It's Time To Get With It!
by Pamela W. Baker, CPA
GASB 34 - Is Everyone On Board?
(Including Your Governing Board)
The
onslaught of GASB Statement No. 34 information to finance directors is
at times overwhelming. As accounting and finance individuals, we are
all more than a little anxious at the prospect of implementing a change
to our financial reporting that will revolutionize the way we present
and explain our government's finances. But if the changes are to be as
widespread as it appears they will be, we need to ask ourselves if we
are preparing everyone who will be affected by the new reporting model.
There are six steps each finance manager needs to consider.
Step One
Step
one is to educate you. It will be difficult to explain and illustrate
the new financial format and, probably more important, the significance
of the new format, if you do not have a clear grasp of the technical
provisions of the statement. This means attending seminars, reading
relevant material and talking with your peers.
Step Two
Step
two would involve the development of a plan for implementation of the
standard. There is a reason that GASB provided an extended period of
time for implementation of the new standard. The changes in accounting
and reporting are dramatic. The absence of a plan will most certainly
guarantee some degree of failure. The components of a successful plan
include communication, involvement and time lines. Decide how frequent
and what method of communication will be effective for your
organization. Schedule updates on progress toward implementation and,
above all else, document the decisions and progress made. Decide who
should be involved in the process of working toward implementation.
Potential participants would include your support staff, manager, board
members, auditors, software vendors and asset managers. In order to
establish a reasonable time line, determine your "drop dead date," or
the date of required implementation for your government. Work backwards
from that date identifying necessary steps to completion.
Step Three
Step
three will involve "brainstorming" to identify what you don't have or
don't know. This might include fixed assets and the ability to
depreciate, the ability of your accounting system to track two bases of
accounting, staff resources, understanding the utilization of the
standard chart of accounts and a clear understanding of the budgetary
philosophy of your organization. Once your list is determined, each can
become a separate project, placed appropriately on your time line. For
example, if you question your accounting system's ability to handle the
statement, arrange specific steps to resolve it, such as meeting with
your vendor, examining alternatives, analyzing costs and documenting
the basis for assumptions and estimates.
Step Four
Step
four is to determine the cost to implement. At this point, you should
be addressing the funding alternatives and deciding which budget year
will be most affected.
Steps Five and Six
Step
five is an ongoing process to implement the plan, monitor the progress
and make necessary revisions as you move along your time line to
successful implementation. This will lead to step six, which is a clean
audit opinion, a well-informed board and public, and ultimately
well-cared-for taxpayers. Hopefully, it will also result in less stress
for the Business Manager or Accounting Director.
The Governing Board
The
decision of how to address your governing board will depend on many
factors, including, but not limited, to your present relationship with
them, their technical understanding of finances, their interest in
budgets and finances and their confidence in administration of the
organization.
One approach would
be to have your independent auditor discuss the new reporting standard
at the audit review meeting. For this to be most effective, it will be
necessary for you to work with your auditor to establish a preliminary
plan of action for 'hot buttons' that will gain attention. For example,
if your board is comprised of business persons who are accustomed to
reading and evaluating financial information in the for-profit
industry, focus on the entity-wide report will most likely gain their
attention. With the focus of the entity-wide statements being full
accrual and the reporting of the financial condition of the entity as a
whole, business persons will be more prepared to understand and
appreciate the concept underlying this format.
An alternative
approach would be to schedule a workshop with your board or with its
finance committee. Once again, it is imperative that you know and
understand your audience as well as the specifics of the new standard.
The workshop should be designed to focus on the key elements of the
statement, with clear and concise explanation of each of the relevant
components.
A
third approach would be to proceed on your own to interpret the
requirements of the new statement, working with your implementation
team to develop a draft of the new statements with your government's
financial information. An effective way to accomplish this might be to
take audited financial statements for a prior year and convert the
statements to the new format. At that point, meet with your board and
explain and illustrate the differences as well as the similarities.
In Conclusion
One
thing is for certain. The understanding and implementation of the new
standard will be time-consuming and thought-provoking. A well thought
out plan now will contribute greatly to the successful implementation
of GASB Statement No. 34 for your government.
