GASB 77 establishes guidance requiring state and local governments to disclose certain information about tax abatement agreements. A recent CDFA//BNY Mellon webcast brought together 3 panelists to discuss the impact of GASB 77 for economic and community development professionals as well as state and local governments.
- Smart Incentives began the program with an overview of the factors driving interest in incentives disclosure, including growth in the use of tax abatements and increased expectations for data-drive accountability in government programs. We also discussed the fundamentals of transparency and accountability for incentives reporting and concluded with 3 steps economic developers should take as they prepare for the GASB disclosures.
- Pam Dolan of the Governmental Accounting Standards Board provided detail on Statement 77, including specifics on tax abatements that need to be disclosed, required disclosures for each tax abatement program, and general disclosure principles.
- John Tysseling of Moss Adams concluded the program with a review of steps that must be taken to prepare for disclosure, noting that governments will likely need to sort through challenges in determining which tax incentive programs must be disclosed according to the GASB criteria AND collecting data to enable the disclosure. He also offered insights into the roles and expectations of stakeholders interested in the disclosures.
I’m often asked why GASB gets to make the rules and why it’s important to comply. Here’s the answer:
GASB is the official source of generally accepted accounting principles (GAAP) for state and local governments. These principles or standards are intended to improve financial reporting so users of financial statements (bond holders, citizens, elected leaders, oversight bodies) have the information they need to make decisions about how well a government is managing its resources. Compliance with GAAP can also lower the cost of borrowing. GASB has no enforcement authority, but individual state laws and audits that assess conformity with GAAP tend to compel compliance with GASB standards in government accounting and financial reporting. The Financial Accounting Foundation reports that every state follows GAAP and approximately half of states require their counties or localities to follow GAAP.
For more information on GASB 77 and steps economic development organizations should take to prepare for disclosures, please follow these links:
As a reminder, the Governmental Accounting Standards Board (GASB) last year approved Statement No. 77, Tax Abatement Disclosures, which establishes guidance requiring state and local governments to disclose certain information about tax abatement agreements for periods beginning after December 15, 2015.
For more details, see “New Disclosure Rules and the Future of Incentives” from the Summer 2016 issue of the IEDC Economic Development Journal. You can access the article here.