SUBJECT
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Adopt resolution to amend the FY 24/25 budget for required Governmental GASB 87 and GASB 96 capital outlay adjustments. Accounting adjustments only. (No fiscal impact)
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DESCRIPTION
Polk County follows the accounting requirements of the Governmental Accounting Standards Board (GASB). In accordance with these standards, Statement No. 87 (GASB 87), Leases, was implemented in FY 21/22. Statement No. 96 (GASB 96), Subscription-Based Information Technology Arrangements (SBITAs), was implemented in FY 22/23.
GASB 87 statement requirements:
1. Lessees must establish a right-to-use lease asset, offset by a lease liability, for the present value of the future minimum lease payments. The right-to-use asset is then amortized over the lease term. The monthly lease payments are reclassified as principal (reduction of lease liability) and interest. Accounting adjustments must be made to reclassify lease expenses as debt service principal and interest. To meet this requirement, the Budget and Management Services Division has prepared administrative budget amendments for County Management’s approval across all funds per amendment policies.
2. GASB 87 applies to new leases with a start date of 10/1/2021 and after. Lessees must record capital outlay expenditures offset by ‘other financing sources’ revenue for the present value of the future minimum lease payments. Due to the requirement to budget for both revenue and capital expense, an amendment across all affected funds is required. The total GASB 87 capital expenditures recorded (offset by a credit to other financing sources) in FY 24/25 is $768,989. The largest contributing lease is with Lakeland Town Center valued at $346,973.
GASB 96 statement requirements:
1. GASB 96 requires the capitalization of Software Subscription Licenses, a termed contract that conveys control of the right to use another party’s information technology (IT) software for a period of more than 12 months. The contracted SBITA is offset by a lease liability for the present value of the future payments. The right-to-use subscription license agreement is then amortized over the contract term. The payments are reclassified as principal (reduction of subscription liability) and interest. Accounting adjustments must be made to reclassify subscription license expenses as debt service principal and interest. To meet this requirement, the Budget and Management Services Division has prepared administrative budget amendments for County Management’s approval across all funds per amendment policies.
2. GASB 96 also sets forth requirements for new Subscription-Based IT Arrangements with a start date of 10/1/2022 and after (the effective date for GASB 96). Qualified IT subscriptions with third-party providers must be recorded as capital outlay expenditures offset by ‘other financing sources’ revenue for the present value of the future minimum lease payments. Consequently, amendments to the FY 24/25 budget for both revenue and capital expenses across all affected funds are required. The total GASB 96 (SBITA) capital expenditures recorded (offset by a credit to other financing sources) in FY 24/25 is $700,382. The largest contributing subscription is for the SaaS agreement with Trimble for Agile Assets Inc. incurred by the Roads and Drainage Division, valued at $301,221, followed by the SaaS Agreement with Lexis Nexis for Courts Administration at $136,746.
RECOMMENDATION
Request Board adopt Resolution to amend the FY 24/25 budget for required GASB 87 and GASB 96 capital outlay adjustments
FISCAL IMPACT
Upon adoption of the resolution, the FY 24/25 Budget will be amended across all affected funds to meet the required regulation.
CONTACT INFORMATION
Tanra-Lee Milson
Comptroller Division
863-534-6598
Christia Johnson, Director
Budget and Management Services Division
863-534-5985