LGC UPDATE2015 NCLGIA – Winter Conference

Sara Shippee and Becky Dzingeleski

February 9, 2015

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AGENDA

• Announcements / Reminders

• 2014 Audit Season

• 2015 Financial Statements

• New GASB Statements

• Future Single Audit Changes

• Auditing and Reporting Tips

• Deposit and Investment Issues

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ANNOUNCEMENTS

• Staff ChangesoDarrus Cofield – Administrative

staff - joined us at the beginning of November 2014

oJenny Johanns – sends Debt notices, processes LGC-203 reports, currently doing Audit Invoice approvals

“Decide to be happy, it is excellent for one’s health.” Voltaire

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ANNOUNCEMENTS

Vance Holloman Director of State & Local

Government Finance Division retired on

January 16th 2015

Now working as finance officer for

Apex, NC

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NC Department of State Treasurer Relocation

NC Department of State Treasurer is moving

3200 Atlantic AvenueRaleigh, North

Carolina

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NC Department of State Treasurer Relocation

All Department of State Treasurer Departments at the same location

Currently under renovation Second Quarter 2015 Free Visitor Parking

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2015 NC State Treasurer's Conference

Save the Date - watch LGC_News listserve Registration will be available through

NC School of Government

Hickory – Tuesday, May 12, 2015

New Bern – Wednesday, May 13, 2015

David Bean, Director of Research and Technical Activities at GASB will be our featured speaker

Topics to include

GASB 68 Accounting and Financial Reporting for Pensions

Fair Value Measurement and Application

OPEB Accounting and Financial Reporting

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NCGFOA Spring Conference

• March 4-6 at the Sheraton Imperial Hotel & Convention Center – RTP http://www.sheratonrtp.com/

• Panel Discussion regarding Pension Attestation Engagement required by Office of State Auditoro Auditor and Participants

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2015 Treasurer’s Award for Excellence

Applications now available for the 2014 Treasurer's Awards for Excellence in Accounting and Financial Management.  To encourage all units of local government in North Carolina

to make innovative changes to their accounting and financial management programs, systems, methods, and procedures or improve transparency of financial operations or records.

Applications are due by February 16th, 2015

Winners announced at GFOA Spring Conference Banquet

Treasurer’s Award for Excellence Memo

Treasurer’s Award for Excellence Rules

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Annual Financial Information Report - Reminder

• AFIR data purposes:o National statistics such as GNP by the Census o Used by State Legislature, State Agencies, Legislative

Researcho If legislature needs the info and nothing is there –

does not look good.o SOG for Water & Sewer Dashboardo Used by League and County

Commissioners Assoc. o Used by peers for

comparative purposeso Should be timely & accurate

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2014 Audit Review Process

• Positive response from auditors and units.

Turnaround was faster.

LGC staff availability was improved

As of February 5th we had received 1,105 FYE 2014 auditsoMissing – 45 municipalities & 10 counties

• Audit review Process is reviewed each year for efficiency

• Team is in process of making updates for 2015 audit review season

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2014 Audit Review Process

• Segregation of Duties finding

Letters sent to Units regarding FYE 2014 SOD finding

Internal Controls Memos currently being updatedMemo 569 and Memo 568

• New Local Government officials? Please alert our office of changes in …Finance OfficerMayor or Board ChairmanManager

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2014 Audit Process

• FYE 2014 County Audit reportsLate program confirmations from DHHS due to

implementation of new software caused delay in obtaining information needed for County Audits

If it happens again, we will work with the County Auditors on 2015 Audit due date.

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• Deferred Inflows Notes – please clarify descriptions

Unearned revenues (prepaid cash receipts) from exchange transactions are liabilities; unearned revenues from nonexchange transactions are deferred inflows of resources. [GASBS 65 ¶53, 67]

Memo 949 GASBS 33, Accounting and Financial Reporting for Nonexchange Transactions and GASBS 36 Recipient Reporting for Certain Shared Nonexchange Revenues - if you need assistance with exchange vs. non-exchange classifications.

2014 Audit Presentation Issues

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2014 Audit Presentation Issues

Exchange transaction vs. Imposed non-exchange transaction

From GASBS 65, ¶9: Imposed Nonexchange Revenue Transactions - “Deferred inflows of resources should be reported when resources associated with imposed nonexchange revenue transactions are received or reported as a receivable before (a) the period for which property taxes are levied or (b) the period when resources are required to be used or when use is first permitted for all other imposed nonexchange revenues in which the enabling legislation includes time requirements.”

• Privilege license is exchange transaction: show as a liability, not Deferred Inflows

• Grants that have been prepaid but for which the substantive or contractual requirements have not been met are liabilities, not deferred inflows

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2014 Audit Presentation Issues

• Transfers to Discretely Presented Component Unit reported in error (GASB 34 ¶61)

• Transfers - Descriptions of purpose often too vague

• OPEB - Financial Statement liability does not match notes or OPEB Required Supplemental Information (RSI)

• Pension Note - If pension cost is immaterial, please include a statement explaining that this was the reason that an actuarial study was not performed. 

• Deposits Note - §159-30(b) Certificates of Deposit are allowable in the form of Time Deposits. CDs are not considered an investment and should be included in Deposits note, not listed separately as an investment.

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2014 Audit Presentation Issues

LiabilitiesLiabilities payable from Restricted Assets not being

broken out separately / identified correctly.

Example: Restricted Cash - loan or bond proceeds likely related to capital project

** Not including Liabilities payable from Restricted Assets when appropriate, can have a significant affect on water & sewer ratio’s

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2015 Audit Contract changes

Primary Government – Discretely Presented Component Unit (DPCU)

o DPCU (e.g. Tourism Development Authority) – legally separate Public Authority with separate board: Memo 2014-08 DPCU. Annual Audit required but DPCU’s Board decides not to issue separate financial statements

oSeparate Fee / Signature Pages for each legally separate Unit including separate Pre-Audit certificate

oPrimary Government Board Chairman or MayoroBoard Chairman of TDA

o If Tourism Development Authority issues separate financial statements, separate Audit contract is required

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2015 Audit Contracts / Invoices

• Submit all audit contracts through the Leapfile portal

o Include email addresses for parties to receive contract approval in portal message box

o Contract approval is by email

currently Steven Holmberg is contract reviewer – Darrus Cofield will soon be assisting

• Send Invoices via Email – lgc.invoice@nctreasurer.com

o Approved stamped invoice sent to auditor by email

currently Jenny Johanns sends approved invoices

• Until 2015 audit contract form is available

o Use of 2014 form is fine until the 2015 form is published - please use the form most currently published on the Department of State Treasurer website

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2015 Audit

2015 Illustrated Financial StatementsoBeing updated for GASB Statement 68oClarifyingoCleaning upoGoal is to have Illustrated Statement

samples prepared by NC State Treasurer’s Conference in May 2015.

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• If you are considering issuance of Debt – please call us sooner rather than lateroBegin conversations with the SLGFD Debt

Management Section at least 2 to 3 months prior to your anticipated LGC meeting to begin discussions if you expect to issue debt.

oBegin discussions ahead of time with your auditor if you are planning issuance of Debt later in the year.

Mark your calendar and notify Tim Romocki and your auditor if issuing debt in November or December of 2015, or January of 2016.

LOCAL GOVERNMENT DEBT ISSUANCE

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AUP –Testing eligibility for State funded programs

o All NC Counties and certain District Health Agencies.  oFor District Health Agencies the State Auditor

and/or Local Auditor selects to test a certain program, such as WIC. 

o Local Auditors will likely be relied upon by the Office of State Auditors this year to test eligibility for selected major programs of the State of NC. oNotification of these programs most likely will be

available the first week in May.

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GASBS 68 – Financial Report for Pensions

• Effective years ending 6/30/2015The Department of State Treasurer, the Office of State Controller, Office of State Auditor, and the State’s have worked together to guide implementation of GASB 68.

o You will have the data you and your auditors need to meet your requirements under the standards

o Law Enforcement Officers Separation Allowance

oNot affected unless in an irrevocable trust as defined by GASB

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AICPA GUIDANCE ON AUDITING PENSION DATA

• Audit of Census Data: attest engagement separate from the annual financial audit o Auditor comfort with pension numbers and disclosureso OSA chooses sample of participant employers each year for census

data testing using risk based approach.o Data being tested on a calendar year basis to coincide with the

valuation of the Pension Plans • LGC Memo 2015-06: GASB 67 and GASB 68 – for more information• DST Webpage dedicated to GASB 67 and 68,

Webpage - GASB 67 and GASB 68 provides additional guidance and resources.

Sharon Edmundson sharon.edumundson@nctreasurer.com (919) 807-2380

Preeta Nayak preeta.nayak@nctreasurer.com (919) 807-2393.

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GASB Other Post Employment Benefits (OPEB)

Improve accountability and transparency of OPEB financial reporting regarding the financial effects of employers’ commitments and actions related to OPEB

Improve the usefulness of information for decisions or judgments of the various users of the general-purpose external financial reports of governmental employers and OPEB plans

Every unit will have to determine how best to approach implementation since almost all OPEB plans are single employer plans

June 2015 GASB expects to issue final statements

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GASB - Fair Value Measurement & Application

Purpose: Review and consider alternatives for the further development of (1) the definition of fair value, (2) the methods used to measure fair value, (3) the applicability of fair value guidance to investments and other items currently reported at fair value, and (4) potential disclosures about fair value measurements.

Current Stage: Exposure Draft Redeliberations: The Board re-deliberated issues raised by respondents to the Exposure Draft, Fair Value Measurement and Application, at its September, November, and December 2014 meetings and October 2014 teleconference meeting

February 2015 – GASB expects to issue final Statement

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Future Federal Single Audit requirements

Effective date will be for years ending June 30, 2016

US OMB has announced changes to Federal Single Audit requirements for local governments and public authorities that receive Federal Financial Assistance.

The amount to determine if a Federal Single Audit is required will be $750,000 of expenditures.

Among the other changes: minimum threshold to determine major programs will be $750,000

Total amount of financial assistance that is required to be audited reduced to forty percent (40%) and twenty (20%) for low-risk auditees.

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State Single Audit requirements

• DST is considering changes to the State Single Audit Act that typically occurs when the Federal changes their thresholds.

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AUDITING AND REPORTING TIPS

• Statutory limits on Transfers from Electric Funds for Eastern Municipal Power Agency – GS 159B-39

o Effective July 1, 2014 – Permits the following:oPayments in Lieu of taxes based on property taxes –

presented as transfers in both fundsoReimbursements treated as reduction in expendituresoOther transfers will be capped at the greater of:

oThree percent (3%) of gross electric capital assets at the end of the preceding fiscal year

oFive percent (5%) of the gross annual revenues of the electric system for the preceding fiscal year

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DEPOSIT AND INVESTMENT ISSUES

• LGC-203 Reports

Were due January 25th

As of February 5 - 65% - approx. 778 of 1200 have been received

June 2014 cycle - 97% or 1165 reports were received

Late letters to go out the 4th week of February

Not required for NC Charter Schools

ABC - LGC-203 report forms are accessed at the NC ABC Commission

Website: http://abc.nc.gov/boards/reports.aspx?folder=1

If you cannot find your name or bank, please call Becky

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DEPOSIT AND INVESTMENT ISSUES

• 8 Units with Investment Violations as of June 30, 2014 – the issues were……. o Insufficient collateralization (Market Value) for

accounts in non-pooling banks as of report date.

o Credit Union Deposits

o Annuity Investment

o FNMA and FHLMC REMIC Investments – No authority for moneys of units of local governments to be invested in them

• AG Opinion

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DEPOSIT AND INVESTMENT ISSUES

o Brokered CD Investments issued in out of state banks - violation of §159-30(b) or (b1)

• CD’s in form of Time Deposits, are not considered an investment

• Corporate CD’s are not eligible in North Carolina

• Has to be the Unit depositing the money into the bank, not the Broker

o Money Market deposits with FDIC insurance reported as deposits different from Money Market Funds which are not FDIC insured and generally are not an allowable investment

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DEPOSIT AND INVESTMENT ISSUES

• SEC Municipal Advisor Rules – Dodd/Frank Billo Primarily about issuing debto Relates to investment of proceeds as wello Normal brokers cannot advise you if bond

proceeds are included with certain exceptions:oIssue RFP to 3 brokers specifying date range,

security type, and time for quotes to be returned

oUtilize an independent municipal advisor when you come to the market

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DEPOSIT AND INVESTMENT ISSUES

• SEC Municipal Advisor Rules – Dodd/Frank Billo Investment of new debt issues will be handled

by your trustees or financial advisors but this rule may catch you with left over bond proceeds from older issues … you must certify to broker that no bond proceeds are included in your funds to be investedoIf no bond proceeds – business as usualoIf bond proceeds comingled then brokers can

only show you market information - an inventory with no advice

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• Be cautious with investments offered with rates of return that are significantly higher than what appears to be available in the markets

• Safety, Liquidity, then Yield

• Avoid any investment you do not understand

• Questions – call our office at 919-807-2381

DEPOSIT AND INVESTMENT ISSUES

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Best way to stay informed is through listserv:

LGC_News

Register multiple people on your staff in case you are out of the office.

Please give Sara or Becky a business card or send us an email if you wish to be registered.

ANNOUNCEMENTS / REMINDERS

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Investment Questions?

oBecky Dzingeleski (919) 807-

2396

becky.dzingeleski@nctreasurer.com

oSara Shippee (919) 807-2356

sara.shippee@nctreasurer.com

Thank you!Together , we can build and maintain a fiscally strong and prosperous North Carolina.

www.NCTreasurer.com