Governmentals – What We’ve Seen + What We Expect to See
What We Have Seen in 2017
Tax abatements have been widely used by local governments, especially to encourage economic development. A tax abatement for the purposes of GASB 77 is defined as: A reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which one or more governments promise to forgo tax revenues to which they are otherwise entitled and the individual or entity promises to take a specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments. While many governments offer these tax abatement programs, the financial statements do not always provide the necessary information to determine how these tax abatements affect financial position and results of operations. By properly implementing this standard, the governmental entities are disclosing how they were affected by tax abatements for this fiscal year.
- Governmental entities are implementing Governmental Accounting Standards Board Statement No. 77, Tax Abatement Disclosures, (GASB 77) for the fiscal year ended June 30, 2017. This statement is being implemented to ensure that the following requirements are met - Financial Statements should include: information about whether current year revenues were sufficient to pay current year services, information about whether the government has complied with finance related legal and contractual obligations, information about where a government’s financial resources come from and how the government uses them, and information about a government’s financial position and economic condition and how they have changed over time.
- The governmental entities are in the third year of reporting a Net Pension Liability for their proportionate share of the IPERS net pension liability. The liability to be reported on the government-wide Statement of Net Position has grown for most governmental entities for the fiscal year ended June 30, 2017.
What We Expect to See in 2018
- Due to the low interest rates available for investments, many governmental entities have decided to cash out their investments in certificates of deposit. More and more entities are looking to money market accounts, stamped drainage warrants and investments in government securities for a higher rate of return.
- The Governmental Accounting Standards Board has issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement will be implemented for the fiscal year ending June 30, 2018 and will replace the current postemployment benefits other than pensions guidance. Financial statement implications include a liability to be reported on the government’s Statement of Net Position and additional footnote disclosures and required supplementary information. If you haven’t already, governmental entities should contact their GASB 45 actuary concerning these changes so you are prepared at audit time.