching the video to the 15 minute mark, when Chuck draws the parallel between the letter of the law and the spirit of the law. When Enron became famous for fraudulent reporting, it was because they obfuscated their long-term liabilities, in the same way that state/local governments sometimes like to obfuscate their own financial position.
If you were to watch the first ten minutes, you’d have data to chew on for a few hours.
If you watched the first twenty minutes (at 2x speed, of course) you’ll be more knowledgeable about arcane government finance machinations than 99% of the lay population of the USA.
Josh Thompson’s Testimony #
I submitted a letter (per the above presentation, which I watched live and took a lot of notes from). I ended up being given an opportunity to present to the board. Me, someone who’s a total outsider to the industry. I “manage” my household finances, and that’s the most financial management I’ve ever done.
Watch the live testimony here. You might even see my funny-looking face at 12:45p Mountain time, I’ll be presenting for a few minutes, with a time for the GASB board to ask me questions afterwards.
I’ll be sharing updates on twitter:
Get in touch! I’d love to talk about any of these things more:
Finance-related things #
Keep in mind that I’m a software developer, and only occasionally read financial statements. (That said, I do occasionally read financial statements, which I imagine is unusual for non-finance/accounting people).
I live in Golden, Colorado, and plan on living here for the next 60 years or so, until I (hopefully) die peacefully in my sleep.
The financial well-being of my family, my children, grand-children, and neighbors is necessarily associated with the financial well-being of the City of Golden.
If you’d like to read their annual financial reports, you may find them towards the bottom of the page here:
Data-Z’s gives Denver’s financial state a grade of “D”, summarizing the challenges as (paraphrased):
Denver so over-spends that each taxpayer would have to be taxed an extra $5,800 to simply cover its expenses.
Proposed Concept Statement #
Here’s the proposed statement (pdf)
On page 10, you see the following:
Short-Term Financial Resources Measurement Focus and Accrual Basis of Accounting* #
Definition (Josh Thompson’s light summarization/reformatting)
The short-term financial resources measurement focus incorporates outflows of short- term financial resources and inflows of short-term financial resources and all short-term financial assets, deferred outflows of resources, liabilities, and deferred inflows of resources.
Under an accrual basis of accounting, elements of financial statements arising from short-term transactions and other events are recognized as they occur, and elements of financial statements arising from long-term transactions and other events are recognized when payments are due.
Financial assets in this measurement focus include cash, assets that are available to be converted to cash, and assets that are consumable in lieu of cash. All liabilities in this measurement focus are financial liabilities.
Sheila Weinberg, Founder & CEO in Truth in Accounting:
One of the GASB members highlighted that because the governmental fund financial statements of the general fund exclude long-term obligations and related expenses, these statements “obfuscate the government’s true financial condition” and “conceal costs and obligations incurred in a current period.”
Some people have objected to the use of the word “obfuscate” suggesting it is a strong word indicating confusion and bewilderment. I think it is the CORRECT word.
It is confusing and bewildering to have a balance sheet of governmental funds that does not include the pension and OPEB liabilities even though those funds will be used to pay them. States report positive fund balances while collectively they have accumulated more than $855 billion in unfunded pension liabilities and $617 billion of retiree health care liabilities. Most of the 75 most populated cities also report positive fund balances while they have collectively accumulated more than $179 billion in unfunded pension liabilities and $160 billion of retiree health care liabilities.
You can download the entire detailed letter here (pdf)
Related Reading #
These books are not technically about accounting and finance, but they’re about accounting and finance: