DRAFT - GASB NO. 34 LETTER TO COMPONENT UNIT WITH EXTERNAL AUDITOR.
DATE:
March 24, 2000
TO:
Community Development Commission
FROM:
Auditor Controller
SUBJECT: Implementation of a new
accounting standard for governments
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. The purpose of the standard is to provide more understandable
and useful financial reports to a wider range of users. The purpose of
this memo is to notify you of important dates related to this change and
to briefly describe the changes which will have an effect on your annual
financial statements.
The following will briefly describe some of the major changes this new
accounting standard will bring, along with the dates which we are required
to implement the changes:
-
The new standard requires governments to report 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 report 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 report 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.
Since your financial statement information is reported as a component unit
of the County of Sonoma=s financial
statements, your Agency will be required to implement the required changes
at the same time the County implements which is reflected in the above
dates.
This new accounting standard will require you to make additional changes
to your financial statements which are not detailed above. Additionally,
some of the required changes could affect the way you budget for certain
types of transactions beginning with the preparation of the FY 2001/2002
budget. Since your agency is audited by an outside auditor, our office
will need to coordinate with your outside auditor for a smooth transition.
The Auditor's Office will be working closely with the County Administrator's
Office over the next several months to determine the full impact of the
new requirements. We will continue to communicate how those changes will
affect your Agency as more information becomes available.
If you have any questions or concern, please call Mark Walsh, Assistant
Auditor-Controller at 3288.