New GASB Statement Addresses Foundations

On May 28, 2002, the Government Accounting Standards Board (GASB) issued GASB Statement No. 39. A major change introduced by the new standard is that many state and local governments will soon be required to include the financial activities of their fundraising foundations through a "discrete presentation."

"In the present reporting environment," explains GASB Project Manager Ken Schermann, "some entities include in their financial statements the balances and transactions of their related fundraising organizations. Others either disclose limited information in the notes or provide no information at all. The standard should bring a greater level of comparability to financial reporting."

To promote greater comparability, the new standard provides useful guidance on the reporting requirements for component units. The new guidance will help preparers, auditors and users understand:

  • The conditions under which certain organizations, such as not-for-profit foundations related to public universities and school districts, should be reported as component units based on the nature and significance of their relationship with a state or local government.
  • The criteria for determining whether the government is required to provide financial information about both its own activities and those of the affiliated organization through a "discrete presentation."
  • The reporting for certain organizations for which the primary government is not financially accountable.

Obtain a copy of GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units.

-Rosemary Schlank

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