GASB 34: What You Need to Know

(from Maine Townsman, January 2002)
by Bruce W. Chase, Director of Governmental and Nonprofit Assistance Center, Radford University

EDITOR'S NOTE:  The following article is reprinted from the November 2000 issue of Virginia Town & City, published by the Virginia Municipal League.

State and local governments are preparing for a major change in how financial information is reported to citizens, elected officials and other financial statement users.

“This is the most significant change in the history of government financial reporting.  Never before has the public been able to get a comprehensive overview of a state or local government’s finances in one place.  This new reporting system will give citizens a clearer picture of what a government is doing with the taxes it collects,” says Tom Allen, chairman of the Governmental Accounting Standards Board (GASB). 

Allen’s comments contain two important messages to elected officials.  First, this is a major change in financial reporting.  The finance staff will have to devote significant resources to implement the requirements of this reporting standard.  Second, once the standard has been implemented, new information about a government’s finances will be reported.  This information should be easier to use and give a concise picture about the changes in a government’s finances for the year.  This information may result in local governments thinking differently about how financial resources are managed. 

The new financial reporting standards are contained in GASB Statement No. 34, Basic Financial Statements — and Management’s Discussion and Analysis —  for State and Local Governments (GASB 34).  Approved in June of 1999, this financial reporting standard must be followed by state and local governments in preparing annual audited financial statements.  The required implementation date varies based on the size of the government.  The date is based on certain revenue totals as reported in the table shown on the next page.

What are the major features of GASB 34?

In many ways, GASB 34 can be seen as an expansion of the current reporting model.  Much of the information currently contained in a government’s financial statements will remain.  Major new information, however, will be added to the financial reporting model.  The major features of GASB 34 are:

New government-wide statements.  These statements provide financial information from the government entity perspective. For the first time, information regarding the performance of the whole government will be presented in a business-type format.  These government-wide statements do not replace the current fund-based statements, but provide new information on financial performance. 

Management’s discussion and analysis (MD&A).  Government will now provide a narrative overview and analysis of the financial operations of the government.  This narrative should assist users in understanding changes in certain key financial elements from the prior year.

Infrastructure reporting.  Most local governments do not report the past cost of infrastructure assets (e.g., roads, sidewalks, bridges) in their financial statements.  Governments will need to determine a cost efficient way to implement this new reporting requirement.

Fund-statements.  Most of the information contained in the current fund-based statements will remain. However, to assist users in evaluating the performance of the government’s largest funds, information for each individual major fund will be presented. 

Original budget reported.  The current budgetary comparison statement contrasts the final revised budget to actual results.  GASB 34 requires governments to also report the original adopted budget.    

What are the government-wide statements?

The new government-wide financial statements will provide information not currently reported in the fund-based financial statements of local governments.  First, they will provide information for the government as a whole-unified entity.  Second, they will provide a measure of “operational accountability” by accounting for activities in a manner similar to a business enterprise.  Finally, the government-wide financial statements will report the net cost of providing different types of service.  There are two government-wide financial statements: the statement of net assets and the statement of activities. 

Statement of net assets.  In many regards, the statement of net assets is similar to a business’s balance sheet.  It reports what a government owns (assets) and what a government owes (liabilities).  The difference is referred to as “net assets.”  The statement separates information by governmental activities (generally those activities supported by taxes) and business-type activities (activities that are financed by user fees and charges).  Component units, separate legal entities for which the primary government is financially accountable, are also reported separately.

Statement of activities.  This statement reports a government’s revenue and expenses for the year.  The change in net assets (difference between revenue and expenses) can be considered the financial results of operations.  It will indicate if the government’s net assets increased or decreased during the year. The format of the statement is unique to governments.  The cost of providing government services (expenses) are listed first, offset by any fees, charges, and grants generated by these services.  This format presents the net cost of providing government services.  The general revenue of the government is listed in the bottom portion of the statement followed by the change in net assets.     

Elected officials and other decisions makers need to understand the new government-wide statements measure certain financial activities differently than the fund-based statements.  It will report financial information using a business-type reporting model.  For example, the purchase of capital assets is reported as expenditures in the fund financial statements, however, the government-wide statements would not record the purchase as an expense.  Instead, depreciation expense would be reported in the government-wide statements.  Another major difference between the fund-based statements and government-wide statements is how debt transactions are reported.

The new government-wide statements should be easier for users to understand, however it gives external users a different measurement of the finances of the government. Measuring financial information differently can result in a government approving and maintaining a balanced budget in the general fund, but reporting a substantial deficit or surplus for governmental activities in the government-wide statements.


Elected officials and other decision-makers need to become familiar with the new reporting requirements and how best to use the new information in the financial statements.  In addition, policy-makers also need to understand several key decisions governments have to make in implementing the required changes in financial reporting. 

         Elected officials should begin this process by discussing the new reporting model with their finance and budget staff.

GASB 34 Implementation Schedule

Total Revenue for              Required implementation
Governmental and              for fiscal year ending
Enterprise Funds

 $100 million or more               June 30, 2002 

  $10 million to $100 million      June 30, 2003 

Less than $10 million              June 30, 2004


What is GASB?  Financial statements are important to a variety of users including investors, taxpayers, creditors, legislative bodies, and the media.  These financial reports should provide the information needed for fair presentation of financial activities of a local government.  Generally accepted accounting principles (GAAP) are the criteria used to guide financial statement preparation and are used by the auditors to determine fair presentation.  For state and local governments these generally accepted accounting principles are set by a private sector oversight organization known as the Governmental Accounting Standards Board (GASB).  GASB is a sister organization to the Financial Accounting Standards Board (FASB), which oversees GAAP for private industry. 

Do local governments have to follow it?  Yes.  One of the goals of generally accepted accounting principles is to achieve consistency in financial reporting. Therefore, adherence to GAAP (established by GASB pronouncements) is valued by financial statement users and required by financial statement auditors. State and federal government agencies also expect local governments to follow generally accepted accounting principles. 

Frequently Asked Questions About Abandoned Property By Office of State Treasurer

 The June 1999 edition of the TOWNSMAN carried a story introducing the subject of abandoned property reporting in Maine. Since that time, more communities have begun reporting abandoned property to the State, and others are about to do so. A series of frequently asked questions regarding legal and administrative issues relating to abandoned property have been developed, and the Office of the State Treasurer has responded to them.

Q.  Are all government units required to report and remit unclaimed property to the State Treasurer?

A. Yes, the statute makes it very clear that all holders of abandoned property, public or private are required to report and remit this property annually to the State Treasurer. In fact, Maine’s Unclaimed Property Act specifically identifies the dormancy period for property held by government, governmental subdivision, agency or instrumentality as one year after the property becomes distributable, so it is likely that most will have some reportable abandoned property.

Q. What is a local government unit?

A. Any municipal entity (i.e., a city, town, county, court, school district, etc.) having its own incorporated government for local affairs.

Q. Why is unclaimed property reported and remitted to the State Treasurer?

A. Maine’s Unclaimed Property Law is a win-win-win. Businesses and governmental units win because they are relieved of the expense and liability of carrying the unclaimed property on their records. Consumers win because the State Treasurer safeguards the unclaimed property until they or their heirs claim it. Maine taxpayers win because until we locate the owner, the value of the property is used to fund schools, roads, and healthcare and therefore benefits all of us, not just the chance possessor.

Q. What would a local government unit be holding as abandoned property?

A. Frequently, intangible abandoned property can be identified as checks that have been uncashed for a period of time, including paychecks (particularly the final check), vendor checks, drafts, and warrants. A credit balance remaining on an account is another common place to find abandoned property. Pension or retirement distribution accounts should also be researched for potential abandoned property, as retirees may have left the area, retiring to a distant locale. Occasionally, abandoned property finds its way into the suspense, unearned income or miscellaneous income accounts.  Some tangible property, such as safekeeping items, must also be reported to the State.  This would include personal contents of tax-acquired real estate property. In some cases, local law enforcement agencies report and deliver unclaimed evidence or lost and found items.  In other cases, that property is auctioned and the proceeds are remitted to the State Treasurer (see 25 M.R.S.A. Chapter 401).

Q. How do I go about reporting the property to the State, and is there anyone who can assist me in this process?

A. The Office of the State Treasurer distributes booklets that contain the filing procedure and forms.  All of the information necessary to help get you started is also available on their web site,  Beginning in November 2001, all reports must be submitted electronically. A diskette seems to be the favorite of most filers, but other options (like e-mail) are also available. Exemptions from the electronic requirement may be available. The State Treasurer’s Office has contacted Maine accounting firms, particularly those that specialize in municipal audit work, and asked that they become more engaged in the process of compiling and filing reports of abandoned property. They can be of substantial assistance to local governmental units. You may also call Don DeMatteis at the State Treasurer’s Office for answers to questions and further assistance.

Q. How substantial is the amount of abandoned property being held by private and public organizations?

A.  Nationally, more than three billion dollars a year of abandoned property is identified and reported to State Treasurers and Abandoned Property Administrators!  Last year, Maine received more than $8.5 million, of which over $4 million was returned to rightful owners or heirs.  Since the State Treasurer first assumed responsibility for abandoned property in Maine in 1979, approximately $80 million of cash and stock has been reported, benefiting all citizens of Maine.

Q.  What does the State do in order to reunite abandoned funds with the rightful owner?

A. Once the Office of the Treasurer takes custody of funds, their goal is to reunite them with the rightful owner or their heirs. Large newspaper insert ads are run annually containing the names of the individuals whose property was reported during the past year. Access to the Treasurer’s database of unclaimed property is made available online at their web site. Phone inquiries can be made to the Office of the State Treasurer, Abandoned Property Division to determine if any property is being held in custody for you. The Maine data is also linked to a national search engine ( so owners from other states can check for property in Maine, and Maine residents can use these search engines to look for their property nationwide. In addition, the Treasurer furnishes State Legislators with lists of owners of abandoned property in their district. Legislators write letters, place articles in local papers and conduct searches to locate these individuals within their districts. Last year, Legislators located over 800 Maine owners who had lost track of $200,000!

Q. What happens to the funds that are not yet reunited with the owners or heirs?

A. While funds wait to be claimed by their owners, the Treasurer transfers all but $150,000 of the amount of unclaimed property remitted, less claims paid, to the State’s General Fund annually. The General Fund is currently utilizing over $57 million of unclaimed property funds to benefit all of the citizens of the State of Maine.

It is the goal of the Office of State Treasurer Dale McCormick to have each Maine holder of abandoned property in compliance with the statute and make every effort to reunite rightful owners with their property. Substantial public and private sector resources are available to assist municipalities in completing their annual abandoned property report; call us for a current list.

The statute provides for interest and penalties for failure to report and remit abandoned property. Voluntary compliance saves the state the expense of auditing holders and the holder the expense of interest and penalties that would be incurred. The Treasurer currently grants waivers of interest and penalties for first time filers who inadvertently failed to report, but agree to voluntarily comply with the statute by an extended deadline of May 1, 2002. When it becomes necessary to audit a holder to achieve compliance, however, interest and penalties may be imposed.

Copies of Maine’s Unclaimed Property Act (33 M.R.S.A. Chapter 41) and instruction booklets are distributed by the Office of State Treasurer.  For more information, or if you have additional questions about abandoned property, call  (207) 624-7474 or toll-free in Maine at (888) 283-2808 or e-mail