January 1999 Issue GASB Provides Updates on Y2K and Reporting Model Initiatives By James L. Craig, Jr. The Governmental Accounting Standards Board requires certain Year 2000 disclosures for "mission critical systems" of governmental entities, explained Leslie Galloway of GASB's research department at the November meeting of the NYSSCPA Public Schools Committee. Galloway's remarks were part of a GASB update which also discussed the board's progress on its basic governmental reporting model. Regarding Year 2000, or Y2K, disclosures, Galloway outlined GASB technical bulletin 98-1 and, after comments from committee members who said that the term "mission critical" is not well-known in accounting jargon, he conceded that while the phrase first appeared in AICPA guidance on Y2K matters, it was not clearly defined. Committee member David Evangelista (Mid Hudson) commented that it will be a challenge to public school auditors to assess which of their clients' systems are mission critical, and as examples, he questioned state aid and real estate equalization. Galloway offered no specifics and placed the decision in the jurisdiction of the auditor's judgment. Government Reporting Model Most of Galloway's remarks focused on the proposed new government reporting model that combines full accrual accounting with some vestiges of traditionally practiced fund accounting. Galloway reported that GASB expects to have a final statement by June 1999. He noted that the board has replaced the dual presentation concept proposed in a 1997 exposure draft with governmentwide financial statements on a full accrual basis. Statements for major governmental funds on a modified accrual basis are included in the information package that comprises the full financials, but as a subset reconciled to the governmentwide statements. Galloway indicated that the reconciliations' level of detail may change as the project moves toward completion but the concept of being reconcilable will not. Committee Questions MD&A and School Lunch Fund The Society's Public Schools Committee expressed much interest in Galloway's comments on the financial statements' Management Discussion and Analysis section that is likely to be a requirement. Committee members felt that with public schools in New York, the burden for the MD&A's preparation would fall on the auditors. They cautioned that this could create a responsibility for which they are not experienced and that conducting an audit would not necessarily reveal or bring to their attention the kind of information necessary to prepare the MD&A. Galloway acknowledged that such implementation issues must be addressed further. The committee also questioned the proposed new model's treatment of the school lunch fund. Members asked whether it should be classified as part of government activities or shown as an enterprise fund, and concluded that because the fund does not include a charge for use of facilities and other capital items, it should be included as part of the governmental funds. Galloway noted that the role of a government's adopted budget in the financial statements is likely to differ from current practice. He said that GASB feels it is in the business of setting standards for financial statements and not budget presentations. He also pointed out that there are no present plans to have a size cutoff for various aspects of the standards, and that the treatment of affiliated organizations such as parent/teacher associations and the charge to operations of governments for facility use are still under discussion. Regarding the latter, the question is whether to retain depreciation or allow a charge for the cost of maintaining the facilities in appropriate condition. Committee Chair Thomas Lauffer (Rochester) said the committee will continue to follow GASB's developments and give implementation guidance as part of the State Education Department's reference manual that the committee assists in drafting for public school audits. *

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