Articles

May 1, 2012

New Developments at the GASB and the U.S. Office of Management and Budget

by David Gannon, Partner

GASB Statement No. 63

In June 2011, the Governmental Accounting Standards Board (GASB) issued GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Previously, GASB Concepts Statement No. 4, Elements of Financial Statements, introduced the concept of deferred outflows, deferred inflows and net position and provided a definition for each; however, prior GASB standards did not include guidance for how those financial statement elements would be reported and how those elements were distinctly different than assets and liabilities. The net asset reporting requirements from GASB Statement No. 34, Basic Financial Statements – and Management's Discussion and Analysis – for State and Local Governments, is amended by this statement and renames net assets as net position.

Financial statement amounts meeting the definitions of deferred outflows of resources and deferred inflows of resources would be reported in separate sections following assets and liabilities, respectively. The residual value of all of the financial statement elements would be classified as net position. In essence, the financial statements would reflect assets, plus deferred outflows of resources, less liabilities, less deferred inflows of resources would equal net position. The components of net position would be Net Investment in Capital Assets, Restricted and Unrestricted.

Who Will Be Affected?
All governmental organizations that follow generally accepted accounting principles would be required to implement this GASB Statement.

Timeline:
The provisions of this Statement are effective for financial statement periods beginning after December 15, 2011.

GASB Statement No. 65

In March 2012, the GASB issued GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. This Statement's objective is to either (a) properly classify certain items as deferred outflows or deferred inflows of resources that were previously reported as assets or liabilities or (b) recognize certain items as inflows of resources (revenues) or outflows of resources (expenditures) that were previously reported as assets or liabilities. This Statement discusses the following topics, amongst others, refundings of debt, sales of future revenues and intra equity transfers of future revenues, sales of future revenues, and debt issuance costs.

Who Will Be Affected?
All governmental organizations that follow generally accepted accounting principles would be required to implement this GASB Statement.

Timeline:
The provisions of this Statement are effective for financial statement periods beginning after December 15, 2012.

U.S. Office of Management and Budget

On February 28, 2012, the U.S. Office of Management and Budget published proposed rules in the Federal Register to solicit feedback from federal grant recipients and stakeholders in the audit community. One of the most dramatic changes being proposed relates to the establishment of a three-tiered structure for performance of single audits under OMB Circular A-133 as follows:

  • Organizations that expend less than $1 million in federal awards would not be required to have a single audit performed. Currently the threshold is $500,000.
  • Organizations that expend between $1 million and $3 million in federal awards would be required to undergo a more focused single audit than the current standards require. Auditors would only be required to review two compliance requirements—allowable and unallowable costs and a second compliance requirement that is most significant to the program being audited.
  • Organizations that expend more than $3 million in federal awards would be required to undergo a full single audit and the current single audit requirements would be strengthened to make the single audit process more effective.

The proposed rules would also reduce the number of compliance requirements from the current 14 compliance requirements and focus much more attention on how to address improper payments, fraud, waste, abuse, and program performance. The proposed rules would also consolidate the three cost principle circulars currently being used (Circular A-21 for institutions of higher education, Circular A-87 for state and local governments and Circular A-122 for nonprofits) into one single comprehensive circular.

Who Will Be Affected?
Any organizations that receive federal funding, whether they be state and local governments, higher education institutions, not-for-profit organizations or commercial entities.

Timeline:
Comments on the proposed rules were accepted until March 29, 2012. No timeline for further evaluation or implementation has been established.