GASB Publishes New User Guide on Business-Type ActivitiesNorwalk, CT, March 12, 2013—How are public utilities, airports, hospitals, and colleges and universities supported? How do these institutions spend their resources? How much do they owe, and to whom? A new, easy-to-understand guide to how state and local governments finance and account for their business activities can help answer those questions—and many others.
What You Should Know about the Finances of Your Government’s Business-Type Activities: A Guide to Financial Statements is a comprehensive primer for taxpayers, elected representatives, and others seeking information about state and local government “business-type activities” (BTAs) and how BTAs report their finances.
“Public universities, hospitals, utilities, and other business-type activities may operate similar to businesses but they are nonetheless governments—and therefore are accountable to the citizenry,” said GASB Chairman Robert H. Attmore. “This guide is written from the layperson’s perspective to help citizens understand what the financial report of a BTA says about its financial status and how it operates. Considering that many BTAs receive tax-funded support, it is important for citizens to be able to understand what the information in a BTA’s financial statements means.”
The guide is a staff document of the Governmental Accounting Standards Board (GASB), an independent board of the Financial Accounting Foundation (FAF) that sets accounting and financial reporting standards (commonly referred to as generally accepted accounting principles, or U.S. GAAP) for state and local governments.
The guide addresses issues specific to BTAs that citizens and others should be familiar with, including:
- The statement of net position, which identifies what a BTA owns and owes and its overall financial status as of the end of the reporting period
- The statement of revenues, expenses, and changes in net position, which reports on the BTA’s inflows and outflows of resources during the period covered by the report and whether it made ends meet
- The statement of cash flows, which shows the source(s) of the BTA’s cash receipts—from providing services to customers or borrowing, for instance—and what it used that cash for during the reporting period
- Notes to the financial statements, which can provide insight about the types of investments a BTA has made, how much outstanding debt it has, its long-term obligations and its costs related to pensions and retiree health insurance, and other important issues
- Management’s discussion and analysis, which provides the reader with a summary of the BTA’s finances and explains how they have changed since the previous financial report
- The statistical section, which includes financial, economic, demographic, and operating information for the past 10 years
- Information about regulated BTAs—BTAs whose abilities to establish rates for service are controlled by an independent regulatory body.
About the Governmental Accounting Standards Board
The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board’s diverse constituency, including preparers and auditors of government financial statements, users of those statements, and members of the academic community. More information about the GASB can be found at its website, www.gasb.org.
About the Financial Accounting Foundation
The FAF is responsible for the oversight, administration, and finances of both the Governmental Accounting Standards Board and the Financial Accounting Standards Board. The FAF also is responsible for selecting the members of both Boards and their respective Advisory Councils. For more information about the FAF, visit www.accountingfoundation.org.