New GASB Standards Affect Leave Accounting and Risk Disclosures

Governmental and quasi-governmental organizations, including charter schools, should begin preparing for two new standards issued by the Governmental Accounting Standards Board—GASB 101 and GASB 102. These statements, effective for fiscal year 2025 audits, introduce changes to how compensated absences are recorded and how certain risks must be disclosed.

GASB 101: Compensated Absences

GASB Statement No. 101 updates how organizations recognize and measure liabilities related to compensated absences such as vacation, sick leave, and paid time off (PTO). It replaces GASB 16 and establishes a unified approach that applies to all types of leave. Key provisions include:

• Recognition and measurement. Under GASB 101, organizations must record a liability for any unused leave that is more likely than not—defined as a probability greater than 50 percent—to be used. The standard also applies to leave already taken but not yet paid. Liabilities are generally measured using the employee’s pay rate as of the financial statement date, unless a different rate is more likely than not to apply.
• Disclosure updates. Entities may now disclose only the net change in the long-term liability for compensated absences, rather than detailing gross increases and decreases.

How this affects your organization.

The lower threshold for recognizing leave use is expected to increase reported liabilities. Organizations will likely see higher balances for compensated absences on their financial statements.

What we advise.

Review your leave policies and evaluate all unpaid leave as of year-end. Record any leave that is more likely than not to be used as a liability in accordance with GASB 101.

GASB 102: Certain Risk Disclosures

GASB Statement No. 102 requires disclosure of risks related to a government’s vulnerabilities stemming from concentrations or constraints. The goal is to provide users of financial statements with clearer insight into these risks and how they may affect financial health.

Key provisions.

• Definitions:
  • A concentration is a lack of diversity in significant inflows or outflows of resources, such as a heavy reliance on a single funding source.
  • A constraint is a restriction placed by an external party or through a formal decision by the organization’s highest authority.
• Disclosure requirements. If a concentration or constraint makes the organization vulnerable to a substantial effect, defined by GASB as more than material, it must be disclosed. Required details include a description of the risk, events that have occurred or are likely to occur, and actions the organization is taking to address it.

How this affects your organization.

These disclosures provide more timely and relevant information about risks that could materially affect operations or financial stability.

What we advise.

Start identifying and evaluating any risks from concentrations or constraints that may fall under the scope of GASB 102. Organize this information to meet disclosure requirements in upcoming financial statements.

Preparing for Implementation

Now is the time to review your accounting policies and make the necessary updates to comply with GASB 101 and GASB 102. Clear documentation and early planning will support a smooth transition and help meet audit expectations.

How We Help

AAFCPAs works with charter schools and educational service organizations to assess the ways in which new accounting standards may affect financial reporting and compliance. We help organizations interpret the technical guidance behind GASB 101 and 102, evaluate leave and risk-related policies, and document the steps needed to comply with disclosure and recognition requirements.

Our approach reflects the structure and funding realities of education providers. We offer clear, actionable guidance tailored to your circumstances, and we are available to assist with any questions that may arise during the implementation process.

These insights were contributed by David Kelleher, CPA, CGMA, Partner and Jennifer A. L’Heureux, CPA, Manager. Questions? Reach out to our authors directly or your AAFCPAs partner. AAFCPAs offers regular alerts & insights for Charter Schools and Charter Management Organizations. Subscribe to get alerts and insights in your inbox.

About AAFCPAs’ Charter School Practice

AAFCPAs has long served charter schools and Charter Management Organizations (CMOs) across the country, offering audit, tax, and advisory support grounded in the public funding and compliance realities of education providers.

The firm’s charter school team is backed by a national network of professionals in accounting, finance, technology, and governance. From outsourced CFO support to risk and cybersecurity assessments, AAFCPAs helps schools strengthen their financial operations and make informed decisions that align with mission-driven goals.