DRAFT LETTER TO CAO - FOR DISCUSSION PURPOSES ONLY.
DATE: April 6,
2000
TO:
Gary Kovacovich, County Administrator=s
Office
FROM: Rod Dole, County
Auditor Controller
SUBJECT: Implementation of a new accounting standard
for governments (GASB 34)
The Government Accounting Standards Board (GASB) has recently adopted
a new accounting standard which will change the way governments prepare
their annual financial statements and report the results of their financial
activity. These new government-wide financial statements are designed to
help users in the following ways:
-
Assess the finances of the government in its entirety, including the year's
operating results;
-
Determine whether the government's overall financial position improved
or deteriorated;
-
Evaluate whether the government's current-year revenues were sufficient
to pay for current-year services;
-
See the cost of providing services to its citizenry;
-
See how the government finances its programs-through user fees and other
program revenues versus general tax revenues;
-
Understand the extent to which the government has invested in capital assets,
including roads, bridges, and other infrastructure assets;
-
Make better comparisons between governments.
In short, the new annual reports should give government officials a new
and more comprehensive way to demonstrate their stewardship in the long
term in addition to the way they currently demonstrate their stewardship
in the short term and through the budgetary process.
The purpose of this memo is to notify you of important dates related
to this change and to briefly describe some of the major changes which
could have an effect on the way departments currently budget for certain
types of transactions.
-
The new standard requires governments to record the costs related to the
construction of infrastructure (roads and bridges, etc.) beginning 7/1/2001.
In past years, we have not been required to record what it costs to construct
roads or bridges.
-
The new standard will require governments to depreciate fixed assets and
infrastructure beginning 7/1/2001. In past years we have only been required
to depreciate assets owned by enterprise funds or internal service funds.
-
The new standard will require governments to retroactively report the historical
cost of existing general infrastructure assets (roads and bridges, etc)
beginning 7/1/2005. We will be required to determine and report the historical
cost of major general infrastructure assets that were acquired from 7/1/1981
to 6/30/2001. In past years we have not been required to record the costs
of these types of assets.
-
The new standard will require governments to report all receivables at
year end, regardless of when the money will actually be received. In past
years we have only been required to report receivables which will be collected
in the first 90 days of the new fiscal year.
-
Many of the activities that we currently report in trust funds will be
reported in another type of fund. The Auditor=s
office will be reviewing all of the fund types to determine that we are
in compliance with the new requirements. We will have more details of any
required changes at a later date.
-
The new standard will require governments to develop a managements' discussion
and analysis letter (MD&A) for submission with the annual financial
statements. The MD&A gives an objective and easily readable analysis
of a government's financial activities based on currently known facts,
decisions, or conditions. It presents short and long-term analyses of the
government's activities, compares current-year results with those of the
prior year, and discusses the positive and negative aspects of that comparison.
-
Under the new standard, certain fund types currently in use will need to
be evaluated and possibly converted to a different fund type. For example,
the Information System's Department is currently a general fund. The new
standard will require that ISD be converted to an internal service fund
because they provide services on a cost reimbursement basis to the primary
government.
This new accounting standard will require us to make additional changes
to the County's annual financial statements. Additionally, some of the
required changes could affect the way we budget for certain types of transactions
beginning with the preparation of the FY 2001/2002 budget. The Auditor's
Office would like to develop a committee of representatives from this office
and the County Administrator's Office to determine the full impact of the
new requirements. Once the full impacts of the new standard are determined
we would ask for your help in working with departments to prepare them
for the changes that will be required when they prepare their FY 2001/2002
budget.
This information may change based on our continued analysis of GASB
#34. We will be in touch with your office soon to begin looking at the
new budgeting and accounting requirements.
If you have any questions or concern, please call Mark Walsh, Assistant
Auditor-Controller at 3288.