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Governmental Accounting Standards Board Statement No. 68 Implementation Q&A prepared by the New Jersey Department of Education, Division of Field Services, Office of School Finance to Assist New Jersey School Districts, Charter Schools, and Renaissance School Projects with June 30, 2015 Financial Statement Preparation

General Background

Q1) What is GASB?

A1) The Governmental Accounting Standards Board (GASB) is the independent organization that establishes standards of accounting and financial reporting for U.S. state and local governments.  New Jersey school districts, charter schools and renaissance school projects are required to report in accordance with generally accepted accounting principles established by GASB (N.J.S.A. 18A:4-14).

Q2) What is GASB Statement No. 68, Accounting and Financial Reporting for Pensions?

A2) GASB Statement No. 68, Accounting and Financial Reporting for Pensions  was issued in 2012 and is required to be implemented for the fiscal year ending June 30, 2015. This statement requires schools participating in pension plans maintained by public employers  to report their proportionate share of the plan’s Net Pension Liability, pension expense, and deferred outflows and inflows of resources.  Implementation is required for the year ended June 30, 2015. Links to the GASB website publication of the statement and the related Implementation Guide follow:

Statement:

http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176160220621&acceptedDisclaimer=true

Implementation Guide:

http://www.gasb.org/jsp/GASB/Document_C/GASBDocumentPage?cid=1176163784087&acceptedDisclaimer=true

Q3) What is Net Pension Liability?

A3) The Net Pension Liability is the liability of employers and nonemployer contributing entities to employees for benefits provided through a defined benefit pension plan (GASB Statement No. 68, Page 69).  New Jersey school districts, charter schools, and renaissance school projects will recognize their proportionate share of the collective net pension liability of cost-sharing plans as determined and calculated by the plan and provided by the plan’s audit report.

Q4) What is Deferred Outflow of Resources?

A4) Deferred Outflow of Resources is a consumption of net assets by the government that is applicable to a future reporting period. For example, prepaid items and deferred charges and it should be reported as a separate section following assets in the statement of financial position (GASB Statement No. 63).

Q5) What is Deferred Inflow of Resources?

A5) Deferred Inflow of Resources is an acquisition of net assets by the government that is applicable to a future reporting period. For example, deferred revenue and advance collections and it should be reported as a separate section following liabilities in the statement of financial position (GASB Statement No. 63).

Q6) What is PERS?

A6) The Public Employees' Retirement System (PERS) is a pension system that is open to state, county, municipal, authority, and school board employees who are precluded from any other NJ state pension system (e.g., Teachers'. Police and Fire, State Police, Judicial). In relation to GASB 68, PERS is a cost sharing multi-employer defined benefit pension plan without a special funding situation.

Q7) What is TPAF?

A7) The Teachers' Pension and Annuity Fund (TPAF) is a pension system that is open to employees of boards of education and the State who must be certified or credentialed as a condition of employment. In relation to GASB 68, TPAF falls under as a cost sharing multi-employer defined benefit pension plan with a special funding situation whereby a non-employer (i.e. state) government entity is legally required to provide the employer’s (e.g. school districts) required contributions to the teacher retirement plan for all school district employer in the state.

Technical Questions:

TQ1) Should the prior year numbers related to GASB 68 be updated in MD&A?

TA1) No, per discussion with GASB staff, prior year’s numbers included in standard tables do not require  update for GASB Statement No. 68.

TQ2) Should the added pension expense from the GASB 68 be allocated among the functions on the Statement of Activities (CAFR Statement A-2)?

TQ2) Per discussion with GASB staff, financial statement preparers should apply the same method of allocation applied to other compensation expenses. Where the preparer has allocated other compensation/employment expenses among functions presented in the Statement of Activities, then the preparer should do the same for the accrual basis pension expense as well.