The Governmental Accounting Standards Board (GASB) has
issued Statement No. 39, “Determining Whether Certain Organizations Are
Component Units.” The statement provides criteria for determining
whether certain organizations, such as not-for-profit foundations related
to public universities, school districts, and hospitals, should be
reported as component units based on the nature of their relationship with
a state or local government.
Generally, a legally separate, tax-exempt fundraising organization
whose primary purpose is to raise or hold significant resources for the
benefit of a specific governmental unit (e.g., hospitals) should be
included as a component unit of that governmental unit for financial
reporting. Government hospitals that have qualifying fundraising
foundations would be required to include, through discrete presentations,
the financial activities of those foundations in their financial
statements. Previously, many government entities did not report the
financial activities of those foundations in their financial statements.