GASB #34: Problems and Solutions During Implementation
Presented by: Bert Nuehring FPT&W, Ltd. Chicago, Oak Brook, Springfield www.fptw.com
Andy Mace, William F. Gurrie, Ltd. Oak Brook www.gurrie.com
Illinois Association of School Business Officials 52nd Annual Conference
GASB 34 Questions and Answers
May 14, 2003
1. If our District follow the cash basis of accounting and we have our separately issued stand alone financial
statements audited on the cash basis, do we need to comply with GASB 34?
Yes, in order for your auditors to opine on the cash basis of accounting for your separately issued stand alone
financial statements, they are required to follow the standards related to an “other comprehensive basis of
accounting.” These standards require that financial statements be audited to determine that they are presented
with all disclosures that are necessary in accordance with generally accepted accounting principles. GASB 34 is
generally accepted accounting principle, therefore, a cash basis financial report would be required to be
presented in the format of GASB 34 and to include all disclosures required by generally accepted accounting
principles.
2. What is the Illinois State Board of Education’s (ISBE) position on GASB 34?
The guidance available from the ISBE regarding GASB 34 suggests that school districts will not be required to
implement GASB 34. If a district chooses not to implement GASB 34, the annual financial report can be utilized
as a regulatory financial report. The auditor will then need to issue a regulatory report on the Annual Financial
Report (AFR). If a school district follows the GASB 34 format they would still be required to prepare and submit
an AFR (similar to current format) with an auditor opinion on the regulatory basis of accounting. However,
developments at ISBE will need to be monitored because of recent comments attributed to the State
Superintendent regarding having school districts follow GASB 34 requirements; though GASB 34 requirements
will likely require legislative changes before required implementation.
3. Can our school district only issue the AFR and receive an unqualified (clean) opinion on the AFR in
accordance with a regulatory basis of accounting?
A district could get an unqualified opinion on the regulatory basis of accounting as a limited use report. A limited
use report would have to restrict the reliance on the report to the District and the ISBE. However, if the auditor is
aware that the report may be used by parties other than the District or the ISBE, then the auditor is required to
first issue an adverse opinion on the financial statements in accordance with generally accepted accounting
principles. Then the auditor can issue an unqualified opinion in accordance with the regulatory basis of
accounting as a limited use report. An auditor would probably need to consider that a District’s financial
statements are used by additional parties when a Single Audit is required or when there is outstanding bonded
debt or other debt.
4. What are the consequences if our District does not comply with GASB 34?
Noncompliance with GASB 34 would result in an adverse opinion on the district’s financial statements. An
adverse opinion states the “…financial statements are not presented in accordance with generally accepted
accounting principles…” The impact on an entity with an adverse opinion on the financial statements could mean
a lower credit rating and negative publicity.
5. Does GASB 34 prescribe standards for capital asset policies, capitalization thresholds and asset useful
lives?
No. GASB did not prescribe or require minimum standards for policies related to capital assets. Each entity is
required to disclose its capital asset policies in the notes to the financial statements.
6. Many people have indicated that capitalization thresholds for assets should be increased. Are there
prescribed amounts for capitalization thresholds in GASB 34?
No. GASB does not prescribe threshold amounts for the capitalization of assets.
7. If we increase capitalization thresholds, won’t we be losing valuable information for the insurable assets?
It is recommended that consideration be made for maintaining a ledger for accounting purposes and another
ledger for property control purposes. The accounting ledger would maintain information regarding assets
capitalized according to the accounting policy. A separate property control ledger will use a lower threshold. This
ledger will be used for property control and insurance purposes.
8. Which revenues should be considered program revenues for presentation on the Statement of Activities?
Generally, GASB 34 requires that program revenues meet the following definitions:
Program revenues derive directly form the program itself or from parties outside the district’s taxpayers or
citizenry. There are three categories of program revenues:
a. Charges for services – these revenues directly arise from charges to customers or applicants who
purchase, use, or directly benefit from the goods, services or privileges provided.
b. Program – specific operating grants and contributions – these revenues arise from transactions with other
governments, organizations or individuals that are restricted for use in a particular program.
c. Program specific capital grants and contributions – these revenues are similar to program-specific
operating grants and contributions, except that they involve funds that are to be restricted for capital
purposes. Capital purposes include that purchasing, constructing or renovating capital assets associated
with a specific program.
Specifically, some of the following revenues by source could be considered as program revenues:
NCES Title
Property taxes
Payments in lieu taxes
Interfund payments
Payments for services (tuition)
Food service sales
Non-capital sales
School activity income
Interest on investments
Other local revenue
Interdistrict transit of aids
Interdistrict tuition payment
Other interdistrict payments
Intermediate transit of aids
Intermediate payment for
services
Other intermediate payments
Categorical state aid
General state aid
State payments for special
projects
State tuition payments
State payments through local
units
Federal categorical aid
Federal impact aid
Federal payments for special
projects
Gain or loss sale of fixed
assets
Refund of prior year
disbursements
PROGRAM REVENUES
Operating
Capital
Charges for
Grants and
Grants and
Services
Contributions
Contributions
Potentially
Generally
Always
Generally
Generally
Potentially
Potentially
Potentially
Generally
Potentially
Potentially
Generally
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Generally
Potentially
Generally
General
Purpose
Always
Always
Potentially
Potentially
Special/
Extraordinary
Items
Potentially
Potentially
Generally
Generally
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Potentially
Always
Potentially
Potentially
Generally
Generally
Potentially
Generally
Generally
Potentially
Potentially
Generally
Generally
9. Our district currently has a working cash fund that is presented as an expendable trust fund in our
financial statements. Under GASB 34, expendable trust funds no longer exist as a fund type. How will
the working cash fund be classified under GASB 34?
The working cash fun would likely be considered a special revenue fund under GASB 34.
10. Our district has a Section 457 deferred compensation plan that is not trusted. In the past we have
presented this fund as a fiduciary fund. How will this fund be presented under GASB 34?
It will be presented as a Fiduciary fund type, pension trust fund.
11. Some examples of GASB 34 style financial statements show the school lunch activities as Business Type
Activities (BTA) or proprietary funds. Is it a requirement that these activities be presented as business
type or proprietary funds?
No. GASB 34 indicates that following requirements for proprietary funds:
Proprietary enterprise funds may be used to report any activity for which a fee is charged to external users for
goods or services. Activities are required to be reported as enterprise funds if any one of the following criteria is
met. Governments should apply each of these criteria in the context of the activity’s principal revenue sources:
a. Activity is financed with debt that is secured solely by a pledge of the net revenue from fees and charges of
the activity.
b. Laws or regulations that the activity’s costs of providing services be recovered with fees and charges, rather
than with taxes or similar revenues.
c. The pricing policies of the activity establish fees and charges designed to recover its cost, including
depreciation and other overhead.
12. What is the Illinois Community College Board’s (ICCB) position on GASB 34/35?
ICCB issued guidance to community colleges on May 16, 2002. Generally, the guidance indicates the following:
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Property taxes should be recorded according to GASB 33. Receivables and deferred revenue should be
recorded when passed by the Board.
Corporate personal property tax should be recorded according to GASB 33, example 5, when the tax is
measurable and available.
Depreciation should be recorded in the GFAAG. Capitalization thresholds are as follows:
o $2,500-$5,000
o For remodeling that extends the life of a building: $50,000-$100,000
Useful life guidelines:
o Buildings: 40-60 years
o Land Improvements: 10-20 years
o Equipment: 5-10 years
o Technology related software and hardware: 3-5 years
o Vehicles: 3-5 years
Acceptable depreciation methods:
o Straight line
o Double declining balance
o Sum of the years digits
Summer school revenue and expense should be reported in the subsequent fiscal year.
Recommend the BTA model. IF BTA is not used, ICCB requires BTA as supplemental information for any
other model.
The consolidation financial reporting method should be used for GASB 35 reporting.
Elimination and adjustment entries should be made in the consolidated statement:
o Elimination of internal service charges and equivalent expenditures
o Funds to be provided should be eliminated from the LTDAG
o Interfund due to/from should be netted
o Scholarships and Pell grants provided for tuition and fees should offset tuition revenues as an
allowance.
13. What are sources of material to assist in the implementing of GASB 34?
There are number of sources of guidance related to the implementation of GASB 34. Some of those sources
include the following:
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Association of School Business Officials – 703-478-0405
o GASB Statement No. 34, Implementation Recommendations for School Districts
o Implementing GASB 34
Government Finance Officer’s Association – 312-977-9700
o GAAFR
o An Elected Official’s Guide to GASB 34
Government Accounting Standards Board – 203-847-0700
o Guide to Implementation of GASB Statement 34 and Related Pronouncements
o Guide to Implementation of GASB 34 on Basic Financial Statements – and Management’s
Discussion and Analysis – for State and Local Governments
o GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions
o GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and
Analysis – for State and Local Governments
o GASB Statement No. 34, Implementation Guides, (Vol. 1 and 2)
o GASB Statement No, 35, Basic Financial Statements – and Management’s Discussion and
Analysis – for Public Colleges and Universities – an amendment of GASB Statement No. 34
o GASB Statement No. 36, Recipient Reporting for Certain Shared Nonexchange Revenues – an
amendment of GASB Statement No. 33
o GASB Statement No. 37, Basic Financial Statements – and Management’s Discussion and
Analysis – for State and Local Governments: Omnibus-an amendment of GASB Statements No.
21 and No. 34
National Association of College and University Business Officers – 202-861-2500
o GASB 35 Implementation Guide