GASB Financial Statement #34 & 35 Identification of Current and Non-current Liabilities Requirements. Service Request #14852

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1 GASB Financial Statement #34 & 35 Identification of Current and Non-current Liabilities Requirements Service Request #14852 University of California Office of the President VP - Business & Finance Payroll Coordination & Tax Services June 12, 2001

2 Service Request #14852 GASB Financial Statement #34 & 35 - Identification of Current and Non-current Liabilities Background The Government Accounting Standards Board (GASB) introduced two new statements, GASB Statements 34 and 35, that revised the standards for external financial reporting by public institutions. The new standards are required for the fiscal year beginning July 1, Under GASB, the financial statements should reflect the current and non-current liability for accrued vacation leave, compensatory time, paid time-off, and senior management and health sciences severance pay. Because the vacation leave accrual for each employee represents a liability that may be payable beyond one year, the University must identify and report the current and noncurrent portions of the accrued liability. The University will consider compensatory time as a current liability as employees must take or be paid compensatory time within six months of accruing the time. The University will classify severance pay as a non-current liability unless the payments become significant (i.e., material). Overview The modifications requested should provide campuses with a comprehensive report of the dollars associated with the accrued vacation, compensatory time, and paid time-off hours earned by employees within a fiscal year. However, these requirements will not address the severance pay liabilities displayed on the pay posting and summary reports from program PPP820. Current Reports At the present, campuses can review the estimated liabilities in dollars for accrued vacation, compensatory time, paid time-off, and sick leave on several reports. These reports are as follows: PPP6403 PPP6405 PPP6406 PPP6407 PPP6408 Leave Liability Summary: Summary of vacation, compensatory time, paid time-off, and sick leave estimated liabilities by home department code Leave Liability by Home Department: Detail of vacation, compensatory time, paid time-off, and sick leave estimated liabilities at employee level sorted by home department code order Estimated Liabilities by Location/Function Code: Summary of vacation, compensatory time, paid time-off, and sick leave estimated liabilities by Function Code within Location Estimated Liabilities by Fund Group: Summary of vacation, compensatory time, paid time-off, and sick leave estimated liabilities sorted by fund range within location Total Campus Estimated Liabilities: Totals of estimated liabilities for vacation, compensatory time, paid time-off, and sick leave by locations

3 within campus. The Total Campus Estimated Liabilities report displays the aggregate liabilities by location. See Attachment A for a sample of the current PPP6408 report. Proposed Process A new report should be developed in the Payroll/Personnel System (PPS) that provides a comprehensive accounting of the liability for vacation, compensatory time, and paid time-off, including new fiscal year-to-date (FYTD) balances for accrual, usage, adjustments, and hours lost. After the completion of month 13 processing, the time benefits reporting process should capture the ending balances for vacation, compensatory time, and paid time-off from the previous fiscal year. The previous fiscal year balances will serve as the beginning balances for the new fiscal year. Using the beginning balance as a constant, the reporting process should accumulate FYTD usage, accrual, and lost-hours balances and reconcile to the ending balance taken from the month-end leave reporting process. The FYTD Adjustment balance should contain entries required to balance the liabilities from Beginning to Ending Balances. Modifications Needed To provide information needed to comply with GASB Statements 34 and 35, campuses will need a comprehensive report that displays the leave liability, in dollars, by Home Department Sub-location for each leave category. The leave categories are Vacation, Compensatory Time, and Paid Time-Off and the sub-locations are Campus, Medical Center, UCOP, and DANR. For each category and sub-location, the report should display Beginning Balance - as of June 30: obtaining data from the previous fiscal year Accumulative FYTD Usage (new): compiling total dollars that equate to the number of leave hours used during the processing month Accumulative FYTD Accrual (new): compiling total dollars that equate to the number of leave hours accrued during the processing month Accumulative FYTD Adjustments (new): reporting entries needed to reconcile the Beginning, FYTD Accumulative, and Ending Balances Accumulative FYTD Lost Hours - Vacation only (new): compiling total dollars equating to the number of lost vacation hours in the processing month Ending Balance: obtaining data from the monthly reporting process Sub-total by category Total Campus Liability Each month the reporting process should capture the monthly balances for usage, accruals, adjustments, and lost hours; then add the current month's balances to the previous accumulative balance in the fiscal year in process. For the month of July, the previous month's balance should equal zero.) See the following example showing the accumulation of data. The new comprehensive report should display the highlighted areas. 3

4 Beginning(1) Usage Accrual Adjustments (4) Lost Ending (3) Balance Forward VAC CTA PTO Current Month VAC CTA PTO FYTD VAC (2) (2) (2) CTA PTO Beginning + Usage + Accrual + Adjustments - Lost = Ending (1) Beginning Balance for new fiscal year is Ending Balance of previous fiscal year (2) FYTD Balances are the result of adding previous month balance to current month balance (Example: = ) (3) Ending Balance is the Balance created during the month-end leave process. (4) The difference between the Beginning Balance Minus the FYTD Usage, Accrual, and Lost Balances and the Monthend Ending Balance Attachment B is a sample of the proposed report that displays the total campus current and noncurrent liability and activity. The start-up process may require a one-time program to extract and sort data by sub-location code. Impact upon Other Processes Until the appropriate programming is in place to capture the data required for the statements, locations must retain the data from the beginning of the new fiscal year and all activity affecting the ending balance. 4

5 Attachment A - Current Total Campus Estimated Liability Report PPP6408/PPP640 / UNIVERSITY OF CALIFORNIA-SYSTEMWIDE PAGE NO. XXXX RETN: SEE RPTS DISP SCHEDULE/DIST. PERSONNEL PROCESSING RUN DATE 03/22/01 TOTAL CAMPUS ESTIMATED LIABILITY PAY CYCLES-PAY PERIOD END DATES: SM-06/15/00 XX-06/08/00 MO-05/31/00 MA-05/31/00 LOCATION VACATION COMP TIME PTO SICK LEAVE TOTAL J 10,036, , ,873, ,118, ,256, , , ,904, ,668, TOTAL CAMPUS LIABILITY 48,292, , , ,778, ,787,472.77

6 Attachment B - Proposed Total Campus Current/Non-Current Liability and Activity PPP64XX/PPP640 / UNIVERSITY OF CALIFORNIA-SYSTEMWIDE PAGE NO. XXXX RETN: SEE RPTS DISP SCHEDULE/DIST. PERSONNEL PROCESSING RUN DATE 03/22/01 TOTAL CAMPUS CURRENT/NON-CURRENT LIABILITY ACTIVITY Vacation FISCAL YEAR-TO-DATE Beginning Usage Accrual Adjustments Lost Ending As of June 30 as of June 30 Campus 51, , , , , Medical Center 15, , , , UCOP 10, , , , DANR 5, , , , Sub total 81, , , , , Compensatory Time Campus 9, , Medical Center 2, , UCOP DANR 2, , Subtotal 13, , , Paid Time Off Campus 3, , , Medical Center UCOP DANR Subtotal 4, , , Total Campus Liability 99, , , , ,