Imagine discovering your hospital is sitting on a new liability potentially amounting to hundreds of thousands of dollars—and you’ve suddenly got to account for it.
That’s the reality some healthcare organizations are facing as GASB 101—the new standard on compensated absences—kicks into effect for fiscal years ending December 31, 2024, and beyond. The biggest shift? Governments must now recognize liabilities when leave is earned, not when it’s paid out. And for many, that’s going to uncover obligations that were previously hidden from view.
Let’s walk through what that means, using a hypothetical hospital case based on recent real-world experience.
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Step 1: Understand Your Leave Types
Start with your employee handbook. What types of leave do staff accrue? In our example hospital, there were four:
- PTO (Paid Time Off): Already being accrued correctly, as it’s paid out upon termination.
- Extended Illness Bank (EIB): Accrued over time but not paid out at termination—and not currently accrued for.
- Maternity Leave: Unpaid and covered under FMLA—also excluded.
Only one item raised a red flag: the EIB. Since hours were accumulating as employees worked, it met the new GASB 101 recognition requirements.
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Step 2: Determine Materiality
Unlike with leases, GASB 101 doesn’t allow you to apply a threshold for materiality. But you know your organization’s financial landscape. Our hospital found the EIB balance averaged $350,000 over three years—undeniably substantial in this case.
However, since the hospital had never accrued for it before, HR had never generated reports showing those balances with current pay rates. That took some digging—but eventually, they produced current and historical reports.
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Step 3: Assess Likelihood of Use
Now you need to determine if it’s more likely than not (greater than 50% chance) that the leave will be used.
In our case, the first two years showed less than 5% usage—pretty negligible. But in 2024, usage skyrocketed to 35% (or $122,000). What changed?
A policy shift.
The Board had amended the EIB rules to allow usage without:
- 12 months of full-time status,
- Proof of hospitalization, or
- Use only for employees (i.e. family illness had been unallowable).
The result? A massive uptick in leave taken under the EIB. Given the new, looser policy was still in effect at year-end, the trend is expected to continue.
The Bottom Line
After reviewing the facts, the hospital decided to accrue 35% of the EIB balance as of fiscal year-end 2024.
This process isn’t just about compliance—it’s about proactively identifying financial exposure and preparing your systems and teams. GASB 101 might sound like just another regulation, but in reality, it’s a lens revealing hidden obligations you need to be ready for.
