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The Federal Government, State and Local Governments (SLG), and Not-for-profit
organizations (NFP) all have unique objectives and assets under their control. As a result it
may not be feasible to develop a single set of accounting standards that accurately
represents all of their financial activity in a manner that is useful to concerned parties. To
resolve these discrepancies three separate standard setting bodies have been tasked with
developing Generally Accepted Accounting Principles (GAAP) for these different
organizations: The Federal Accounting Standards Advisory Board (FASAB) for federal
accounting, the Governmental Accounting Standards Board (GASB) for SLG, and the
Financial Accounting Standards Board (FASB) for NFPs. The different standards created
by these organizations all achieve their goals with varying strengths and weaknesses.
Federal Government Accounting
FASAB faces many unique challenges when developing accounting standards for the
federal government. The federal government shear size, ability to manipulate the money
supply, and complex issues such as accounting for social security all complicate the task of
developing a single standard for representing the government financial activity. In spite of
these obstacles FASAB has managed to provide a standard requiring all agencies to
provide similar reports, which can is then consolidated into an individual report. This
allows the reader to analyze the whole as well as the contributions of the individual parts.
The greatest strength of FASAB, in my opinion, is its use of performance and
accountability reports. These reports require federal organizations to provide logical
outcome based metrics that measure the entities ability to achieve its desired effect on
society rather than simple outputs of goods or services provided. I believe that this
standard, though difficult to properly implement, serves to close the loop between business
and government/NFP accounting. FASB applied to businesses has always served to
provide a useful metric for the business to achieve its intended objective, maximization of
profits. Performance and Accountability Reports, when properly applied, can provide this
same service to federal organizations.
At the same time, the federal governments actual implementation of performance
standards and report consolidation standards may be one of its weaknesses. A potential
difficulty with consolidation of the financial reports and performance metrics of several
unique and distinct federal agencies may be an oversimplification of the big picture. This
oversimplification can lead to a competition that shifts emphasis from big picture concerns
to more trivial matters. This phenomenon can be viewed in the implementation of the
Executive Branch Management Scorecard which compares specific areas of different
