GASB Statement No. 102, Certain Risk Disclosures: Essential Guidance for Government Entities

ARTICLE | September 10, 2025

How prepared is your governmental entity to navigate the complex landscape of financial risk disclosure? With GASB Statement No. 102, Certain Risk Disclosures, now effective for fiscal years beginning after June 15, 2024, governmental entities and school districts face new requirements that demand immediate attention and strategic planning.

The COVID-19 pandemic served as a stark reminder of how quickly unforeseen events can impact public sector finances. Natural disasters, economic fluctuations, and other risks have long affected governmental operations, but the pandemic amplified stakeholder concerns about transparency and preparedness. In response, the Governmental Accounting Standards Board (GASB) developed Statement No. 102 to provide users of governmental financial statements with critical information about risks and vulnerabilities that could substantially impact their communities.

Understanding the Core Framework

GASB Statement No. 102, Certain Risk Disclosures focuses on two fundamental risk categories that governmental entities must evaluate: concentrations and constraints. Concentrations represent a lack of diversity in significant resource flows, such as heavy dependence on a single major employer, limited revenue sources, or reliance on specific industries like tourism or manufacturing. For school districts, this might include overdependence on state funding formulas or a significant portion of the workforce covered by collective bargaining agreements.

Constraints involve limitations imposed by external parties or formal actions by the government’s highest decision-making authority. These include caps on taxes or fees, spending limitations requiring external approval, debt restrictions, or mandated expenditures such as asset retirement obligations. The standard requires disclosure when three specific criteria are simultaneously met: the concentration or constraint is known, it creates vulnerability to substantial impact, and an associated triggering event has occurred or is more than 50 percent likely to occur within 12 months of financial statement issuance.

Practical Application and Real-World Scenarios

The standard’s practical application becomes clear through real-world scenarios. Consider a school district heavily dependent on property taxes from a major manufacturing facility that announces potential closure. The district must evaluate whether this situation meets all three disclosure criteria. The concentration (revenue dependence) is known, creates substantial vulnerability, and the closure announcement represents a triggering event making the risk more likely than not to materialize within the disclosure timeframe.

Similarly, a municipality facing state-imposed spending limitations while managing aging infrastructure requiring significant capital investment may need to disclose these constraints if they substantially limit the entity’s ability to meet its obligations. The key lies in understanding that disclosure requirements are forward-looking, focusing on potential future impacts rather than problems already experienced.

Strategic Implementation and Ongoing Compliance

Successfully implementing GASB Statement No. 102, Certain Risk Disclosures requires more than mechanical compliance checking. Governmental entities should establish systematic processes for identifying and monitoring concentrations and constraints throughout the fiscal year. This includes regular communication between executive leadership, finance teams, and external advisors to ensure comprehensive risk assessment and timely recognition of triggering events.

Documentation plays a crucial role in the process. Even when disclosure is not required, entities should document their evaluation processes and decision-making rationale. This documentation demonstrates due diligence and provides valuable reference points as circumstances evolve. The standard also recognizes that effective mitigation actions taken before financial statement issuance may eliminate the need for disclosure if they cause the criteria not to be met.

Preparing for Success

GASB Statement No. 102, Certain Risk Disclosures represents a significant evolution in governmental financial reporting, emphasizing proactive risk management and transparent stakeholder communication. Governmental entities and school districts should begin their assessment processes immediately to ensure smooth compliance and avoid complications during audit and financial statement preparation.

The standard’s emphasis on forward-looking risk assessment creates opportunities for entities to strengthen their overall risk management frameworks while building stakeholder confidence through thoughtful, transparent disclosure. Success requires understanding not just the technical requirements, but the underlying principles of effective risk communication and stakeholder engagement.

At Insero Advisors, our experienced team of governmental accounting specialists understands the unique challenges facing public sector entities in today’s complex regulatory environment. With more than 50 years of experience serving growth-focused organizations, we bring deep technical expertise and proactive client service to help you navigate GASB Statement No. 102, Certain Risk Disclosures compliance while strengthening your risk management capabilities. Contact our office today to speak with an expert advisor about developing a comprehensive approach to risk assessment and disclosure that serves your organization’s needs and protects your stakeholders’ interests.