Steven J. Cohen Principal, CPA, CGFM

09 March 2017

The Governmental Accounting Standards Board (“GASB”)
has been busy lately issuing many pronouncements. A
summary of some of the recently issued standards that may affect public higher education institutions are as follows:
GASB Statement Number 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pension (“OPEB”), effective for periods beginning after June 15, 2017, requires the liability for other post-employment benefits (e.g. health care and life insurance) to be reflected in a government’s financial statements. The requirements are similar to pension requirements in that an actuary must calculate the liability based upon demographic information of the plan participants and various assumptions, large fluctuations to the liability are required to be recognized as deferred inflows/outflows and amortized, and various information regarding the plan and the calculation must be disclosed. Many CPA firms will not issue an unmodified opinion on the financial statements if the plan is not audited since OPEB plans are material to the financial operations of an organization. Similar to pensions, the implementation
of the OPEB calculation will not be easy and discussions
should be made with your actuary and CPA firm to discuss
the process for calculating and auditing the OPEB figures.

GASB Statement Number 78, Pensions Provided Through Certain Multiple Employer Defined Benefit Plans, effective for periods beginning after December 15, 2015, allows public entities to exclude the recognition of the pension liability if ALL of the following apply:

a. pension plan is not a state or local government unit;
b. provides benefits to government and non-government employees;
c. the plan has no predominant government employer.

It is possible but unlikely that your organization’s pension plan would fit the criteria. GASB Statement Number 80, Blending Requirements for Certain Component Units, effective for periods beginning after June 15, 2016, requires the primary government to use the blending method for presenting component units for a not-for-profit corporation in which the primary government is the sole corporate member. The blending requirement is not applicable when the component unit has a board of directors that is materially unaffiliated with the primary government.

GASB Statement Number 83, Certain Asset Retirement Obligation (“ARO”), effective for periods beginning after June 15, 2018, requires a liability to be recognized when a government has a legal obligation to perform a future asset retirement related to a tangible capital asset. The event that triggers the ARO could be internally (e.g. board
decision) or externally (e.g. laws, court judgment, and Federal/state agency). The liability is the present value of the future outlay to perform the ARO. The offsetting entry to the liability is a debit to deferred outflow that is amortized using a systematic basis over the life of the obligation.  This pronouncement does not apply to obligations that arise solely from a disposal plan, cost of replacement of the asset, conditional obligations for asset retirement or obligations associated with pollution remediation that is covered under GASB Statement 49, Pollution Remediation Obligations. This pronouncement is geared to large and regulated industries such as nuclear power plants and sewer districts, but could also be applied to events affecting buildings and land on your campuses.

GASB Statement Number 84, Fiduciary Activities, effective for periods beginning after December 15, 2018, provides guidance for identifying fiduciary activities and reporting on them. The pronouncement defines four types of fiduciary funds:

a. Pension trust funds
b. Investment trust funds
c. Private purpose trust funds
d. Custodial funds

Any fiduciary activity would be reported in the Statement of Fiduciary Net Position. An exception exists for business-type
activities (the reporting model for public higher educational institutions) that reports the assets with a corresponding liability in the Statement of Net Position if normally the funds will be held for three months or less.

An activity is a fiduciary activity if ALL of the below
attributes exist:

a. Assets are controlled by the government;
b. Assets are not derived from either:
1. Solely from government’s own source revenues;
2. Government mandated non-exchange transactions or
voluntary non-exchange transactions with the exception
of pass-through grants
c. Assets have one of the following:
1. Assets are administered through a trust in which the
government is not a beneficiary, dedicated to providing
benefits to recipients or legally protected from the
creditors of the government;
2. Assets are for the benefit of individuals and the
government does not have administrative involvement

If you wish to discuss your institution’s compliance with GASB pronouncements, please contact Steven Cohen, CPA, CGFM at 617.471.1120 or [email protected]


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