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Federal Accounting Standards Advisory BoardAccounting for Public-Private-Partnerships

ABA PCLS Privatization, Outsourcing and Financing Transactions Committee

McKenna Long & Aldridge LLP Washington, DC

April 10, 2014

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Disclaimer

• Views expressed are those of the speakers. The Board expresses its views in official publications.

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FASAB’s Mission

The FASAB serves the public interest by improving federal financial reporting through

issuing federal financial accounting standards and providing guidance after considering the

needs of external and internal users of federal financial information.

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What is FASAB? One of three U.S. Accounting Standards-

Setting Organizations

United States

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Who is FASAB? We currently have 9 board members supported by 8 staff.

Bios available at www.fasab.govCurrent as of December 2013

Mark RegerTreasury

Norman DongOMB

Sam McCall Robert DaceyGAO

Harold Steinberg Graylin Smith

Michael Granof D. Scott Showalter

Tom AllenChairman

(Former GASB Chair)

Wendy PayneExecutive Director

Non-voting Member

Public-Private PartnershipsOverall goal - Making the full costs of P3s transparent

• Governments increasingly use innovative approaches to partnering with non-governmental entities. – Benefits include:

• Risk sharing• Enhanced performance incentives• Financing arrangements to avoid large up front investments of

taxpayer funds– Arrangements may obscure costs and results.

• The project will consider how the lease and entity standards may be applied to such arrangements and fill any voids in the standards.

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Task Force CompositionPublic & Private Participants

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Task Force CompositionProfessional Disciplines

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Agencies Consulted

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Public-Private PartnershipsDisclosure Phase Overview

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Work-in-ProgressDraft Definition

• Federal public-private partnerships (P3s) are contractual arrangements or transactions between public and private sector entities to deliver a service or an asset for either government or general public use where in addition to the sharing of resources, each party shares in the risks and rewards potential of said arrangements or transactions.

• As a result, federal P3s can (1) exclude contractual protections afforded the government by the Federal Acquisition Regulations, (2) require the government to provide resources or absorb losses greater than other alternative or competing arrangements or transactions, and (3) include the formation of special purpose vehicles or SPV’s.

• Sharing of risks and rewards is evidenced by conditions such as (1) agreements covering a significant portion of the economic life of a project or asset, and/or lasting more than five years, (2) financing arranged by the private partner, (3) conveyance or transfer of real and personal property, multi-sector skills and expertise, and (4) formation of special purpose vehicles or SPV’s.

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Proposed Characteristics

Conclusive – “You’re in if you meet any one”1. Creation of a long-lived asset or financing liability2. The federal entity participates in or helps sponsor

an SPV, partnership, trust, etc. 3. The term of the procurement or contract

arrangement is longer than 5 years.4. The principal arrangement is exempt from the

Federal Acquisition Regulation (FAR)

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Proposed CharacteristicsSuggestive – “Maybe, maybe not” - requires

judgment. View each SC in light of the others.

1. A Value for Money analysis is performed.2. The principal arrangement is NOT managed by an

Administrative Contracting Officer (ACO) and/or Procurement Contracting Officer (PCO).

3. The consideration or items given up in an arrangement or their value are not readily apparent.

4. Significant work force duties, activities, or knowledge are cross-shared between public and private sector P3 parties.

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Proposed Characteristics5. The focus is more on collaboration and informal,

real-time, resolution processes as opposed to formal, contractual, administrative processes.

6. The government relies on either the private sector partner’s or a third party’s determination of a P3’s performance or return on investment/equity, without performing its own verification of performance/return on investment/equity.

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Suggested Disclosures1. The purpose or objective for the P3 arrangement or

transaction to include the relative benefits/revenues being received in exchange for all of the government’s consideration, monetary and non-monetary.

2. The decision criteria for selecting a P3 arrangement or transaction to include the entity’s statutory authority for entering into the P3.

3. Type of funding, federal or otherwise used to meet mission requirements and service delivery needs to support the P3; e.g., appropriated, non-appropriated, private capital or investment.

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Suggested Disclosures4. The operational and financial structure of the P3

including the entity’s rights and responsibilities and amounts the government can be reasonably expected to incur/pay over the life of the P3 arrangement or transaction.

5. Contractual provisions for termination/exit payments and related amounts.

6. Whether the private partner(s), to include any SPV, have borrowed or invested capital contingent upon the entity’s promise to pay whether implied or explicit.

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Suggested Disclosures7. Identification of the significant risks the P3 partners are

undertaking. 8. Violations of legal and contractual provisions governing

the P3 arrangement or transaction.

What do you think about the disclosures?• Too Burdensome?• Are they sufficient?• How might they impact you or your

organization?

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Uncle Sam Wants YOU!!!!

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We invite your comments and suggestions so

ask for a copy of the draft ED and get a head start!!

If you’d like to join the P3 Task

Force or follow its work, let me

know.

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Contact and Website Information

• General inquiries can be directed to fasab@fasab.gov

• Phone: 202 512-7350• www.FASAB.gov

– Listserv– Exposure Drafts– Active Projects

• I can be reached at: savinid@fasab.gov, 202 512-6841