Today we will take a closer look at GASB Statement 84. For the first two parts of this look at GASB & LOSAP, click here.

Here is what you need to know about GASB Statement 84:

• GASB 84 is effective for fiscal years beginning after December 15, 2019.
  
  
• The OSC has implemented GASB 84 in the AUD for all fiscal years ending on/after December 31, 2020.
  
  
• Essentially, the interpretation of GASB 84 by the OSC is that municipalities should be reporting the LOSAP assets with the governmental funds. The only exception would be reporting any LOSAP assets that have been contributed by another municipality. This exception is a rare circumstance and does not apply to the majority of municipalities.
  
  
• This change in accounting and financial reporting does not require additional actuarial calculations.
  
  
• Since LOSAP assets are generally now considered governmental funds, we expect they should be reconciled similarly. This implies balancing the LOSAP trust on a periodic basis, accounting for changes in the value of the trust. Changes include contributions, interest earned, benefits paid, and change in market value of any securities.
  
  
• The reconciliation of the LOSAP assets should likely be included on a monthly treasurer’s report to the Board.
  
  
• If a local government is not receiving period statements (preferably monthly, but minimally quarterly) or a payment register to reconcile benefits paid from the Trust, speak to your vendor(s) to ensure this information is received.
  
  
• The OSC has issued implementation guidance, but we expect more support to come as treasurers, comptrollers, and accountants wrestle with some of the intricacies of the Statement. Specifically, how to report a future LOSAP payable or future LOSAP amounts earmarked, but not yet payable.

Governor Hochul has signed bill S1210 / A6401 as Chapter 462 of the laws of 2021. Essentially, this new section of the General Municipal Law (GML) allows a LOSAP sponsor to adjust the department responses category of its point system to recognize that some groups of volunteers may be restricted from responding to certain types of calls. 

As a reminder, the department responses category provides that 25 points are earned by a volunteer who attends a minimum number of the fire department’s total calls for the year. For departments that also have a rescue/ambulance unit, an additional 25 points can be earned for attending a minimum number of those calls as well. The minimum number is based on a percentage of the total calls for the year. For example, if a department has 400 calls during a year, a volunteer must respond to 40 (10%) in order to earn 25 points. The department responses category is unique from other categories since it is an all-or-nothing category – either a volunteer responds to at least the minimum number and earns 25 points or does not and earns zero (0) points.

If a volunteer is restricted from attending some calls, it limits the opportunity to respond to the minimum to earn the 25 points. For example, if a certain volunteer is restricted from responding to 50 of those 400 total calls, that volunteer would have to respond to 40 of the other 350 calls – a little more than 11%. The new law allows a LOSAP sponsor to change the requirement for this volunteer from 10% of 400 calls to 10% of 350 calls, or 35, to earn 25 points. 

If a LOSAP sponsor chooses to adjust its point system for this change, no referendum is required - only a resolution of the LOSAP sponsor governing board (at least 60% approval) is needed. However, it states that an adjustment to the point system must be in response to written emergency response protocols adopted by the sponsor. (The use of the term sponsor here is potentially problematic, as a village or town isn't likely setting emergency response protocols for a department.) The statute elaborates that these protocols may be related to a determination made by the district/department physician regarding the duties that a volunteer may be assigned. Since the word may is used, that implies it is not the only determining factor that could be used when a sponsor adopts these written emergency response protocols.

The adjustment would become effective the January 1st following the date the sponsoring board adopts the resolution, unless the written emergency response protocols were enacted as a result of a state disaster emergency. The wording of the amendment is not completely clear regarding this case – if the amendment can be made effective in the year the resolution is adopted by the board, or when the written emergency response protocols were adopted, or even when the state disaster emergency was declared. The takeaway is there is some flexibility allowed in this case.

It is important to be clear about how this amendment is implemented - it must be adopted by the municipal sponsor. A fire department that is interested in changing the point system must work with the sponsoring village, town, city or fire district to actually make the change.

Initially, this bill was meant to address the staffing challenge fire departments were facing during the COVID-19 pandemic. Many departments were limiting certain at-risk volunteers from responding to calls. Although this was for the safety of those volunteers, these limitations made it more difficult to earn points under the department responses category. However, this new law is not necessarily tied to the COVID-19 pandemic or any state disaster emergency (although it can be); it is a permanent change to the statute that can be adopted at any time.

We could see this new statute being helpful, or at least provide clarity in the following situations:

1. Implementation of duty-crews or stand-by crews. Some fire departments have moved to a system where a certain group of volunteers are on-call at the firehouse during a scheduled period of time. Calls during that period could be assigned only to that group and not the entire department. Unless an incident required the entire fire department to be activated, calls handled by the duty-crew would count towards their response percentage, and the other volunteers would not be hurt (from a percentage response standpoint) by being unable to respond to these calls.
   
   
2. For larger departments that have multiple fire companies that are dispatched individually. The actual point system category in the law is titled “participation in department responses”, but then the chart detailing the percentage requirement references “volunteer fire company.” Since “department” and “company” can sometimes be used interchangeably, it isn’t 100% clear if total number of responses should be (or could be) broken out by company or tracked for the entire department. This new legislation would make it clear that a LOSAP sponsor could calculate the minimum percentage of calls a volunteer is required to respond to based on their company’s total number of responses.
   
   
3. For departments that respond to a lot of automatic alarms that don’t require the entire department to be activated. Many departments call these “chief’s investigations” or something similar because they do not activate the entire membership, but rather dispatch a chief to investigate the automatic alarm. If the chief determines that the situation requires the activation of the full department, then that step is taken. Again, we believe that under the old construct of the law an argument could be made to exclude chief’s investigations as a “department response” since the entire department was not activated. However, this new legislation would appear to make it clear that this can be done. (A second discussion about how to award the individuals performing the chief’s investigations with points is a topic for another time, and is also potentially impacted by this new statute.)
   
   
4. For departments that may still have impacted department responses in early 2021 because of the COVID-19 pandemic, or where COVID-19 may end up impacting responses again later in 2021. 
   
   
5. For a volunteer who joins or resigns mid-year. Although we aren't certain this is a positive, it could allow a sponsor to require a volunteer to attend the percentage of the calls only during which he/she was an active member. Under the existing requirement, a volunteer must attend a number of calls that is based on a percentage of the total department calls for the entire year. This is difficult for those who join/resign mid-year or take a leave of absence. That doesn't appear to be the intention of the statute, but it would seem like a possible interpretation.

Of course, there could be others we aren’t thinking of - reply in the comments with your suggestions!

The full text of the new statute, including the Summary and Justification are printed at the conclusion of this post. The Summary and Justification make it fairly clear that the intent is to allow a sponsor to credit the points for department responses on an individual basis, not necessarily based on the department’s total number of calls. In the view of the legislators that sponsored the bill, this creates “a more equitable and efficient system.”

Since our expertise is not in fire department operations, we won’t discuss how a specific department operates and if an emergency response protocol is efficient or not. We are certain there are many factors to be considered and each department has its own unique set of parameters and challenges to work through.

Ultimately the volunteer fire service in New York is diverse, and a one-size-fits-most statute means those on the outside of “most” have a hard time getting the point system to work with the unique ways they must operate to protect their residents. This change may offer some departments the flexibility it needs to reward volunteers with LOSAP points in a manner that is consistent with the department’s operational requirements.

One thing is certain, this amendment is a departure from how the department responses category has always been administered. In the past, every active volunteer firefighter of a fire department was expected to respond to the same number of calls in order to earn the same number of points (i.e., 25). If this change is implemented, some volunteers will earn 25 points for responding to fewer calls than other volunteers.

We foresee additional administrative challenges:

• How to handle someone changing groups mid-year?
• How to handle someone who joins or resigns mid-year?
• Can the department accurately track what volunteers are responsible for what calls?
• Volunteers who did not earn the 25 points in their category could now potentially appeal the number of calls they were assigned during the year in addition to the number of calls they may have attended.
  
  

We can easily see this resulting in an individual-by-individual call requirement to earn the 25 points, as seems to be indicated in the Summary and Justification. This would likely be an administrative challenge for any department – large or small.

Care should be taken before a sponsor decides to implement this change. Certainly, the sponsor should review this statute and any proposed changes it with its legal counsel.

​The full text of the new law follows: 

SUMMARY OF PROVISIONS:
Amends General Municipal Law by adding a new subparagraph (q) to address developments in how volunteer fire departments respond to emergencies by allowing programs to calculate percentages based on the total number of calls an individual was dispatched.
 
JUSTIFICATION:
The length of service award programs (LOSAP) are pension-like programs intended to help recruit, retain, and reward volunteer firefighters and ambulance workers for serving their communities. New York requires volunteers to earn 50 points in a given year to receive these benefits. One of the ways firefighters can earn points is by responding to emergency calls. However, since COVID, emergency precautions have been adopted to protect vulnerable volunteer firefighters from being exposed to the virus. Specifically, fire departments have had to reduce how many firefighters respond to calls.
 
This bill recognizes that not every emergency call requires all volunteer firefighters to be dispatched. The current LOSAP point system does not reflect the complexity of emergency response protocols, which only results in more emergency vehicles on our streets and represents a less efficient system. Updating the law from using a percentage of the total number of calls the department was dispatched to in calculating LOSAP points, to the total number of calls an individual was dispatched to will create a more equitable and efficient system.

NEW STATUTE:
Section 217 of the general municipal law is amended by adding a new subdivision (q) to read as follows:

(q) The program sponsor may make adjustments to the participation in department responses point system category provided for in paragraph(vi) of subdivision (c) of this section in the event that such program sponsor adopts written emergency response protocols setting different emergency response requirements for the fire department, fire companies, squads and units thereof such that certain participants are not permitted to respond and are restricted from responding to all non-emergency rescue and first aid squad calls and/or all emergency rescue and first aid squad calls. Such restrictions on response may relate to determinations made by the district physician or department's physician as to the duties that may be assigned to certain personnel. In the event that the program sponsor adopts different response requirements for different groups, participants in those groups shall be required to respond to the minimum number of emergency calls assigned to their group by applying the percentage provided for in paragraph (vi) of subdivision (c) of this section. Notwithstanding the provisions of section two hundred sixteen of this article, a point system amendment to address written emergency response protocols may be adopted by the affirmative vote of at least sixty percent of such governing board, without referendum. Such amendment shall only take effect as of the first day of January next succeeding the completion of the proceedings required for adoption of the amendment and shall only apply prospectively unless the new written emergency response protocol is adopted in order to address a state disaster emergency, as such term is defined in section twenty of the executive law, and applicable to the county or counties in which the fire department operates, in which case such amendment may be applied in the year adopted.

There are currently two GASB pronouncements that have a significant bearing on the reporting of LOSAP on the municipal sponsors financial statements. In this second part of our look at GASB and LOSAP, we'll highlight GASB Statement 73.

Notes about GASB Statement 73:
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• GASB 73 is effective for fiscal years beginning after June 15, 2016.
  
  
• The statement only applies to GAAP financial statements; the OSC has not implemented GASB 73 for the AUD.
  
  
• It requires a local government to disclose on its financial statement footnotes certain liability information about the LOSAP (i.e., a value of the benefits that have been earned).
  
  
• For Defined Contribution (DC) plans, the reporting is fairly straightforward and assistance is not needed from an actuary.
  
  
• For Defined Benefit (DB) plans, an actuary must calculate the total pension liability and the pension expense using methods and assumptions prescribed in the Statement. Specifically, the entry age normal cost method is required, and the discount rate is tied to rates for 20-year, tax-exempt general obligation municipal bonds with ratings of AA/Aa or higher.
  
  
• This method and discount rate are vastly different from the method and discount rate used for calculating the contributions to the trust. Since most LOSAP trust asset allocations incorporate some equities, the discount rates used for funding will be higher than the rate required for the GASB 73 calculations. The entry age normal cost method is best utilized in traditional pension plans whereby a participant retires at a specified retirement date. Since LOSAP instead has an entitlement date, and participants can continue to accrue benefits after that date, using the entry age normal method requires some actuarial license. Naturally, different actuaries are likely to approach how to apply this method to a LOSAP differently.
  
  
• From our viewpoint, GASB 73 is simply an exercise for the purpose of standardized reporting of LOSAPs on financial statements. At this time, we aren’t aware of any significant impact this reporting has on the local government, other than additional fees to the actuary to calculate the liabilities.

Next we will highlight GASB Statement 84.