Governmental Updates – Elizabeth Thyer, CPA, Partner

The fiscal year ended June 30, 2026 will see the implementation of two new Governmental Accounting Standards Board (GASB) Statements and a revision to the Uniform Guidance.

The most significant changes will come with the implementation of GASB Statement No. 103 Financial Reporting Model Improvements. This statement was designed to clarify operating and nonoperating items and report presentation in proprietary funds, to make adjustments to the information included in the management’s discussion and analysis and to make changes to the budgetary comparisons currently included in the financial statements.

Nonoperating items for proprietary funds were clarified to include subsidies received and provided, the revenues and expenses of financing, resources from the disposal of capital assets, investment income and expenses and contributions to permanent and term endowments. Any items other than those listed will be classified as operating items with the implementation of this standard.

Changes to the management’s discussion and analysis include more information provided by the client for analysis of current year balances and activity and more explanation of why balances and results changed from the prior year. The management’s discussion and analysis will now include an overview of the financial statements, a financial summary that includes condensed financial statements, detailed analysis of the primary government’s financial position and results of operations for governmental and business-type-activities, a description of significant capital asset and long-term financing activity and currently known facts, decisions and conditions that are expected to have a significant effect on financial position or results of operations in the subsequent fiscal year.

Budgetary comparisons are now required to be presented as required supplementary information. Other changes to the budgetary comparisons include a requirement to present final budget to actual variances and original budget to final budget variances. Additional information and explanations regarding significant changes in the budget during the year and significant variances between final budget amounts and actual amounts will also be included with the implementation of this standard.

The second GASB statement to be implemented for the fiscal year ended June 30, 2026 is GASB Statement No. 104 Disclosure of Certain Capital Assets. This statement requires certain capital assets to be disclosed separately including lease assets, subscription assets and capital assets held for sale. Implementation of this statement will change the note disclosures currently presented to include these classifications.

The 2024 Uniform Guidance was issued in April 2024 and consisted of the Office of Management and Budget revising guidance relating to federal awards. Some of the most significant changes impacting governmental clients include: the threshold for requiring a single audit was increased from $750,000 to $1,000,000 in federal expenditures during a fiscal year; the de minimis indirect cost rate increased from 10% to 15%; and equipment and supply thresholds also increased from $5,000 to $10,000.