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Determining if July Debt Payments should be Accrued in Governmental Funds

Is your government about to obtain new debt in their governmental funds? If there is a payment in July following fiscal year end; should the payment be recorded in the current year or next fiscal year? Under cash basis, there should not be an expenditure recorded until amounts are due and payable; however there is an exception to your July debt payment. GASBI No. 6, paragraph 13, provides that governments may report a liability and expenditure for debt service on general long-term debt before it is paid if it meets the following requirements:

1.) Financial resources have been accumulated in a debt service fund and
2.) The debt matures early in the following year which usually means one to thirty days.

It is the government’s discretion whether or not to accrue; but a government should be consistent with their reporting year over year.

Henry & Horne