gaap & gfoa update wisconsin gfoa winter conference...gasb 83, certain asset retirement...

Government Finance Officers Association

GAAP & GFOA UPDATEWisconsin GFOA

Winter Conference

November 29, 2018

Speaker

Michele Mark Levine, CPA (NY)

Director, Technical Services CenterGovernment Finance Officers Association of the US and Canada (GFOA)

All stated opinions are those of the speaker and do not necessarily reflect an official position of GFOA.

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AgendaI. GAAP UpdateII. GFOA UpdateIII. Common Reporting DeficienciesIV. Using the GASB CodificationV. GASB Conceptual Framework

I. New (& newish) GAAP

GASB Statements To Be Implemented

GASB 83, Certain Asset Retirement Obligations GASB 84, Fiduciary Activities GASB 87, Leases GASB 88, Certain Disclosures Related to Debt,

Including Direct Borrowings and Direct Placements

GASB 89, Accounting for Interest Costs Incurred before the End of a Construction Period

GASB 90, Accounting and Financial Reporting for Majority Equity Interests

5

When Does My Government Need to Implement?

New Standard Implement By Fiscal Years Ending

Standard # For FYEs Beginning After

March 31st June 30th September 30th

& October 31stDecember 31st

GASB 83 6/15/2018 2020 2019 2019 2019

GASB 84 12/15/2018 2020 2020 2020 2019

GASB 87 12/15/2019 2021 2021 2021 2020

GASB 88 6/15/2018 2020 2019 2019 2019

GASB 89 12/15/2019 2021 2021 2021 2020

GASB 90 12/15/2018 2020 2020 2020 2019

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GASB Statement No. 83 [Cod. A10]Certain Asset Retirement Obligations

Issued: November 2016Effective Date: Periods beginning after June 15, 2018

What is an ARO? Asset retirement obligation (ARO)

• Legally enforceable liability associated with the retirement of a tangible capital asseto Retirement = permanent end of use such as sale,

abandonment, recycling, other types of disposal, • Results from the normal operations of capital

assets Examples - costs associated with:

o Decommissioning nuclear reactors and medical imaging equipment

o Dismantling and removing sewage treatment plants and waste-to-energy plants

o Removal and disposal of wind turbines, solar farms

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Depreciation9

$

Defer/Capitalize → Allocate

Asset Retirement Obligation10

$

Anticipate/Liability Recognition → Allocate

Excluded Obligations that would not qualify for ARO

recognition: • Voluntary sale of tangible capital assets• Alternate use of a tangible capital asset• Pollution remediation associated with other-than-

normal use of the tangible capital asset• Normal maintenance costs• Replacement parts• Landfill postclosure care costs• Conditional obligations to perform retirement activities

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Governmental Funds

No change from current accounting and reporting

Recognize liabilities and expenditures for goods and services when received, to the extent due and payable

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Economic Resources MF Determination of Recognition

Occurrence of external

obligating event

Occurrence of internal

obligating event

Recognize if liability is

reasonably estimable

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Source of potential obligation

Circumstances that trigger the obligation

Recognize when a liability is incurred and the amount is reasonably estimable.

Incurred if two events occurred:

External Obligating Events

Sources of ARO obligations: Approval of laws and regulations

establishing disposal requirements Creation of a legally binding contract Issuance of a court judgment

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Internal Obligating Events

Events that trigger obligations:Acquisition

Example: County acquires a power plant with a pre-existing ARORecognize: When asset is first acquired

Contamination (based on normal usage) Example: Nuclear medical imaging

equipment, such as an MRI Recognize: When contamination first occurs –

initial testing 15

Internal Obligating Events

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Contamination:

An event or condition normally involving a substance that is deposited in, on, or around a tangible capital asset in a form or concentration that may harm people, equipment, or the environment due to the substance’s radiological, chemical, biological, reactive, explosive or mutagenic nature.

Internal Obligating Events (cont.)

Non-contamination-related Triggers:Pattern of usage Examples: logging, mining Recognize: when operations begin and some usable

capacity is consumed

Not based on usage Example: Wind turbines Recognize: when placed in service

Abandonment Example: power plant abandoned before completion Recognize: when abandoned

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Recognition

Recognize:• Credit an ARO liability • Debit -oGenerally - Deferred outflow of

resources oAbandonment - Expense

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Expensing of Deferred Outflows

If: deferred outflows were initially reported at the beginning of the asset’s useful life,• Than: recognize over the asset’s entire

estimated useful life

If: deferred outflows initially reported after asset was in service but before the end of its estimated useful life,• Than: recognize over the remaining life,

starting from time of recognition 19

Initial Measurement

Include legally enforceable liabilities for• Retirement of tangible capital asset• Disposal of replaced parts of a tangible

capital asset• Environmental remediation associated

with asset retirement necessitated by normal operation of the asset

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Initial Measurement (cont.)

Best estimate of current value (notPV) of expected outlays• Use all information available (at a

reasonable cost)• Current requirements (enacted laws)• Cost of required goods/services/facilities

if purchased at year end

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Initial Measurement (cont.)

Probability weighting of potential outcomes (expected cash flow technique)oIf information for probability weighting

is not available, use most likely amount in range of possible outcomes

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Annual Remeasurement

Adjust for effects of inflation/deflation Evaluate effect of all other relevant factors

• Changes in: oPrice not attributable to inflation or deflationoTechnologyoLegal requirementsoType of equipment, facilities, or services that will

be used to meet ARO

• Adjust estimated asset retirement outlays for these factors only if effects are significant 23

Initial Measurement Exception for Minority Owner

If: • A government has minority ownership (<50%) in a

jointly operated asset • Owners each responsible for share of ARO• A nongovernmental entity is the majority owner or has

operational responsibility for the operation

Then:• Use the nongovernmental entity’s measure of ARO

(FASB)• Measurement date may be no more than one year and

one day prior to the government’s financial reporting date

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Remeasurement Exception for Minority Owner

Use nongovernmental entity’s measurement of ARO prepared under that entity's accounting standards

Measurement date may be no more than one year and one day prior to the government’s financial reporting date

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Treatment of Changes in Estimate

Prior to retirement of capital asset -• Prospective change in amortization

After retirement of capital asset -• Immediate recognition

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Financial Assurance Requirements

Cannot offset restricted assets against the ARO

Disclose: • How those requirements are being met• Amounts of assets restricted for payment (if

not displayed separately)

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Accounting for: Landfill Closure & Postclosure Care

Pollution Remediation Obligation (PRO)

Asset Retirement Obligation (ARO)

Triggering event for liability recognition

Use of capacity of a landfillsubject to MSWLF closure and postclosure regulations

One or more obligating events

One or more externalobligating events AND one or more internal obligating events

Measurement Current cost Current cost Current cost

Costs included in liability

Equipment, facilities, and services

Equipment, facilities and services; oversight and enforcement

Equipment, facilities, and services

Treatment of long-lived asset purchases

Liability reduced when purchased; may capitalize if alternative use

Liability reduced when purchased; four scenarios in which capitalization is permitted

Liability reduced when purchased; may capitalize if alternative use

Cost remeasurement Annually When each specifiedbenchmark is reached

Annually

Expense recognition Expense when liability is recognized. Allocated toyears of landfill active operation by capacity usage.

Expense when liability is recognized.

Systematic & rational allocation over remaining life of asset; if none, expense immediately.

Expenditure recognition

When goods & services received



Comparison of environmental obligation accounting standards

Note Disclosures General description of ARO and associated

assets, as well as the source of obligations

Methods and assumptions used to estimate AROs

Estimated remaining useful life of associated assets

Any liability for an ARO that has not been recognized only because it is not yet reasonably estimable (and the reason)

If applicable, disclosures for minority share29

GASB Statement No. 84Fiduciary Activities

Issued: January 2017Effective Date: Periods beginning after December 15, 2018

Identifying Fiduciary Activities

• Meet CU Criteria GASB Codification Section 2100

• PEB: GASB 84 Paragraphs 6 - 7• Other: GASB 84 Paragraphs 8 - 9

Activity Conducted by the Government’s

Component Unit (CU)

• Assets Controlled by Government• PEB: GASB 84 Paragraph 10• Other: GASB 84 Paragraph 11

Activity of the Government

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PEB= Postemployment benefits, including pension and OPEB

GASB Fiduciary TrustsGASB PEB Trusts

(Unchanged from PEB standards)Administered through trusts or equivalent arrangements where:a) Contributions from employers

and nonemployer contributing entities and earnings on those contributions are irrevocable

b) Plan assets are dedicated to providing pensions/OPEB to plan members in accordance with the benefit terms

c) Plan assets are legally protectedfrom the creditors of the employers, nonemployer contributing entities, and, for DB plans, members.

GASB Other Fiduciary Trusts

(New)Administered through trusts* where:a) The government itself is not a

beneficiary of the trustb) Trust assets are dedicated to

providing benefits to recipients in accordance with benefit terms

c) Trust assets are legally protected from the creditors of the government.

* In the case of a CU, may also be an equivalent arrangement

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GASB Non-Trusted PEB Fiduciary Activities [CU or Gov]

Assets from entities that are not part of the reporting entity

Assets are accumulated for Pension or OPEB purposes

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GASB Non-Trusted, Non-PEB Fiduciary Activities [CU or Gov*]

Held for Benefit of Individuals

Government does not have administrative or direct financial involvement with assets

Assets are not from provision of goods or services to beneficiaries

Held for Benefit of Organizations or

Other Governments Beneficiaries are not in

the government’s reporting entity

Assets are not from provision of goods or services to beneficiaries

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* There are additional requirements for Non-trusted, Non-PEB, fiduciary activities carried out by the government itself rather than through a CU.

Administrative and Direct Financial Involvement

A government has administrativeinvolvement with assets, for example, if it:• Monitors compliance by subrecipients with

program requirements,• Determines eligibility, even if using grantor

established criteria, or• Can exercise discretion in allocation of funds

A government has direct financial involvement if, for example, it finances some program costs in accordance with matching requirements

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Fiduciary Component UnitsStep 1: Is it a component unit (CU)? Yes, if it is a legally separate entity for which the primary government (PG) is financially accountable?

New: A government has a financial burden from an PEB plan to which it contributes because it is legally required or has assumed an obligation to do so.

If: a contribution obligation is combined with either:(1)Appointment of a majority of the board, or (2)Fiscal dependency (substantive approval of PG needed for entity’s budget, fee-setting, or debt issuance), Then: PG is financial accountability, and the entity is its CU

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Component Unit Determination Component unit (CU) criteria of GASB Cod. Sec. 2100, Defining the

Financial Reporting Entity, paragraph 120 (GASB 14, as amended)

Financial accountability for a separate legal entity

Board appointment

Financial benefit or burden Ability to impose will

Fiscal dependency

Financial benefit or burden

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Fiduciary CUs - PEBStep 2 Is it a fiduciary CU?

Yes, if it is:• Administered through a GASB PEB

Trust • Non-trusted pension or OPEB Assets

(from outside of the reporting entity)

Or…

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Fiduciary CUs – Non-PEB

Yes, if one or more of the following: • Assets are administered through a GASB

Other Fiduciary Trust• Assets are non-trusted, but are held for the

benefit of individuals (and meet the respective requirements)

• Assets are non-trusted, but are held for the benefit of organizations (and meet the respective requirements)

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Government’s Own Fiduciary Activities

Step 1: Does the government have control of the assets of the activity?

Yes, if the government: Holds the assets, or Has the ability to direct the use, exchange, or

employment of the assets in a manner that provides benefits to the specified or intended recipients

Note: Control is not negated by either:• Externally-imposed purpose restrictions on assets• Designation of others by the government to act on its behalf

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Government’s Fiduciary Activity - PEB

Step 2 Is it a fiduciary activity?

Yes, if it is:• Administered through a GASB PEB Trust • Non-trusted pension or OPEB Assets (from

outside of the reporting entity)

Or…

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Government’s Fiduciary Activities – Non-PEB

Yes if both:1.The assets are not derived from either:

• The government’s own-source revenue, or• Government-mandated nonexchange or

voluntary nonexchange transactions*, and

* Except if assets are derived from pass-through grants for which the government does not have administrative or direct financial involvement.

And…42

Government’s Fiduciary Activity - Non-PEB (cont.)

2. If one or more of the following: • Assets are administered through a GASB

Other Fiduciary Trust• Assets are non-trusted, but are held for the

benefit of individuals (and meet the respective requirements)

• Assets are non-trusted, but are held for the benefit of organizations (and meet the respective requirements)

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Fiduciary Fund Types –Trusts

Pension (and other employee benefit) trust funds• GASB PEB Trusts• Other trusted employee benefit plans

o GASB Other Fiduciary Trusts (for active employee benefits rather than postemployment benefits)

Investment trust funds • GASB Other Fiduciary Trusts holding

o External portion of holding of investment pools, or o Individual investment accounts

Private-purpose trust funds• All other GASB Other Fiduciary Trusts

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Fiduciary Fund Types –Non-Trusted: Custodial Funds

Agency funds are replaced with custodial funds

Custodial funds report all non-trusted fiduciary assets (those not held in a GASB PEB Trust or a GASB Other Fiduciary Trust)

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Note that: Custodial funds are now required to report a statement of

changes in fiduciary net position Custodial funds can now have a fiduciary net position

Liability Recognition GASB PEB Trusts – follow Pension and

OPEB liability recognition standards All other fiduciary fund types – recognize

when compelled to disburse resources:• Demand for the resources has been made, or• No further action or condition is required to be

met to be entitled to receive the resources oFor example, tax collections on behalf of other

governments

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Other Reporting Requirements

GASB PEB Trusts - follow Pension and OPEB reporting standards

All other fiduciary fund types - statement of changes in fiduciary net position should disaggregate additions by source and display:

+ Investment earnings- All significant investment-related costs, including:

o Investment management feeso Custodial fees

= Net investment earnings

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BTA & Enterprise Fund Option If resources:

• Otherwise should be in custodial fund, and• Upon receipt are normally expected to be held

for 3 months or less Then may avoid use of custodial fund:

• Report assets and corresponding liability on BTA/enterprise fund statement of net position

• Report significant cash inflows and outflows separately in operating activities section of BTA/enterprise fund cash flow statement

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Custodial Funds Option If resources

• Upon receipt are normally expected to be held for 3 months or less

Then may report single aggregated totals in custodial fund• Additions • Deductions

Example: A county collects and remits property taxes to other taxing authorities (towns, villages, school districts)

• Addition – Property taxes collected for other governments• Deduction – Property taxes remitted to other governments

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Effective Date

Periods beginning after December 15, 2019

Restate prior periods if practical, or report a restatement of beginning net position/fund balance

GASB implementation expected• Exposure Draft December 2018;

Final May 2019

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GASB Statement No. 87Leases

Issued: June 2017Effective Date: Periods beginning after December 15, 2019

GASB 87: Leases

Establishes revised standards on lease accounting and reporting

Eliminates capital and operating leases Treats leases as intangible “right to use”

asset and long term liability for lessee Effective for reporting periods beginning

after December 15, 2019. Earlier application is encouraged.

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Excluded from Scope Excluded from scope of GASB 87

• Leases for:o Intangibles (includes computer software)

»Exception - Sublease of the intangible right-to-use a leased tangible asset

oBiological assetso Inventory

• Leases where underlying asset is financed with conduit debt

»Exception - underlying asset and conduit debt reported by lessor

• Service concession agreements• Supply contracts

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What is a Lease?Definition of a lease:

A contract that conveys the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction

Contract – legally enforceable (written or oral) Right to use underlying asset –

• Obtain present service capacity • Determine nature and manner of use

Nonfinancial asset –• Land, buildings, equipment; not securities

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Lease TermPeriod during which lessee has:

• Noncancelable right to use underlying asset,

• Plus periods where oLessee or lessor has option to extend (if

exercise is reasonably certain), andoLessee or Lessor has option to terminate (if

not exercising is reasonably certain)

Note: Fiscal funding clauses only affect a lease term if they are reasonably certain to be exercised. 55

Exceptions Short term lease – A lease that, at its beginning, has a

maximum possible term under the contract of 12 months or less, including all options to extend• Recognize revenue/expense when payments are due• No revenue or expense during rent holidays

Contracts that transfer ownership – A contract whereby a lessee will become owner of the underlying asset at end of contract term and that contains no termination options (except fiscal funding clauses reasonably certain not to be exercised)• Account for as a financed purchase of the underlying

asset 56

Lessee Accounting – Economic Resources Measurement Focus Initial recognition

• Lease asset – intangible right-to-use capital asset• Lease liability

Subsequent accounting• Amortization of lease asset

oShorter of lease term or useful life of underlying asset• Lease payments

oReduction of liabilityo Interest expense

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Measurement – Lessee Lease liability

• Present value (PV) of payments over lease termo Interest rate charged by lessor, oroLessee’s borrowing rate

Intangible lease asset • PV of payments over lease term (lease liability)• Add: Payments made at or before the beginning of the

term to lessor• Less: Lease incentives received from lessor beginning of

the term• Add: Certain direct costs to put asset into service

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Government Lessee Example Assumptions:

• 5 year lease for capital equipment (60 months) entered into on April 1

• Monthly payment of $1,000 are due beginning of each month, 1st payment April 1

• End of lease term option to purchase equipment for $2,000; reasonably certain to exercise

• Lessor charges interest of 3% per year• Government estimates useful life of equipment will

equal 7 years• Lessee incurs costs of $2,500 to transport and install

equipment

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Present Value of Lease Payments

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Assumptions Excel PV Function Term

Monthly payments $1,000 Pmt

Number of payments 60 Nper

Annual Interest rate 3%

Monthly interest rate 0.25% Rate

Future value 0 FV

Type (annuity due) 1 Type

= Present value of lease payments

$55,791 [Result]

Present Value of Lease Purchase Option Payment

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Monthly payments 0 Pmt

Number of payments 5 Nper

Annual Interest rate 3% Rate

Monthly interest rate 0.25%

Future value ($2,000) FV



$1,725 [Result]

Lease liability = $55,791 + $1,725 = $57,517Lease Asset = $57,517 + $2,500 = $60,017

Lessee Accounting – Current Financial Resources MF

Unchanged from Current Guidance

Initial recognition • Expenditure – capital outlay• Other financing source

Subsequent accounting• Lease payments – debt service expenditures

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Note Disclosure – Lessee

Description of leasing arrangements Amount of lease assets Schedule of future lease payments

• Principal and interest listed separately

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Lessor Accounting – Economic Resources Measurement Focus

Initial recognition• Lease receivable

o Continue to report underlying asset• Deferred inflow of resources

Subsequent reporting• Lease payments

o Reduction of receivableo Interest revenue

• Reduction of deferred inflow of resources → revenueo Over term of the lease o Systematic and rational mannero Governmental funds – if available

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Measurement – Lessor

Lease receivable • PV of lease payments over lease term

Deferred inflow of resources • PV of lease payments over lease term• Add: Payments received at or prior to the

beginning of the lease that relate to future periods

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Government Lessor Example Assumptions:

• 10 year lease of two floors of government-owned office building to unrelated 3rd party (not in same reporting entity)

• Monthly payment of $3,000 are receivable at the beginning of each month, 1st payment July 1

• Lessee pays last month rent at inception of lease• Government’s estimated return on investments is

0.8% and it charges this rate to lessee• Government paid $10 million for building with an

estimated 75 year useful life

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Present Value of Lease Payments to be Received

67


Monthly payments $3,000 Pmt

Number of payments 119 [(10x12) -1 prepaid] Nper

Annual Interest rate 0.8%

Monthly interest rate 0.00067% Rate

Future value 0 FV



$343,325 [Result]

Lease receivable = $343,325Deferred inflows = $343,325 +$3,000 =

$346,325

Lessor Accounting – Current Financial Resources MF

Initial recognition• Lease receivable at PV of payments• Deferred inflow of resources

Subsequent reporting• Lease payments

oReduction of receivableo Interest revenue

• Reduction of deferred inflow of resources → revenueoOver term of the lease oSystematic and rational manner, if available

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Note Disclosure - Lessor

Description of leasing arrangements Total amount of lease revenue for current

year

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Lease Incentives

Payment to or on-behalf of the lessee from lessor• Lessee has right of offset – payments are

reduced• A rebate or discount

Lessee reduces the amount of the underlying asset and liability at beginning lease term

70

Contracts with Multiple Components

Contract with lease and nonlease components• Separate lease component from nonlease component• Treat as separate contracts

Multiple underlying assets in same lease and assets have different lease terms• Each underlying asset treated as separate component

(lessee and lessor)• Allocate contract price to each component using

reasonableness and professional judgmento Prices for each component in the contracto Stand-alone prices for similar assets

• If cannot determine allocation, treat as a single-lease unit

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Contract Combinations

Criteria for treating as a single contract• Entered into at or near the same time with the

same counterparty and one of the following:oNegotiated as a package with a single objectiveoConsideration paid in one contract depends on the

price or performance of the other contract

Then, evaluate as a contract with multiple components

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Lease Modifications Amendments to lease contracts

• Normally a modificationo If right to use reduced = partial termination

Treatment of modification• Treat as separate lease if both exist:

o Lessee receives one or more underlying assets not part of original lease

o Increased payments for additional asset are not unreasonable• If not, treat as remeasurement

73

Lease Modifications (cont.) Remeasurement

• LesseeoRemeasure lease liabilityoAdjust lease asset – difference between remeasured

liability and liability before lease modification• Lessor

oRemeasure lease receivableoAdjust deferred inflow of resources – difference

between remeasured receivable and receivablebefore remeasurement

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Terminations Lessee’s right to use asset is reduced

• Lease term shortened• Number of assets reduced

Treatment• Lessee

oReduce lease liability and assetoDifference = gain/loss

• LessoroReduce lease receivable and deferred inflowoDifference = gain/loss

75

Subleases

Treated as a separate transaction• Lessee now also the lessor• No offset of transactions

oOriginal lessee– Right to use asset and liability (original lease)– Receivable and deferred inflow of resources (sublease)

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Effective DatePeriods beginning after December 15, 2019

Apply retroactively• Facts and circumstance of the lease in period of

implementation (not inception of the lease)oRemaining lease payments at beginning of period will become the future

lease payments

• Restatement of beginning net position in period of implementation may be needed

GASB implementation guide expected • Exposure Draft - February 2019; Final -June 2019

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GASB Statement No. 88 Certain Disclosures Related to Debt,including Direct Borrowings andDirect Placements

Issued: April 2018Effective Date: Periods beginning after June 15, 2018

GASB 88

Establishes new note disclosure requirements for long term debt, including direct borrowings and placements.

Effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged.

79

Purpose Many governments use bank loans or private

placement of debt instead of accessing the bond market • Lower costs of issuance / complexity• relationship with local bank

Accelerated payment requirements and other provisions of private debt expose governments to financial risks

Inconsistent interpretation and application of disclosure requirements for such debt

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Definition of Debt

A liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established.

Excludes leases (except for contracts reported as a financed purchase of the underlying asset) and accounts payable.

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Additional Disclosures

Amount of unused lines of credit Assets pledged as collateral for debt Terms specified in debt agreements

related to significant:• Events of default with finance-related

consequences, • Termination events with finance-related

consequences, and • Subjective acceleration clauses

82

Disclosures (continued)

Separate information in debt disclosures • Direct borrowings and direct placements

of debt • Other debt

83

GASB Statement No. 89 Accounting for Interest Costs Incurred before the End of a Construction Period

Issued: June 2018Effective Date: Periods beginning after December 15, 2019

GASB 88

Seeking consistent treatment of interest costs of assets being constructed

Based on GASB Concept Statement 4• Interest costs do not provide present service

capacity – not assets• Financing decision separate from asset

construction – interest costs not inseparable from asset

Prospective implementation

Interest Costs Incurred Prior to the End of Construction

86

GASB 89: No Capitalization

Economic Resources

Current Financial

Resources

Expense in the period interest cost incurred

Expenditure when due and payable [unchanged]

GASB Statement No. 90 Accounting and Financial Reporting for Majority Equity Interests

Issued: August 2018Effective Date: Periods beginning after December 15, 2018

GASB 90 - Equity Interest

A financial interest In a legally separate organization represented by shares of stock or otherwise having an explicit, measurable right to net resources of organization, that is usually based on an “investment” of financial or capital resources by a government

88

Equity Interest (cont.) A government has an explicit, measurable

right to net resources of an entity if the• Government has a present or future claim to

net resources, and• Government’s share is determinable• Excludes residual interests in assets that may

revert to a government upon dissolution of an entity

89

Investment Determination Investment asset criteria

• Government holds primarily for income or profit, and• Has a present service capacity based solely on ability

to generate or be sold for cash

90

Investment MEI Report

• Investment asset of the government or fund that holds MEI

• Do NOT also report entity as a CU Measure using the equity method, except use

fair value if investment is held by a designated kind of government or fund• Special-purpose government engaged only in

fiduciary activities (pension/OPEB)• Fiduciary fund• Endowment (term or permanent)• Permanent fund

91

Non-investment MEI Report:

• Non-investment asset of the government or fund that holds MEI

• A CU because MEI = financial accountabilityo If blended CU, eliminate asset and CU net position

Measurement :• Economic Resources MF – Use equity

method• Current Financial Resources – Report only

current financial resources (payables & receivables between government and entity)

92

100% Equity Interest in CU Follows guidance for government

acquisitions (Cod. Co10, GASB 69) CU measures assets, deferred outflows,

liabilities, and deferred inflows at acquisition value as of acquisition date • Acquisition value = Price that would be paid

for acquiring similar assets, with similar service capacity, or discharging the liabilities assumed as of acquisition date

• Acquisition date = Date on which the government acquires 100% equity interest

93

100% Equity Interest in CU (cont.)

Total consideration paid by government includes all net resources exchanged to complete the acquisition, whenever paid, including related deferred outflows

Net position acquired by government (non-investment MEI asset & deferred outflows) = net position of CU after re-measurement

CU flows statement includes only post-acquisition activity

94

Implementation

Effective - periods beginning after December 15, 2018

Early implementation is encouraged Retroactive implementation - restatement

of beginning net position of• First period presented, or• Earliest period restated and explain reason for

not restating earlier period(s)

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II. GFOA Update

GFOA is a non-profit association focused on the professional management of governments

Established in 1906 19,500+ Members Offices in Chicago and Washington, DC Product and Services

• Best Practices• Annual Conference• Publications• Training• Award Programs• Consulting• Research• Advocacy

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Current membership 19,500 +S99

GFOA Best PracticesS100

http://www.gfoa.org/best-practices

GFOA Best Practices


GFOA has over 30 Best Practices & Advisories Pertaining to Accounting, Auditing & Financial Reporting

GFOA Best Practices


GFOA has over 40 Best Practices & Advisories Pertaining to Pension and OPEB

Free Webinar on New Best Practices and Advisories

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Broadcast October 23, 2018 –Recording available on demand at GFOA.org

Who Makes this Stuff Up?GFOA has 7 standing committees that advise on specific areas of government finance1. Committee on Accounting, Auditing, and Financial

Reporting [CAAFR]2. Committee on Canadian Issues [CCI]3. Committee on Economic Development and Capital

Planning [CEDCP]4. Committee on Governmental Budgeting and Fiscal Policy

[BUDGET]5. Committee on Governmental Debt Management [DEBT]6. Committee on Retirement and Benefits Administration

[CORBA]7. Committee on Treasury and Investment Management

[TIM]

S104

Standing Committees Meet twice a year (at annual conference and

Dec –Jan) Limited to 25 GFOA members each Members selected through an application

process and appointed by GFOA’s president Recommend new policies, best practices

and advisories Develop resources for members Leadership pipeline

֎ Apply after conference for the next year֎

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113th Annual Conference

3 Keynote Addresses 2 Major Social /

Networking Events Concurrent Sessions

• 9 Core Tracks• 10 Series Themes

7 Targeted Networking Sessions

20 CPE + optional preconference seminars for more

Conference and Housing Registration is Open

Conference Brochure is Available on-line

Including Session Descriptions (not all)

113th Annual Conference

Preconference Seminars:

May 17 & 18

Standing Committees:

May 18

Main Conference:May 19 - 22

Government Finance Reviewo 6 issues / yearo Practitioner

authorso Focused on case

studies and lessons learned

Highlight: Accounting Angle

National Training (Live)S109

Accounting Courses Level Length (Days)Accounting Academy Basic 4Intermediate Governmental Accounting Intermediate 2Advanced Governmental Accounting Advanced 2Accounting for Pensions and OPEB Intermediate 1Accounting and Financial Reporting for Capital Assets

Intermediate 1

Accounting and Financial Reporting for Enterprise Funds

Intermediate 1

Preparing a CAFR Basic 1Advanced Financial Reporting Advanced 2Evaluating Internal Controls Basic 1Budget Level Length (Days)Budget Academy Basic 4Managing the Budget Process Advanced 2Long Range Financial Planning Intermediate 2Budgeting Best Practices Intermediate 2Effective Budget Presentation Basic 1

Capital Finance & Debt Management Various Levels

Financial Management Various LevelsPension & Benefit Administration Various LevelsTreasury Management Various Levels

Internet TrainingS110

https://www.gfoa.org/search-for-training

Webinar Training (Live Streaming)S111

Rebroadcasts of Offerings Still Available – December & January

Award Programso Award for Excellence in Government Finance

[Competitive awards issued annually at conference]

o Budget process awards: Award for Best Practices in School Budgeting Award for Best Practices in Community College Budgeting

o Document-based awards:

S112

Awards for ExcellenceIn Government Finance

Recognize innovative programs that exemplify outstanding financial management

Two categories:• Creative solutions to common challenges• Exceptionally well implemented GFOA best

practices Judging criteria include:

• Local significance and value• Technical significance• Transferability• Cost/benefit analysis

S113

Budget Process Awards 2 Best Practices in Budgeting Programs

• School Budgeting Program• Community College Budgeting Program

Began in 2012 with grant from Gates Foundation, now solely GFOA

Focus on process, not product Purpose:

Develop a budget process that is intended to clearly articulate how funds are allocated to support strategic goals.

The program includes feedback on policies and principles to guide the budget process, development of budget process goals and strategies, budget process implementation planning, and continuous improvement in the budgeting process.

Best Practices in School BudgetingS115

http://www.gfoa.org/pk-12budgethttp://smarterschoolspending.org/

Document Award Programs Disclaimer

GFOA award programs are intended to recognize governments’ efforts to make high quality financial reports or budget documents available to the public.*GFOA relies on each government’s assertions and information supplied in their award application. GFOA makes no guarantees, representations, or warranties regarding the accuracy of the financial information made available by award recipients or the financial solvency or soundness of any government as part of the award programs. Receipt of a GFOA award is not, and may not be inferred or assumed to be, GFOA’s endorsement, evaluation or approval of a recipient’s financial information or practices beyond what is listed in GFOA’s evaluation criteria for each award. *For budget process awards, the intention is to encourage governments to implement process improvements aligned with GFOA’s best practice statements.

116

Distinguished Budget Presentation

Referred to as “Budget Document Award” Program

Established in 1984 Purpose:

To encourage governments to present budget documents that are clear and understandable and that provide transparent information about policy, financial planning, operations, and communications.

Over 1,770 award winners for fiscal years beginning in 2017

117

Budget Document Award Criteria27 Award Criteria in 6 Categories:

1. Introduction and overview • TOC, goals, priorities, overview

2. Finance, Structure, Policy, and Process• Org chart, department/fund relationship, financial & budget policies

3. Financial Summaries• Multi-year consolidated financial schedules, fund balance, revenue, LT

financial plan4. Capital and Debt

• Capital expenditures, impact of capital investment on operating budget, debt5. Departmental Information

• Position summary schedule, department descriptions, goals and performance measures

6. Document-wide Criteria• Statistical section, glossary, charts and graphs, over understandability and

usability

118

Under review – may lead to updating criteria to incorporate process elements for along with document requirements for general purpose and other governments

Certificate of Achievement for Excellence in Financial Reporting

Referred to as “CAFR Award” or “CAFR Certificate” Program

Established in 1945• Oldest of all GFOA’s Award Programs

Purpose: To encourage state and local governments to prepare comprehensive annual financial reports using generally accepted accounting principles.

Almost 4,300 award winners for FY 2016 CAFRs • Largest of all GFOA’s Award Programs

119

Participation by Cities*

Cities with Populations over

AwardWinners as a % of All US Cities*

200,000 99%

100,000 90%

50,000 75%

25,000 60%

10,000 41%

Up to 10,000 1%

All 6%

* Includes cities, municipalities, villages and towns

120

Participation by Counties

Counties with Populations over

AwardWinners as a % of All US Counties*

250,000 83%

100,000 66%

50,000 50%

25,000 34%

10,000 23%

Up to 10,000 0.6%

All 18%

121

Participation by School Districts

Student EnrollmentAwardWinners

1 - 9,999 274

10,000 – 24,999 126

25,000 – 49,999 77

50,000 – 99,999 48

100,000 + 29

122

Other Participants

Government TypeAwardWinners

States 43

Enterprise Funds 511Public Employee Retirement Systems (PERS)

173

Colleges and Universities 83All other 309

123

New Checklist Format

New ‘Condensed’ Checklist Format125

NOTE TO READERS:The format of the checklist has been changed. The checklist is no longer an exhaustive list of every disclosure required by GAAP, but a reference tool to help preparers find the information necessary to prepare a CAFR. The checklist provides preparers references to where the detailed required disclosures can be found in the authoritative literature.

New ‘Condensed’ Checklist Format (cont.)

New standards receive comprehensive coverage Total number of pages general purpose checklist = 79 Total number of pages dedicated to pension & OPEB

disclosure (notes and RSI) pages = 36 Pension & OPEB > 45%

126

Transition to Codification Citations

GASB-S34:63; COD 1300:103

GASB-S34:63; COD 1300:103GASB-S34:63; COD 1300:103

127

Process1. Application received – electronic or paper (for now) – and

entered into system• Applicants Identified by GFOA Using Member ID of Applicant Government (Not

Individual Person) - Found on PY report of comments2. Sent to volunteer reviewer3. In-house review – highly detailed, checking all criteria4. Final review (in-house):

• Considers initial in-house and volunteer reviewers’ comments• Focus on asterisked “ * “ criteria = Mandatory fail if missing

o Continuing participants may receive warning• Makes award/deny determination in consultation with other senior TSC staff

5. Results and comments sent to applicant• Comments must be addressed in subsequent year submission

128

Technical Services Center Responsible for CAFR, PAFR, CanFR, and

Budget Documents Award Programs Staffing:

• 16 Professionals (two vacancies) – 11 Primarily Award Programs

• 4 Support – All Primarily Award Programs• 2 Interns – Both Primarily Award Programs

Initial reviewers: approximately 11 – 15 reviews per week

Final reviewers: approximately 25 reviews per week

129

Volunteer Participation Oversight / Direction

• Special Review Executive Committee (SREC)• Appointed by President – Staggered Terms• Chairperson - Final Decisions on Appeals

Outside / Peer Reviewers• All Volunteer

oStaff Development• Perform up to 12 per year (1/month) – Volunteer selects

months and maximum reviews/year• Provide Comments and Vote Sheet• GAAP Update

130

Popular Annual Financial Reporting

Referred to as “PAFR Award” Program Established in 1991 Must win CAFR Award for same FY to Win

However, may apply before being notified on CAFR Award

Purpose: To encourage governments to prepare a clear and understandable popular annual financial report (PAFR) to make financial information accessible and understandable to ordinary citizens and other interested parties who may be challenged to understand traditional financial reports.

400 award winners for FY 2016 PAFRs

131

PAFR Award Program Criteria

Reader Appeal (10%) • Length, organization, aesthetics

Understandability (25%)• Jargon free charts & graphs, narrative clarity

Distribution (7.5%)• Number, methods

Other (7.5%)• Creativity

Overall Quality and Usefulness (50%)

132

Discontinued Small Government Award Program

Certificate of Conformance Program for Small Government Annual Financial Reports Award Program for Small Government Cash Basis Reports Initiated by GFOA Board Action October 2012 Highest Annual Participation – 3 Governments Discontinued February 2018

• Exception for continuing governments

133

Notwithstanding, GFOA is committed to helping small governments, which for practical reasons do not prepare GAAP financial statements and CAFRs, find appropriate financial reporting rubrics that provide internal decision makers, oversight bodies and officials, and the public with the verifiable financial information necessary for their purposes.

Small Government Financial Reporting Initiative

Committee formed with GFOA, ICMA, GASB and other interested parties

Purpose• Identify financial information that is necessary for

small government users to assess accountability and make decisions, and

• Develop tools to assist small government preparers report that information.

134

Certified Public Finance OfficerS135

Certified Public Finance Officer

Eligibility: • Bachelor's degree from an accredited college

or university• Accept GFOA’s Code of Professional Ethics• Full time government employee (or

unemployed immediately after – and seeking new - government employment).

• Min 3 years government employment in 10 years

• GFOA Membership

S136

Certified Public Finance Officer

Self-study reading list 5 subject matter exams passed over 7

years:• Governmental accounting, auditing, and

financial reporting• Operating and capital budgeting • Debt management• Treasury and investment management• Retirement and benefits, risk management,

and procurement

S137

CPFO Program Review Twelve-member project steering committee

• GFOA Council on Certification• GFOA Executive Board members and prior members

who serve(d) as city managers or in similar positions Staff from GFOA’s Research and Consulting

Center and Technical Services Center Comprehensive review identifying:

• Core body of knowledge• Resources available to promote mastery of skills and

knowledge• Assessment • Continuing education

S138

GFOA Consultingo GFOA has become a nationally recognized leader in the

ERP system market generating value for clients through: Software selection / contract negotiations Reducing costs Reducing risk during implementation Providing best practice recommendations for improving

business processes

S139

Research ReportsS140

http://www.gfoa.org/research-reports

GOVERNMENT FINANCE OFFICERS ASSOCIATION 141

Financial Sustainability Framework

• Developed from Nobel Prize winning research on “common pool resource theory”

http://www.lincolninst.edu/publications/working-papers/financial-sustainability-index

Financial Sustainability Framework

Advocacy Congressional Advocacy

oTax exempt municipal bondsoDeductibility of state & local taxeso Internet Sales TaxoPensions & benefitso Infrastructure

Executive Advocacy oSECoMSRB

Amicus Briefs to the Supreme Court

Public Finance NetworkThe Big Seven1. National Governor’s Association2. US Conference of Mayors3. National Association of Counties4. National League of Cities5. ICMA6. Council of State Governments7. National Conference of State Legislatures

The Financial Four8. National Association of State Treasurers9. National Association of State Budget Officers10. National Association of Comptrollers, Auditors

and Treasurers

Schools24. National Association of School Boards25. National Association of College and

University Business Officers26. Association of School Business Officers27. National Education Association

Housing11. National Association of Local Housing Finance

Authorities12. National Council of State Housing Agencies

Power28. Large Public Power Association29. American Public Power Association

Conduit Issuers13. National Association of Health & Educational

Facilities Finance Authorities14. American Hospital Association

Public Works and Utilities15. American Public Gas Association16. American Public Transportation Association17. American Public Works Association

Water18. American Water Works Association19. Association of Metropolitan Water

Agencies20. National Association of Clean Water

Agencies21. Water Infrastructure Network22. National Water Resources Association23. Water Reuse Association

All Other Partners30. The National Association of Towns

and Townships31. American Planning Association32. American Society of Civil Engineers33. International Economic

Development Council34. International Public Management

Association for Human Resources35. National Association of County and

City Health Officials36. National Association of County

Community and Economic Development

37. National Association of Development Organizations

38. National Association of Regional Councils

39. National association of Resource Conservation and Development Councils

40. National Community Development Association

41. National Council on Teacher Retirement

42. National Association of State Retirement Administrators

SEC Update

In August, the Securities and Exchange Commission approved new Amendments to Rule 15c2-12 • Effective February 27, 2019

Governments will have to state in continuing disclosure agreements entered on or after the effective date that they will disclose to the market:

144

SEC Update (cont.)1. Any new and material financial obligations

• bank loans, • capital leases, • swaps, • variable rate obligations, • other financial products that “operate as

vehicles to borrow money”2. When an outstanding or new financial

obligation reflects material financial difficulties

145

SEC Update (cont.)

The most important first step:• Talk with bond and/or disclosure

counsel about how these changes specifically relate to your debt program and future bond issuance and other financial transactions.

Next step: • GFOA webinar January 9, 2019

146

Future of the profession initiativeS147

Inspiring Careers in Local Gov’tS148

Code of Ethics ModernizationS149

• Current code decades old• Goal is to develop new code

that is: Values based Addresses current

realities• Use latest research: Giving Voice to Values Ethicalsystems.org

• Engage members in process• Support with research &

training

Getting Involved with GFOA Committees National and Internet Training Participation in Research Project Award Reviewer Networking Group

• Urban Forum• Small Government Forum• Utility Forum• Black Caucus• Women’s Public Finance Network

GFOA Social MediaRelaunching Leadership Academy Fall 2019

S150

III. Common Reporting Deficiencies

Comments Database of Standard Comments

• Used by in-house reviewers• Over 1,500 Standard Comments in

Database (General Purpose)• Some Deficiencies, Some

Recommendations Non-standard comments also used

• Over 1,300 Used in 2017; • Not in Statistics Used

152

Reporting Deficiencies All Comments Reported to Applicants

• Virtually Always Include at Least One Comment

If Award Denied, Most Significant Reason(s) Noted

If Award Granted But Significant Issue Noted• Warning of Subsequent Denial if Not Corrected• Only for Continuing Participants• Will Deny Next Year Unless Corrected

153

Reporting Deficiencies (cont.) Continuing Applicants Must Address

all Comments Noted in Prior Year Suggestion: Address Comments

Immediately Upon Receipt

154

Common Reporting Deficiencies50 Most Frequently Cited Deficiencies for FY 2016 CAFRs:

155

Pensions Comprise 4 of Top 10 Most Common Deficiencies [and 12 of Top 50]

1. Covered payroll – funding progress v. employer contributions [RSI]

2. Which governmental funds liquidate pension liabilities? [Notes]

3. Donated assets at “acquisition value” (not “fair value”) [Notes]

4. Debt service as a % of non-capital expenditures [Stats]

5. Disclosures about each type of asset measured at fair value

6. Pension contributions made after measurement date &

before government’s FYE [Notes]

7. Debt capacity schedules should match financial statements [Stats]

8. Aggregate for all plans’ pension: liabilities, assets, deferred items, and expenses/expenditure [Notes]

9. “Unmodified” v. “unqualified” opinion [Auditor’s Opinion]

10.Total direct debt includes bonds, notes, COPs, loans, and capital leases [Stats]

156

Letter of Transmittal Government is transmitting the audited financial

statements Cannot transmit something you do not have Date of transmittal letter cannot be before the date

of the independent auditor’s report• Dated on or after independent auditor’s report date

[GAAFR, 592]

157

Management’s Discussion and Analysis

Missing Explanations for Significant Changes Amounts Do Not Agree to Financial

Statements …or to Transmittal, Note Disclosures, RSI, etc.

Should Include Ending Net Position

158

MD&A Deferred outflows and inflows are separate elements Governments combining deferred outflows with assets and

deferred inflows with liabilities in condensed statement of net position. Governmental Activities

2017 2016Assets

Current and other assets 100$ 85$ Capital asset, net 90 88

Total Assets 190$ 173$

Deferred outflows of resources 50$ 48$

LiabilitiesCurrent and other liabilities 45$ 46$ Long-term liabilities 60 55

Total Liabilities 105$ 101$

Deferred inflows of resources 44$ 40$

159

Government Wide –Statement of Net Position

Net Investment in Capital Assets• Miscalculated byoExcluding Deferred Gains and Losses on RefundingoIncluding Unspent Bond Proceeds

• MislabeledoNet Investment in Capital Assets v Invested In Capital Assets,

Net of Related Debt

Net Pension (and OPEB) Liabilities –Report with Non-current Liabilities

160

Governmental Fund Statements

Failure to Report All Major Funds Inappropriate Use of: Special Revenue Fund Type Other Financing Sources or Uses

Reporting in a Fund Type other than the General Fund (FG): Positive Unassigned Fund Balance

GF Inventories and Prepaid Items - Nonspendable Amount of Other Financing Source From Issuance of

LT Debt Should = Addition to LT Debt from Note Disclosure

161

Proprietary Fund Statements Capital contributions should be reported if

capital grants were reported in statement of activities

Cash Flow Statement:• Report receipts and disbursements gross rather than

net (generally)• All cash flows not properly reported as capital and

related financing activities, noncapital financing activities, or investing activities are reported as cash flows from operating activitiesoEven if Nonoperating on the Statement of Revenues, Expenses

and Changes in Net Position

162

Financial Statement Recognition Government-wide statement of net position, employer’s

(collective) net pension/OPEB liability should be reported with noncurrent liabilities due in more than one year*

* Unless a pension/OPEB plan’s fiduciary net position is less than the amount expected to be paid within one year

163

Noncurrent Liabilities

Due within one year 10,403,155

Due in more than one year

Bonds payable 38,827,143

Net pension liability 9,756,238

Net OPEB liability 37,961,200

Claims and Judgements 659,214

Other noncurrent liabilities do in more than one year 4,950,995

Total non-current liabilities do in more than one year 92,154,790

Fiduciary fund display In fiduciary fund financial statements, all pension (and

other employee benefit) trust funds are reported in a single column

164

Pension (and Other Employee Benefit)Trust Funds

Investment Trust Funds

Private-Purpose Trusts

Custodial(formerly Agency) Funds

Net position restricted for:

Pensions 29,897,802

OPEB 12,813,343

Pool participants 2,075,946

Individuals, organizations, and o other governments 886,024 99,842

Employer Aggregate PEB Disclosure165

PEB Disclosures Presented for Each Plan

Description of the plan: disclose whether the pension plan is a single-employer, agent multiple-employer, or cost-sharing multiple-employer defined benefit plan

Disclose pension/OPEB contributions made after the measurement date but before period end:• The amount of such contributions (which are reported as deferred

outflows of resources),• That they will not affect expense in subsequent years (as will other

deferred items), and• That they will be recognized as a reduction of net pension

liability/collective net pension liability in the subsequent reporting period.

166

PEB Disclosures Presented for Each Plan (cont.)

Disclose the amounts of the of deferred outflows and inflows of resources for each plan• Totals should equal amounts

in basic statements

Schedule of the net amount of deferred outflows and inflows of resources separately for each plan that will be recognized in the employer's pension expense for each of the subsequent five years, and, at a minimum, in the aggregate for subsequent years. Should not include amount of contributions

made subsequent to measurement date

2018 458,200$ 2019 303,510 2020 303,510 2021 303,510 2022 303,510

Thereafter 755,811 Total 2,428,051$

Deferred Deferredoutflows inflows

of resources of resourcesDifference between expected and

actual experience -$ 152,300$ Changes in assumptions 130,251 - Earnings on pension plan investments 2,450,100 - Contributions made subsequent to

the measurement date 458,622 - Total 3,038,973$ 152,300$

167

PEB Disclosures Presented for Each Plan (cont.)

Employers that provide pension or OPEB benefits through plans that are administered through GASB PEB trusts:• If the plan issues GAAP financial statements, the

employer must disclose how they may be obtained (link to website)

• If the plan does not issue GAAP financial statements, the employer must include a complete set of financial statements and note disclosures for the plan in its own note disclosures, and plan RSI in its own RSI

168

Disclose Funds that Pay Pension, OPEB, and Compensated Absences Liabilities

The notes to the employer’s financial statements should disclose what funds typically have been used in prior years to liquidate pension/OPEB (and other long-term) liabilities

169

Note Disclosures - OtherComponent Units Missing complete explanation as to either or both: Why Entity is a CU?

oe.g., entity fiscally dependent & potential benefit/burden on PG; PG appoints voting majority of entity’s board & has ability to impose will

• Why CU is Blended?oe.g., governing bodies of PG and entity substantially same, AND either

(a) potential Benefit/Burden, or (b) PG management has operational responsibility for entity

Not Distinguishing PG Pension from CU Pension Disclosures

170

Note Disclosures – Other (cont.)Valuation Donated Assets – Reported at Acquisition Value (v. Fair

Value)

Missing Disclosures about Each Type of Asset Reported at Fair Value - Description of valuation techniques• Use term Fair Value (v. Market Value)

It is Not Necessary to Disclose Credit Ratings for US Treasury or other Obligations Explicitly Guaranteed by the US.

Inventory:• Supplies – Cost• For Resale - LCM

171

Note Disclosures – Other (cont.)

Schedule of Changes in Capital Assets Explain if and why decrease in accumulated

depreciation is NOT accompanied by a decrease in same classification of depreciable dssets

Explain why a decrease in construction-in-progress is greater than an Increase in capital assets

Debt Refunding (Defeasance or Redemption) Disclose difference in debt service between old & new

Debt

172

Note Disclosures – Other (cont.)Miscellaneous Missing pledged revenue disclosures Modify fund balance disclosures to indicate that only

the general fund can report a positive unassigned fund balance

Separately disclose increases and decreases in compensated absences

disclose significant encumbrances • For each major fund and in total for nonmajor funds

173

Required Supplementary Information Schedule of employer contributions

• Information should be as of the most recent fiscal year end, not measurement date

• Payroll-related measure is covered payroll, not covered employee payroll.

2017 2016 2015 2014

Actuarially determined contribution 79,713$ 86,607$ 89,828$ 91,963$

Contributions in relation to the actuarially determined contribution 79,713$ 86,607$ 89,828$ 91,963$ Contribution deficiency (excess) -$ -$ -$ -$

Covered payroll 449,293$ 436,424$ 416,243$ 407,812$

Contributions as a percentage of covered payroll 17.74% 19.84% 21.58% 22.55%

174

Payroll-related Measures in RSI175

Statistical SectionDebt Miscalculation of debt service as % of noncapital

expenditures • Use capital outlay amount from reconciliation of statements of

revenues, expenditures and changes in fund balances to the statements of activities

Amounts in debt capacity schedules should match F/S• Premiums and discounts should be included in schedules

Total direct debt should include All LT debt instruments of governmental activities • Bonds, Notes, COPs, Direct Loans, Capital Leases

176

Easily Avoided But Frequent Errors Indentation under revenue heading of items that are

Not revenue• Contributions, special and extraordinary items, transfers

Grants inconsistently reported as operating or capital between government-wide and fund F/S

Net position (v. net assets)

• Net position in pension trust fund should be labeled “Net position restricted for pensions”

Capital assets (v. fixed assets)

177

Laugh or Cry…? Numbers do not match

• Between position and activity statements

Numbers do not articulate / differences not explained• Between sections

oTransmittal letter, MD&A, government-wide FS, fund FS, notes, RSI, statistical section

oFrequent examples include: deferred Inflows/outflows for pensions, capital assets

Rounding Errors

178

IV. GASB Codification

180

Original PronouncementsCodification

Which one are you relying on?

GASB Codification GASB’s Codification is a comprehensive

one-stop source for:• Applicable NCGA literature• Applicable AICPA accounting guidance • GASB:

o Statements o Interpretationso Technical bulletinso Implementation guideso Concept statementso Illustrations and flowcharts

Authoritative

Non-authoritative

GASB Codification contents

Consists of five parts:• Part 1 (1000 series) General Principles• Part 2 (2000 series) Financial Reporting• Part 3 (3000 series) Measurement• Part 4 (Alpha designations) Specific Topics

i.e. Pensions=P20• Part 5 (Alpha) Stand Alone Reporting-

Special Units & Activities

Volume 2

Volume 1

GASB Codification contents

Appendicies:• GASB Pronouncements Not Yet in Effect –

Including codification instructions• GASB Concepts Statements• NCGA Objectives of Accounting and Financial

Reporting for Governmental Units• Effective Dates of Pronouncements• Finding List of Original Pronouncements

GASB Codification contents (cont.)

Within each Section:• Paragraphs .101-.499-Standards A• Paragraphs .501-599-Definitions A• Paragraphs .601-699-GASB Technical Bulletins B• Paragraphs .701-.799-GASB Implementation B

Paragraphs .801-.899-AICPA literature cleared by GASB B

• Paragraphs .901-.999-Nonauthoritative materials, such as flowcharts and illustrations

A Category A GAAP B Category B GAAP

GASB Codification

Q & A immediately following standard being clarified

Illustrations have been updated to reflect changes to GAAP since the standards were originally issued

What’s missing from the Codification?• Statement introduction paragraphs• Statement backgrounds & bases for conclusions• Most transition guidance

186

https://gars.gasb.org

Free access to all GASB Original Pronouncements & Codification

https://gars.gasb.org/

V. GASB Conceptual Framework –

Financial Reporting

Existing Concepts Statements

1. Objectives of Financial Reporting2. Service Efforts and Accomplishments3. Communication Methods in GPEFR that

contain BFS4. Elements of Financial Statements5. Service Efforts and Accomplishments

[take 2]6. Measurement of Elements of Financial

Statements

Financial Reporting Concepts Statements & Projects

1. Objectives of Financial Reporting2. Service Efforts and Accomplishments

3. Communication Methods in GPEFR that contain BFS

4. Elements of Financial Statements5. Service Efforts and Accomplishments

6. Measurement of Elements of Financial Statements

7. Preliminary Views (PV) Issued -Recognition of Elements of Financial Statements

8. Newly Added to Agenda - Disclosure Framework

#1: Objectives of Financial Reporting

Primary users: Citizens Legislative & oversight bodies Investors & creditorsPrimary objective: Accountability“The Board considers it [accountability] to be the paramount objective from which all other objectives must flow”

190

Concepts Statement 1 (cont.)Financial reporting should enable users to assess accountability1. Provide information to determine whether

current-year revenues were sufficient to pay for current-year services [Economic Resources/Government-wide reporting]

2. Demonstrate whether resources were obtained and used in accordance with the legally adopted budget and compliance with finance related legal & contractual requirements [Fund reporting]

3. Assess the service efforts, costs, and accomplishments

191

Concepts Statement 1 (cont.)

Other objectives of financial reporting and related concepts include assisting users in evaluating: Financial condition and results of

operations Efficiency and effectiveness Interperiod equity Ability to meet obligations as they come

due

192


Characteristics of information in financial reporting: Understandability Reliability Relevance Timeliness Consistency Comparability

193

#3: Communication Methods in GPEFR that contain BFS

Hierarchy of communication methods

194

Recognition in basic financial statements

Disclosure in notes to basic financial statements

Presentation as required supplementary information

Presentation as supplementary information

Concepts Statement 3 (cont.) Recognize

• Elements of financial statements, that are• Measurable with sufficient reliability

Note disclosures• Integral to financial statements, and• Essential to user’s understanding thereof• Provide:

o Descriptions of policies underlying recognized amountso Additional detail or explanationo Additional information that does not meet criteria for

recognition

195

Concepts Statement 3 (cont.) Required supplementary information

• Supporting information, that • GASB has concluded is essential for placing

BFS & notes into appropriate contextoOperationoEconomicoHistorical

Supplementary information• Supporting information, that • Is useful for placing BSF and notes into

appropriate context

196

#4: Elements of Financial Statements

Recognition in BFS requires an item to meet the definition of a FS element

Resource An item that can be drawn on to provide

services to citizenry

197


Elements of financial statements Assets

• Resources with present service capacity that the government presently controls

Liabilities• Present obligations to sacrifice resources that

the government has little or no discretion to avoid

198


Outflows of Resources• A consumption of net assets* by the

government that is applicable to the reporting period

Inflows of Resources• An acquisition of net assets by the

government that is applicable to the reporting period

* Assets netted with liabilities

199

Concepts Statement 4 (cont.) Deferred Outflows of Resources

• A consumption of net assets by the government that is applicable to a futurereporting period

Deferred Inflows of Resources• An acquisition of net assets by the

government that is applicable a reporting period

Net position• The residual of all other elements in

statement of financial position

200

#6: Measurement of Elements of Financial Statements

Measurement Act/process of determining the value for

elements presented in financial statements

Measurement approaches Initial amount, use for

• Assets used directly in providing services Remeasured amount, use for

• Assets that will be converted into cash• Variable-payment liabilities

201

Concepts Statement 6 (cont.)Focus on Assets and Liabilities “Balance sheet approach” Deemphasizes “matching” Measurement Attributes Historical cost Fair value Acquisition value Replacement cost Settlement amount

202

#7(?): Recognition of Elements of Financial Statements

Recognition hierarchy of elements

203

Meets definition of asset or liability? If yes, recognize as such.

Meets definition of deferred outflow/inflow of resources?If yes, recognize as such.

Meets definition of outflow/inflow of resources?If yes, recognize as such.

If no to all - don’t recognize in financial statements

#7(?): Recognition of Elements of Financial Statements (cont.) Recognition when

• Meets definition of an element within context of the measurement focus applicable to the financial statementoExpansion of “recognize elements” in Concept

Statement No. 3• Reflects qualitative characteristics of

information in financial report oConcept Statement No. 1oExpansion of “Measurable with sufficient reliability”

in Concept Statement No. 3

204

#8(?): Disclosure Framework Expansion of Concepts Statement

No. 3, Communication Methods…• Develop concepts to further clarify what

is “essential”• Staff and GASB will “test” new concepts

with existing disclosures

205

Questions?

For More Information…

Government Finance Officers

Association

Technical Services Center

312.977.9700

GFOA.org

207