Are you ready for GASB 87 deadline? We can help!
This years’ GASB compliance scramble 2021 is wrought with policy change, procedural guidance, an aggressive timeline, and a remote workforce.
Fiscal year-end and the associated GASB87 compliance date is June 30, 2021. This is the latest date extension from GASB, in response to the series of compliance mandate date extensions induced by Covid-19.
Guidance around time/effort to implement the controls, policy, process, data, and reporting to support this mandate is Six(6) Months – which means many agencies are now in a scramble mode to meet these timelines, avoid penalties, audit costs and develop all the reporting documentation that GASB guidance requires.
The complexities of building out a solution to automate this requirement, are significant. Besides interpreting the GASB guidance, digesting the change, auditing policy, and supporting processes – which we call Phase 0. Government organizations must reconsider existing business requirements to create/modify:
- Cataloging the location of all leases – Do you have a centralized repository?
- No standard lease terms – especially for equipment – Do you have a template for ingesting/uploading leases into your lease accounting system?
- Lease abstraction and review – Do you have technical accountants on staff, that can discern the business impact of GASB on your existing leases?
- Resource constraints – Remote workers are working an average of 25% more hours since shelter in place – Are you going to add to this number?
- Cross department approvals – Even with Zoom meetings, it is still a challenge to get teams of remote employees on the same call, at the same time to gain consensus on anything
- New accounting and financial reports – Disclosure statements are the bane of the GASB guidance, developing these reports based on spreadsheets is inducing lease accounting risk
- Final testing period – who’s checking who? Without an automated solution, your chances of 100% compliance are improbable, based on the complexities mentioned
These complexities are not only time-consuming, they impact all departments as well as future business operations – so need to be aligned with the executive vision. The real meat of the compliance effort is in the buildout of the solution footprint, including: Systems, Data, Security, Reporting, Compliance Maintenance, Audit Impact, Documentation Control, and Lease Negotiations. The following is a summation of the solution impact from a time, cost, and solution perspective:
- Time – The time factor is prohibitive for post-Covid compliance initiatives, as of June 30, 2021, is just a few months away – which does not provide enough runway for companies to go through the ERP requirements gathering, implementation partner (SI) selection bake-off, software price negotiations, infrastructure procurement, network workload modification and implementation time frame. I’m tired just thinking about how much effort and business disruption a project of this magnitude creates. Keep in mind, on the business side – all of the resources required to give input, create requirements, validate application configurations and workflow, extract, scrub, normalize corporate data, and then do iterative testing cycles are all fully burdened.
- Cost – The price tag for supporting GASB87 compliance modules is significant, in many cases, a Tier One solution can run a customer 100-300k just for the software, with an implementation cost of 2-3X the cost of the application. Then add in the ongoing 22% annual software maintenance cost, plus the Human Capital costs associated with FTE’s being diverted onto a project team and you have a million-dollar commitment, to solving your corporate compliance initiative
- Solution – Designing a solution in the middle of a scramble, is not recommended. This is a complicated, intra-departmental solution, that impacts all departments – upstream and downstream. Partial, or compromised solutions, that have been selected based on convenience are temporary, and will ultimately require either a large customization project or a massive platform migration. Let Leaseology onboard you, quickly and automate all the chores and inconvenient tasks that take you away from growing your business
COVID Impact on SBITA, BYOD and SIPA, and GASB87 interpretation:
Corporate roadmaps have been highly impacted by COVID influenced business changes, which have a direct impact on equipment and real estate leases by not having ready access to lease documents, tracking critical dates, and clear understanding for new lease accounting compliance as the new normal has added complexities to standard business processes, through the extension of operations into a virtual model. The following business requirements are ancillary to the lease compliance process, but have remained under the radar for most, as they scramble to meet the GASB87 mandate with a remote workforce – has provided enough distraction for most, so few are looking outside of what’s directly in front of them. For educational purposes – we are offering a brief overview on what other ancillary functions, may impact your final compliance deliverables and thus, require some strategic thought to understand and support your business:
SBITAs – Subscription-Based Information Technology Arrangements – The leasing of a software license/subscription – as employees become more virtualized, tracking their expiration dates on assets is now a reporting and compliance risk for businesses, as these assets potentially carry a monthly disclosure responsibility, as well as influence the way EBITDA is calculated. Are you tracking your SBITAs?
BYOD – Bring your own device – This trend is growing rapidly, as it adds speed to the onboarding process as well as reduces the capital cost of hiring a new employee – also highly preferred by the millennials, who rely on their personal devices for all things social or personal. Do you have the asset tracking sophistication to discern what employees are using their personal devices? What about contractors? Do you have a way to track these assets?
Shelter in Place Asset Tracking (SIPA) Home office Equipment usage – How do you track the home usage on cell phones, laptops, tablets, displays/monitors, chairs, desks, and printers? Where are these assets physically located? Which assets are employee-owned versus corporate? Leased versus owned? More and more of the leased assets are making their way into employee home offices, so understanding the logistics around leased equipment as well as managing the leases themselves, has created exponential growth in this area – creating an opportunity to help customers understand their assets and liabilities.
The Great GASB 87 – Compliance scramble 2021
The Leaseology Service Funnel, helps communicate how complex solving for GASB87 is – from a process perspective:
- Immediate Lease Compliance: We implement our lease platform (certified deployment partner) and provide Senior-level Technical Accountants, to audit lease data, to ensure there are no data discrepancies, post go-live. We also help your team to understand the EBITDA impact, so that your compliance program yields the best financial/taxation results as part of your migration.
- Critical Date Notifications: We audit your critical dates, and on the majority of customers, uncover money in the form of evergreen leases, as having auditors discover these leases may cause collateral damage.
- Lease Administration: We optimize the lease accounting solution and controls as part of our service offering, so that you are receiving all legislative and guidance updates real-time, as well as ensure that these details are reflected in the downstream reporting.
- Disclosures Reporting: We share our best practices and templates that we have built previously so that you don’t lose any time designing, testing, or configuring reporting dashboards. We automate the running of these reports, to ensure compliance and that critical dates are proactively communicated.
- Technical Accounting: Experts to help you with understanding the latest guidance, to provide best practices on reporting, Tax advice on any interpretation of an asset or regulation.
- Lease Negotiation: We have experts that help customers to calculate the market value, then represent our customers on their behalf to negotiate the best possible terms on new or modifying an existing lease.
- Document Management: We work with you to configure a lease repository, based on categorization, geography, duration, and value of a lease – so that you never have to worry about lease status.
The Great GASB 87 – Compliance Scramble 2021: Takeaways
- Manually tracking of these assets is not of core business value – outsource
- Companies need a program to address these trending requirements and a partner to help guide them through the process
- Automation is needed for keeping up with the pace of change, as well as for the ongoing reporting on assets
- Experts are required to help guide customers stemming from this new business capability/challenge
The Great GASB – Compliance scramble 2021:
The mandate of June 30, 2021 GASB87 compliance is rapidly approaching – Our customers are actively looking to simplify their workloads and to be able to respond without disruption, to activities that help grow the business. If you apply excel bandaids, you are signing up for future efforts, which will be hard, disruptive, and unrewarding.
Let the experts help you, Leaseology has a subscription model that achieves compliance and removes risk, schedule a free assessment of your most complex leases now – clock ticking.
Ken Royce * Leaseology Inc * Board of Directors
Leaseology, Inc is a North America-based business advisory services firm committed to accelerated marketplace adoption of digital technology, financial management innovation, and business operations practice excellence. These core competencies apply to real estate and equipment portfolios.
