Questions about GASB Statement No. 103 repeatedly centered on three topics during the GASB 103 & Beyond: Key Updates for Public Sector Entities webinar from Forvis Mazars: subsidies and transfers, budgetary comparison information, and proprietary fund presentation. Together, these topics accounted for 39 of the 51 attendee questions.
The following FAQs address those recurring questions, including how the substance of a transaction affects classification, which funds require budgetary variance analysis, and how presentation changes affect comparative statements and major-fund determination.
Subsidies & Transfers
Q. Are nonreciprocal interfund transfers reported as subsidies?
A. Yes. Subsidies include resources received from another party or fund without providing goods or services in return that directly or indirectly keep the proprietary fund’s current or future fees and charges lower than they otherwise would be.
The definition also includes resources provided to another party or fund without receiving goods or services in return that are recoverable through the proprietary fund’s current or future pricing policies, as well as all other transfers. Nonreciprocal interfund transfers therefore are reported as subsidies.
Q. How does a transfer differ from a payment for services or an administrative cost allocation?
A. The substance of the transaction—not its name—determines the classification. A payment for services provided or received does not meet the definition of a subsidy.
Administrative cost allocations typically qualify as reciprocal transfers and would need to be netted against the corresponding expense and/or revenue. True nonreciprocal transfers, by contrast, are reported as subsidies.
Q. Are airport passenger facility charges capital subsidies?
A. If passenger facility charges are limited to qualifying capital purposes, they should be classified as capital subsidies. The restriction on how the resources may be used is central to this classification.
Q. Do state grants for student meals qualify as subsidies?
A. They can, assuming the student nutrition operation is an enterprise fund or business-type activity. These grants represent resources received from another party without providing goods or services to that party.
If the grant reduces meal costs so students pay less—or nothing—compared with what the food service operation otherwise would charge, it meets the definition of a subsidy.
Budgetary Comparison Information
Q. Are business-type activities required to add budgetary schedules?
A. No. GASB 103 did not change the requirements established under GASB Statement No. 34 regarding which budgetary schedules must be presented.
Q. Which funds require budgetary comparison information and variance analysis?
A. A budgetary comparison schedule and related variance analysis must be presented for the General Fund and each major special revenue fund with a legally adopted annual budget.
This also applies when an entity elects to present an otherwise nonmajor special revenue fund as a major fund, provided that fund has a legally adopted annual budget. Electing major fund presentation does not remove the related budgetary reporting requirements.
Q. Should additional budgetary comparisons in other supplementary information follow the same requirements?
A. No. GASB 103 does not require budgetary comparison schedules presented as other supplementary information to include the additional variance column and related analysis required for budgetary comparison information under the statement.
The distinction is between schedules subject to GASB 103’s requirements (RSI) and additional comparisons presented as other supplementary information. Governments may choose to present the additional information in the other supplementary information comparison schedules, but they are not required to.
Proprietary Fund Presentation
Q. How is interest expense on GASB 87 leases classified?
A. Interest expense related to financing, including leases under GASB Statement No. 87, is always reported as a nonoperating expense.
Q. Should prior-year amounts in comparative statements be reclassified?
A. Implementation of GASB 103 is a change in accounting principle, so GASB Statement No. 100 provides the relevant guidance. GASB 103 changes revenue and expense classifications but does not affect beginning net position.
When a change in accounting principle requires reclassification without affecting beginning net position, affected amounts for all prior periods presented should be reclassified, if practicable.
Q. Does GASB 103 require new statistical-section columns for governments with governmental and business-type activities?
A. No. It does not create a new requirement for those general-purpose governments to add separate governmental activities and business-type activities columns to financial trends schedules.
The specific change in paragraph 17 applies to the statistical section of separately issued financial reports of governments engaged only in business-type activities or business-type and fiduciary activities.
Q. Does the treatment of transfers affect major-fund determination?
A. Yes, for proprietary funds only. Transfers presented as subsidies are included in nonoperating revenues and expenses for major-fund determination.
Governmental fund presentation is unchanged. Transfers remain other financing sources and uses, which are excluded from the major-fund determination calculation.
How Forvis Mazars Can Help
Transaction substance and fund type are central to applying GASB 103. Distinguishing subsidies from payments for services, identifying required budgetary comparisons, and understanding proprietary fund presentation changes can help governments focus their implementation efforts.
The Public Sector team at Forvis Mazars offers accounting, audit, and consulting services and resources to help you navigate compliance and plan for the future. For more information, please reach out to one of our professionals.