Governments Strive for Transparency and Accountability

Over the past few years, information about our governments is more and more accessible to its citizens. Federal and State jurisdictions down to the smallest local government are subject to the Freedom of Information Act (FOIA) which mandates that the public, upon written request, have access to information about the government. With the popularity and ease of the internet, the process by which the public can access information has been expedited, eliminating some of the necessity for a written request. Most governments now have websites with information on public officials, services provided, events, applications, documents, minutes of board meetings and important financial information, such as financial statements, annual budgets and bond ratings.

Due to the downturn of the economy, a major concern to most residents over the past few years has been the finances of federal, state and local governments. Taxpayers are struggling to make ends meet with salaries that are unstable while the cost of living and taxes continue to increase. The Federal government has created websites to track the spending of federal grants, such as stimulus monies, while New York State has created a website to show residents how their tax dollars are being spent. This includes but is not limited to disclosing salaries and pensions of specific government employees within New York State (counties, towns, villages and district), contracts and other expenditures.

The financial statements that governments issue have changed dramatically. They have been greatly expanded and emphasize the issue of financial transparency. Since the issuance of the Government Accounting Standards Board (GASB) Statement 34 – Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, governments are required not only to report on their separate funds and budgets using the modified accrual basis of accounting, but also on the government entity as a whole using the full accrual basis of accounting, resulting in increased transparency and accountability. Under the full accrual method of accounting governments were required to present the impacts of capital assets and long-term debt liabilities. This is now similar to financial reporting for corporations. Reporting under this standard gives taxpayers the ability to access the effect of long-term financing liabilities such as bonding, leases and other debt in relation to the capital assets purchased by the government. In addition, the full accrual statements disclose the effect of liabilities for employee unused sick and vacation time (compensated absences), judgments and claims in which the municipality is responsible to pay and other future costs such as the capping and closing landfills. This new reporting presentation requires governments to include a management's discussion and analysis which provides management of the government the opportunity to explain and discuss the financial standing of the government and known economic factors expected in upcoming years.

Since the establishment of GASB 34, there have been numerous statements issued to improve the transparency of government reporting and disclosure. GASB Statement 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions requires governments to have actuaries project the future health and Medicare benefit costs to be paid for current as well as past employees upon retirement. These liabilities projected by the actuaries were not only overwhelming to management of most municipal governments but shocked taxpayers and other groups as well. The liability represents the unfunded amount of the postemployment benefits which will be paid out of future budget on a pay-as-you-go basis, however, the liability will be amortized and recorded on the government's financial statements over a thirty year period, and the enormity of this liability is already becoming evident. This will bring public pressure to bear and may cause municipalities to make more informed decisions when renegotiating employment contracts.

Further efforts towards transparency were seen through the issuance of GASB 49 – Accounting and Financial Reporting for Pollution Remediation Obligations. This statement requires governments to address the potential liabilities associated with pollution, contamination and remediation obligations and record those liabilities in the financial statements. This statement establishes criteria for governments to identify pollution issues and if the government is a responsible party to accrue costs of remediation and future monitoring of the site.