M E M O R A N D U M NO. SAD 02-13
 

TO:	Chief Financial Officers Vice Chancellors Business Managers
FROM:	Robert L. Powell  State Controller Don Waugh Assistant State Controller
SUBJECT:	GASB Statement No. 34, Direct Method Statement of Cash Flows

The State of North Carolina will begin reporting in accordance with the new financial reporting standards required by the Governmental Accounting Standards Board Statement No. 34 (GASB 34) beginning with the fiscal year ending June 30, 2002. One of the new requirements of GASB 34 is that the Statement of Cash Flows for proprietary funds must be prepared by the direct method. In prior years, agencies have prepared the statement of cash flows using the indirect method, but under GASB 34, the indirect method is no longer an option. Under the new reporting model, colleges and universities will report as proprietary funds and will need to prepare cash flow statements for their separately issued financial statements. In order to prepare the statement of cash flows by the direct method, primary government agencies will need to analyze operating revenues and expenses and identify whether receipts and payments are internal or external.  For primary government agencies, internal customers/suppliers are defined as primary government agencies only.  External customers/suppliers are all others including individuals, community colleges, universities, other component units, and any other non-primary government agency or organization. For colleges, universities and other component units, transactions are generally considered external.

Under the direct method of cash flows, proprietary funds will be required to separately report, at a minimum, these classes of operating cash receipts and payments:
 

a.	Cash receipts from external customers.
b.	Cash receipts from other funds for interfund services provided. (For primary government agencies, internal customers defined as other primary government agencies)
c.	Other operating cash receipts, if any.
d.	Cash payments to external suppliers of goods or services.
e.	Cash payments to employees for services.
f.	Cash payments to other funds for interfund services used, including payments in lieu of taxes. (For primary government agencies, internal suppliers defined as other primary government agencies)
g.	Other operating cash payments, if any.

For agencies using the North Carolina Accounting System, you may contact your OSC analyst to discuss different ways to capture this information. We appreciate your cooperation and assistance in our statewide implementation of GASB 34.