Accounting and Financial Reporting

Infrastructure Reporting

The Government Finance Officers Association (GFOA) strongly believes that state and local governments should adequately maintain their infrastructure assets. Achieving this goal requires that governments do all of the following in regard to their infrastructure assets, consistent with the Budget Guidelines (Guidelines) set forth by the National Advisory Council on State and Local Budgeting (NACSLB):

Assess capital assets, and identify issues, opportunities and challenges (Guidelines 2.2)
Prepare policies and plans for capital asset acquisition, maintenance, replacement and retirement (Guidelines 5.2)
Develop options for meeting capital needs and evaluate acquisition alternatives (Guidelines 6.2)
Develop a capital improvement plan (Guidelines 9.6)
Monitor, measure, and evaluate capital program implementation (Guidelines 11.5)

The capital budgets of many state and local governments provide strong evidence that significant progress has been made in this regard in recent years.

Under current generally accepted accounting principles (GAAP), state and local governments are not required to report the infrastructure assets of the general government in their financial statements. Recently, however, the Governmental Accounting Standards Board (GASB) has proposed to require the presentation of general government infrastructure assets on the face of the statement of position at their historical cost. This amount would subsequently be allocated to the statement of activities over the useful life of the assets in the form of depreciation expense. Alternatively, the GASB is considering the possibility of allowing governments to forego the depreciation of infrastructure assets (although those assets would still need to be reported on the statement of position), provided that the government had demonstrated that it was preserving or maintaining such assets at an "acceptable" condition level.

GFOA is persuaded that the type of information needed concerning a government’s general infrastructure assets is the type of information set forth in the NACSLB'’s Guidelines. Furthermore, GFOA continues to believe that the budget, rather than the financial statements, is the appropriate setting for infrastructure reporting. The infrastructure reporting requirements proposed by the GASB (i.e., the retroactive reporting of infrastructure assets at their historical cost and the subsequent depreciation of such assets) are potentially costly and provide information of little practical benefit to financial statement users. Furthermore, GFOA adamantly opposes any effort to move financial reporting into the realm of what "ought to be," as would clearly be the case if GASB were to adopt the "preservation/maintenance option" for reporting infrastructure assets. Such an approach not only potentially encroaches upon public policy (which is properly decided by elected officials), but would clearly "tip the scales" in favor of capital expenditures at the expense of other services to citizens.

GFOA Position
To affirm GFOA'’s strong opposition to GASB'’s proposal to mandate the reporting and depreciation of general infrastructure assets.
To authorize GFOA'’s Executive Board to give consideration to withholding GASB funding if the GASB proceeds with its infrastructure reporting proposal.
To authorize the GFOA Executive Board to consider encouraging governments not to implement the infrastructure provisions of GASB'’s proposed financial reporting model.
To allow governments that do not comply with the infrastructure provisions of GASB’s proposed financial reporting model to participate in the Certificate of Achievement for Excellence in Financial Reporting Program.

  • Publication date: May 1999