Governmental Accounting Standards Board (GASB) Statement 61 (GASB 61), The Financial Reporting Entity – Omnibus
Summary: GASB 61 was issued in November 2010 and amends guidance provided in GASB 14, The Financial Reporting Entity. It primarily affects how authorizing local educational agencies (LEAs) report charter schools in their financial statements, but may also affect how LEAs report other potential component units such as financing authorities or community facilities districts, e.g., Mello Roos districts. GASB 61 is effective beginning 2012–13.
Background: GASB 14, in part, establishes standards for determining whether a component unit should be included as part of the financial reporting entity, and if so how to present the component unit in the financial statements. A component unit is a legally separate entity for which the primary government is financially accountable, or whose relationship with the primary government is such that exclusion from the primary government’s financial statements would cause the financial statements to be misleading.
GASB 61 amends certain of these standards. A few of the most significant changes include:
- Modification of the requirements for determining whether a component unit should be included as part of the financial reporting entity.
- Modification of the criteria for blending, i.e., reporting component units in the financial statements as if they are part of the government, as opposed to discrete presentation, i.e., reporting separate from the government.
- Clarification that funds of a blended component unit are treated exactly the same as the funds of the primary government, with one very important exception.
- The general fund of a blended component unit should be reported as a special revenue fund, even if it does not meet the requirements to be reported as a special revenue fund.
Implications for LEAs: One of the most significant implications of GASB 61 is that a charter school that is a blended component unit and has been reported in the authorizing LEA’s general fund should now be reported in a special revenue fund, e.g., Fund 09. Note that a charter school that has been reported in Fund 62 should continue to be reported in Fund 62.
LEAs should work with their auditors to evaluate whether GASB 61 has any implications for the manner in which existing component units are reported.