The Governmental Accounting Standards Board (GASB) is responsible for developing standards of state and local governmental accounting and financial reporting that will:

• result in useful information for users of financial reports, and
• guide and educate the public, including issuers, auditors, and users of those financial reports.

GASB provides ongoing reviews of the processes used to prepare governmental financial statements. It uses the GASB advisory board, which includes local government representatives and a representative from NACo, to help implement new procedures. All new statements and guidelines are thoroughly reviewed and put out for public comment before implementation.

Statement 34, the new statement
Statement 34, Basic Financial Statements — and Management’s Discussion and Analysis — for State and Local Governments, adopted in June 1999, is the most recently implemented guideline from GASB.

It establishes financial reporting standards for state and local governments, including states, cities, towns, villages and special-purpose governments such as school districts and public utilities. It establishes new content for the basic financial statements — including a full accounting for all capital assets, including the government’s infrastructure — and also provides for required supplementary information for general-purpose governments.

The new government-wide information will make the government’s fiscal viability readily apparent to readers of the annual financial statement. It will make the government’s large investment in infrastructure clearly visible, something not been apparent under previous guidelines.

The new statement uses conventional governmental financial reporting methods and adds some new features GASB believes will increase the usefulness of government finance reports.

These new features include government-wide financial statements and management’s discussion and analysis. The new format not only provides a presentation of the current year’s fiscal accountability but it also provides a picture of the medium range to long term operational accountability of the government.

The new features of financial reports prepared under Statement 34 are grouped together under the new category of required supplementary information.

The information required in these supplemental reports is an addition to the usual basic financial statements prepared annually by most governments. Among the reports now required are a management discussion and analysis. GASB says this report “should provide an objective and easily readable analysis of the government’s financial activities” using facts, decisions or conditions known to management at the time the report is prepared.

Another newly required supplemental report is a government-wide financial statement. This report will show the financial position and operating results of the government as an economic enterprise without any reference to the government’s fund structure. This report will provide the information necessary to assess the government’s operational accountability.

Special-purpose governments that are engaged in only governmental activities (such as some library districts) or are engaged in both governmental and business-type activities (such as some school districts) are generally required to use the same reporting requirements as general-purpose governments. Special-purpose governments engaged only in business-type activities (such as utilities) should continue to prepare the financial statements required for enterprise funds.

Effective Date and Transition
The requirements of Statement 34 are effective in three phases based on a government’s total annual revenues in the first fiscal year ending after June 15, 1999.

• Phase 1 – Governments with total annual revenues (excluding extraordinary items) of $100 million or more should apply this statement for periods beginning after June 15, 2001.
• Phase 2 – Governments with at least $10 million but less than $100 million in revenues should apply this statement for periods beginning after June 15, 2002.
• Phase 3 – Governments with less than $10 million in revenues should apply this statement for periods beginning after June 15, 2003. Earlier application is encouraged.

The NACo Research Division is currently creating a repository of GASB 34 information on the NACo Web page. This information is accessible from a button on NACo’s home page at www.naco.org and also under the button “links” then “financial management.”

Information used in this report was taken from the Governmental Accounting Standards Board Web page, the Government Finance Officers Web page and “GASB Statement No. 34: The Dawn of a New Governmental Financial Reporting Model,” by Laurence E. Johnson and David R. Bean, published in The CPA Journal, December 1999.

(Jacqueline Byers, director of research, wrote Research News.)