GASB 34 The New Financial Reporting Model New York Society of Municipal Finance Officers Colonie,...

GASB 34

The New Financial Reporting Model

New York Society of Municipal Finance OfficersNew York Society of Municipal Finance Officers

Colonie, New YorkColonie, New York

May 13, 2001May 13, 2001________________________________

Presented byPresented by

Kenneth G. Scherrieble, Valley River, Inc.Kenneth G. Scherrieble, Valley River, Inc.

Allison Quinn, CPA, Allison Quinn, CPA,

BBOLLAMOLLAM, S, SHEEDY,HEEDY, T TORANIORANI & C & COO. . LLP, CPAsLLP, CPAs

© 2001 BOLLAM, SHEEDY, TORANI & CO. LLP, CPAS2

GASB Statement No. 34

““Basic Financial Statements – Basic Financial Statements –

and Management’s Discussion and Analysis –and Management’s Discussion and Analysis –

for State and Local Governments”for State and Local Governments”

What is it?What is it?

And why is it such a big deal?And why is it such a big deal?


What is GASB 34 ?

Sweeping revision of the current financial Sweeping revision of the current financial reporting model (in place since 1979)reporting model (in place since 1979)

Adopted in June 1999, by the Governmental Adopted in June 1999, by the Governmental Accounting Standards Board (GASB)Accounting Standards Board (GASB) Sets “Generally Accepted Accounting Sets “Generally Accepted Accounting

Principles” (“GAAP”) financial reporting Principles” (“GAAP”) financial reporting rules for all state and local governmentsrules for all state and local governments

The highest level of standard setting of The highest level of standard setting of governmental accounting principlesgovernmental accounting principles


Why Implement ?

Generally Accepted Accounting Principles Generally Accepted Accounting Principles GASB 34 is now the industry standard GASB 34 is now the industry standard

for financial reportingfor financial reporting Extensive “due process” (over 15 years) Extensive “due process” (over 15 years)

before its adoption before its adoption


Why Implement ? - Continued

Support for New ModelSupport for New Model

National Association of State Auditors, National Association of State Auditors, Comptrollers, and TreasurersComptrollers, and Treasurers

Credit rating agenciesCredit rating agencies

Public works officialsPublic works officials

Supported by some well-respected Supported by some well-respected finance professionalsfinance professionals


Why Implement ? - Continued

More understandable financial reportsMore understandable financial reports

More useful financial reportsMore useful financial reports

To a wider range of usersTo a wider range of users


Why is “GAAP” Important ?

Maintaining citizen confidence in the Maintaining citizen confidence in the entity’s financial stewardship requires entity’s financial stewardship requires credibility and integrity in accounting and credibility and integrity in accounting and financial reporting systemsfinancial reporting systems

Following industry standards is an essential Following industry standards is an essential foundation in gaining and sustaining this foundation in gaining and sustaining this trusttrust


Applies To ?

The general-purpose external financial reports ofThe general-purpose external financial reports of-- Public benefit corporations and authorities Public benefit corporations and authorities-- Bodies corporate and politic Bodies corporate and politic-- Public school districts Public school districts

-- Public hospitals and other health care Public hospitals and other health care providersproviders

-- Public colleges and universities (GASB 35) Public colleges and universities (GASB 35)


How Soon ?Phase in based on Total Annual Revenues

Total Annual RevenueTotal Annual Revenue

Required for Required for periods beginning periods beginning

after after June 15,June 15,

In other words, In other words, fiscal years fiscal years ending on ending on

or afteror afterForFor

InfrastructureInfrastructure $100 million +$100 million + 20012001 June 30, 2002June 30, 2002 June 30, 2006*June 30, 2006* $10 million - $100 million$10 million - $100 million 20022002 June 30, 2003June 30, 2003 June 30, 2007*June 30, 2007* $10 million or less$10 million or less 20032003 June 30, 2004June 30, 2004 Not required **Not required **

Annual revenues does not include other financing sources and extraordinary gainsAnnual revenues does not include other financing sources and extraordinary gains

* Retroactive to 1980 as the minimum* Retroactive to 1980 as the minimum

** Entity’s are encouraged, but not required to report general government infrastructure assets ** Entity’s are encouraged, but not required to report general government infrastructure assets retroactivelyretroactively

Component unit is to implement no later than its primary governmentComponent unit is to implement no later than its primary government


Basic Financial Statements Management’s Discussion and Analysis (MD&A)Management’s Discussion and Analysis (MD&A)

Two distinct financial statementsTwo distinct financial statements-- Government-wide (major change)Government-wide (major change)-- Fund (similar to current model)Fund (similar to current model)

Notes to the financial statements (for both)Notes to the financial statements (for both)

Required Supplemental Information (RSI)Required Supplemental Information (RSI)Three elements to RSI:Three elements to RSI:-- Management’s Discussion and Analysis Management’s Discussion and Analysis -- Budgetary comparison reportingBudgetary comparison reporting-- Infrastructure condition data (new)Infrastructure condition data (new)


M D & A

Precedes and introduces the basic financial statementsPrecedes and introduces the basic financial statements

Is part of RSIIs part of RSI

May be the most sensitive and subjective, and therefore, the most May be the most sensitive and subjective, and therefore, the most difficult aspect of GASB 34difficult aspect of GASB 34

Use of charts, tables, and graphs is encouragedUse of charts, tables, and graphs is encouraged


M D & A - Continued

Should provide a brief, objective, andShould provide a brief, objective, and

easily readable analysis ofeasily readable analysis of

the entity’s financial activitiesthe entity’s financial activities


M D & A - Continued Minimum requirements:

A brief discussion of the basic financial A brief discussion of the basic financial statements, including the relationships of statements, including the relationships of the statements to each other, and significant the statements to each other, and significant differences in the information they providedifferences in the information they provide

Condensed financial information derived Condensed financial information derived from government-wide financial statements from government-wide financial statements comparing the current year to prior yearcomparing the current year to prior year



An analysis of the government’s overall financial An analysis of the government’s overall financial position and results of operations to assist users in position and results of operations to assist users in assessing whether financial position has improved assessing whether financial position has improved or deteriorated as a result of the year’s operationsor deteriorated as a result of the year’s operations

An analysis of balances and transactions of An analysis of balances and transactions of individual funds addressing reasons for significant individual funds addressing reasons for significant changes in these balances and amountschanges in these balances and amounts



An analysis of significant variations An analysis of significant variations betweenbetween

Original and final budget amounts and Original and final budget amounts and

Final budget amounts and actual budget Final budget amounts and actual budget results for the general fund (or its results for the general fund (or its equivalent)equivalent)



A description of significant A description of significant Capital asset activityCapital asset activity

Long-term debt activity during the yearLong-term debt activity during the year

Including a discussion of commitments made for capital Including a discussion of commitments made for capital expendituresexpenditures

Changes in credit ratings, andChanges in credit ratings, and

Debt limitations that may affect the financing of Debt limitations that may affect the financing of planned facilities or servicesplanned facilities or services



A discussion by governments that use the A discussion by governments that use the modified approach to report some or all of their modified approach to report some or all of their infrastructure assetsinfrastructure assets

A description of currently known facts, decisions, A description of currently known facts, decisions, or conditions that are expected to have a or conditions that are expected to have a significant effect on financial position (net assets) significant effect on financial position (net assets) or results of operations (revenues, expenses, and or results of operations (revenues, expenses, and other changes in net assets)other changes in net assets)


M D & A Example

See pages 1 through 9 of ExamplesSee pages 1 through 9 of Examples


Government-Wide Financial Statements Consolidated financial statements for all of the entity’s Consolidated financial statements for all of the entity’s

operationsoperations

Basic financial statements – statement of net assets and Basic financial statements – statement of net assets and statement of activitiesstatement of activities

Full accrual basis of accountingFull accrual basis of accounting

Not presented on fund basisNot presented on fund basis Two Major ActivitiesTwo Major Activities

GovernmentalGovernmental Business-typeBusiness-type


Government-Wide Financial Statements - Continued

Net Asset focus:Net Asset focus:

Assets – Liabilities = Net AssetsAssets – Liabilities = Net Assets

Excludes interfund transactions and Excludes interfund transactions and fiduciary fundsfiduciary funds


Government-Wide Financial StatementsStatement of Net Assets

One column each for:One column each for:

Governmental Activities,Governmental Activities, including all fixed including all fixed assets and long-term debt assets and long-term debt Business-Type Business-Type Activities, Activities, including all enterprise fundsincluding all enterprise funds

Internal service funds are split between Internal service funds are split between the the two two based on volumebased on volume

Trust and Agency funds presented separatelyTrust and Agency funds presented separately


Government-Wide Financial Statements Categories of Net Assets

There are three parts:There are three parts: Invested in Capital Assets,Invested in Capital Assets, net of related debtnet of related debt RestrictedRestricted, externally imposed by law through , externally imposed by law through constitutional provisions, etc., constitutional provisions, etc., notnot by reporting by reporting entity entity (Differs from reserved)(Differs from reserved) Unrestricted, Unrestricted, essentially spendable, but cannot be essentially spendable, but cannot be

designated or reserved designated or reserved (Not the same as undesignated, and(Not the same as undesignated, and

designations are forbidden)designations are forbidden)


Government-Wide Financial StatementsStatement of Activities

Format is radical departureFormat is radical departure

Net cost format (expenses precede revenues)Net cost format (expenses precede revenues)

No comparison with prior year or budget requiredNo comparison with prior year or budget required

Level of detail:Level of detail: Governmental activities by functionGovernmental activities by function

Business–type activities by segmentBusiness–type activities by segment


Government-Wide Financial StatementsStatement of Activities - Continued

Program revenues can be hard to allocateProgram revenues can be hard to allocate

There may be a scramble by departments to There may be a scramble by departments to generate revenues to offset their expensesgenerate revenues to offset their expenses

Enterprise fees may be easier to adjust, now Enterprise fees may be easier to adjust, now that net profits are prominently displayedthat net profits are prominently displayed


Government-Wide Financial Statements Reporting Depreciation Expense

Depreciation (other than on infrastructure)Depreciation (other than on infrastructure) Function-specific capital assets by functionFunction-specific capital assets by function

Ratably allocable capital assets by functionRatably allocable capital assets by function

Otherwise as part of “general government” or in Otherwise as part of “general government” or in separate “unallocated depreciation” lineseparate “unallocated depreciation” line

Depreciation on infrastructureDepreciation on infrastructure Normally in function associated with acquisition and Normally in function associated with acquisition and

maintenancemaintenance

Alternatively in separate lineAlternatively in separate line


Government-Wide Financial Statements Reporting Interest Expense

Reported by function only if direct Reported by function only if direct connectionconnection

Otherwise report as separate “unallocated Otherwise report as separate “unallocated interest” lineinterest” line


Government-Wide Financial Statements Identifying Program Revenues

Amounts received from those who purchase, use, or directly Amounts received from those who purchase, use, or directly benefit from a programbenefit from a program

Grants and contributions restricted to one or more specific Grants and contributions restricted to one or more specific programsprograms Amount must be specified for multi-purpose grantsAmount must be specified for multi-purpose grants

Earnings on investments that are legally restricted for a Earnings on investments that are legally restricted for a specific programspecific program Endowments and permanent fundsEndowments and permanent funds

Invested grant proceedsInvested grant proceeds


Government-Wide Financial Statements Presentation of Program Revenues

Charges for services separate from grants and Charges for services separate from grants and contributionscontributions

Operating grants and contributions separate from Operating grants and contributions separate from capital grants and contributionscapital grants and contributions

A grant or contribution that may be used for either A grant or contribution that may be used for either operating or capital purposes should be treated as operating or capital purposes should be treated as an operating grant or contributionan operating grant or contribution


Government-Wide Financial Statements Special Items

DefinitionDefinition SignificantSignificant items within the control of items within the control of managementmanagement

Unusual in nature Unusual in nature oror infrequent in occurrence infrequent in occurrence

Treat in the same manner as, but separately Treat in the same manner as, but separately from, extraordinary itemsfrom, extraordinary items


Government-Wide Financial Statements Transfers

Single categorySingle category

Elimination of distinction between Elimination of distinction between operating transfers and residual equity operating transfers and residual equity transferstransfers

Consistent with move from capital Consistent with move from capital maintenance to net assets focusmaintenance to net assets focus


Government-Wide Financial Statements



Fund Financial Statements

Meet stewardship and accountability concernsMeet stewardship and accountability concerns

Presented on fund basisPresented on fund basis

Similar to current modelSimilar to current model

Modified accrual for governmental fundsModified accrual for governmental funds

Full accrual for proprietary fundsFull accrual for proprietary funds


Fund Financial Statements - Continued Balance Sheet versus Statement of Net Assets

Significant – but not obvious – differences Significant – but not obvious – differences between these two financial statementsbetween these two financial statements

Detailed reconciliation between the two Detailed reconciliation between the two statements requiredstatements required


Fund Financial Statements - Continued

Still combined, presenting only:Still combined, presenting only: General fundGeneral fund (always a (always a major fundmajor fund)) Major fundsMajor funds – separate column for each – separate column for each All All other funds other funds in single column (regardless in single column (regardless of fund of fund type)type) No fixed assets or long-term debt account No fixed assets or long-term debt account groupsgroups

Focus on major individual funds rather than combined Focus on major individual funds rather than combined fund typefund type


Fund Financial Statements Determining Major Funds

Criteria (apply to any and all)Criteria (apply to any and all) Total AssetsTotal Assets Total LiabilitiesTotal Liabilities Total RevenuesTotal Revenues Total Expenses/ExpendituresTotal Expenses/Expenditures

If If any one any one of the above equals 10% of category of the above equals 10% of category total total and and 5% of Government-Wide total – it is a 5% of Government-Wide total – it is a MajorMajor FundFund (10% test – governmental funds; 5% - (10% test – governmental funds; 5% - governmental funds + enterprise funds)governmental funds + enterprise funds)


Fund Financial Statements Optional Major Funds

Any fund “…the government’s officials Any fund “…the government’s officials believe is particularly important…” can be a believe is particularly important…” can be a major fundmajor fund

No limit on the number of fundsNo limit on the number of funds

No definition of “officials”No definition of “officials”


Fund Financial Statements Determining Major Funds

See page 14 of ExamplesSee page 14 of Examples


Fund Financial Statements The Reconciliations

Reconcile the Reconcile the change change in Net Assets With in Net Assets With the Excess of Revenues Over Expendituresthe Excess of Revenues Over Expenditures

Reconcile Fund Balance with Net AssetsReconcile Fund Balance with Net Assets

Part of the basic financial statements, not Part of the basic financial statements, not the notesthe notes


Fund Financial Statements – Governmental

Basic Financial Statements

Balance sheetBalance sheet

Statement of revenues, expenditures, and Statement of revenues, expenditures, and changes in fund balanceschanges in fund balances

Budgetary comparison (if not presented as Budgetary comparison (if not presented as RSI)RSI)


Fund Financial Statements -Proprietary

Basic Financial Statements

Statement of net assets/balance sheetStatement of net assets/balance sheet

Statement of revenues, expenses, and Statement of revenues, expenses, and changes in fund net assets/fund equitychanges in fund net assets/fund equity

Statement of cash flowsStatement of cash flows


Fund Financial Statements -Proprietary

Basic Financial Statements - Continued

Major fundsMajor funds separate column separate column

All All other enterprise fundsother enterprise funds in single column in single column

All All internal service fundsinternal service funds in separate in separate column – they can not be column – they can not be major fundsmajor funds


Fund Financial Statements Use of Enterprise Funds

Permitted only for activities “for which a fee is Permitted only for activities “for which a fee is charged to external users for goods or services”charged to external users for goods or services”

Issued debt backed solely by fees or chargesIssued debt backed solely by fees or charges

Required by policy or by law to cover Required by policy or by law to cover all all costs, costs, including depreciationincluding depreciation


Fund Financial Statements Use of Internal Service Funds

Available for any activity that provides goods or Available for any activity that provides goods or services to other funds, departments, or agencies of services to other funds, departments, or agencies of the primary government and its component units, or the primary government and its component units, or to other governments, on a to other governments, on a cost-reimbursement basiscost-reimbursement basis

May only be used if the reporting government is the May only be used if the reporting government is the predominate participantpredominate participant

Minority participant, then fund becomes enterprise Minority participant, then fund becomes enterprise fundfund


Fund Financial Statements Inter-Fund Activity

Inter-fund loans now must be recorded in Inter-fund loans now must be recorded in borrower funds borrower funds

No more GLTDAGNo more GLTDAG

Inter-fund reimbursements “should not be Inter-fund reimbursements “should not be displayed in the financial statements”displayed in the financial statements”


Fund Financial Statements Inter-Fund Eliminations

Now required at government-wide levelNow required at government-wide level

Must eliminate inter-fund profitsMust eliminate inter-fund profits


Fund Financial StatementsFiduciary Funds

Fiduciary funds never Fiduciary funds never major fundsmajor funds Presentation by fund typePresentation by fund type

Employee benefit trust funds Employee benefit trust funds Investment and private purpose trust fundsInvestment and private purpose trust funds Agency fundsAgency funds

Basic financial statementsBasic financial statements Statement of net assetsStatement of net assets Statement of changes in net assets (not used for Statement of changes in net assets (not used for agency funds)agency funds)


Fund Financial Statements Agency Funds Defined

“…“…used to report resources held… in a used to report resources held… in a purely custodial capacity”purely custodial capacity”

Funds used to collect developer fees or Funds used to collect developer fees or other charges levied by the entity are not other charges levied by the entity are not agency fundsagency funds


Fund Financial Statements

See pages 15 through 23 of Examples for basic financial See pages 15 through 23 of Examples for basic financial statementsstatements

See page 18 for reconciliationSee page 18 for reconciliation

See pages 24 through 26 for conversion worksheets for See pages 24 through 26 for conversion worksheets for Fund Statements Fund Statements to Government-Wide Statementsto Government-Wide Statements


Notes to the Financial Statements

Summary of significant accounting policiesSummary of significant accounting policies

Capital assetsCapital assets

Long-term debt and other long-term Long-term debt and other long-term liabilitiesliabilities


Notes to the Financial Statements Summary of Significant Accounting Policies

Description of government-wide statementsDescription of government-wide statements No fiduciary funds or fiduciary component unitsNo fiduciary funds or fiduciary component units

Policy for eliminating internal activity in Policy for eliminating internal activity in the statement of activitiesthe statement of activities

Capitalization policy and estimated useful Capitalization policy and estimated useful lives of capital assetslives of capital assets

Description of modified approach for Description of modified approach for infrastructure assets (if applicable)infrastructure assets (if applicable)


Notes to the Financial Statements Summary of Significant Accounting

Policies - Continued

Types of transactions in program revenues Types of transactions in program revenues and policy for allocating indirect expensesand policy for allocating indirect expenses

Definition of operating and nonoperating Definition of operating and nonoperating revenues in proprietary fundsrevenues in proprietary funds

Policy assumption on use of restricted Policy assumption on use of restricted versus unrestricted resourcesversus unrestricted resources


Notes to the Financial Statements Capital Assets

Assets associated to governmental activities Assets associated to governmental activities to be reported separately from those to be reported separately from those associated with business-type activitiesassociated with business-type activities

Assets being depreciated to be reported Assets being depreciated to be reported separately from those not being depreciatedseparately from those not being depreciated


Notes to the Financial Statements Balances and Changes by

Capital Asset Class

Beginning-of-year balances, with accumulated Beginning-of-year balances, with accumulated depreciation presented separately from historical costdepreciation presented separately from historical cost

Capital acquisitionsCapital acquisitions

Sales or other dispositionsSales or other dispositions

End-of-year balances, with accumulated depreciation End-of-year balances, with accumulated depreciation presented separately from historical costpresented separately from historical cost


Notes to the Financial Statements Depreciation

Current-period depreciation expense, with Current-period depreciation expense, with disclosure of the amounts charged to each disclosure of the amounts charged to each of the functions in the statement of of the functions in the statement of activitiesactivities


Notes to the Financial Statements Long-term Debt and

Other Long-Term Liabilities

Separate governmental and business-type activitiesSeparate governmental and business-type activities

Required disclosureRequired disclosure Beginning and end-of-year balancesBeginning and end-of-year balances

Increases and decrease (separately presented)Increases and decrease (separately presented)

The portions of each item that are due within one year The portions of each item that are due within one year of of the statement datethe statement date

Governmental funds typically used to liquidate other Governmental funds typically used to liquidate other long-term liabilities in prior yearslong-term liabilities in prior years


Notes to the Financial Statements

See pages 27 through 29 of Examples for See pages 27 through 29 of Examples for Capital Assets and Long-Term Liabilities Capital Assets and Long-Term Liabilities samplessamples


Budgetary Comparison Schedules

22ndnd component of RSI component of RSI

Comparison of “budget-to-actual” results Comparison of “budget-to-actual” results for the governmental funds no longer for the governmental funds no longer required as part of the “basic” financial required as part of the “basic” financial statementstatement


Budgetary Comparison Schedules - Continued

Schedules presentSchedules present Original budget as adoptedOriginal budget as adopted

Final amended budgetsFinal amended budgets

Actual inflow, outflows, and balancesActual inflow, outflows, and balances

Stated on budgetary basisStated on budgetary basis

Budget basis can still differ from GAAP Budget basis can still differ from GAAP basisbasis


Budgetary Comparison Schedules- Continued



Capital Assets and Infrastructure Reporting

33rdrd component of RSI component of RSI

Two schedulesTwo schedules

Report of condition of assetsReport of condition of assets

Annual estimate of maintenance and Annual estimate of maintenance and preservation costs compared to actual preservation costs compared to actual expensesexpenses


Capital Assets

DefinitionDefinition Tangible or intangible assets that are used in Tangible or intangible assets that are used in operations and that have initial useful lives operations and that have initial useful lives extending beyond a single reporting periodextending beyond a single reporting period

ExamplesExamples Land and improvements to land, easements, Land and improvements to land, easements, buildings and building improvements, buildings and building improvements, vehicles, machinery and equipment, works of vehicles, machinery and equipment, works of art and historical treasures.art and historical treasures.


Capital Assets - continued

Determine Capitalization ThresholdsDetermine Capitalization Thresholds Capitalization Thresholds can be different Capitalization Thresholds can be different

for:for: Different types of assetsDifferent types of assets Existing assetsExisting assets Newly acquired assetsNewly acquired assets


Capital Assets - continued

Buildings and Equipment must be Buildings and Equipment must be Depreciated.Depreciated.

May use historical cost or deflate current May use historical cost or deflate current replacement cost.replacement cost.

Determine useful life.Determine useful life. Select depreciation method.Select depreciation method. Do not depreciate inexhaustible assets.Do not depreciate inexhaustible assets.


Infrastructure

DefinitionDefinition Long-lived capital assets that normally are Long-lived capital assets that normally are

stationary in nature and normally can be stationary in nature and normally can be preserved for a significantly greater number preserved for a significantly greater number

of of years than most capital assetsyears than most capital assets

ExamplesExamples Roads, bridges, tunnels, drainage systems, water Roads, bridges, tunnels, drainage systems, water

and sewer systems, dams and lighting systemsand sewer systems, dams and lighting systems


Infrastructure - Continued

Determining Value Determining Value Actual historical costActual historical cost Reasonable estimates for historical costReasonable estimates for historical cost

Depreciating assets - Two optionsDepreciating assets - Two optionsperper “Network” “Network” or or “Subsystem”“Subsystem” Traditional - Straight-line over estimated useful Traditional - Straight-line over estimated useful

lifelife Modified Approach - No depreciation if Modified Approach - No depreciation if maintenance standards are metmaintenance standards are met


Infrastructure: Modified Approach Standards (per paragraph 23)Standards (per paragraph 23)

Maintain up-to-date inventoryMaintain up-to-date inventory Use objective condition measurement scaleUse objective condition measurement scale Set condition standardsSet condition standards Estimate annual costs to achieve this standardEstimate annual costs to achieve this standard Perform ongoing condition assessment (at least every 3 years)Perform ongoing condition assessment (at least every 3 years)

DisclosureDisclosure Actual condition (per scale) compared with standard (show Actual condition (per scale) compared with standard (show

results of last 3 assessments)results of last 3 assessments) Amount actually spent on maintenance for the last 5 years Amount actually spent on maintenance for the last 5 years

compared with estimatecompared with estimate Determining the method used is a major accounting policyDetermining the method used is a major accounting policy


Capital Assets and Infrastructure Reporting Net Asset Surprises

If the entity constructed a capital asset which will be If the entity constructed a capital asset which will be maintained by another - maintained by another - do notdo not record it on your books record it on your books

But if entity issued debt to finance that asset, the debt But if entity issued debt to finance that asset, the debt mustmust be recorded on your books be recorded on your books

The infrastructure paid for is not required to be The infrastructure paid for is not required to be recorded for four yearsrecorded for four years

Net Assets will be understated, and may be a negative Net Assets will be understated, and may be a negative amountamount


Does The Entity Look Better or Worse?

The answer is in the eye of the beholderThe answer is in the eye of the beholder

The new format gives people a better picture of The new format gives people a better picture of where the money went, since long-term where the money went, since long-term transactions and all the money spent on transactions and all the money spent on infrastructure will now be capturedinfrastructure will now be captured

The financial statements are more completeThe financial statements are more complete But the amounts are much larger, and further away But the amounts are much larger, and further away

from cash basis, which most people understand from cash basis, which most people understand betterbetter



- Continued

New government-wide statements may focus New government-wide statements may focus people – including council – on the big picture, people – including council – on the big picture, and keep them out of the detailand keep them out of the detail

Even at fund level, only Even at fund level, only major fundsmajor funds are presented are presented

Pushes people to look at more than cash balances Pushes people to look at more than cash balances and their favorite fundand their favorite fund



- Continued

Governmental Unrestricted Net Assets Governmental Unrestricted Net Assets differs from General Fund Balancediffers from General Fund Balance

Statement of Activities focuses on net costsStatement of Activities focuses on net costs This may force increases in fees and This may force increases in fees and

chargescharges Will it change the budget approach? Will it change the budget approach?


Impact on Entity Financial Picture

Government-Wide Level:Government-Wide Level: Depends on the unique circumstances of the Depends on the unique circumstances of the

entityentity Including infrastructure may increase equity,Including infrastructure may increase equity, But including long-term debt and other But including long-term debt and other liabilities may decrease equityliabilities may decrease equity

Fund level: Little affectFund level: Little affect Based on the handful of entities that have Based on the handful of entities that have

prepared sample statements:prepared sample statements: Not better or worse - just differentNot better or worse - just different


Other Changes

No Account Groups (GFAAG and GLTDAG)No Account Groups (GFAAG and GLTDAG)

Depreciation for governmental activitiesDepreciation for governmental activities

Longer and more complicated notes to meet Longer and more complicated notes to meet disclosure requirementsdisclosure requirements

The BIG one: Recording infrastructure as capital The BIG one: Recording infrastructure as capital assets - and expensing them through depreciationassets - and expensing them through depreciation


So What’s the Big Deal?

Basic statements will be longer and more Basic statements will be longer and more complexcomplex

More difficult to prepare and audit – especially More difficult to prepare and audit – especially during conversionduring conversion

Directly translates into increased costs, both Directly translates into increased costs, both initially and ongoing for:initially and ongoing for: Staff resourcesStaff resources Audit and feesAudit and fees Engineering/appraisal services for infrastructureEngineering/appraisal services for infrastructure


Is the Effort Worth it?

New Model goalsNew Model goals Improve financial reportingImprove financial reporting Enhance awareness of fiscal issues facing state and Enhance awareness of fiscal issues facing state and local governmentslocal governments Recognize the importance of adequately maintaining Recognize the importance of adequately maintaining infrastructureinfrastructure

Unclear if it will achieve these goalsUnclear if it will achieve these goals Will it be easier or harder to understand the entity’s Will it be easier or harder to understand the entity’s fiscal picture?fiscal picture?

But very clear it will be expensive to make these But very clear it will be expensive to make these changeschanges


How Much Will it Cost?

The short answer - it depends . . . .The short answer - it depends . . . . Operational size and complexityOperational size and complexity Financial staff resourcesFinancial staff resources Age of infrastructureAge of infrastructure Information availabilityInformation availability

Issues (both initial and ongoing)Issues (both initial and ongoing) Preparing additional statementsPreparing additional statements Developing and maintaining infrastructure dataDeveloping and maintaining infrastructure data Auditing the resultsAuditing the results


Summary GASB 34 is a major change in financial reporting for GASB 34 is a major change in financial reporting for

state and local governmentsstate and local governments

While there are concerns (especially with infrastructure While there are concerns (especially with infrastructure reporting), there is wide-spread agreement for reporting), there is wide-spread agreement for implementation because of the importance of preparing implementation because of the importance of preparing audited financial statements in accordance with audited financial statements in accordance with “GAAP”“GAAP”

Successful implementation will require careful planning, Successful implementation will require careful planning, staff training and allocating necessary resources staff training and allocating necessary resources


Questions ?

Allison M. Quinn, CPAAllison M. Quinn, CPA

BOLLAM, SHEEDY, BOLLAM, SHEEDY, TORANI & CO. LLP, CPAsTORANI & CO. LLP, CPAs

26 Computer Drive West26 Computer Drive WestAlbany, New York 12205Albany, New York 122051-800-724-67001-800-724-6700

[email protected]@bstco.com

Kenneth G. ScherriebleKenneth G. Scherrieble

VALLEY RIVER, INCVALLEY RIVER, INC

29 Firemens Way29 Firemens Way

Poughkeepsie, New York 12603Poughkeepsie, New York 12603

1-845-452-60131-845-452-6013

[email protected]@aol.com

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