This guidance is provided to address the timing for implementation of GASB 34 for those school districts that are a component unit of a primary government.

Background
New Jersey school districts are required under N.J.A.C 6A:23-2.1 to maintain a uniform system of financial bookkeeping and reporting that is fully consistent with GAAP as set forth in the Codification of Governmental Accounting and Financial Reporting Standards, 1998, (GASB code) published by the Governmental Accounting Standards Board (GASB), as amended and supplemented. GASB issued GASB 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments in June 1999. GASB 34 is applicable to state and local governments and to special-purpose governments (such as school districts).

Component Unit
Based on guidance from the Division of Local Government Services, county vocational, county special services and Type I school districts are considered component units of either their applicable county or municipal government. GASB Statement No. 14 (GASB 14) provides authoritative accounting guidance on this subject, and is applicable to primary governments, other stand-alone governments, and to the separately issued financial statements of governmental component units.

As referenced in GASB 14, a primary government includes a special-purpose government (such as a school district) that meets all of the following criteria:

• Has a separately elected governing body.

• Is legally separate.

• Is fiscally independent of other state and local governments.

A school district that does not meet the above criteria should evaluate whether it is a component unit, or other form of reporting entity such as another stand-alone government. Education service commissions (ESCs) and jointure commissions (Jointures) meet the definition of other stand-alone governments, in that they are legally separate government organizations that do not have a separate elected governing body and do not meet the definition of a component unit. For ESCs and jointures, since no single government appoints a voting majority of the governing board of these district types, they do not meet the criteria of a component unit.

Implementation
The implementation requirements of GASB 34 are effective in three phases based on total annual revenues. GASB 34 requires component units to implement GASB 34 no later than the same year as their primary government, regardless of the amount of each component unit’s total revenues. Even though most New Jersey municipal and county government agencies are not on a GAAP basis of accounting, the interpretation of GASB 34 has implied that this does not forgo the requirement for the component unit to implement GASB 34 when the primary government would have been required to implement had they been on a GAAP basis of accounting.

For component units, the department recommends that the district superintendent or business manager contact the county or municipality’s chief financial officer, request a copy of the audited year ending December 31, 1999 Statement of Operations, and determine in conjunction with the district auditor which implementation period would be applicable for that municipality or county government. Ultimately, the auditor issuing an opinion on a school district’s financial statements prepared in accordance with GAAP will evaluate whether GASB 34 has been implemented in the appropriate time period.

Inquiries
If you have any questions regarding this letter, please email doecafr@doe.state.nj.us.