Transcript CURRENT AUDIT ISSUES Georgia Department of Audits

G.A.I.N.S. Annual Meeting
May 4, 2012
Presented by: Suzanne L. Hatfield, CPA, CGFM
OVERVIEW
 GASB 54 Fund Balance Reporting and Governmental
Fund Type Definitions
 GASB 59 Financial Instruments Omnibus
 GASB 60 Accounting and Financial Reporting for Service
Concession Arrangements
 GASB 61 The Financial Reporting Entity: Omnibus
 GASB 62 Codification of Accounting and Financial
Reporting Guidance Contained in Pre-November 30, 1989
FASB and AICPA Pronouncements
 GASB 63 Financial Reporting of Deferred Outflows of
Resources, Deferred Inflows of Resources, and Net Position
 GASB 64 Derivative Instruments: Application of Hedge
Accounting Termination Provisions
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OVERVIEW
 Collateralization Form
 Net Assets, Invested in Capital Assets, net of
Related Debt
 Reconciling Balance Sheet to Statement of Net
Assets
 Timeliness
 Manuscript Process
 Data Submission
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Fund Balance Reporting and Governmental Fund
Type Definitions
5 Classifications of Fund Balance
 Nonspendable
 Restricted
 Committed
 Assigned
 Unassigned
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Nonspendable Fund Balance
 Includes amounts that cannot be spent because
 Not in spendable form

Not expected to be converted to cash
 Inventories
 Prepaid amounts
 Legally or contractually required to be maintained intact

Corpus of a permanent fund
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Restricted Fund Balance
 Use the same criteria required when reporting government-wide
net assets
 Constraints placed on the use of resources are either
 Externally imposed by





Creditors (debt covenants)
Grantors
Contributors
Local Matching Funds
Laws or regulations of other governments
 Imposed by law through constitutional provisions or enabling
legislation

SPLOST receipts
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Committed Fund Balance
 Amounts that can only be used for specific purposes as a
result of constraints imposed by formal action of the board
 Formal action should occur no later than the close of the
fiscal year
 The actual amount may be determined in the subsequent
period
 Constraints on committed amounts can only be removed
by formal action as well
 Can also be created by contracts
 Committed amounts cannot be used for any other purpose
unless the board removes or changes the specified use by
taking similar formal action
 School Activity Accounts
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Assigned Fund Balances
 Amounts that are constrained by the government’s intent to be used
for specific purposes, but are neither restricted nor committed
 Exception – stabilization arrangements. Should be reported as
Restricted or Committed.
 Established by



The board
Finance committee or
An official delegated by the governing body to assign
amounts
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Unassigned Fund Balance
 Residual classification for the general fund
 The general fund balance that has not been restricted,
committed, or assigned to specific purposes within the
general fund
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Differences between Committed and Assigned
1.
2.
3.
An assignment of resources does not have to be made
by the board’s highest level of decision-making
authority
The actions needed to remove or modify an assignment
are not as prescriptive
Resources may be assigned for specific purposes even
after the LEA’s year end
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Assigned Fund Balance
 Assigned fund balances should always be reported for positive
fund balances remaining after nonspendable, restricted, and
committed amounts have been identified for reporting in
 special revenue
 capital projects
 debt service
 permanent funds
 By reporting resources in any of these funds, the government has
effectively assigned them to the purpose of that fund.
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Assigned Fund Balance
 There should be no unassigned fund balance in
 Special revenue
 Debt service
 Capital projects
 Permanent
 Typically, general fund will include unassigned fund
balance
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Requirements for School Districts
 O.C.G.A. § 20-2-167
 The total of the Committed + Assigned, + Unassigned
fund balance – Committed for Capital Outlay will be
used in the calculation of the 15% maximum allowable
fund balance
 The residual unobligated bus replacement funds
will be accounted for as Restricted
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Financial Statements Omnibus
Summary
 Objective
 Update and improve existing standards regarding financial
reporting and disclosure requirements of certain financial
instruments and external investment pools
 Amends
 GASB Statements 25, 31, 40 and 53
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Summary
 Provides for more complete information
 Improving consistency of measurements

Interest-earning investment contracts that are reported in
pension and OPEB plans
 Providing clarifications of existing standards


Interest rate risk disclosures
Refining which financial instruments are within scope of
GASB 53
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Accounting and Financial
Reporting for Service Concession
Arrangements
Summary
 Objective
 Improve financial reporting by addressing issues related to
service concession arrangements (SCAs)
 Improve the consistency in reporting these arrangements
Enhancing comparability of accounting and financial
reporting of such arrangements among state and local
governments
 Effective periods beginning after December 15, 2011

 Fiscal year 2013
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Service Concession Arrangements
 A type of public-private or public-public partnership
 Public-private relationship is used to refer to a variety
of
 Service arrangements
 Management arrangements
 Service concession arrangements
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Service Concession Arrangements
 An arrangement in which all of the following criteria are met
1. A transferor conveys to an operator the right and related
obligation to provide services to the public through the use and
operation of a capital asset (facility) in exchange for significant
consideration
2. Operator collects and is compensated by fees from third parties
(users of the facility)
3. Transferor is entitled to significant residual interest in the service
utility of the facility a the end of the arrangement
4. Transferor determines or has the ability to modify or approve
1.
2.
3.
What services operator is required to provide
To whom services will be provided
Prices or rates that will be charged
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The Financial Reporting Entity:
Omnibus
Summary
 Objective
 Improve financial reporting for a governmental financial
reporting entity
 Effective periods beginning after June 15, 2012
 Fiscal year 2013
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Overview
 Increases the emphasis on financial relationships
 Raises the bar for inclusion
 Refocus and clarify the requirements to blend certain
component units
 Improve the recognition of ownership interests
 Joint ventures
 Component units
 Investments
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Inclusion Criteria
 GASB 14 requires inclusion if PCU is fiscally dependent
(PG has authority over)
 Budget
 Setting taxes or charges
 Issuing debt
 GASB 61 adds requirement for a financial benefit or burden
before inclusion is required
 Effect of this
 PCU needing PG approval for its budget, levies or debt issuance is no
longer a sufficient reason, on its own, to include it
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Inclusion Criteria
 GASB 14 requires inclusion of a PCU if exclusion
would make
incomplete”
PGs
statements
“misleading
or
 GASB 61 eliminates “incomplete” and emphasizes
determination would generally be based on the nature
and significance of relationship with PG
 Based on preparer professional judgment
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Blending Requirements
 GASB 14 requires blending if PG & CU have
“substantively same” governing body
 GASB 61 additionally requires either of the following
relationships to qualify for blending
 A financial benefit/burden relationship, or
 PG has “operational responsibility” for CU
 PGs personnel manage activities of CU like a fund,
program, or department of PG
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Blending Requirements
 GASB 61 expands blending criteria to include CUs
whose total debt outstanding is expected to be repaid
entirely or almost entirely by resources of the PG
 Even if the CU provides services to constituents or other
governments, rather
exclusively to the PG
than
exclusively
or
almost
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Codification of Accounting and
Financial Reporting Guidance
Contained in Pre-November 30,
1989 FASB and AICPA
Pronouncements
Summary
 Objective
 Incorporate into GASBs authoritative literature certain
accounting and financial reporting guidance that is includes
in the following pronouncements issued on or before
November 30, 1989, which does not conflict or contradict
GASB pronouncements
FASB Statements and Interpretations
 Accounting Principles Board Opinions
 Accounting Research Bulletins of the AICPA Committee on
Accounting Procedure
 Effective periods beginning after December 15, 2011

 Fiscal year 2013
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Guidance Incorporated










Capitalization of interest costs
Statement of net assets classification
Special and extraordinary items
Comparative financial statements
Related parties
Prior-period adjustments
Accounting changes and error corrections
Contingencies
Extinguishments of debt
Troubled debt restructuring
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Guidance Incorporated











Inventory
Leases
Sales of real estate
Real estate projects
Research and development arrangements
Broadcasters
Cable television systems
Insurance enterprises
Lending activities
Mortgage banking activities
Regulated operations
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Financial Reporting of Deferred
Outflows of Resources, Deferred
Inflows of Resources, and Net
Position
Summary
 Objective
 Provides financial reporting guidance for deferred outflows of
resources and deferred inflows of resources
 Effective periods beginning after December 15, 2011
 Fiscal year 2013
34
Background
 Concepts Statement 4 identifies five elements making up a
financial position
1.
2.
3.
4.
5.
Assets
Liabilities
Deferred outflows of resources
Deferred inflows of resources
Net position
This from composition currently required by GASB 34 which
requires
1. Assets
2. Liabilities
3. Net assets
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Definitions
 Deferred outflows of resources
 A consumption of net assets by the entity that is applicable to
a future reporting period
 Positive effect on net position, similar to assets
 Deferred inflows of resources
 An acquisition of net assets by the entity that is applicable to
a future reporting period
 Negative impact on net position, similar to liabilities
 Net position
 The residual of all elements presented in a statement of
financial position
36
Accounting Equation
 Governmental activities – Statement of Net Position
 Net position = assets + deferred outflows – liabilities –
deferred inflows
 Governmental funds – Balance Sheet
 assets + deferred outflows = liabilities + deferred inflows
+ fund balance
37
Derivative Instruments:
Application of Hedge Accounting
Termination Provisions
Summary
 Objective
 Clarify whether an effective hedging relationship continues
after the replacement of a swap counterparty or a swap
counterparty’s credit support provider
 Effective periods beginning after June 30, 2011
 Fiscal year 2012
39
Required Disclosure
 For the notes disclosure, GASB codification C20.107
indicates that the disclosure of custodial risk should
be broken out into 3 categories:
1.
2.
3.
Uncollateralized
Amount collateralized with securities held by the
pledging financial institution
Amount collateralized with securities held by the
pledging financial institution's trust depart or agent,
but not in the School District's name
 Note: Categories 2 and 3 are both NOT in the School
District’s name.
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Confirmation
 Additional categories
 4a. Amount collateralized with securities held by the
pledging financial institution or by its trust department
or agent, IN the School District's name
 4b. Amount covered by depository insurance
 In accordance with GASB, Categories 4a and 4b are not
reported in the Notes to the Financial Statements
 Categories 2 and 3 are confusing because the phrasing is
exactly like the standard
 HOWEVER, both categories are for securities not held in the
school district's name
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Category for Pooled Pledges
 GASB Comprehensive Implementation Guide 2011-
2012 1.37.3 states:
 “Multiple financial institution collateral pool… Statutes
authorizing these pools specify the amount of collateral
that is required to be pledged by each financial
institution – usually a percentage of the uninsured
public deposits it holds…. As a result, a multiple
financial institution collateral pool that provides for
additional assessments is similar to deposit insurance
and does not require the disclosure of custodial credit
risk.”
 The category depends on if your entity is specifically
listed as a member of the pledging pool
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Notes Disclosure
 Collateralization information is needed for the
disclosure
 Worksheet for collateralization is included in the
Audit Packet found on our website.
 To prepare your deposit and investment note, you
should obtain this information from the bank
 We will verify the validity of the information
included in the Notes
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45
Calculation
Capital Assets, net of Accumulated Depreciation
- Total Long Term Debt
including any Bond Premium or Discount
+
Long Term Debt not used to acquire Capital Assets
Compensated Absences
+ Amount of Bond Proceeds not expended
If the debt has not been expended, it is not yet related to
the Capital Assets
+ Amount of Debt expended for items that were not capitalized
If items were not capitalized that were acquired with debt,
the related debt should not be included in the calculation
NOTE: Bond Issuance Costs that are Amortized over the life of the
debt is added to Unrestricted Net Assets and is not included in this
calculation
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GASB Implementation Guide 2011-2012
 Section 7.23.3
 Question – Which component(s) of net assets do
unamortized debt issue costs, premiums and discounts, and
deferred amounts from refundings affect – invested in capital
assets, net of related debt; restricted net assets; or
unrestricted?
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GASB Implementation Guide 2011-2012
 Answer – Because premiums, discounts, and deferred amounts
from refundings affect the carrying value of the debt in the
statement of net assets, they “follow the debt” in calculating net
asset components for the statement of net assets. That is, if debt
is capital related, those amounts would be included in the
calculation of invested in capital assets, net of related debt. If the
debt is restricted for a specific purpose and the proceeds are
unspent, the net proceeds would affect restricted net assets.
Reporting both within the same element of net assets prevents
one classification from being overstated while another is
understated by the same amount. If the debt proceeds are not
restricted for capital or other purposes, the unamortized
premiums, discounts, and deferred amounts from refundings
would be included in the calculation of unrestricted net assets.
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GASB Implementation Guide 2011-2012
 Unamortized debt issue costs should be included in
unrestricted net assets because those outlays do not
acquire, construct, or improve capital assets. If the
issuance costs were paid from bond proceeds, the portion
of outstanding debt attributable to those issuance costs
also should be included in unrestricted net assets.
49
Balance Sheet to Statement of Net Assets
50
Reconciling Items to Include
 Restricted for Capital Projects
 Deferred revenue
 Amount of unexpended bond proceeds on hand
 Restricted for Debt Service
 Deferred revenue
 Interest payable
 Restricted for Continuation of Federal Programs
 Inventories reported as Nonspendable on Balance
Sheet
51
Reconciling Items to Include
 Unrestricted
 Sum of Balance Sheet Classifications



Committed
Assigned
Unassigned
 Deferred revenue
 Uncapitalized bond proceeds expended
 Compensated absences
 Amortized bond issuance costs
 Consumable
supply inventory
Nonspendable on Balance Sheet
reported
as
52
53
MARCH 31ST Federal Clearinghouse Deadline
 OMB Circular No. A-133, Subpart E—Auditors
§__.320 – Report Submission states, in part:
 The audit shall be completed and the data collection form and
reporting package shall be submitted within the earlier of 30 days
after receipt of the auditor’s report or nine months after the end of
the audit period.
 The 2011 OMB Compliance Supplement states, in
part:
 In order to meet the criteria for a low-risk auditee (OMB Circular A-
133 §__.530) in the current year, the prior two years audits must have
met the requirements of OMB Circular A-133, including report
submission to the Federal Audit Clearinghouse by the due date
(OMB Circular A-133 §__.320).
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MARCH 31ST Federal Clearinghouse Deadline
 FY 2011 – 55 School District audits were released,
certified and submitted to the Federal Audit
Clearinghouse prior to March 31, 2012
 Increase from 46 School District audits in FY 2010
 FY 2012 – 37 School Districts will meet the low risk
criteria
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Federal Low Risk Auditee
What does “low-risk status” mean?
 A low risk of noncompliance with federal programs
 Determination
made utilizing a list of
requirements set for in the OMB Circular No. A-133
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Federal Low Risk Auditee
Why does a School District want to meet lowrisk status???
 DECREASED FEDERAL TESTING!!!
How can your School District best meet the
low-risk status?
 BY HAVING YOUR FINANCIAL STATEMENTS AND
SUPPORTING DOCUMENTATION READY EARLY!
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Report Cover
 The Report Cover may be designed by the School District.
 If no design is provided, DOAA will use the standard report
cover with the appropriate information.
 If designing a report cover please include the following:
 Name of the School District
 City and State
 Annual Financial Report for the Fiscal Year Ended June 30,
20xx
 (Including Independent Auditor’s Report)
 Allow at least 1/2 " of space on the left margin of the cover to
allow for the binding strip.
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Other Report Basics
 DOAA Font – Franklin Gothic Book
 DOAA Font Size – 11 pt.
 Exception = Larger Tables 8-10 pts.
 Title of Exhibit 0r Schedule – .5 inches from top
 Margins :
 ½ inch top and bottom
 1 inch Left and Right
 Footers .3 inches from the bottom of the page
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So What?
 Limited Support Staff Resources
 To efficiently release reports we need:
 Electronic versions of Word & Excel Files
 When Using DOAA delivered templates:



Always start with the Latest Version!
Updated Resources should be available by Oct. 1st
If you need the prior year manuscript documents, just ask!
 Email or Call Your Audit Supervisor
 Email [email protected]
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DOAA
Submission
Site
•
•
•
•
Salary & Travel
AHIS
SPLOST
Financial
Statements
• HB87
63
Salary & Travel Submission
 No changes for FY2012
 Submission Site should open around the
2nd week of July
 Due August 15th
 Salary & Travel should reconcile to the General Ledger
64
2012 AHIS Submission
 No new legislation for FY2012
 Due October 15th
 FY2011 Statistics
 42 after October 15th
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2012 AHIS Submission
 Validation Rules
 Fields must meet size limitations/expectations outlined on
the file specification

*** Object should be 5 digits
 Records must include a valid Fed Flag value (FE or SO)
 Revenue records must include a valid Revenue Source from
GDOE’s chart of accounts
 ALL records must have at a minimum:



Function (Balance Sheet Accounts)
Function and Object (Expenditure Accounts)
Revenue Source (Revenue Accounts)
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2012 AHIS Submission
 Issues
 Each record should be traceable to the General
Ledger

DOAA received records with
NO Function, Object, or Revenue Source
 Local Account
 If you do not use the State Chart of Accounts or you
crosswalk the accounts when reporting to GDOE, you
should provide the local account in the last column to
allow the auditors to trace the transaction to the
general ledger.
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2012 AHIS Submission
 Issues
 Federal Flag is likely based on program code
 If federal activity is not in a program code that has been
tagged as federal, these transactions will not be flagged
correctly. (Example: 9990)
 If payments to a vendor are predominantly federal
expenditures , you have the opportunity to adjust these
payments through the DOAA adjustment screens after
uploading the file. This is not required, but an option if you
feel the data is misleading
 ALL PAYMENTS ARE DISPLAYED ON OPEN.GEORGIA.GOV
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Open.Georgia.Gov Website
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2012 SPLOST Submission
 Under Transparency in Government Act, School
Districts must submit SPLOST Schedules
 Due by December 15th
 FY2011 Statistics
 39 after December 15
 Only 1 with no submission
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2012 Financial Statements
 Entities can submit a complete set of financial
statements to the same application used for SPLOST
submissions.
 This is an easy place for auditors to get the files, and
you can avoid potential email issues.
 You can submit a zipped file or compressed folder.
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2012 HB87 Submission
 More information to come on deadlines
 More information to come on submission period
 Must enter the site even if there is “Nothing to Submit”
 ALL School Districts submitted this year!!
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Questions??
Kristina Turner, CPA, CISA
404-657-4352
[email protected]
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