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Recent GASB Standards and Higher Education

Sue MendittoSenior ManagerAccounting and Finance ProgramsNACUBO

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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

1990—Project began 1991—GASB Statement No. 14

Paragraph 41 – future guidance 1994—First exposure draft 2001—Second exposure draft NACUBO’s position

www.nacubo.org 2002—Final 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 organization’s 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 institution’s 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

Management’s 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

presentation—a 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 foundation’s input

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GASB 39Foundation Issues

Consequences of Non-cooperation Direct

None—unless special state statutes apply

Indirect Strained relationship with institution Rescission of authority to use

institution’s 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