The Governmental Accounting Requirements Board has appointed a brand new activity power to assist GASB cope with going concern uncertainties and extreme monetary stress disclosures.
The venture will think about enhancements to GASB’s current steerage on going concern concerns to handle variety in apply and make clear the circumstances beneath which disclosure is suitable, develope a definition of extreme monetary stress and standards for figuring out when governments ought to disclose their publicity to extreme monetary stress, and what details about a authorities’s publicity to extreme monetary stress is critical to reveal.
Members of the duty power embody customers and preparers of economic statements in addition to auditors:
Customers
- Lisa Washburn, Managing Director, Municipal Market Analytics, Inc.
- Shripad Joshi, Senior Director & Accounting Officer, Company and Authorities Scores, S&P World
- Stephen Spencer, Managing Director, Houlihan Lokey
- Sharon Edmundson, Director, North Carolina Division of State Treasurer
- Amanda Beck, Assistant Professor of Accounting, Georgia State College
- Mary Murphy, Senior Director, The Pew Charitable Trusts
- Angus Maciver, Legislative Auditor, Montana Legislative Audit Division.
Preparers
- Kristine Brock, Assistant Metropolis Administrator/Chief Monetary Officer, Metropolis of Franklin, Tennessee
- Linda Brief, Deputy Director of Finance, Metropolis of Fort Lauderdale, Florida
- Chad Greenwell, Affiliate Controller, College of Michigan
- Mark Merry, Assistant Director, Florida Division of Monetary Providers
- Kathy Ketchum, Supervisor, Accounting and Assistant Controller, Sacramento Municipal Utility District
- Elizabeth Hill, Deputy Comptroller, Nassau County, New York.
Auditors
- Jodi Dobson, Companion, Baker Tilly US, LLP
- Tim Lyons, Companion, Mauldin & Jenkins, LLP
- Chris Pembrook, Companion, Crawford & Associates, P.C.
- Robert Hinkle, Deputy Auditor of State, State of Ohio.
GASB famous on its venture web page that the idea of going concern uncertainties wasn’t particularly developed for state and native governments, however GASB analysis indicated that, though present steerage offers that monetary assertion preparers have a duty to judge a authorities’s potential to proceed as a going concern, such evaluations typically pose challenges to preparers and auditors and has resulted in variety in apply when making use of that steerage. Even when state and native governments are in or have been experiencing extreme monetary stress, few dissolve or stop operations. Some state legal guidelines prohibit governments from submitting for chapter and a few states don’t enable dissolution of governments with out a merger or consolidation association with one other authorities to keep away from interruption of providers supplied for affected residents. Even when a authorities seeks Chapter 9 chapter safety, it usually continues to exist as the identical authorized entity.
GASB headquarters in Norwalk, Connecticut
Courtesy of GASB
Nonetheless, customers want data nicely prematurely of the purpose at which dissolution is a sensible consideration, however current GASB requirements do not include steerage for an earlier disclosure that may be extra helpful to customers, resembling a course of by which a authorities evaluates its publicity to extreme monetary stress and, beneath sure circumstances, discloses details about that publicity.
“Governments going through extreme monetary stress is a big concern of governments themselves, as evidenced by the numerous states that take a proactive strategy to monitoring their native governments’ monetary well being and addressing these experiencing extreme monetary stress,” mentioned GASB.
Whereas the variety of state and native governments with going concern uncertainties is small, there’s proof that the inhabitants of governments experiencing extreme monetary stress is noticeably bigger than the inhabitants of governments with going concern uncertainties. Almost half (47%) of respondents to a GASB survey of customers have evaluated authorities monetary statements that contained a going concern observe disclosure. They typically discovered the disclosures to be invaluable and indicated that the data within the observe was used to evaluate a authorities’s monetary situation, working outcomes and skill to satisfy its ongoing commitments; make municipal bonds funding selections and credit standing assessments; and develop legislative or oversight responses. Respondents additionally famous that the data disclosed helped them perceive the explanations for the going concern uncertainty and the chance that administration’s plans to remediate the considerations have been lifelike.
The survey requested customers what data needs to be disclosed within the notes if a authorities is in extreme monetary stress. All 4 forms of data listed within the reply obtained substantial help (a number of decisions have been allowed):
- Administration’s plan to remediate the extreme monetary stress (89%);
- Clarification of how the extreme monetary stress was recognized (81%);
- Environmental elements resulting in the extreme monetary stress dedication (75%); and
- Particular monetary ratios that point out extreme monetary stress (72%).