The Great GASB: What, When, and Who Can Help
The Governmental Accounting Standards Board (GASB) is an independent organization that establishes the accounting and financial reporting standards for U.S. state and local governments that follow Generally Accepted Accounting Principles (GAAP). The organization issues accounting and reporting standards documented by statement numbers and colloquially referred to as “GASB” requirements. There are several GASB reports agencies may be required to follow depending on their structure, but we would like to highlight two predominant ones utilized by many special districts.
Actuarial Retirement Consulting’s Molly McGee explains the GASB requirements broadly, “If you provide any benefit to your retirees, it’s going to fall under a GASB.” We asked McGee to share some basic GASB facts and common misunderstandings to assist special districts in sorting out the best practices they should utilize in this important aspect of annual accounting.
GASB 68 requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability, and to comprehensively and comparably measure the annual costs of pension benefits. The majority of our special district members participate in CalPERS and receive an annual Valuation Report produced by CalPERS for this reporting. An actuary can help to prepare an annual Disclosure Report that provides the required information for the financial audit.
GASB 75 is intended to improve accounting and financial reporting by state and local governments for post-employment benefits other than pensions (other postemployment benefits or ‘OPEB’). The Valuation Report for this is required every other year and is ideally produced by an Actuary for the district.
In addition to the Valuation Report requirements, each GASB 75 plan also must have an annual Disclosure Report. While some auditors create Disclosure Reports, McGee recommends having an Actuary perform this step. “Disclosure Reports should be created by the same actuary in the GASB 75 “rollover” year to reduce confusion, and in many cases, cost,” stated McGee.
It is also critically important to correctly identify participants in health benefit plans. McGee often sees errors of omission when it comes to retirees who may retain health benefits but the District is no longer required to pay for them. All eligible participants must be identified and accounted for, including those who are active, those who may waive benefits but have the option to add them later, and those who are inactive but eligible.
For a GASB checkup, Valuation Reports and Actuarial Consulting services, CSDA has teamed up with Actuarial Retirement Consulting (ARC) to provide a variety of actuarial services at discounted rates to CSDA members. They provide consulting and GASB-compliant reports for retirement benefit plans including pensions, stipends, and other post-employment benefits. Learn more about the member benefit provided by ARC on our website under ‘GASB Reporting Compliance.’
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