States begin accounting system revamps

States begin accounting system revamps

Tom Allen, chairman of the Governmental Accounting Standards Board, says he is pleased with the way governments are handling Statement 34's new reporting requirements.

To meet new standards, governments are upgrading their systems in ways both plain and fancy

By Trudy Walsh

GCN Staff

State and local governments are preparing to report to a higher standard. Last year, the Governmental Accounting Standards Board (GASB) established more sharply focused financial reporting guidelines for state and local governments [GCN/State & Local, October 1999, Page 1].

Shifting to the new accounting rules has required changes in the computer systems state finance offices use to keep track of revenues, expenses and assets.

The cases of Michigan and Oklahoma illustrate how systems designers in different states have taken advantage of the sophistication or simplicity of their financial systems as they prepare to meet the new standards.

The two states are leading the pack in the race to bring accounting systems in line with the new requirements.

The standards, GASB Statement No. 34, Basic Financial Statements'and Management's Discussion and Analysis'for State and Local Governments, require governments to provide greater detail in the way they report funds and also the way they manage and report assets.

Governments traditionally categorized finances into groups such as general funds, enterprise funds and special revenue funds.

Reports based on the new model will reclassify monies into more specific funds. Statement 34 also requires each government to produce an aggregate, governmentwide financial report as a basic financial statement.

Traffic assets



The other major change induced by Statement 34 is in asset management. Most governments record infrastructure assets'roads, highways, bridges, dams and the like'as one-time-only expenditures, during the year the government procured the assets. Statement 34 requires governments to record these items as capital assets and monitor their cost and value each subsequent year.

One of the goals of Statement 34 is to make government financial reporting more like that of the private sector. By requiring comprehensive financial data on all current assets, debts and operations on a detailed, long-term basis, Statement 34 will improve government accountability, GASB officials said.

The deadline for compliance is based on a government's annual revenues. State and local governments that have revenues between $10 million and $100 million must to comply with Statement 34 by June 15, 2002.

Governments with revenues of less than $10 million must have the first few pieces of the new reporting requirements in place by June 15, 2003.

'We're very pleased with the way governments are implementing Statement 34,' said Tom Allen, chairman of GASB in Norwalk, Conn.


How to leap Statement 34 hurdles
''Re-evaluate what you've got. Maybe you could switch that accounting system you've kept on a mainframe for 12 years to an Excel spreadsheet.

''Keep detailed records. Exploit the data you've already collected.

''Simplify, simplify. States that kept their systems as simple as possible are ahead of schedule in Statement 34 compliance.

''Take advantage of sophisticated new technologies.

'States that are ahead on compliance preparation


'Already about a dozen smaller governments have implemented the new standard,' Allen said. 'We had allowed four more years leeway on implementing that change, and now the governments are saying they won't need the extra time.'

Kelly Chesney, spokeswoman for Michigan's Management and Budget Department, said the state is on track to produce its first Statement 34-compliant financial report by Oct. 1, 2001, almost a year ahead of schedule.

Chesney attributed the state's speed in compliance to comprehensive record-keeping. 'We already had a statewide LAN database that kept track of all resources, facilities and infrastructure,' she said.

Since 1994, the state's Financial Management Office has worked with KPMG LLP of New York to customize Michigan's financial accounting system. KPMG built the system in Cobol on an IBM mainframe that runs OS/390 with 3270 terminal emulation. Accountants and other users access the data from PCs running Microsoft Windows 95 and 98.

'For Statement 34, we'll just generate a custom report using regular Microsoft Excel,' Chesney said.

Public access

The financial information will also be available to the public on the Financial Management Office's Web site, at www.state.mi.us/dmb/ofm, Chesney said. Now the state posts its comprehensive annual financial reports, or CAFRs, at the site.

'Keep it simple' is the unofficial motto of Oklahoma's Office of State Finance. 'That's one reason we felt we had a good chance at being among the first to implement Statement 34,' said Steve Funck, financial reporting supervisor.

'We don't have a sophisticated computer accounting system,' he said. 'It's cash in and cash out.'

Funck estimates the state will finish implementing Statement 34 by June 30, 2001.

The office uses Lotus 1-2-3 97 for Windows 95 and Windows NT spreadsheets and CAFRonMicro, MS-DOS software created by the Government Finance Officers Association of Chicago, which the office has been running for 10 years on a Digital Equipment Corp. mainframe.

'We just have to add one more chart of accounts,' Funck said. 'We have to reformat a lot of our reports, but that's easy. It's not like fiddling with the database.'

Another factor that puts Oklahoma in the lead, Funck said, is that Oklahoma does not have separate special revenue funds like most states.

'We include special revenue and internal service fund activity in our general fund,' he said.

'A lot more states are having to produce more details that we are. We're just taking advantage of a couple of good things going for us. It's just simpler for us here in Oklahoma,' Funck said.

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