Understanding GASB Statement 102: Identifying and Disclosing Risks

GASB Statement 102 introduces new financial reporting requirements designed to increase transparency and strengthen how governments communicate risk. Simply put, the goal is to help public entities identify and disclose potential vulnerabilities that could significantly impact their ability to acquire resources or control spending.

In everyday terms, GASB 102 asks governments to look closely at two key areas,  concentrations and constraints, and disclose where they may be exposed to significant risks.

What Are Concentrations and Constraints?

A concentration occurs when a government relies heavily on a single source or type of inflow or outflow. Examples include a major employer or industry that makes up a large portion of the tax base, a limited supply chain, or dependence on one funding source or grant. If that source suddenly changes or disappears, this creates risk.

 A constraint is a limitation that is imposed by an external party or by a formal action of a government’s highest level of decision-making authority that limits the government’s ability to acquire resources or control spending. Constraints can limit flexibility when conditions change or unexpected needs arise.

By requiring disclosures in these areas, GASB 102 helps stakeholders, auditors, and citizens better understand where governments could be vulnerable through dependence on a single economic driver. or through spending and revenue restrictions that reduce flexibility.

How to Apply GASB 102

Applying GASB 102 begins with an honest assessment of your organization’s risks. Review your primary government, any blended component units, and any reporting units with revenue debt to determine where concentrations or constraints exist.

From there, evaluate whether any of those risks rise to the level of requiring disclosure. GASB 102 applies when there’s a substantial likelihood (more than 50%) that an identified event could occur within 12 months of issuing financial statements and have a meaningful financial impact.

Assessing these risks is not only a compliance requirement. It also helps strengthen your financial resilience, inform long-term planning, and build public trust through transparency.

Questions to Ask:

• Where are we most concentrated or dependent?
• What external or internal factors limit our flexibility?
• What steps can we take now to mitigate these risks before they become disclosures?

Frequently Asked Questions About GASB Statement No. 102

• When does GASB Statement No. 102 take effect?
  GASB 102 is effective for fiscal years beginning after June 15, 2024, with the GASB encouraging earlier application. Governments should assess risks during the fiscal year to ensure readiness for implementation.
• How do I know if a concentration or constraint needs to be disclosed?
  Disclosure is required if the concentration or constraint is known before the issuance of the financial statements, and an event that makes the organization vulnerable to a substantial impact has begun to occur, or is more than 50% likely to occur, within 12 months of issuing financial statements. If the organization is able to take mitigating steps, it may alleviate the disclosure requirements. 
• What types of risks should we be looking for?
  Common examples include heavy reliance on a single employer, industry, or grant source, or restrictions that limit revenue generation, spending, or debt capacity. Reviewing these areas helps identify potential financial vulnerabilities before they become significant issues.
• What steps should we take to prepare for GASB 102 compliance?
  Start by conducting a risk assessment across your primary government and any blended component units. Identify concentrations and constraints, evaluate which require disclosure, and document mitigating actions. Engaging advisors familiar with GASB requirements can help ensure accuracy and completeness.

How Redpath Can Help

We help government entities navigate accounting standards like GASB 102 with confidence. Our team brings expertise in GASB compliance, audit readiness, and financial reporting, along with the kind of proactive guidance that keeps you ahead of change.

If your organization is preparing for GASB 102 implementation or needs help assessing concentrations and constraints, our Government team is here to guide you through each step with the hands-on support, communication, and follow-through you can count on. Contact us today to start a conversation.