Recent GASB Standards and Higher Education

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Recent GASB Standards and Higher Education

• Sue Menditto
• Senior Manager
• Accounting and Finance Programs
• NACUBO

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GASB 35Projects and Resources

• IPEDS
• Survey considerations
• Listserv
• UNC Chapel Hill
• NACUBO
• Training
• Implementation Guide
• Web links to F/S
• GASAC
• NASACT
• Task force with higher education participation

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GASB 39Introduction

• Officially known as Governmental Accounting
  Standards Board Statement No. 39, Determining
  Whether Certain Organizations Are Component
  Units, an amendment of GASB Statement 14
• Commonly referred to as Affiliated Organizations

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GASB 39Project History

• 1990Project began
• 1991GASB Statement No. 14
• Paragraph 41 future guidance
• 1994First exposure draft
• 2001Second exposure draft
• NACUBOs position
• www.nacubo.org
• 2002Final Standard

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GASB 39GASB 14 The Genesis

• Financial reporting entity
• Primary government
• Organizations for which the primary government is
  financially accountable
• Other organizations for which the nature and
  significance of their relationship with the
  primary government are such that exclusion would
  cause the reporting entity's financial statements
  to be misleading or incomplete.

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GASB 39Misleading to Exclude

• Why GASB 39 was issued
• New standard amends GASB 14 to define legally
  separate, tax-exempt fund-raising organizations
  as component units
• Basis is misleading to exclude

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GASB 39Misleading to Exclude

• Matter of professional judgment to determine
  whether the nature and the significance of
  relationship with the primary government warrants
  inclusion.
• Organizations affiliated with governmental units,
  agencies, colleges, universities, hospitals, and
  other entities may warrant inclusion.
• An example of an affiliated organization that may
  be evaluated for inclusion is a nonprofit
  corporation whose purpose is to benefit a
  governmental university by soliciting
  contributions and managing those funds.

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GASB 39Criteria

• Must meet three criteria
• Holds resources (almost) entirely for direct
  benefit of institution, its component units, or
  its constituents
• Institution or its component units are entitled
  to access majority of resources
• Individual affiliated organization resources are
  significant

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GASB 39Criteria

• First criterion
• Intended to exclude federated fundraising
  organizations with ability to direct resources to
  multiple beneficiaries
• Example United Way

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GASB 39Criteria

• Second criterion
• Institution is entitled to or has the ability to
  otherwise access the majority of affiliated
  organization resources
• Past trend of providing resources
• Affiliated organization honors requests from
  institution
• Financially interrelated per FASB 136

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GASB 39Criteria

• Third criterion
• Resources held by individual affiliated
  organization must be significant to institution
• If affiliated organizations resources not
  significant, fails test (and not reported)
• Excludes most Parent Teacher Organizations or
  booster clubs supporting public school districts

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GASB 39Reporting Requirement

• Affiliated Organizations that meet the criteria
  must be included in an institutions financial
  statements
• Discrete presentation is required
• Statement of Net Assets
• Statement of Revenues, Expenses and Changes in
  Net Assets
• Statement of Cash Flows not required
• Unless no affiliated organization audit
• Institution prepares the cash flow statement

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GASB 39Display Options

• Institution and sole component unit in separate
  columns on same page
• Component unit on succeeding page
• Institution and multiple component units in
  separate columns on same page
• Multiple component units in separate columns on
  succeeding page

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GASB 39Display Considerations

• FASB entities
• Option to present on separate page immediately
  following each GASB statement
• Can adapt FASB classifications to present on same
  page using GASB classifications
• GASB entities
• Rare
• One institution out of 160 in a NACUBO training

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GASB 39Display Considerations

• Combined totals for multiple component units
• Requires detail in footnote disclosure
• Compatibility
• Compatibility of terms
• Program expenses
• Natural expenses
• Managements Discussion and Analysis

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GASB 39Footnote Disclosures

• Required disclosures
• Description of the component unit
• Nature and amount of significant transactions
• Explanation of transaction differences due to
  different reporting periods
• Other disclosures essential for fair
  presentationa matter of professional judgment

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GASB 39Effective Date

• Fiscal years beginning after June 15, 2003
• For most colleges and universities, fiscal year
  ending June 30, 2004
• Earlier adoption encouraged
• Failure to implement could result in adverse
  financial statement opinion for institution

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GASB 39Implementation Issues

• Review each potential component unit
• Resolve display issues
• Assess impact on audit schedule
• Assess impact on audit fees
• Develop communication strategy
• Primary Government
• Board / Executive Management
• Affiliated Organizations

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GASB 39Foundation Issues

• Work with the Institution
• Compliance by institution is mandatory, if
  applicable
• Better to cooperate than have decisions made
  without foundations input

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GASB 39Foundation Issues

• Consequences of Non-cooperation
• Direct
• Noneunless special state statutes apply
• Indirect
• Strained relationship with institution
• Rescission of authority to use institutions name
  in fundraising

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GASB 39Conclusion

• GASB desire for increased disclosure and
  transparency
• Began with GASB 34/35 reporting changes
• Also seen in current Performance Measurement
  Project
• NACUBO web-cast www.nacubo.org