GASB Statement No. 103, Financial Reporting Model Improvements, is effective for fiscal years beginning after June 15, 2025. School districts with year-ends of June 30, 2026, will be the first to implement this standard. GASB 103 updates several areas of governmental financial reporting with the goal of improving transparency and making financial statements more useful to governing boards, taxpayers, and other stakeholders. While the changes do not generally affect a district’s fund balance or net position, they will impact financial statement presentation and disclosures. See below for highlights.
Revised Management’s Discussion and Analysis (MD&A)
One of the most significant changes is the restructuring of MD&A. School districts will need to organize MD&A into five required sections:
- Overview of the Financial Statements
- Financial Summary
- Detailed Analyses
- Significant Capital Asset and Long-Term Financing Activity
- Currently Known Facts, Decisions, or Conditions
Districts should focus on explaining why financial results changed rather than simply restating financial statement amounts or percentage changes. Boilerplate language should be minimized, and discussions should be tailored to the district’s circumstances. Examples of items to discuss in the MD&A include changes in enrollment; state aid increases or decreases; tax levy changes; federal grant activity; staffing trends; and capital project activity.
Enhanced Budgetary Comparison Disclosures
School districts will need to provide meaningful explanations regarding budget variances within Required Supplementary Information.
Additional discussion may be required for:
- Significant changes between the original and final budget
- Significant differences between final budget and actual results
- Major budget amendments made during the year
These changes provide greater transparency into the district’s budgeting process and financial performance.
New Reporting for Unusual or Infrequent Items
GASB 103 replaces the previous concepts of “extraordinary items” and “special items” with a single category of unusual or infrequent items, which may be presented separately within the financial statements. Some examples are as follows: significant storm or flood damage, major legal settlements, and other significant nonrecurring transactions. If applicable, this line item would be on the face of the financial statements and described in the notes to the financial statements. This change is intended to make it easier for financial statement users to identify the impact of unusual events on district operations.
Proprietary Fund Changes
For districts that maintain proprietary funds or internal service funds, GASB 103 refines the presentation of operating and non-operating revenues and expenses. While this will not affect most school districts significantly, those with activities such as self-insurance programs, internal service funds or certain business-type activities should review their financial statement presentation for these changes.
What Should School Districts Do Now?
School districts should begin preparing for implementation by:
- Reviewing current MD&A templates
- Evaluating current budget variance explanations
- Discussing implementation plans with auditors and finance staff
- Updating financial statement preparation procedures
Bottom Line
The most noticeable impact of GASB 103 for school districts will be enhanced MD&A requirements and expanded budgetary reporting. Districts should expect to provide more meaningful analysis and clearer explanations of financial results, helping stakeholders better understand the district’s financial condition and operations.
If you have any questions or are interested in learning more, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
