North Carolina local governments are advised of the following LGC staff guidance regarding budget violations attributed to the implementation of Governmental Accounting Standards Board (GASB) Statements No. 87 and No. 96:
In previous guidance, LGC staff acknowledged that technical budget violations related to GASB 87 and GASB 96 were common in the year of implementation. This was largely due to the requirement that, in the year a lease or SBITA agreement is initiated, the present value of the net minimum payments must be recorded as both an expenditure and an other financing source — both of which must be included in the budget ordinance. However, by this point, units are expected to have incorporated these requirements into their standard budgeting practices, including appropriating the current-year portion of these liabilities. Any overexpenditures occurring now due to GASB 87 or 96 indicate that the budget appropriation was insufficient, which constitutes a statutory violation under G.S. 159, rather than a temporary implementation issue. Accordingly, Financial Performance Indicators of Concern (FPIC) responses attributing budget overexpenditures solely to GASB 87 or GASB 96 will not be considered acceptable.
This guidance has been added to the GASB 87 FAQ document prepared by LGC staff. Units are encouraged to assess their budgets to ensure that this type of violation will not be incurred.
For additional information, please see LGC staff memos on GASB 87 and GASB 96. Contact SLGFD@nctreasurer.com with any questions or concerns.