GASB, GAGAS, FASB, SAS, OMB Oh My!

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1 CCIA Spring 2014 Conference Understanding Your Audit Report Heather McGee Decauwer Senior Manager, VLS Patrick Cabildo Internal Auditor, Chaffey CCD October 3, 2014 What are all these Standards? GASB, GAGAS, FASB, SAS, OMB Oh My! 2 1

2 GASB 3 GASB Governmental Accounting Standards Board - source of generally accepted accounting principles (GAAP) for state and local governments. - Accounting and financial reporting standards designed for the government environment are essential because governments are fundamentally different from for-profit businesses. Furthermore, the information needs of the users of government financial statements are different from the needs of the users of private company financial statements. 4 2

3 FASB 5 FASB Financial Accounting Standards Board - the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental organizations. - CCD s follow GASB. College Auxiliaries, including Foundations, follow FASB. 6 3

4 GAGAS 7 GAGAS Generally Accepted Government Auditing Standards - Also known as Yellowbook - These standards are for use by auditors of government entities and entities that receive government awards and audit organizations performing GAGAS audits. 8 4

5 SAS 9 SAS Statement of Auditing Standards - issued by American Institute of Certified Public Accountants (AICPA) - Its mission is to serve the public interest by developing, updating and communicating comprehensive standards and practice guidance that enable practitioners to provide high-quality, objective audit and attestation services to nonissuers in an effective and efficient manner. 10 5

6 CCCCO 11 CCCCO California Community College Chancellor s Office - The Fiscal Standards and Information Unit is responsible for maintaining the budget and accounting structure and fiscal reporting procedures for the community colleges. - The Section also collects and analyzes fiscal information and prepares reports; monitors changes in related laws, regulations, generally accepted accounting principles, and GASB requirements; and monitors and reports on district compliance with the Fifty Percent Law and Full-Time/Part-Time Faculty statutes and regulations. 12 6

7 CDAM 13 CDAM Contracted District Audit Manual -This manual applies to annual financial and compliance audits of community college districts and was developed to encourage sound fiscal management practices among community college districts. -The intent is to promote efficient and effective use of public funds for education in California by strengthening fiscal accountability at the district, county and state levels. 14 7

8 OMB 15 OMB Office of Management & Budget Federal Office of Management and Budget - OMB Circular A Audits of States, Local Governments, and Non-Profit Organizations - This Circular is issued pursuant to the Single Audit Act of 1984, P.L , and the Single Audit Act Amendments of 1996, P.L It sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of States, local governments, and non-profit organizations expending Federal awards. 16 8

9 CCIA Fall 2014 Conference UNDERSTANDING YOUR AUDIT REPORT & AUDIT PROCESS AUDIT REPORT SECTION Independent Auditors Report Presented by: Heather McGee Decauwer, Vicenti, Lloyd & Stutzman LLP Patrick Cabildo, Chaffey CCD Standard or Agency DECRIPTION Provides the auditors opinion on the fairness of the financial statements prepared by management and whether the financial statements are prepared in accordance with generally accepted accounting principles. SAS 1 Two types of opinions: Unmodified Opinion - the opinion where auditor expresses that the financial statements are presented, in all material respects, in accordance with applicable the financial reporting framework. Modified Opinion - A qualified opinion, an adverse opinion, or a disclaimer of opinion. Given when the auditor (a) concludes that based on the audit evidence obtained, the financial statements as a whole are materially misstated OR (b) is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement. Qualified - a. the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are material but not pervasive* to the financial statements or b. the auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive. Adverse - the auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the financial statements Disclaimer - the auditor, unable to obtain sufficient appropriate audit evidence on which to base the opinion, and the auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could be both material and pervasive. *pervade to spread through or throughout

10 AUDIT REPORT SECTION Independent Auditors Report (continued) Management s Discussion and Analysis Provides a written picture of what the financial statements communicate to the readers and users of your audit report. This is a required element under the GASB 34/35 reporting model. Basic Financial Statements Under the GASB 34/35 reporting model, the financial statements are completely reconfigured to focus on the District as a whole without displaying individual fund information. Standard or Agency GASB 34/35 GASB DECRIPTION Opinion letter may include: Emphasis of Matter Paragraph - A paragraph included in the auditor's report that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor's professional judgment, is of such importance that it is fundamental to users' understanding of the financial statements. Examples: o Going Concern o Pending Lawsuit Other Matters Paragraph- A paragraph included in the auditor's report that refers to a matter other than those presented or disclosed in the financial statements that, in the auditor's professional judgment, is relevant to users' understanding of the audit, the auditor's responsibilities, or the auditor's report. Examples: o Required Supplementary Information** o Other Information** **see examples on page 3 Certain limited procedures are applied by your auditor, however, this information is unaudited and the auditor expresses no opinion on it. The statement of net position and statement of revenues, expenses and changes in net position are presented on the full accrual basis of accounting including capitalization and depreciation of fixed assets and the recognition of long-term debt. A statement of cash flows is also presented. 2

11 AUDIT REPORT SECTION Footnotes The footnotes are an integral part of the financial statements the financial statements would be incomplete without footnotes. The footnotes help to explain the accounting policies of the District and give more insight into the numbers included on the financial statements. Required Supplementary Information Standard or Agency GASB GAAP DECRIPTION Some of the key footnotes are: Accounting Policies Deposits & Investments Capital Assets Long-term Debt Retiree Benefits SERP Commitments and Contingencies Subsequent Events Required supplementary information differs from other information outside the basic financial statements. Certain agencies considers the information essential to financial reporting and because authoritative guidelines for the measurement and presentation of the information have been established. GASB Post-employment health care benefits funding process Schedule of employer contributions Supplementary Information Information required by the California Communication College Chancellor s Office (CCCCO) and the Federal Office of Management and Budget (OMB). The same audit procedures (unless noted as unaudited) are applied to this information as to the general purpose financial statements. CCCCO History & organization (unaudited) State financial assistance Workload measures for State general apportionment Reconciliation of annual financial and budget report with audited financial statements Reconciliation of 50% law Proposition 30 EPA expenditure report OMB Expenditures of Federal awards Prop 39 District Preference Optional (for continuing disclosure requirements) Financial trends and analysis General fund budget to actual (unaudited) Optional Reconciliation of Governmental Funds to the Statement of Net Assets 3

12 AUDIT REPORT SECTION Series of Compliance and Internal Control Letters Required by the Federal and State Governments These letters discuss whether, during the course of our audit, the auditor noted any material issues of non-compliance with local, state or federal laws and/or regulations; also, whether any internal control issues were noted regarding the processing of on-going transactions or transactions related to federal major programs. Findings and Recommendations This section includes the Federal required disclosures of OMB Circular A- 133 as well as other compliance and/or internal control findings. Statistical Information This information is presented to aid the District in meeting the bond continuing disclosure requirements. Standard or Agency GAGAS OMB CCCCO GASB CCCCO OMB Prop 39 DECRIPTION This section contains three reports. The first addresses compliance related to laws, regulations, grants, etc. and consideration of the internal controls over financial reporting. The second reports on compliance with Federal grant requirements and internal control over compliance. The third addresses the District s compliance with state programs. Any reportable conditions are identified in these reports and the reader is referred to the Findings and Questioned Costs section. This section contains five parts: Summary of Auditor Results - required by OMB Circular A-133 and CCCCO. Schedule of findings and Questioned Costs Related to General Purpose Financial Statements findings related to internal controls over financial reporting and compliance with laws and regulations. Schedule of Findings and Questioned Costs Related to Federal Awards Report on State Compliance identifies programs in the Department of Finance s transmittal of audit requirements and the determination of reasonable assurance that the District is in compliance. Status of Prior Year Finding This section provides an update on the findings and recommendations included in the prior year audit report Information in the statistical section is presented for informational purposes and is not audited. 4

13 Contact Information Heather McGee Decauwer, CPA - Senior Manager Vicenti, Lloyd & Stutzman LLP hdecauwer@vlsllp.com (626) Patrick Cabildo, CPA - Internal Auditor Chaffey Community College District patrick.cabildo@chaffey.edu (909)