GAAP Process Update FY14. Agenda. General overview of GAAP process and FY14 due dates GASB Update WEDGE Update Common Issues

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1 GAAP Process Update FY14 Agenda General overview of GAAP process and FY14 due dates GASB Update WEDGE Update Common Issues 1

2 Division of Financial Reporting Katie Madonia, Director of Financial Reporting (217) Elizabeth Johnson, Manager of Financial Reporting (217) Division of Financial Reporting Cindi Ryan-Tinch, PSA (217) Miriam Stowell, PSA (217) Olga Richmiller, PSA (217) Quarterly State Property Reports Capital Asset Forms (SCO-537/SCO-538) Quarterly Accounts Receivable Reports Compensated Absences Forms (SCO-580) Leases (SCO-560) Quarterly Locally Held Fund Reports 2

3 Overview GAAP PACKAGE PREPARATION General Information Agencies will have access to post/update their GAAP information into WEDGE, and when finished, transmit the package to the IOC. Once packages are transmitted, agencies will only have access to view and/or print packages. All changes subsequent to transmission will need to be made by IOC staff. Required manual forms not included on WEDGE must be completed and sent to the IOC by the appropriate due dates. 3

4 General Information The following entries, if applicable, will be posted to GAAP packages by IOC staff, and notification will be mailed to the GAAP coordinator of the agency: Interest accrual entries for Treasury-held Non-Shared funds Securities lending entries for Treasury-held Non-Shared funds Capital lease entries for Governmental funds Unearned revenue related to unexpired licenses The following activity, if applicable, will be mailed to the GAAP coordinator of an agency, to be input by the administering agency of a Non-Shared fund: Accrual only activity of the non-administering agency General Information Due Dates Lease Information Confirmed by 7/11 Compensated Absence Information Due (SCO-580) by 7/25 Capital Asset Information Due (SCO-537/SCO-538) by 8/8 IOC to mail by 7/16 depending on receipt of lease information confirmation Interfund Transfers Entered by Grantee Agency (SCO-567) by 8/1 Interfund Transfers Approved by Grantor Agency (SCO-568) by 8/8 4

5 General Information Due Dates GAAP Packages - WEDGE system will be available approximately 7/16. Manual forms that display prior year balances will be mailed no later than 7/16. Locally Held Packages due 8/8 All Other Packages due 8/15 GRF, Funds with SEFA reporting requirements, and Proprietary Packages due 8/22 Private Purpose Trust Funds, Investment Trust Funds, and Pension Trust Funds Nonretirement Systems due 9/8 Significant Packages at Material Agencies due 9/8 Financial Reporting GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) UPDATES 5

6 Summary of GASB Updates Effective Dates Recently Implemented GASB Standards June 30, 2013 GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position* * Effective as of the previous December 31; however, effective as of June 30, for the State of Illinois. Summary of GASB Updates Effective Dates Recently Issued GASB Standards June 30, 2014 GASB Statement No. 65, Items Previously Reported as Assets and Liabilities* GASB Statement No. 66, Technical Corrections 2012 an amendment of GASB Statements No. 10 and No. 62* GASB Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25 GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees * Effective as of the previous December 31; however, effective as of June 30, for the State of Illinois. 6

7 Summary of GASB Updates Effective Dates Recently Issued GASB Standards June 30, 2015 GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 GASB Statement No. 69, Government Combinations and Disposals of Government Operations* GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the measurement Date an amendment of GASB Statement No. 68 * Effective as of the previous December 31; however, effective as of June 30, for the State of Illinois. Summary of GASB Updates GASB Statement No. 63 Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position Addresses presentation issues associated with the new financial position elements created in Concepts Statement No. 4 (assets, liabilities, deferred outflows of resources, deferred inflows of resources, and net position). Deferred Outflows of Resources and Deferred Inflows of Resources should only be used as specifically required in authoritative GASB pronouncements: GASB No. 53 Derivative Instruments GASB No. 60 Service Concession Arrangements GASB No. 65 Items Previously Reported as Assets and Liabilities GASB No. 68 Accounting and Financial Reporting for Pensions GASB No. 69 Government Combinations and Disposals of Government Operations 7

8 Summary of GASB Updates GASB Statement No Definitions Deferred outflow of resources A consumption of net assets by the government that is applicable to a future period. Has a natural debit balance and is reported in a separate section following assets. Deferred inflow of resources An acquisition of net assets by the government that is applicable to a future reporting period. Has a natural credit balance and is reported in a separate section following liabilities. Net position The residual of all elements presented in a statement of financial position. Net position components include Net investment in capital assets Restricted Unrestricted Summary of GASB Updates GASB Statement No Reporting Requirements Statement of Net Position (Government-Wide Financials) Assets Deferred Outflows of Resources (DOR) Liabilities Deferred Inflows of Resources (DIR) Net Position Balance Sheet (Governmental Fund Financials) Assets Deferred Outflows of Resources (DOR) Liabilities Deferred Inflows of Resources (DIR) Fund Balance 8

9 Summary of GASB Updates GASB Statement No Reporting Requirements (cont.) Footnote Disclosures Governments should provide details of different types of deferred amounts in the notes to the financial statements if the deferred inflows/outflows consist of multiple components on the face of the financial statements. Summary of GASB Updates GASB Statement No. 65 Items Previously Reported as Assets and Liabilities Objective is to determine whether certain transactions previously reported as assets and liabilities should continue to be reported as such or should instead be reported as: A deferred outflow of resources, An outflow of resources (expense/expenditure), A deferred inflow of resources, or An inflow of resources (revenue). 9

10 Summary of GASB Updates GASB Statement No. 65 Use of the Term Deferred Use of the term deferred should be limited to those items classified as deferred outflow of resources or deferred inflow of resources. IOC has renamed account 220 Unavailable Deferred Revenue to Unavailable Revenue IOC has renamed account 221 Unearned Deferred Revenue to Unearned Revenue Summary of GASB Updates GASB Statement No. 65 Reporting Examples Deferred Outflows of Resources (debit balance) Grants paid in advance of meeting timing requirements Deferred amounts from refunding of debt (debits) Costs to acquire rights to future revenues (intra-entity) Deferred loss from sale-leaseback Deferred Inflows of Resources (credit balance) Grants received in advance of meeting timing requirement Taxes received in advance (imposed non-exchange such as property taxes) Deferred amounts from refunding of debt (credits) Proceeds from sales of future revenues (GASB No. 48) Deferred gain from sale-leaseback Regulatory credits Unavailable revenue in governmental funds 10

11 Summary of GASB Updates GASB Statement No. 65 Reporting Examples Assets Grants paid in advance of meeting eligibility requirements (other than timing) Rights to future revenues acquired from outside the reporting entity Prepayments Pension asset (Plan net assets exceed total liability) Regulatory assets (capitalized incurred costs) Liabilities Derived tax revenues received in advance (income taxes, sales taxes, assessments on earning or consumption) Premium revenues (risk pools) Grants received in advance of meeting eligibility requirements (other than timing) Resources received in advance of an exchange transaction Refunds imposed by a regulator Summary of GASB Updates GASB Statement No. 65 Reporting Examples Outflows of Resources (Expense/Expenditure) Debt issuance costs (other than insurance) Initial costs incurred by lessor in an operating lease Acquisition costs for risk pools Loan origination costs Inflows of Resources (Revenue) Loan origination fees Commitment fees (after exercise or expiration) 11

12 Summary of GASB Updates GASB Statement No. 65 Grants Paid/Received in Advance of Meeting the Timing Requirement Government-mandated and voluntary nonexchange transaction resources received in advance when timing requirements are the only eligibility requirements yet to be met. This applies to: Grants where the only eligibility requirements are timing requirements, and Grants with various eligibility requirements where the timing requirement is the only eligibility requirement yet to be met. Grantors should report amounts paid in advance of meeting the timing requirement as a deferred outflow of resources. Grantees should report amounts received in advance of meeting the timing requirement as a deferred inflow of resources. GAAP reporting amounts previously reported in account 221 Unearned Revenue, which meet the criteria above, should now be reported in account 222 Unearned Revenue DIR. Summary of GASB Updates GASB Statement No. 65 Grants Paid/Received in Advance of Meeting the Timing Requirement The IOC believes the majority of the State s grants are expenditure driven grants and, therefore, have eligibility requirements in addition to any potential timing requirements. In most cases, unspent grant proceeds will continue to be reported as unearned revenue (liability) by the State. Agencies should review the documentation surrounding all grant resources paid and received in relation to specific eligibility requirements. 12

13 Summary of GASB Updates GASB Statement No. 65 Unavailable Revenue in Governmental Funds Unavailable Revenue is reported in governmental funds when revenues are measureable but are not received within 60 days after year end Prior to GASB Statement No. 65, amounts relating to unavailable revenue were reported in account 220 as a liability Unavailable Revenue will continue to be reported in account 220; however, the account will now be shown under the section of deferred inflows of resources, or DIR Summary of GASB Updates GASB Statement No. 66 Technical Corrections 2012 an amendment of GASB Statements No. 10 and No. 62 Resolves conflicting guidance surrounding differences in Statements No. 54 and No. 10 regarding the reporting of risk financing activities Resolves differences between Statements No. 62 and No. 13 regarding the reporting of certain operating lease transactions and No. 48 regarding the reporting of the acquisition of a loan or group of loans 13

14 Summary of GASB Updates GASB Statement No. 67 Financial Reporting for Pension Plans an amendment of GASB Statement No. 25 Scope is limited to defined benefit and defined contribution pension plans administered through trusts that meet certain criteria Few changes from Statement 25 for financial statement recognition Notes/RSI changes primarily to reflect changes in measurement of liabilities of employers Summary of GASB Updates GASB Statement No. 68 Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 Scope is limited to defined benefit and defined contribution pension plans provided through trusts that meet certain criteria Excludes all OPEB Applies to employer and nonemployer contributing entities that have a legal obligation to make contributions directly to a pension plan Revised recognition, measurement, and disclosure requirements for all employers Liability is measured net of pension plan s fiduciary net position and is fully recognized in accrual-basis financial statements Liability changes: some recognized as expense in the period of the change, others recognized as deferred outflows/inflows of resources with expense recognized over defined future periods 14

15 Summary of GASB Updates GASB Statement No. 69 Government Combinations and Disposals of Government Operations Scope includes Combinations in which no consideration is provided Government mergers Transfers of operations Combinations in which consideration is provided Government acquisitions Disposal of government operations Summary of GASB Updates GASB Statement No. 70 Accounting and Financial Reporting for Nonexchange Financial Guarantees Requires a government that extends a nonexchange financial guarantee to recognize a liability when it is more likely than not that the government will be required to make a payment on the guarantee Requires a government that has issued an obligation guaranteed in a nonexchange transaction to recognize revenue to the extent of the reduction in its guaranteed liabilities 15

16 Financial Reporting WEDGE UPDATE New Form for FY14 Wedge Updates SCO-577 Inventory Analysis Form summarizes the detail of inventory Form allows the user to post automatic journal entries, which will carry directly to the SCO-547 and SCO-548 Form should only be completed if inventory totals are in excess of $150 thousand Form is only applicable to shared funds, non-shared funds, and locally held funds 16

17 Wedge Updates Revised Account Number Structure Structure revised to conform with GASB 63/65 Assets Deferred Outflows of Resources (DOR) Liabilities Deferred Inflows of Resources (DIR) Fund Balance Account names revised renamed account 220 Unavailable Deferred Revenue to Unavailable Revenue renamed account 221 Unearned Deferred Revenue to Unearned Revenue Wedge Updates Revised Account Number Structure (continued) The following accounts are now displayed as Deferred Inflows of Resources (not liabilities) account 220 Unavailable revenue DIR account 222 Unearned revenue DIR (new account in FY14) account 249 Unamortized deferred amounts on bond refundings, current DIR account 254 Unamortized deferred amounts on bond refundings, long-term DIR account 283 Unamortized deferred amounts on certificate refundings, current DIR account 288 Unamortized deferred amounts on certificate refundings, long-term DIR 17

18 Financial Reporting COMMON ISSUES Common Issues WEDGE Forms SCO-534 Non-Shared SAMS Funds Cash Reconciliation Transfers in/out Adjustments should NOT be made to transfers in/out. Any adjustment to transfers in/out must be approved by IOC staff. When consolidated at the CAFR level, transfers in MUST EQUAL transfers out. Vouchers-in-transit Vouchers recorded on agency records which have not yet been recorded on SAMS. At the State level, these vouchers have not yet been paid, and should therefore be reported as accounts payable at year end. SCO-549 payable entry should include a debit to cash and a credit to payables for the amount of vouchers in transit. 18

19 Common Issues WEDGE Forms SCO-549 Summary of Liabilities Shared Funds, Non-Shared Funds, Locally Held Funds Payable entries to accounts 205, 208, 209, 215 and 216 should be reported on the SCO-549 and not on the SCO-544. Exception payables related to held warrants should not be included on the SCO-549, as they do NOT represent lapse period expenditures. For those packages due prior to the end of lapse period, an estimate should be made to represent liabilities as of June 30. If paid during July, report in the July Actual column If expected to be paid in August, report in August Estimate column If expected to be paid from Future Year Appropriations, report in Future Appropriations column Common Issues WEDGE Forms SCO-565 Interfund Payable/Receivable Analysis SCO-567 tab used to report gross amounts due to and from other funds as reported on the SCO-567 SCO-568 tab used to report gross amounts due to and from other funds as reported on the SCO-568 SCO-565 tab includes those items not reported on the SCO-567 or SCO-568 tab. May include amounts due to/from: Internal Service Funds Pension Funds Non-federal activity with Universities and Component Units Transactions with any other fund must be approved by the IOC before being included on this tab (most likely will be required to be added to the SCO-567/568) 19

20 Common Issues Manual Forms SCO-546 Government-Wide Adjusting Journal Entries Generally limited to 2 types of entries: Reversal of unavailable revenue Recording of prepaid expenses Entry to reverse unavailable revenue must agree to the balance in account 220 on the trial balance SCO-551 SAMS to GAAP Reconciliation AR Balances reported at the top of the form must agree to balances as reported on the submitted C-97 Reconciled balances at the bottom of the form must agree to the balances as reported on the trial balance Common Issues Manual Forms SCO-553 Fund Balance to Net Position Reconciliation Fund balance (deficit) at top of form must trace to account 350 on the trial balance Adjustments shown on the SCO-546 should be included as POSITIVE adjustments on the SCO-553 Classification of net position should be consistent with classification of fund balance: Restricted fund balance Committed fund balance Assigned fund balance Unassigned fund balance Restricted net position Unrestricted net position Unrestricted net position Unrestricted net position If funds are restricted, documentation of restriction must be included on form 20

21 Common Issues Manual Forms SCO-579 Analysis of Deposits and Investments Classifications of Deposits and Investments for footnote disclosure will not always correlate to trial balance classifications of Cash and Investments Financial Statement Disclosure: Deposits versus Investments Deposits include all amounts, demand or time, deposited in financial institutions (banks, savings and loans associations, and credit unions). Investments include all other financial instruments held by the government that do not meet the definition of a deposit. Financial Statement Reporting: Cash and Cash Equivalents versus Investments Cash and cash equivalents include deposits and short-term, highly liquid investments readily convertible to cash, with a maturity of 90 days or less at time of purchase. Investments include all other financial instruments held by the government that do not meet the definition of cash and cash equivalents. Common Issues Manual Forms SCO-579 Analysis of Deposits and Investments (cont.) Financial Statement Disclosure Financial Statement Reporting Deposits Investments Cash and Cash Equivalents Investments SCO-579 Form X X Included on p.1 as Deposit No reconciling items X X Included on p.1 as Deposit Reconciling item shown as deduction on p.1 Reconcililing item shown as addition on p.3 X X Included on p.2 as Investment Reconciling item shown as addition on p.1 Reconciling item shown as deduction on p.3 X X Included on p.2 as Investment No reconciling items 21

22 Common Issues Manual Forms SCO-579 Analysis of Deposits and Investments (cont.) Items to remember Total cash and investments reported on form should reconcile to the submitted C-17 Total Deposits at the bottom of page 1 should agree to account 102 Total Investments at the bottom of page 3 should agree to the sum of account 111 and account 115 Reconciling items on page 1 and page 3 listed under other must be fully described Additional disclosures on page 3 must be completed In cases where an investment type has multiple credit ratings, the schedule on page 4 must be completed to show the detail Common Issues Grant Forms SCO-563 Grant and Contract Analysis In general, if GAAP package shows revenue in account 426, form SCO-563 should be completed For 100% federally funded funds: Receipts and Expenditures per the SCO-563 should reconcile to total Receipts and Disbursements per the SCO-534 Receivables and Payables per the SCO-563 should agree to the trial balance In general, fund balance should = $0, unless unavailable revenue is recorded, in which case, fund deficit should = unavailable revenue IOC prepares a standardized reconciliation of all federal funds during our review process 22

23 Common Issues Grant Forms SCO-563B Grant/Contract Reconciliation Purpose of form is to reconcile Total Reimbursable Costs (TRC) per the SCO-563 to grant revenue per the trial balance (CY GAAP basis column) Common reconciling items: Amounts received from grantor agencies per the SCO-567 (TRC column for P transactions) Amounts paid to subgrantee agencies per the SCO-568 (Total activity column for P transactions) Unavailable revenue, both prior year and current year Rounding should not be shown as a reconciling item. Verify receipts/expenditures/accruals reported on the SCO-563 and adjust accordingly Other reconciling items are rare and should be fully documented Common Issues Grant Forms SCO-563C Grant/Contract Subrecipient Listing Purpose of form is to provide detail of amounts provided to subrecipients as reported on the SCO-563 Listing should be cash basis, and take into account refunds Listing should exclude state agencies Listing should include universities and component units and amounts should agree to the grantor expenditure column per the SCO-568 for those entities 23

24 Common Issues Agency-wide Forms SCO-538 Capital Asset Summary page 1 Beginning balances have been entered by IOC staff and MUST not be changed. If you disagree with the beginning balances reported, please contact the IOC. Capital lease categories are entered by IOC staff from our lease system and MUST not be changed. Additions on page 1 MUST agree to Total Capital Additions on page 2. Deletions on page 1 MUST agree to totals on the Disposition of Capital Assets section on page 2. Assets transferred to CMS surplus should be reported in the Deletions column. Depreciation shown in the Deletions column should not exceed the corresponding Asset amount shown in the Deletions column. If an adjustment is run through deletions resulting from a prior year error, causing depreciation deletions to exceed asset deletions, an explanation should be included on the bottom of page 1. Common Issues Agency-wide Forms SCO-538 Capital Asset Summary - page 2 Capital Outlay Reconciliation The following columns/rows are entered by IOC staff and should not be changed: Expenditures per SAMS Less Capital Leases Less Prior Year Payables Capital assets acquired through capital leases Capital assets acquired through installment purchases Assets purchased using locally held funds should be included in Other Capital Outlay column When amounts are entered under Other Capital Outlays, Noncash contributions, or Other additions, an explanation should be provided Impairment of Capital Assets - question must be answered annually Service Concession Arrangements - question must be answered annually 24

25 Common Issues Agency-wide Forms SCO-580 Compensated Absences Form Beginning balances have been entered by IOC staff and MUST not be changed. If you disagree with the beginning balances reported, please contact the IOC. There should NEVER be amounts in the Additions column for Sick and Salary Related Costs Sick. If balances need to be increased due to pay increases, this should be done through a negative adjustment in the Deletions column. Current portion due within 1 year estimate based on individuals known to be retiring or leaving State employment within the next fiscal year. QUESTIONS/COMMENTS? 25