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GASB Update
Presented by
Corey Arvizu
February 17, 2011Prescott, Arizona
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Intangible Assets
• Internally generated software – capitalize only application development costs
• Water rights may or may not be amortized – see related agreements Planned renewals and/or minimum renewal costs
may result in indefinite life
• Reported as capital assets – may or may not need separate presentation in note disclosure
• Application not required for immaterial items
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Fund Balance Reporting
GASB position – Most utilized element of governmental financial
information Extensive research and due process completed on
this standard Provides criteria for new fund balance
classifications Clarifies fund type definitions Effective for fiscal year June 30, 2011
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Less restrictive More restrictive
Current Standar
ds
New Standar
ds
Current Practice
Effect of Special Revenue Fund Clarifications
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Fund Balance Reporting
Required note disclosures Fund balance policies for committed and assigned Fund balance classification usage “sequence” or “priority” Information about encumbrances Detail of balances if not presented on the face of the balance
sheet Information on stabilization accounts or “rainy day funds” Minimum fund balance policies
Prior year must be restated if presented See disclosure checklist attached
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General Fund
Highway Fund
School Aid Fund
Other Funds Total
Fund Balances:Nonspendable:
Long-term receivables, inventory, and prepaid items 225,000$ 108,000$ 16,000$ -$ -$ 12,000$ 361,000$
Permanent fund principal 152,000 152,000 Restricted for:
Social services 240,000 240,000 Parks and recreation 80,000 80,000 Education 55,000 55,000 Highways 444,000 444,000 Pothole repairs 24,000 24,000 Debt service revenue 206,000 206,000 School construction 301,000 301,000 Law enforcement 60,000 214,000 274,000 Other capital projects 51,000 51,000 Other purposes 30,000 45,000 75,000
Committed to:Regulatory boards 16,000 16,000 Economic stabilization 210,000 210,000 Education 50,000 103,000 153,000 Health and welfare 125,000 125,000
Assigned to:Parks and recreation 50,000 26,000 76,000 Library acquisitions 50,000 50,000 Highway resurfacing 258,000 258,000 Debt service 306,000 306,000 Public pool 121,000 121,000 City Hall renovation 60,000 60,000 Other capital projects 50,000 471,000 521,000 Other purposes 80,000 73,000 105,000 258,000
Unassigned: 525,000 525,000 Total fund balances 1,846,000$ 390,000$ 192,000$ 512,000$ 1,448,000$ 554,000$ 4,942,000$
MajorSpecial Revenue Funds
Major Capital Projects
Fund
Major Debt
Service Fund
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General Fund
Highway Fund
School Aid Fund
Other Funds Total
Fund Balances:Nonspendable 225,000$ 108,000$ 16,000$ -$ -$ 164,000$ 513,000$ Restricted 465,000 24,000 206,000 796,000 259,000 1,750,000 Committed 401,000 103,000 504,000 Assigned 230,000 258,000 73,000 306,000 652,000 131,000 1,650,000 Unassigned 525,000 525,000
Total fund balances 1,846,000$ 390,000$ 192,000$ 512,000$ 1,448,000$ 554,000$ 4,942,000$
Major Major Debt
Service Fund
Major Capital Projects
Fund
Special Revenue Funds
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Fund Balance Reporting
Implementation Pointers Restricted, committed and assigned take precedent
over nonspendable reporting Actions to commit resources needs to occur prior to
year end Amount however may be determined after
Fund balance policies should not be vague Stabilization arrangements may not be assigned –
either restricted or committed General ledger and financial statements may differ
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Fund Balance Reporting
Implementation Pointers Statutory revenue sources “Significant” revenue threshold for special revenue
fundsMay be less than 50%
Investment income on restricted revenues No encumbrance classification – incorporate into
other categories Modify statistical section template for CAFR
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Fund Balance Reporting
Fund Balance Policy Appropriate level, typically percentage of revenues
or expenditures Two months of expenditures
Circumstances in which fund balance may be spent Unanticipated shortfall in excess of ….
Policy for replenishing deficiencies Sales taxes over 5 years
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Codification of FASB Standards
• Issued December 2010• Guidance to incorporate pre-1989 FASB and
related standards into GASB’s literature• Exposure draft over 600 pages • Option to apply post-1989 FASB removed• Effective for fiscal year June 30, 2013
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Codification of FASB Standards
• Key areas for which guidance is provided – Capitalization of Interest Cost Statement of Net Assets Classification Accounting Changes and Error Corrections Contingencies Leases Sale of Real Estate
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Crosswalk provided in exposure draft – not in standard
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Service Concession Arrangements
Issued November 2010 Guidance for certain agreements between
governments and private entities or other governments
GASB partnered with international standard setters in development
Flowchart included in standard Effective fiscal year 2013
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Service Concession Arrangements
Definition –
1) Government conveys to an operator right to provide services through use of asset/facility in exchange for significant consideration,
2) The operator collects fees from third parties for service provided, and
3) The government has input on services provided by the operator and the fees charged for services.
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Service Concession Arrangements
Examples –
1) State transportation department entering into arrangement with a transportation authority for the operation of a tollway
2) City entering into arrangement with a private company for the operation of City owned golf courses
3) County entering into an arrangement for a City to design, build and operate a new jail facility
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Service Concession Arrangements
Provides guidance on capital asset recognition and depreciation by the government
Recognition of liabilities for obligations under the arrangement
Guidance for govermental operators to recognize intangible assets (right to use factilty)
Note disclsoure requirements
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Component Units
• Issued November 2010 • Objective – amend component unit guidance
for specific issues which have arisen• Modifies certain requirements for inclusion of
component units• Effective for fiscal year June 30, 2013
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Component Units
• New blending requirement if CU total debt to be repaid from PG resources
• “Incomplete” removed from misleading guidance
• Enhanced guidance on “major” component unit presentation
• Note disclosure should focus on rationale for inclusion rather than the criteria Explain which criteria apply to the component unit
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it
Component unit flowchart
“Incomplete” removed from criteria
Debt repayment requirement added
Additional financial criteria added
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Pension Accounting and Reporting
Governments may be required to report its pro-rata share of the pension plan’s unfunded obligations
Will be applicable to nearly all Arizona governments
Many governments will report liabilities in the tens of millions of dollars
Numerous comment letters provided to GASB, including one from ASRS
Exposure draft to be issued this summer
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Other GASB Projects
• In research or deliberation – Conceptual framework OPEB accounting and
reporting Economic condition reporting
– fiscal sustainability Electronic financial reporting Fair value measurements Fiduciary responsibilities Financial guarantees Government combinations
• Monitoring or on work plan – Statement 34 implementation OPEB implementation Financial performance
measurements Popular reporting Compensated absences Debt refunding Risk financing
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The Future of GASB
• SEC concerns – Municipal bonds market and GAAP reporting
• Opposition from GFOA• Funding sources• Constituents’ concerns with OPEB and
pension reporting• International standard setting
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Audit Standards Update
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Internal Control Deficiencies
• Consistency with pubic company definitions• New definition for significant deficiency• Changed guidance on “prudent official test”• Clarified level of work to be performed on
compensating controls• Effective for fiscal year June 30, 2010
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Internal Control Deficiencies
New definition of significant deficiency
“…less than severe than material weakness, yet important enough to merit the attention of those charged with governance.”
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Supplementary Information
• Additional guidance for “in-relation” information Examples – combining section of CAFR, schedule
of expenditure of federal awards, other related schedules
• Very limited guidance in current standards• Three standards developed to address• Effective for fiscal year June 30, 2012
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Supplementary Information
• Suggested procedures – Information derived from the same underlying
accounting records used for financial statements Relates to the same period Auditor served as the principal auditor Neither adverse or disclaimer of opinion issued on
financial statements Inquire as to reporting criteria used Obtain representations from management
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New Auditors’ Report Language
The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures…
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Governmental Audit Quality Center
Communication with regulators and other stake holders
Comment letters to standard setters Tack force committees in response to single
audit study Development of practice aids and resources Development of trainings for webcasts and
conferences Timely email alerts on governmental audit issues
