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Weekly UpdatesThis past May, the Governmental Accounting Standards Board issued Statement No. 44, Economic Condition Reporting: The Statistical Section (an amendment of NCGA Statement 1). The new standard will significantly modify the statistical section of the comprehensive annual financial report. The new guidance is scheduled to take effect for fiscal periods beginning after June 15, 2005.
BACKGROUND
The GASB was persuaded that changes to the statistical section were needed for three reasons.
To provide a broader focus. Previous authoritative guidance on the statistical section focused exclusively on general-purpose local governments supported principally by property taxes. GASB Statement No. 44 offers its guidance in terms of five generic objectives designed to be generally applicable.
To improve comparability. Previous authoritative guidance offered no detailed description of the contents or format of required statistical presentations. As a result, considerable diversity developed in practice, hindering comparability and potentially confusing readers. GASB Statement No. 44 offers extensive descriptive and illustrative material designed to minimize future diversity.
To encompass newly available data.
The new governmental financial reporting model offers a wealth of information not previously available in state and local government financial reports. GASB Statement No. 44 takes full advantage of that fact to incorporate for the first time certain accrual-based data extracted from the new government-wide financial statements.
OBJECTIVES, ORGANIZATION, AND CONTENT
The revised statistical section will provide five categories of information: (1) financial trend information, (2) revenue capacity information, (3) debt capacity information, (4) demographic and economic information, and (5) operating information. GASB Statement No. 44 directs that the contents of the statistical section be organized on the basis of these five objectives.
1. Financial trend information. The first portion of the statistical section will feature four schedules of trend data extracted from the basic government-wide and governmental fund financial statements:
* Information about net assets (10 years). This schedule is to present data on each of the three categories of net assets in the government-wide statement of net assets.
* Information about changes in net assets (10 years). This schedule is to present all of the key elements of the government-wide statement of activities.
* Information about fund balances (10 years). This schedule is to provide information about both reserved fund balance and unreserved fund balance, presented separately for the general fund and all other governmental funds in the aggregate.
* Information about changes in fund balances (10 years). This schedule is to present most of the data from the governmental fund operating statement, as well as debt service expenditures expressed as a ratio/percentage of total noncapital expenditures.
2. Revenue capacity information. The second portion of the statistical section will include four schedules concerning a government's largest own-source revenue(s).
* Information about the revenue base (10 years). This schedule is to present the major components of a government's revenue base and the total direct rate applied to that base.
* Information about revenue rates (10 years). This schedule is to present the components of the total direct rate, as well as the rates for overlapping governments. Any restriction on the ability to raise direct taxes needs to be explained.
* Information about principal revenue payers (current period and period nine years prior). This schedule is to list a government's 10 principal payers or remitters (unless fewer than 10 are needed to account for at least 50 percent of total payments or remittances), as well as the amount of each remitter's payments and its share of the total.
* Information about property tax levies and collections (10 years). If property taxes are reported in the previous schedules, this schedule must disclose the amount of each year's levy, collections as of the end of the levy year (both in dollars and as a percentage of the levy), collections in later years (in dollars), and total collections to date (both in dollars and as a percentage of the levy).
3. Debt capacity information. The third portion of the statistical section will offer five schedules concerning debt capacity.
* Ratios of outstanding debt (10 years). This schedule is to present each type of outstanding debt separately. The total outstanding debt burden then needs to be expressed as two ratios: (1) total outstanding debt to personal income and (2) total debt per capita.
* Ratios of general bonded debt (10 years). This schedule is to present any debt that will be financed, in whole or in part, by general government resources, by type of debt and in total. If resources have been restricted for principal repayment, the amount should be shown as a reduction to arrive at net general bonded debt. Two ratios also need to be presented: (1) net general bonded debt to the estimated actual value of taxable property and (2) net general bonded debt per capita.
* Information about direct and overlapping debt (current year). This schedule is to present the combination of direct and overlapping debt related to governmental activities.
* Information on debt limitations (most recent year for calculation, 10 years for results). If a government is subject to a legal debt limit, this schedule is to provide the information needed to calculate that legal debt margin for the current year. It also must report the debt limit, total net applicable debt, and the legal debt margin (but not the calculation itself) for each of the preceding nine years. In addition, one of two ratios must be presented for all 10 years: (1) outstanding net debt/debt ceiling or (2) legal debt margin/debt ceiling.
* Information about pledged-revenue coverage (10 years). If a government has any revenue-backed debt outstanding, this schedule must present coverage information for each type of debt, along with a description of pledged revenues. GASB Statement No. 44 provides its own coverage formula for this purpose.
4. Demographic and economic information. The fourth portion of the statistical section will furnish two schedules concerning demographic and economic information.
* Demographic and economic indicators (10 years). This schedule is to present, at a minimum, the following: (1) population, (2) total personal income, (3) per capita personal income, and (4) the unemployment rate.
* Information on principal employers (current period and period nine years prior). This schedule must specify a government's 10 largest employers (unless fewer than 10 are needed to account for at least 50 percent of employment), the number of people employed by each, and each employer's share of the total.
5. Operating information. The fifth and final portion of the statistical section will offer the following schedules providing information on the government's operations:
* Number of governmental employees by function (10 years)
* Indicators of demand or level of service by function (10 years)
* Indicators of the volume, usage, or nature of capital assets (10 years)
ADAPTATION OF REQUIREMENTS
GASB Statement No. 44 invites governments to modify specific requirements in situations where adaptation is necessary to meet the pronouncement's stated objectives. Thus, while it is meaningful for general-purpose governments to report total debt per capita, the presentation of total debt pet customer/ratepayer would probably be the more meaningful presentation for a utility. Also, governments are permitted to include additional information in the statistical section, provided it can be justified as furthering one of the pronouncement's five stated objectives.
STEPHEN J. GAUTHIER is director of GFOA's Technical Services Center in Chicago.
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