2. GASB 34 And the Public Schools of Petoskey

3. GASB 34: Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments 10 Years in the Making. 10 Years in the Making. Arguably the most significant change in the history of governmental accounting. Arguably the most significant change in the history of governmental accounting. Implemented at the Public Schools of Petoskey effective with Year Ended June 30, 2003. Implemented at the Public Schools of Petoskey effective with Year Ended June 30, 2003.

4. Prior to GASB 34 Current system has been in place for 20 years. Current system has been in place for 20 years. Recent emerging consensus regarding the need for public schools to institute financial reporting that promotes fiscal and operational accountability. Recent emerging consensus regarding the need for public schools to institute financial reporting that promotes fiscal and operational accountability. Pressure to provide annual reports that were easier to read for investors and creditors. Pressure to provide annual reports that were easier to read for investors and creditors.

5. Objectives of GASB 34 Fiscal Accountability Fiscal Accountability Compare actual financial results with legally adopted budget. Compare actual financial results with legally adopted budget. Determine compliance with finance-related laws, rules and regulations. Determine compliance with finance-related laws, rules and regulations. Operational Accountability Operational Accountability Assess financial condition and results of operations. Assess financial condition and results of operations. Evaluate efficiency and effectiveness. Evaluate efficiency and effectiveness. Interperiod equity. Interperiod equity.

6. Interperiod Equity Definition: Whether current-year revenues are sufficient to pay for current-year services. Definition: Whether current-year revenues are sufficient to pay for current-year services.

7. So What Changed? Management’s Discussion and Analysis (MD&A). Management’s Discussion and Analysis (MD&A). Focus on the District as a “Whole”. Focus on the District as a “Whole”. Focus on long-range activities. Focus on long-range activities. Budget to actual comparisons. Budget to actual comparisons.

8. What Do the Financial Statements Look Like? Government-wide Fund Financial Financial statementsStatements

9. Management’s Discussion & Analysis (MD&A) Purpose: Purpose: Narrative introduction and overview Narrative introduction and overview Analysis of key data Analysis of key data An objective and easily readable analysis of the district’s financial activities based on currently known facts, decisions, or conditions An objective and easily readable analysis of the district’s financial activities based on currently known facts, decisions, or conditions Provides district an opportunity to present both long and short term analysis of the district’s activities Provides district an opportunity to present both long and short term analysis of the district’s activities

10. Management’s Discussion & Analysis (MD&A) Oh yeah, its required by GASB 34 also!! Oh yeah, its required by GASB 34 also!!

11. Management’s Discussion & Analysis (MD&A) What can I expect from this report? What can I expect from this report? Discussion of current year results Discussion of current year results Focused on General Fund Focused on General Fund Very condensed financial information Very condensed financial information Comparisons to prior year and to budget, and discussion of variances. Comparisons to prior year and to budget, and discussion of variances. An assessment whether the district’s financial position has improved or deteriorated as a result of this year’s operations An assessment whether the district’s financial position has improved or deteriorated as a result of this year’s operations

12. District Wide Financial Statements Purpose: Purpose: Focused on District financial information reported “As a Whole”, versus by fund Focused on District financial information reported “As a Whole”, versus by fund Include all district resources, both capital and financial, current and long-term Include all district resources, both capital and financial, current and long-term Concentrates on the long-term performance of the district Concentrates on the long-term performance of the district

13. District Wide Financial Statements Consists of Two Statements Consists of Two Statements Statement of Net Assets Statement of Net Assets Statement of Activities Statement of Activities

14. Statement of Net Assets Some would call this a “Balance Sheet” of the District in its entirety Some would call this a “Balance Sheet” of the District in its entirety Captures a snapshot of the district’s assets, liabilities and equity at a point in time Captures a snapshot of the district’s assets, liabilities and equity at a point in time

15. Statement of Net Assets Includes ALL assets, including land, buildings, and improvements Includes ALL assets, including land, buildings, and improvements Also includes accumulated depreciation Also includes accumulated depreciation Includes ALL debt, including long-term bonded debt Includes ALL debt, including long-term bonded debt Also includes accumulated leave bank liability Also includes accumulated leave bank liability

16. Statement of Activities Some would call this an “Income Statement” Some would call this an “Income Statement” Captures a record of the financial activity of the district for a defined period of time (one year, in this case) Captures a record of the financial activity of the district for a defined period of time (one year, in this case) Uses the Net Cost Format – to show the financial burden of programs on taxpayers Uses the Net Cost Format – to show the financial burden of programs on taxpayers

17. Statement of Activities Depreciation of fixed assets is shown Depreciation of fixed assets is shown Expenses are shown by program Expenses are shown by program Revenues are shown by the program that generates them Revenues are shown by the program that generates them Or another way to say this: Programs that generate revenue are shown by the amount of revenue they generated, and the amount of expense they incurred Or another way to say this: Programs that generate revenue are shown by the amount of revenue they generated, and the amount of expense they incurred

18. Fund Financial Statements Purpose: Purpose: Focus on most important, or “Major” funds Focus on most important, or “Major” funds Assess compliance with rules and regulations Assess compliance with rules and regulations Compares inflows of the district with its outflows Compares inflows of the district with its outflows Concentrates on the short-term performance of the district Concentrates on the short-term performance of the district

19. Fund Financial Statements Consists of Four Statements Consists of Four Statements Balance Sheet Balance Sheet Reconciliation of Balance Sheet of Governmental Funds to Net Assets Reconciliation of Balance Sheet of Governmental Funds to Net Assets Statement of Revenues, Expenditures and Changes in Fund Balances Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities

20. Which Funds are Shown? Or where the heck is the Capital Projects Fund?? Or where the heck is the Capital Projects Fund?? Only Major funds are shown. These are determined by a formula. Only Major funds are shown. These are determined by a formula. Non-major funds are then lumped together (though each fund has its’ own statements further on in the report) Non-major funds are then lumped together (though each fund has its’ own statements further on in the report)

21. But I Like the Way the Funds Used to Be Shown !@#$%^! And for that reason, the fund by fund financial statements that you have come to know and love, are sitting in the back of the financial report!! And for that reason, the fund by fund financial statements that you have come to know and love, are sitting in the back of the financial report!!

22. What the heck are Net Assets? Theoretically, net assets represent the resources the district has left over for providing services after all its debts are settled. Theoretically, net assets represent the resources the district has left over for providing services after all its debts are settled. Some resources may only be used for designated purposes, and these are shown as “Restricted” Some resources may only be used for designated purposes, and these are shown as “Restricted” Finally, some forms of resources are not in a spendable form (i.e. buildings) Finally, some forms of resources are not in a spendable form (i.e. buildings)

23. What the heck are Net Assets? An increase or decrease in Net Assets is a very good indicator of improving or declining financial health. An increase or decrease in Net Assets is a very good indicator of improving or declining financial health.

24. So Why the Reconciliations? Net Assets includes things that we are not used to seeing in the fund financial statements Net Assets includes things that we are not used to seeing in the fund financial statements Net Assets includes: Net Assets includes: All funds fund balance All funds fund balance All debt and long-term liabilities All debt and long-term liabilities All capital assets All capital assets Accumulated depreciation Accumulated depreciation

25. Notes to the Financial Statements The Notes are an integral part of the Financial Statements. You cannot get a complete picture of the finances of the district without reading the Notes. The Notes are an integral part of the Financial Statements. You cannot get a complete picture of the finances of the district without reading the Notes. Highlights include: Highlights include: Capital Asset Summary Capital Asset Summary Long Term Debt Summary Long Term Debt Summary Subsequent Events Subsequent Events

26. The Stuff in the Back…. Includes: Includes: Individual Funds financial statements Individual Funds financial statements Budget-to-Actual comparisons Budget-to-Actual comparisons Debt Schedules Debt Schedules Student Activity Funds line item balances Student Activity Funds line item balances Federal Grant information Federal Grant information

27. Thank You!!