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APSU adjusting to new governmental accounting standards

October 8, 2002

Austin Peay State University is undergoing a financial meltdown—at least on paper.

The Governmental Accounting Standards Board (GASB) has required all public colleges and universities to stop counting state appropriations as operating revenue on their fiscal-year financial reports.

While the new accounting standards, informally known as GASB 35, technically report the same numbers, the difference in how they are reported is striking.

Without state appropriations, Austin Peay appears on this past year's fiscal report to be operating on a $33.4-million deficit.

“It's been a very time-consuming change,” says Allan Irby, assistant vice president for finance and administration. “We had to put together two sets of statements this year. [GASB] wanted to see the old statements as well as the new ones from a comparative standpoint.”

The new statements are now streamlined to look like financial statements of private businesses and private colleges. While streamlining may make the statements easier to read, other difficulties arise.

“There is a lot of detail missing on specific accounts, like what was spent by which department and how much. None of this detail is in the new statements,” says Irby. The business office now prepares two sets of statements for the benefit of viewing the individual expenses of each department and fund group.

In addition to a change in format of the financial statement, GASB has broadened the information provided by focusing on all the liabilities and assets of the institution.

This has left public colleges to set up for the first time a cash-flow statement and a new system of depreciation by which they can determine the life expectancy of buildings, land and equipment.
Irby says that recognizing depreciation actually presents a more realistic figure. “Using the old method, we always counted capital assets at cost. Now that we depreciate everything, it's more realistic.”

Highlighting the positive aspects of the change, Irby says that using the new system helps to show how much state revenue Austin Peay actually does need to operate.

“Someone not familiar with the new system may be initially shocked that we're operating at such a loss, but then they realize that state appropriation is missing.” Such a huge difference in the deficit can make a significant impact.

Overall the change will benefit those who look at the statements, even though the work for the Business Office has doubled these past two years.

“Whatever problems we're having right now are temporary,” says Irby, “Eventually as we get used to the new system, we'll be able to think in the new way.”