Press Releases
GOV. MALLOY: PER EXECUTIVE ORDER ONE, OPM SECRETARY BARNES SUBMITS GAAP CONVERSION PLAN TO LEGISLATURE
GAAP Accounting Will be Required on July 1, 2013; GAAP Fund Balance Deficit Repaid Over 15 Years
(HARTFORD, CT) - When signing Executive Order One on his first day in office, Governor Dannel P. Malloy mandated that the Secretary of the Office of Policy and Management prepare a plan to bring Connecticut's budget in alignment with Generally Accepted Accounting Principles (GAAP), as prescribed by the Governmental Accounting Standards Board (GASB). Submitting his report to the General Assembly's Appropriations and Finance, Revenue and Bonding Committees today, OPM Secretary Ben Barnes proposed a target date for GAAP-based budgeting for the General Fund, Special Transportation Fund and the eight other appropriated funds of July 1, 2013, and beginning in fiscal year 2014, the accumulated GAAP fund balance deficit, currently projected at $1.52 billion, would be repaid over 15 years, unless economic circumstances allow for a more rapid repayment.
As the first step in implementing GAAP, Governor Malloy's proposed budget for fiscal years 2012 and 2013 implements GAAP budgeting on an aggregate basis reporting the fund balances on both a budgetary and GAAP basis for each of the appropriated funds and includes $72.8 million in fiscal year 2012 and $47.5 million in fiscal year 2013 aimed at ensuring a balanced budget on both a budgetary and GAAP basis. The next step, which Secretary Barnes' plan addresses, involves moving to budgeting for each agency and the state overall on a GAAP basis. The plan outlines statutory, Core-CT and other system changes, training, and process issues that need to be implemented in order to fully budget on a GAAP basis. Based on these tasks, it was determined that the July 1, 2013 implementation date would provide for a well-planned and orderly conversion to transactional budgeting on a GAAP basis.
"Our state first began talking about moving to GAAP in 1993, but subsequent deferrals have resulted in little progress being made to this point," said Governor Malloy. "If we had started this process nearly 20 years ago, we would be in much better shape now, but that's not the case. The good news is that this is the bottom line on our state's fiscal woes. There aren't any more gimmicks or other tricks being used to make the budget 'look' balanced in name only. Secretary Barnes' report isn't pretty, but it's truthful and honest and will get us to a place that will make our state more fiscally sound and stable for years to come."
"There is no easy way to clean up years of deferring decisions that are in our state's best interest," said Secretary Barnes. "This report is a blueprint to help get our state on sounder fiscal footing and frankly, require of the state the same thing it requires of its 169 cities and towns - an honest, truthful budget."
Specific recommendations in the report include:
-
That the reporting and other statutory requirements with respect to the fiscal years 2012 and 2013 budgets continue on the budgetary basis, but that information be included by the Secretary of OPM in his monthly letters to the Comptroller, in the Fiscal Accountability Report, and in the development of consensus revenue estimates with OFA in regard to projected GAAP-based operating results.
-
That starting with the full implementation of GAAP-based budgeting in fiscal year 2014, the Comptroller would issue one annual financial report each year (i.e., the CAFR), with the September 1st budgetary basis annual statement being eliminated. The Comptroller, in his monthly letters regarding the status of the current year budget, would provide updates as to estimated results for the prior year until the CAFR is issued.
-
Starting in fiscal year 2014, the accumulated GAAP fund balance deficit, currently projected at $1.52 billion would be repaid over 15 years, unless economic circumstances allow for a more rapid repayment. The repayment amount would be treated as a gradual recognition of prior expenditures and not included in expenditure cap calculations. For accounting purposes, a one-time credit to expenditures is proposed in fiscal year 2014 to cover accruals in the July and August period that would, under the new GAAP method of budgeting, belong to the prior year.
-
Necessary amounts for continuing appropriations, when identified, would be reserved in fund balance and be recorded as expenditures in the year of actual expenditure.
-
Changes are proposed for the definition of budget balance under GAAP that would require that any audited GAAP fund balance deficit (not including the accumulated GAAP fund balance deficit being repaid under this plan) be addressed in the fiscal year following the completion of the audit containing the fund balance deficit.
-
Related to the definition of a balanced budget under GAAP would be statutory requirements that designate the uses of future surpluses for uses such as: retiring Economic Recovery Notes, Economic Recovery Revenue Bonds, and other debt; reducing underfunded pension and OPEB liabilities; reducing the reserved GAAP transition charge; building the Budget Reserve Fund; and establishing a pay-as-you-go infrastructure program.
-
The implementation of GAAP-based budgeting will require a number of changes and implementation actions, including in the following areas: year-end closing procedures and timeframes; the development, presentation and management of the budget; accounting and budgeting control practices and procedures; Core-CT and agency-specific systems; state statutes; and training of state staff. The proposed changes and implementation actions, along with the associated timelines, are outlined in this plan.
**Attached:
Plan for Conversion to GAAP-based Budgeting
###
For Immediate Release: April 18, 2011
Twitter:
@GovMalloyOffice
Facebook:
Office of Governor Dannel P. Malloy
- Twitter: @GovMalloyOffice
- Facebook: Office of Governor Dannel P. Malloy