GASB Update – Elizabeth Thyer, CPA, Partner
What’s new for the audit of the financial statements for the year ended June 30, 2022? Governmental entities will be implementing Governmental Accounting Standards Board (GASB) Statement Number 87 – Leases for the fiscal year ended June 30, 2022. Per GASB Statement Number 87, a lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset as specified in the contract for a period of time in an exchange or exchange-like transaction. Nonfinancial assets include land, buildings, equipment and vehicles. With the implementation of this Statement, there will be changes to the financial statements and to the footnote disclosures. There will also be a restatement of beginning balances and beginning net position.
What do you need to do to be ready for the audit? Governmental entities will need to identify and provide documentation for all leases in effect. Common leases for governmental entities include leases for real estate, communication towers, copiers, vehicles and equipment. GASB Statement Number 87 applies to situations in which the governmental entity is the lessor or the lessee.
What else is new for the audit of the financial statements for the year ended June 30, 2022? Governmental entities received and spent American Rescue Plan Act funds during the fiscal year. This will result in the entity requiring a single audit as required by the Uniform Guidance if the entity spent more than $750,000 in federal funds, not including the American Rescue Plan Act dollars spent. If the entity did not reach the $750,000 threshold without including the American Rescue Plan Act expenditures but is in excess of the $750,000 threshold when including the American Rescue Plan Act expenditures, the entity will be subject to other additional procedures to test compliance.
What do you need to do to be ready for the audit? Governmental entities will need to prepare the Schedule of Expenditures of Federal Awards following the prescribed format and will need to have the Schedule completed prior to the beginning of the audit. Documentation for federal expenditures will also need to be available.