Not Your Bosss GASB Update Eric S. Berman, CPA Deputy Comptroller Commonwealth of Massachusetts...
-
Upload
leslie-maher -
Category
Documents
-
view
218 -
download
1
Transcript of Not Your Bosss GASB Update Eric S. Berman, CPA Deputy Comptroller Commonwealth of Massachusetts...
Not Your Boss’s GASB Update
Eric S. Berman, CPADeputy ComptrollerCommonwealth of
MassachusettsNational Association
of State Auditors Comptrollers and
Treasurers Joint Middle Management Conference
April 10, 2006
How to implement GASB the New Standards (and yes quick reviews)
Implementing NOW Statement 42 - Accounting and Financial
Reporting for Impairment of Capital Assets and for Insurance Recoveries
Statement 44 – Economic Condition Reporting Statement 46 - Net Assets Restricted by
Enabling Legislation Statement 47 – Accounting for Termination
Benefits On the Horizon
Statements 43 and 45 – Post Employment Benefits
Statement 42 - Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries
Not just infrastructure Physical damage Legal or
environmental changes
Technological development or obsolescence
Change in manner or duration of use
Construction stoppages
Key Factors in Decision Tree: Is event significant? Is decline in utilization unexpected? IF YES to BOTH above 2, impairment is
present. IF impairment is present, is impairment
temporary? IF NO – disclosure about idle assets needed
Will asset continue to be used? IF NO – write down to lower of basis or FMV
Recoveries – separate transaction Other financing source or extraordinary item Can also be recoveries of non-capital items
Statement 42 - Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries
Brainstorm risks of impairment and outcomes Departments /
stakeholders involved
What is the average age of fixed assets?
What is significant? Hint – it’s not “material”
Statement 42 - Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries
Develop / Confirm policy – new policy should address Who makes impairment decision
Must be able to gauge five factors explained before
Must judge if temporary or permanent Must be involved in deciding fair market
values or service units Who is in charge of disclosure
Also address insurance recoveries & embezzlement
Statement 42 - Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries
Statement 44 – Economic Condition Reporting
States if part of GFOA CAFR program are 95% there – already doing Financial trends Revenue Debt Demographic /
Economic Operations
Key for states to focus onOPERATING INFORMATION – why?
Focus on information that isVerifiableReplicableTells the story that ‘should be told’
Statement 44 – Economic Condition Reporting
Statement 44 – Economic Condition Reporting
OPERATING INFORMATION – basic requirements:By GASB 34 Activity category:
Number of government employees
“Indicators” (e.g. performance measures) of the demand of level of service
“Indicators” of capital asset usage
In other words “YIKES!”
Pitfalls to watch out for as a middle manager recommending courses of action to a decision maker Not getting consensus on what an
“employee” is or what is the employee’s home agency
Not agreeing with policymakers up front as to what the key indicators should be for operations
What do you think key indicators should be for your state?
Statement 44 – Economic Condition Reporting
Statement 46 – Net Assets Restricted by Enabling Legislation
Clarifies “restrictions” Can’t be removed
by Government easily
External – legal constraints
Can be imposed by public interest groups or citizens in judicial finding
Statement 46 – Net Assets Restricted by Enabling Legislation
Succeeding in implementing 46Review all current restrictions
Special revenue funds are not necessarily restricted revenue
Beware of “earmarking”Work with legal staffWatch out for higher education
endowmentsCreate a database / spreadsheet of
restrictions
Statement 46 – Net Assets Restricted by Enabling Legislation
Statement 46 database or spreadsheetFundAccountLegal cite or source of restrictionInternal or external restrictionType of activity
Statement 46 – Net Assets Restricted by Enabling Legislation
Statement 46 database or spreadsheet Amount of net assets (%) that could be
restricted How can restriction be identified (for future
decision making) Revenue source codes that are tied to
restriction Have any net assets been used for other
than this purpose? What and why Treatment for statutory restrictions if
different than GAAP
Statement 47 – Accounting for Termination Benefits
Key points Must be involuntary Plan has to be
communicated to employees and committed to by government
Numbers have to be known and accruals recognized
May change OPEB / Pensions
Statement 47 – Accounting for Termination Benefits
Keys for managerial successEstablish a line of communication
with HR decision makers toQuantify populationCalculate benefits dueUnderstand timing
Health care costs related to early retirement (ERIP) will increase pensions and OPEB
Work with actuary to make sure changes are done
On the Horizon – Statements 43 and 45 - OPEB
Misunderstood and feared statements – why?Big dollars potentiallyDeals with healthcare and benefitsNeed for specialized help to
accomplish
Statements 43 and 45 – OPEB – calm your fears!
For most governments, obligation is large
No budgetary effect if it’s not funded
It is not a liability unless ARC is not made
Statements 43 and 45 – OPEB – calm your fears!
Key talking points Statement 43 applies to PLANS –
separately audited entities that manage benefits
Implementation is one year sooner (FY07) Statement 45 applies to employers Component Units need to undoubtedly
have separate valuations Need to implement when parent does
If you understand pensions, you understand OPEB
Same standard, different components
Statements 43 and 45 – OPEB – calm your fears!
Don’t Do This!!
Beware of the Headlines“The Trillion - Dollar Pothole” –
Barron’s Magazine 3/13/2006“The great state health-care
giveaway” – Fortune Magazine 5/2/2005
“Our health plan is in a death spiral, and the lawmakers are under-funding it” – State Employees Assn. of North Carolina
Statements 43 and 45 – OPEB – calm your fears!
Statements 43 and 45 – OPEB – calm your fears through planning
Answer the “W”’s Who is in my
census? What information is
available and what do I need?
Where is the information located?
When does it need to be done?
Who can I get to help?
Statements 43 and 45 – OPEB – calm your fears!
Keys to successAgree on a census of covered
employees / retirees BEFORE you engage an actuary
Turn over all the rocks you can NOW and document decisions
Align data to that of your pension valuation
Document all plans, rates, groups, sources of data
Keys to success (continued)Work with your budget / treasury
people earlyFunding for actuarial studyAssumptions for interest rates – drives
amortizationSEC is getting very active on bond
disclosure of OPEB liability DO NOT disclose the unknown or draft
Brainstorm on funding possibilities
Statements 43 and 45 – OPEB – calm your fears!
Keys to success (continued)External issues abound so be
carefulLegal issuesPolitical issuesLabor issuesFederal issuesFinance issues
Be logical and methodicalRationalize all decisions and their
effects on the valuation
Statements 43 and 45 – OPEB – calm your fears!
Questions?