As government entities approach the end of the 2020 calendar year, implementation of Governmental Accounting Standards Board (GASB) Statement No. 87, Leases should be top of mind. The implementation effective date for GASB 87 was postponed to fiscal years beginning after Dec. 15, 2020, as per the exposure draft, Postponement of the Effective Dates of Certain Authoritative Guidance, which was issued on April 14, 2020, in response to the impact of the COVID-19 pandemic. GASB 87 requirements for compliance present certain challenges and reporting issues for organizations, particularly whether they are able to handle necessary reporting requirements, including systems to properly handle financial components needed for compliance. As such, many organizations are utilizing software system to automate processes and store important data related to their leases. As more organizations are looking to software systems to help with GASB 87 compliance, there are some important considerations to keep in mind when navigating such implementation.
Software Solutions Versus Spreadsheet Management
The complexity and sheer amount of data required to maintain GASB 87 compliance can be challenging for organizations; therefore, it is imperative to have the right system in place to help store data while also minimizing user error. This reality has caused many governmental organizations to utilize software systems over traditional spreadsheet management to help manage compliance requirements. By integrating the general ledger into the right software system, the need to create separate mapping files is eliminated, and the system can help automate journal entries (i.e., no manual moving of data within spreadsheet cells). Organizations can also add relevant workflows, track variable expenses, reduce risk of human error and help ensure accurate accounting around modifications and impairment of leases. Utilizing software systems also creates a single repository for all information related to the organization’s leases, including storage of lease contracts, which can be particularly valuable by providing an “audit trail” for auditors that spreadsheets are unable to provide.
Getting Started with Software System Implementation
Organizations should begin by assessing what GASB 87 means for them specifically and uniquely in terms of implementation, which will help to determine what the desired outcome would be when using a software system. Once the desired outcome of the software system is identified, then the process can be mapped to determine what areas can be automated with technology.
Organizations should also remember to understand and make necessary investments in relevant resources (including allocated time) across involved departments (finances, human resources, information technology, etc.). Consider how much each department will be involved in implementation of GASB 87 and how that will be impacted by utilizing a software system to help in the process. As such, keeping departments and teams together throughout project implementation will be paramount.
When determining a third-party vendor for a software system implementation, organizations should carefully consider their vendor selection. One practical step is to issue a Request for Information that can inform the organization of all available options regarding software vendors and their solutions. Vendors can also be asked to perform a “show and tell” session, in which the organization may meet with the vendor to see a demo of the software to make sure it can meet the organization’s implementation needs.
Once a vendor has been selected, it is important for the organization to drive negotiations when putting together a Statement of Work ; remember to be as specific as possible regarding exact requirements that must be built into the software system, as well as how the vendor can be available to offer support, match business requirements and respond to troubleshooting or data security issues.
Practical Steps for Success
As an organization prepares for a software system implementation to help with GASB 87 compliance, the following steps can help lead to a successful project and process:
- Project Planning – Perhaps the most important piece of any software system implementation, the right planning can greatly impact a project’s success. Consider needs for the Project Management Office and who is acting as Project Manager. Also, make sure governance structures are in place to help others understand roles, responsibilities, policies and procedures before project execution. This includes evaluating resource constraints and onboarding someone who can be the voice of the organization and work with the vendor to make sure requirements are met while the organization continues to deliver on “business-as-usual” demands.
- Execution – Working sessions with the selected third-party vendor can help improve confidence regarding the system’s launch, provide better understanding of security roles and help prepare lease data to be integrated into the software system.
- Testing and Training – Remember to conduct extensive testing of the software system, including configurations and ensuring calculations are in line with professional standard requirements. Additionally, all end users should be properly trained on the solution and the “go forward” process in order to warrant a smooth transition.
- Go-Live/Hypercare – Once the software system is live, hypercare support will be essential. Hypercare typically refers to the period immediately following the go-live launch of a project, during which the third-party vendor provides extensive end-user support for a smooth transition and guidance through stabilization of the system. Identifying how issues will be raised, who will manage these issues and service level agreements for turnaround times are key for a smooth go-live. Be sure to assess hypercare support from the vendor in advance of the go-live date.
For more information on considerations and challenges of GASB 87, reach out to us at email@example.com.
 It is significant to note that GASB clarified that the implementation date is for fiscal years, not reporting periods, for governments that issue interim financial statements.