What is GASB?
The Governmental Accounting Standards Board (GASB) was organized in 1984 to establish standards of financial accounting and reporting for state and local governmental entities. Its standards guide the preparation of external financial reports of those entities. The GASB's function is important because external financial reporting can demonstrate financial accountability to the public and is the basis for investment, credit, and many legislative and regulatory decisions. NJIT must comply with the standards promulgated by the GASB because it is a public research university.
What is GASB 33?
GASB 33 is a standard that requires precise distinctions among internal financial events, external exchange transactions, and four classes of external nonexchange transactions.
How is NJIT complying with GASB 33?
To comply with GASB 33, NJIT will record exchange transactions in its 9 ledger (accounts beginning with the numbers 99 or 09). NJIT will record nonexchange transactions in its 8 ledger (accounts beginning with the numbers 88 or 08). In order to have all accounts in the correct ledger, some accounts may be moved from one ledger to another. This inconvenience is regrettable but necessary. Compliance with GASB 33 must be accomplished by the end of June, 2002. The NJIT Faculty and Staff Guide to Public and Private Funding (a link from the research page of the NJIT web site) includes a check list for determining whether a transaction is nonexchange or exchange.
What do I need to know to understand GASB 33?
To understand GASB 33 you need to understand internal financial events and external financial events of two kinds: exchange transactions and non-exchange transactions. Internal financial events include transfers of expenses among internal NJIT accounts.
In an external transaction, NJIT either gives value or receives value.
What is given to an external entity and what is received are of substantially equal value in an exchange transaction. All research grants and contracts are considered exchange transactions, by definition. Key characteristics of exchange transactions are reciprocity and equality of consideration exchanged.
A nonexchange transaction is an external event wherein one party either gives value to another party without directly receiving equal value in exchange - OR, receives value from another party without directly giving equal value in exchange. Private-sector grants and government grants for student scholarships are nonexchange transactions, for example. Key characteristics of non-exchange transactions are
- the sponsor neither expects nor receives anything in exchange for the grant
- the grant is voluntary, not required
- the giver has no ownership in the recipient organization
- although the grant may include specific instructions such as time or purpose, it is unconditional, without barriers to be overcome to receive it .