June 2002: GASB Statement 34

Issued To: Chief Fiscal and Executive Officers

For the past 15 years the Governmental Accounting Standards Board (GASB) has been working to create a new financial reporting model. The objective of the project was to provide a financial reporting model that provides users of financial statements with information which will enhance their understanding of governmental operations and ultimately result in an increased accountability by the governmental units. This project culminated in June 1999 with the issuance of Statement 34 of the Governmental Accounting Standards Board - Basic Financial Statements and Management’s Discussion and Analysis-for State and Local Governments.

Major changes required by GASB Statement 34 include:

Government- Wide Reporting

Focus on Major Funds

Changes in Budgetary Reporting

Full accrual accounting including depreciation of capital assets and infrastructure

Presentation of narrative information (Management Discussion and Analysis)

GASB Statement 34 will be effective in three phases depending on the government’s total revenues. The largest governments, those with revenues of $100 million or greater (phase 1) will implement for fiscal years ending after June 15, 2002; those with revenues between $10 million and $100 million (phase 2) for fiscal years ending after June 15, 2003; and those with revenues less than $10 million ( phase 3) for fiscal years ending after June 15, 2004. Retroactive infrastructure reporting is delayed for four years for phase 1 and 2 governments and optional for phase 3 governments.

Annual financial reporting to OSC is required by Article 3 of the General Municipal Law. This reporting has been accomplished by local governments through filing of the Annual Update Document (AUD), and school districts by filing the ST3. Both of these forms are provided by OSC. The AUD and ST3 report information at the fund level and have not required all of the financial statements necessary to conform to Generally Accepted Accounting Principles ( GAAP). We will continue the policy of fund level reporting, and will make the necessary adjustments to the fund level statements to permit compliance with GASB Statement 34.

We believe that GASB Statement 34 will result in improved financial reporting by local governments. However, we realize that implementation may involve additional resources, which may not be cost benefit justified. Consequently, while we encourage all local governments to implement the provisions of GASB Statement 34, full implementation will not be required to meet the requirements of General Municipal Law. Local governments should be aware that full implementation will be required in order to receive an unqualified opinion on their financial statements.

OSC staff will be providing guidance on various implementation issues. In addition we will continue to participate in training sessions sponsored by local government associations. If you require additional information or need technical assistance please contact the regional office servicing your government.