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Overview - GASB 34 for School Districts
The Governmental Accounting Standards Board Statement 34 (GASB 34) is the result of over a decade of wrangling over how the financial statements of local governments should look.
The result is a compromise between those who wanted to keep the current approach and those who felt that consumers of the output are less interested in such things as fund types and more concerned with how the school district, as a whole, receives its money, spends its money, and how much is funded by the local taxpayers. The reports should be more readable and easier to identify what are the activities and the financial health of the district the local people are funding.
The following outlines some of the changes introduced by GASB 34 for reporting the financial activities of school districts.
First, fund classifications have been redefined. All financial activities of the school district are now to be reported in either governmental, proprietary, or fiduciary funds. Fiduciary funds are not reported in the entity-wide statement of net assets or statement of activities. If trust funds are external to the school, they are reported only in the fiduciary funds financial statements. If they contain internal activities and balances those balances and activities are reclassified and reported directly in either governmental or proprietary funds.
All activities are now reported as either governmental or business-type. Moreover, activities that must be reported as enterprise funds are identified by three specific criteria. As a result of those criteria, many school districts will not be required to report any enterprise funds.
Governmental and enterprise funds are no longer presented in total by fund type in the basic financial statements. They will now be presented as major funds or nonmajor funds of that type (governmental or enterprise). Each governmental or enterprise fund that is identified as a major fund is presented in a separate column within their respective fund financial statements. A fund is classified as major if its total assets, liabilities, revenues or expenditures are equal to at least 10% of the corresponding total for all funds of that category or type (governmental or enterprise) and that same total is at least 5% of the corresponding total for all governmental and enterprise funds combined. Nonmajor governmental and enterprise funds are aggregated and presented in a single column within their respective fund financial statements.
The general fund is always presented as a major fund, while major fund requirements do not apply to internal service funds and fiduciary funds. The reports have been reduced to the following: Budget Versus Actual, Balance Sheet, Statement of Fund Net Assets, Operating Statements, Cash Flow Statement (for proprietary funds only), Statement of Net Assets, and Statement of Activities (the last two are new entity-wide statements). The basic financial statements are introduced by a narrative containing analysis explaining what happened during the year and why.
The Budget Versus Actual Statement consists of four columns including a new column for the original budget amount. The original budget figure is the first appropriation passed for the fund that encompasses the entire fiscal year and encumbrances that automatically rolled forward. The four columns used in the statement are: Original Budget Amount, Final Budget Amount, Actual (spent/received), and Variance of Actual with Final Budget. This statement (schedule if presented as required supplementary information) is required for the general fund and each major special revenue fund for the general purpose external financial statements. A CAFR still requires these for all budgeted funds.
There is a Balance Sheet for governmental funds and a Statement of Fund Net Assets for proprietary funds. These reports have columns for each major fund and one column for all non-major funds. In addition, there is a required reconciliation between the figure for either fund balance or fund net assets appearing on the fund financial statements sheet and that appearing on the Statement of Net Assets.
There are separate Operating Statements for governmental and for proprietary funds. Again, these reports have separate columns for each major fund and one for all nonmajor funds. Also, there is a required reconciliation between the amounts for “changes in fund balance or net assets” appearing on the Operating Statement and that appearing on the Statement of Activities.
The Statement of Net Assets (full accrual) presents what the district owes and owns at a particular point in time. It includes all assets and liabilities excluding fiduciary funds. It is broken out by governmental activities, business-type activities, and the sum of these. Assets include capital assets (net of accumulated depreciation), while liabilities include long-term debt.
The Statement of Activities is the culminating report. It presents a clear picture of the district’s costs of providing activities (allocated by program) and identifies the revenues generated by programs themselves or external sources, and general revenues coming from local sources (such as property taxes) or unrestricted grants. It shows the local community how much they are contributing, and how the school board has decided to allocate the resources it controls. It also indicates whether the financial status of the district improved or declined for that year.
Trial Balances
The Trial Balances are the key to producing the desired GASB 34 statements. They are built from the cash transactions imported from the districts files and all journal entries that are made in the Web-GAAP system.
The full complement of Trial Balance is made up of the following types of trial balances:
- Initial Year Governmental Fund Trial Balance
- Initial Year Governmental Consolidation Trial Balance
- Modified Accrual Trial Balance
- Governmental Restricted Net Assets Trial Balance
- Full Accrual Trial Balance
- Governmental Consolidation Trial Balance
The Initial Year Governmental Fund Trial Balance is only used for the first year a district is on GASB 34. This Trial Balance takes the prior year GAAP balance and allows adjustments to restate the entries according to GASB 34 rules. Columns include opening balance sheet from prior fiscal year, modified accrual adjustments, and full accrual adjustments.
The Initial Year Governmental Consolidation Trial Balance consolidates certain types of accounts into governmental activities including capital asset ending balances, debt ending balances, internal service funds that are governmental activities, and interfund eliminations all from the prior fiscal year. Under the previous GAAP reporting system, general fixed asset and debt ending balances were handled as separate account groups.
The Modified Accrual Trial Balance brings in cash transactions, records certain adjustments and reverses out certain entries to produce financial statements. Revenues and expenses are closed, leaving balance sheet assets, liabilities and fund balances. This trial balance produces the statement of revenues, expenditures, and changes in fund balances and the balance sheet.
The Governmental Restricted Net Assets provides a format to convert each governmental fund from the modified accrual basis to the accrual basis, to reclassify program revenues, and to accumulate the appropriate restrictions on net assets to produce the statement of net assets and the statement of activities (the new GASB 34 statements).
The Full Accrual Trial Balance provides a format to convert each Proprietary (and Fiduciary) fund from the cash basis to the accrual basis, to reclassify program revenues, and to accumulate the appropriate restrictions on net assets to produce the Statement of Fund Net Assets and the appropriate operating statement. It also provides for the accumulation of appropriate internal service fund allocations, eliminations and resulting internal balances to produce the entity-wide statements.
The Governmental Consolidation Trial Balance provides a format to accumulate the restricted net assets data, general capital assets data, and the general debt data to produce the governmental activities portions of the entity-wide Statement of Net Assets and Statement of Activities. It also provides for the accumulation of appropriate internal service fund allocations, eliminations and resulting internal balances. This trial balance is supported by the General Capital Assets Worksheet and the General Debt Consolidation Worksheet.