This post concludes our look at the Government Accounting Standards Board (GASB) and how it has impact the reporting of LOSAP on governmental financial statements.
First, we outlined just what the GASB is, and how the Office of the State Comptroller plays a roll in this, and just how the finances of LOSAP work in New York. You can read that post HERE.
Next, we looked at GASB Statement 73. That post can be read HERE.
Then, we provided an overview of the newest Statement - GASB 84. For more on that, click HERE.
In summary, GASB Statement No. 73 is about reporting the liabilities associated with the LOSAP on the financial statement, and GASB No. 84 is about reporting the assets of the LOSAP.
For our clients, we do not have a formal role in the financial statement reporting. For those clients that report under GAAP, we may be asked to calculate the actuarial liabilities as prescribed in GASB 73. We present those liabilities in the form of suggested footnote disclosures, but ultimately the treasurer, comptroller, or accountant decide how to properly present the information on the financial statement. For those municipalities not reporting under GAAP, our Annual Report provides the information needed to complete the note to the financials, and some clients ask us to draft that note for them. But again, ultimately the person responsible for the financial statement will have the final decision on how the information is reported.
That all said, our commitment to collaboration means we strive to understand and support our clients in all aspects of sponsoring and administering a LOSAP. This is just one area where we can provide support, and ultimately the final decision is made by someone else.
If you have questions, your accountant or auditor would be the first place to start.
The next best options would be to:
We hope this overview was helpful. If you would like a copy of our newsletter/bulletin on this topic, please contact us!
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:
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:
Next we will highlight GASB Statement 84.
Here in New York, the implementation of GASB Statement No. 84 has created some confusion! We thought it might be helpful to unpack the relationship between LOSAP and the GASB over a series of articles. We've consolidated this information into a newsletter - if you would like a copy, please contact our office.
Since the General Municipal Law (GML) was amended to authorize local governments to spend tax dollars on a Length of Service Award Program (LOSAP), the reporting of the assets and liabilities on financial statements has been evolving. At Firefly, one of our core principles is collaboration. We actively seek to build relationships and support all parties with responsibility for our clients’ LOSAP – board members, clerks, treasurers, and other hired professionals like attorneys, investment managers, and auditors. Through these collaborations, we learn how to improve our services to meet the needs of each party.
The purpose of these blog posts is to provide an overview and context on this subject, with the goal of pointing the reader to the experts who can guide you further.
The Government Accounting Standards Board (GASB)
The GASB is an organization that establishes accounting and financial reporting standards for state and local governments that follow Generally Accepted Accounting Principles (GAAP). In New York, a particular city, village, town, or fire district (the four possible local government sponsors of a LOSAP) are not statutorily required to follow GAAP. The adoption of GAAP for financial reporting depends on the facts and circumstances of that particular municipality.
The Office of the State Comptroller (OSC)
Cities, villages, towns, and fire districts are required to file an Annual Update Document (AUD) prescribed by the (OSC). The OSC reviews GASB pronouncements and decides which ones to incorporate into the AUD. The timing of when those changes are incorporated may be later than when the actual pronouncement is effective for GAAP-based financial statements. Therefore, these governments have two potential sources of guidance when implementing changes in financial reporting – the GASB and the OSC.
The Finances of LOSAP in New York State
We like to describe LOSAP as a sophisticated IOU – it is an unsecured promise by the sponsoring local government to pay a benefit at the entitlement age. The GML requires sponsors to reserve assets for the payment of the accrued benefits as they come due, and these assets are held in accounts owned by the local government. These assets are held in trust for the exclusive purpose of LOSAP; however, they are not secured against the creditors of the government sponsor in the case of insolvency. In other words, the LOSAP benefits are not guaranteed by the State Constitution like the Retirement System, and the LOSAP assets are not legally protected from creditors of the sponsoring municipality. That should not raise significant concern for local governments in New York, as the OSC Fiscal Stress Monitoring System and other safeguards make it very difficult for a municipality to go bankrupt. Nonetheless, it is an important distinction for the purposes of financial reporting.