GASB Statements and Impact on Public Higher Education Institutions
- Definition: Established in 1984, the Governmental Accounting Standards Board
(GASB) is the independent, private-sector
organization based in Norwalk, Connecticut, that establishes accounting and
financial reporting standards for U.S. state and local governments that follow
Generally Accepted Accounting Principles.
- Mission: The GASB standards are recognized as
authoritative by state and local governments, state Boards of Accountancy, and
the American Institute of CPAs (AICPA).
GASB develops and issues accounting standards through a transparent and
inclusive process intended to promote financial reporting that provides useful
information to taxpayers, public officials, investors, and others who use
Statements: GASB issues statements
that are numbered and have applicability to state colleges and universities,
which are instrumentalities of state government.
Statement No. 68 “Accounting and Financial Reporting for Pensions” was
effective for fiscal years ending after June 15, 2014 and required employers to
report a liability on the face of the financial statements for the pensions that
Statement No. 77 “Accounting and Financial Reporting for ‘Other Post-Employment
Benefits (OPEB)’ comprising all postemployment benefits other than pensions” is
effective for fiscal years ending after June 15, 2017 and again requires employers
to report a liability on the face of the financial statements for the OPEB that
they provide if a special funding
- GASB Statement No. 68 “Accounting and Financial Reporting for Pensions” was effective for fiscal years ending after June 15, 2014 and required employers to report a liability on the face of the financial statements for the pensions that they provide.
Concern: Liability and Credit Worthiness
liability and pension expense are determined annually for the total State
Pension Fund based on actuarially-determined factors and prescribed
formulas. GASB No. 75 requires the
schools to report their proportionate share of the pension liability and
actual funding of the State Pension Fund is determined each year by the State
Legislature, and the funding is paid by the state (including funding for the
schools’ future pension liabilities).
The payment of retiree pension benefits is made from the State Pension
Fund as retirees become eligible.
technical interpretation of GASB No. 75 resulted in schools having to report
their proportionate share of liability and expense, however, the state
indicated that there is no intention to transfer to the schools the
responsibility for funding of the State Pension Fund or the payment of retiree
concern is the possibility this could change.
The state’s OPEB plan, which pays for retiree health care, is
administered and paid for entirely by the state. The schools do not maintain plan or
participant data. Health benefits and
rates are negotiated by the state without involvement by the schools.
No. 75 requires employers to report their proportionate share of future
expected plan payments (liability) and current year expense on the face of the
financial statements for the state’s OPEB plan that they provide, if a special
funding situation exists.
of December 31, 2018, the state’s OPEB plan is still under audit and a final
determination by the state’s auditors of “special funding situation” has not
are component units of the state and once consolidated, the liability remains
reflected on the state’s financials. The
implementation of GASB No. 68 had no effect on the state’s reported numbers,
however, the unfunded liability and pension expense allocated by the state to
the institutions was significant. The
impact of GASB No. 75 could potentially be even more material.
unfunded liability negatively affects all institutions (e.g., downward pressure on credit rating, financial statements
because of the need to record expense, reduces total net position, possibly
need to record as liability, etc.)
(students, parents, taxpayers, etc.) would have difficulty interpreting
institution’s financials reflecting negative net assets.
will be important to know how the credit-rating agencies intend to factor GASB
No. 75 into the credit ratings of New Jersey’s senior public colleges and
- The delay in finalizing applicability of GASB No. 75 for the schools already has impaired the school’s ability to meet debt compliance deadlines.
The NJASCU Statement: The state colleges and universities contend that they should not be forced to report the liability for OPEB, because the State of New Jersey, not the state colleges and universities, is statutorily required to pay for the health benefits of retired employees.
January 9, 2019