2006 Higher Education Accounting Forum The California Community College Solution To GASB 45 Dr. Steven Kinsella, CPA Superintendent/President Gavilan Joint Community College District

Recording the Expense GASB 45 requires the expense for OPEB be recorded over the working careers of employees even though the payment for those benefits does not occur until the employees retire and begin receiving benefits Community colleges use modified accrual basis of accounting and traditional fund accounting applications

GASB 45 Impact Two immediate impacts will appear in the budgetary accounting system –First, obligations for existing retirees (now budgeted using pay as you go) will increase as a result of amortization of the prior existing liability –Second, obligations for current employees who will receive benefits in the future will not be calculated and reported as expenses (expenditures)

Possible Accounting Entries to Record GASB 45 Impact on the college’s general fund budget. This assumes the expenditure is treated as a cash expenditure –OPEB Expenditure (DR) –Liability for OPEB (CR) –Impact on Balance Sheet –Unrestricted Net Assets (DR) –Liability for OPEB (CR)

Illustrative Financial Statements Comparative Pro Forma Statement of Activities (Exhibit A) Comparative Pro Forma Statement of Assets, Liabilities and Net Assets (Exhibit B)