How to Implement GASB Statement No. 34: Prepare for the Largest Innovation Ever in State and Local Government Financial Reporting
Chase, Bruce W., Triggs, Laura B., Journal of Accountancy
Outside the District of Columbia, changes don't come much bigger than this' New financial reporting requirements from the Governmental Accounting Standards Board (GASB) mean state and local governments must revamp both the form and substance of their financial reports. The new model requires government-wide statements containing information--not previously collected--that will make it easier for financial statement users to measure operational accountability by accounting for activities as business enterprises do. In the statement of activities, for example, governments will have to capitalize--not expense--the purchase of fixed assets. In addition, the financial statements' format will reflect the net cost of government services, such as providing for public safety and education.
For the tens of thousands of governments that have to comply with GASB Statement no. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments--and for the auditors helping them interpret and implement it--this is a major undertaking. (Statement no. 34 was issued in June 1999. See JofA, Official Releases, Oct. 99, page 112.) When they have implemented the statement, however, these governments' financial reports will provide more data than ever before, much of it in new government-wide formats.
The required implementation date for larger governments is for fiscal years beginning after June 15, 2001 (see "GASB 34 Implementation Schedule" page 72). The city of Alexandria, Virginia, however, decided to implement two years early. Its financial statements are presented in exhibit 1, "Statement of Net Assets," page 77, and exhibit 2, "Statement of Activities," page 78. This article offers suggestions and advice on how to implement the new statement. It recounts Alexandria's experience and discusses possible concerns from the viewpoint of the state of Alaska--which expects to implement the standard in 2002--and of an Oklahoma City CPA firm that audits the financial statements of state and local governments and is assisting a number of them in preparing their financial reports under Statement no. 34.
To help governments implement Statement no. 34, GASB issued Statement no. 37, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments: Omnibus, and Statement no. 38, Certain Financial Statement Note Disclosures in June 2001 (see Official Releases, page 127). Governments should review the following related statements as well:
* Statement no. 36, Recipient Reporting for Certain Shared Nonexchange Revenues (April 2000).
* Statement no. 35, Basic Financial Statements--and Management's Discussion and Analysis--for Public Colleges and Universities (November 1999).
* Statement no. 33, Accounting and Financial Reporting for Nonexchange Transactions (December 1998).
GET A GOOD START
Governments need to quickly identify issues that could hinder a smooth implementation of the requirements. One determination they should make early is whether they have enough skilled staff or will need outside assistance in preparing their financial statements, says Frank Crawford, CPA, a partner in the Oklahoma City auditing firm of Crawford & Associates.
Those beginning to plan for implementation will be glad to hear the statement's provisions won't have much impact on accounting software systems. "The effect is minimal," Crawford says. "Governments still will maintain their fund accounting and do adjustments at yearend to convert to the external financial reporting requirements of Statement no. 34."
But there are other areas to be concerned about. Kim Garnero, CPA, director of the division of finance in Alaska's department of administration, says her top concern is staffing. "We don't have people to dedicate to this," she says, "and staff turnover is a constant worry. So, we've been training with a consultant who reviewed our previous financial statements and designed an implementation plan that focused on those statement provisions that pertain to us. …