Fiscal Funding Clauses
Related terms
Category
GASB 87/96
Fiscal funding clauses are provisions in government lease agreements that allow the lessee to cancel the lease if the legislature or governing body does not appropriate funds for the next fiscal period. Under GASB 87, these clauses do not affect the lease term unless it is reasonably certain the clause will be exercised.
Why it matters
Nearly all government leases include fiscal funding clauses because government entities generally cannot commit future legislatures to funding obligations. Despite their prevalence, GASB 87 provides that these clauses should be treated like termination options: the lease term includes periods beyond the fiscal funding clause unless cancellation is reasonably certain.
How Arvexi handles this
Arvexi identifies fiscal funding clauses during document extraction and applies GASB 87's reasonable certainty assessment. The platform treats them as termination options, defaulting to the full contractual term unless evidence supports a shorter period.