The GASB issued Statement #33, Accounting and Financial Reporting for Nonexchange Transactions, to establish accounting reporting standards for nonexchange transactions involving financial or capital resources. It applies to most taxes, grants and private donations.

Issue:

Pursuant to GASB #33, effective for fiscal year 2000/2001 and thereafter, how should external capital contributions to the County's enterprise funds be treated?

Reference:

GASB Statement #33 identifies four classes of nonexchange transactions:

1. Derived tax revenues
2. Imposed nonexchange revenues
3. Government-mandated nonexchange transactions, and
4. Voluntary nonexchange transactions.

The focus of this position paper will be on voluntary nonexchange transactions. According to GASB #33 ¶ 7-c, "Voluntary nonexchange transactions result from legislative or contractual agreements, other than exchanges, entered into willingly by two or more parties. Examples of voluntary nonexchange transactions include certain grants, certain entitlements, and donations by nongovernmental entities, including individuals (private donations). The principal characteristics of voluntary nonexchange transactions are (1) they are not imposed on the provider or the recipient and (2) fulfillment of eligibility requirements is essential for a transaction (other than the provision of cash or other assets in advance) to occur."

Paragraph 21 states "…recipients should recognize receivables (or a decrease in liabilities) and revenues (net of estimated uncollectible amounts), when all applicable eligibility requirements, including time requirements, are met."

Footnote 18 states "This statement requires governments to recognize capital contributions to proprietary funds and to other governmental entities that use proprietary fund accounting as revenues, not contributed capital. However, governments should not restate contributed capital arising from periods prior to implementation of this Statement until the Board issues one or more Statements requiring restatement of those prior-period balances."

GASB Statement #34 becomes effective for Miami-Dade County for the fiscal year ended September 30, 2002. ¶103 of GASB #34 requires that "All proprietary fund revenues, including capital contributions and additions to permanent and term endowments, should be reported in the statement of revenues, expenses, and changes in fund net assets." Capital contributions should be reported after nonoperating revenues and expenses. In addition, ¶98 states that "Capital contributions should not be displayed as a separate component of net assets." Instead, net assets should be presented into invested in capital assets, net of related debt; restricted assets; and unrestricted.

Evaluation:

Historically, contributed capital has been reported as a separate item in the equity section of the balance sheet, to distinguish it from retained earnings. New contributed capital bypassed the operating statement and was reported as an addition to the beginning contributed capital balance. With the adoption of GASB #33 this will change. According to GASB #33, a recipient government should recognize revenue for voluntary nonexchange transactions (including contributions). This will require treating capital contributions as an operating statement item.

Position:

Based on the requirements of GASB #33, the County's enterprise funds must reflect external capital contributions for fiscal year 2000-01 and thereafter in the operating statement. Also beginning with fiscal year 2000-01, capital contributions should be closed to retained earnings. Prior to the implementation of GASB #34 in fiscal year 2001-02, depreciation for all capital contributions should be closed to Contributions in the equity section of the balance sheet. Capital Contributions as a component of the equity section of the balance sheet will cease to exist with the implementation of GASB #34. No restatement of prior years will be necessary until the adoption of GASB #34.