Governmental Accounting and Audit Update - Results...
Transcript of Governmental Accounting and Audit Update - Results...
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Governmental Accounting
and Audit Update
Joey Richard and Freddy Smith
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Financial Pressures on Government
o Employees\Unions
o Revenue declines
o Legislation
o Media
o Mandates (Pension, Healthcare Act, Tax regulation, SEC)
o Accounting Standards
o Voids in Leadership
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Voids in Leadership
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Contents
o GASB’s 60-70
o New Audit Standards
• AICPA
• Government Audit Standards
• Grants Management and Single Audits
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Standards
o Accounting
• Governmental Accounting Standards
Board (GASB)
• AICPA SOP’s and practice bulletins if
cleared by GASB
o Auditing
• AICPA’s Generally Accepted Auditing
Standards (GAAS)
• Government Auditing Standards (GAO)
• Office of Management and Budget (OMB)
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Accounting and Financial Reporting
for Service Concession Arrangements
Periods beginning after December 15, 2011
GASB 60
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GASB Statement 60
o Government (transferor) transfers right to use in exchange for up-front payment
o Transferee receives right to collect fees from third party
o Transferor is entitled to the capital asset at the end of the agreement
o Transferor determines or can modify or approve:• Services to be provided
• Rates to be charged
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Common Applications
o Student Housing
o Toll Roads and Bridges
o Municipal Golf Courses
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Transferor
o Existing facility
• Dr - cash
• Cr - deferred inflow
o Facility constructed or purchased by operator –
• Dr – Capital asset at fair value
• Cr – deferred inflow
o Depreciate over life
o Amortize deferred inflow over term
o No applicability to Governmental Funds!!!!
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Transferee (Gov’t)
o Dr - Right to use (intangible asset)
o Cr – Cash
Amortize over life of agreement
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The Financial Reporting Entity: Omnibus –
an amendment of GASB Statements No. 14
and No. 34
Periods beginning after June 15, 2012
(Early permitted)
GASB 61
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GASB Statement 14
o Statement 14 required inclusion if:
• Financially accountable (appoint board and
financial benefit or burden)
• Fiscally dependent (approve budget, set tax,
approve debt)
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GASB 61
o Adds to fiscal dependency criterion:
• Financial benefit
• Financial burden
o Other significant changes:
• Condensed FS of Blended Component Units of an
Enterprise Fund must be disclosed in footnotes
• Heightens standards for blending CU’s
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Codification of Accounting and Financial
Reporting Guidance Contained in Pre-
November 30, 1989 FASB and AICPA
Pronouncements
Periods beginning after December 15, 2011
GASB 62
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GASB 62
o Capitalization of Interest Cost
o Accounting changes
o Related Parties
o Accounting changes and error corrections
o Contingencies
o Leases
o Inventory
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Financial Reporting of Deferred Outflow
of Resources, Deferred Inflows of
Resources, and Net Position
Effective for periods beginning after December 15, 2011
GASB 63
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GASB 63
Statement of Net Position will include:
o Assets
o Deferred Outflows
o Liabilities
o Deferred inflows
o Net Position
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GASB 63
o Deferred outflows of resources – A consumption of net assets by the government that is applicable to a future reporting period
o Deferred inflow of resources – An acquisition of net assets that is applicable to future reporting periods
o Net Position – The residual of all elements presented in the statement of financial position
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GASB 63
o Concepts statement 4 says to let
GASB determine deferred outflow
and inflow
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Items Previously Reported as
Assets and Liabilities
Periods beginning after December 15, 2012
GASB 65
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GASB 65
o Deferred Outflows
• Losses on fair value of derivatives
• Losses on debt refundings
o Deferred Inflows
• Unavailable revenue – modified accrual
• Gains on fair value of derivatives
• Payments received under SCA’s
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GASB 65
o Expenses (previously assets)
• Bond issuance costs
o Revenues (previously liabilities)
• Loan origination fees
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GASB 65
o Deferred outflows and inflows are not:
• Prepaid expenses
• Unearned revenue
• Grants received prior to meeting
eligibility requirements, other than time
requirements
• Other items in Appendix B
o Use of the term deferred limited to
deferred outflows and inflows
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GASB 68
Accounting and Financial
Reporting for Pensions(an amendment of GASB 27)
Periods beginning after June 15, 2014
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Types of Pension Plans
o Single Employer
o Cost Sharing Multi- Employer
o GASB 25 applied to pension plans;
GASB 27 applied to participating
employers
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GASB 27
Single Employer Plans
o Focus was on budgeting, the ARC was a funding benchmark
o Net pension obligation =+ Beginning NPO
+ Interest
+ Annual Required Contribution (ARC) with adjustments
- Contributions made
AAL, Assets and UAAL reported as RSI and in footnotes notes
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GASB 27
o Cost Sharing Plans
• No liability recorded or disclosed in either
notes or RSI
• Disclosure of contributions for three years
and contact information for plan
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GASB 68
o Net Pension Liability
• AAL – Net position of Plan Assets
• Different then UAAL; no smoothing
o Single employer plans – 100%
o Cost Sharing plans – proportionate
share
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GASB 68
o Actuarial methods and assumptions
• One method
• Lesser latitude on assumptions
o Discount rate
• Takes into account ability to achieve the
long term strategy for all payments – lower
rate
o Higher AAL!!!!
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What’s your net position?
o Large School District• TRSL UAAL = $10,955,671,000
• % employees 4%
• Share of UAAL 438,226,840
• 2012 Net Position 29,000,000
• 2012 Net Pos.(pro-forma) (409,190,105)
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What’s your net position?
o Large City• System UAAL = $ 395,000,000
• % employees 63%
• Share of UAAL 249,000,000
• 2012 Net Position 637,585,000
• 2012 Net Pos.(pro-forma) 388,585,000
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Example Pension Disclosures
o Summary of Significant Accounting Policies
o General Information about the Plan
o Net Pension Liability
o Long-term Expected Rate of Return• Discount Rate
• Sensitivity to Changes in Discount Rate
o Deferred Outflows and Inflows
o Payable
o Statistical Tables
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GASB 69
Government Combinations and
Disposal of Government
Operations,
years beginning after December 15, 2013
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GASB 69
o Three types of combinations
• Merger – no consideration
• Acquisition – significant consideration
• Transfer of Operations – Less then full
entity
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GASB 70
Accounting and Financial
Reporting for Non-exchange
Financial Guarantees,
years beginning after June 15, 2013
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AICPA Audit Standards
o Clarity
• Changes to audit reports
• Clearer description of purpose and
objectives
• Purpose alert vs. restriction for GAGAS
and Single Audit
• Reference to management letter not
required
• Group Audit Standards
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Government Audit Standards
o 2011 Yellow Book
o Independence – Non Audit Services
o Principals vs rules based
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Non-Audit Services
o Services that are considered nonaudit services
include:
• Financial Statement Preparation
• Bookkeeping services
• Cash to accrual conversions (a form of bookkeeping)
• Other services not directly related to audit
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Conceptual Framework
1. Identify nonaudit services
2. Determine if a prohibited service
3. Management responsibilities (preconditions)
4. Evaluate and document SKE
5. Assess whether threats are significant
6. Identify and apply safeguards
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SKE!!!!
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Grants Management
o Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards
• Consolidates OMB Circulars
• Changes audit requirements
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Single Audit Changes
o Threshold - $750,000 in federal
assistance
o Minimum Type A\B - $500,000
o Findings – questioned costs >$25,000
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Single Audit Changes
o Compliance areas for testing (6):
• Allowable costs\activities
• Cash management
• Eligibility
• Reporting
• Subrecipient monitoring
• Special test and provisions
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Hot Topics
o Municipal Securities
• Investigations
• Auditor involvement
• Continuing disclosures
o Pensions
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Questions?