"Environmentally Speaking" - A Gannett Fleming E-newsletter

 

Inside this article:
» understanding » requirements 
» compliance » entities affected » benefits » net assets  
» what we can do

 

 
 

 

Community Asset Management
& GASB 34: Making Us More Accountable

What's the value of your water or storm sewer system?  What are your municipal buildings worth?  How about your roads and bridges? 

Local governmental entities are concerned about these questions now more than ever.

In an effort to better manage assets and facilitate facility financing, new Government Accounting Standards Board Statement 34 (GASB 34) requirements mandate asset inventorying.

 

 

 

 

GASB 34 requirements include:

  • annual reporting

  • inventory assets

  • value assets

  • accrual accounting

  • annual management and supplementary information

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GASB 34 benefits include:

  • better management and accounting

  • establishment of true cost of service

  • bond rating safeguards

  • easier financing and borrowing

  • ratemaking assistance

  • standardization of valuation

  • quicker compliance and regulatory reporting

  • simpler tapping fee and similar calculations

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Why?

Many municipalities and utilities do not have adequate asset information.  This results in ineffective asset coordination.  It also leads to inadequate funding when attempting to finance improvements or additions.

GASB 34 affects:
  • cities/towns
  • boroughs/townships
  • counties

  • public utilities, hospital and schools

With annual 
revenues of:              After:

under $10 million                    6/15/04

$10 - $100 million                    6/15/03

over $100 million                    6/15/02

Compliance
Issues

The GASB doesn't have a way to enforce Statement 34 reporting requirements.  However, a government entity must be GASB 34 compliant in order to receive an unqualified or clean audit opinion on their annual financial report.  

Government entities that don't comply face several potential barriers:

  • borrowing difficulties

  • a lower bond rating

  • higher interest rates

  • more restrictive covenants.

Net Assets

At a minimum, the net value of your reported assets should at least equal the amount of long-term, outstanding debt.  Otherwise, GASB 34's newly introduced "Statement of Net Assets" will highlight any deficiency where capital assets are less than long-term debt.

This will be done by reporting "negative net assets,"  which may draw the ire of local citizens.  Therefore, the value of your assets should be optimized, but not overstated, to avoid material misstatement of your financial condition.

The Big Picture

Gannett Fleming GASB 34 services include:

  • inventory and inspections

  • first and present value estimates

  • rate and fee calculations

  • computerized management

  • Chapter 94 reports

  • annual reports

  • capacity maintenance and operations management

  • tapping fee calculations

GASB 34 will revolutionize the ways assets are managed, preserved, documented and financed in the U.S.  GASB 34 compliance will be an important element in the overall improvement and more efficient management of all of your facilities.  

As with most programs of this nature, it is important to thoroughly understand the requirements.  This will enable you to customize the best plan of attack to meet your facility needs.