Monday, June 1, :40 3: CPE

Transcription

1 Monday, June 1, :40 3: CPE Moderator: Kelly Neal, City of Edmond, OK Speakers: Cara Fitzpatrick, Multnomah County, Oregon Stephanie Walker, City of Gaithersburg, Maryland Dennis Kauffman, City of Sacramento, California

2 Avoiding Common Financial Reporting Deficiencies: Ø MD&A Ø Government Wide Statements Ø Governmental Funds Ø SSAP Ø Footnotes Ø Statistical Section 2

3 } Restatement of BOY Net Position } Explain the restatement } GASB #68 & #71 3

4 } Analysis in MD&A we can still do better! Government-wide financial statements Major governmental funds General Fund Budget } Quantifying $$ changes & %% changes isn t enough } Provide the WHY! } Is the explanation of the change reasonable? } Avoid judgment statements keep to the facts! 4

5 } MD&A Analysis what tools/resources can we use? Develop workpapers, set a $$/%% scope to track financial data throughout the fiscal year don t wait for end of year! Adopted Budget & related documents Council, Board, Commissioners adopted documents Involve others Budget Office Economist, CFO, Finance Director Dept Finance Supervisors & Managers taking ownership of their budgets and financial data Digging into the general ledger line item detail 5

6 } MD&A Analysis workpapers, tools, resources 6

7 } GASB #65 Deferred Inflows & Deferred Outflows } Deferred Outflows of Resources (follows Assets) A consumption of net assets by the government that is applicable to a future reporting period Has a debit balance and positive effect on Net Position, similar to assets } Deferred Inflows of Resources (follows Liabilities) An acquisition of net assets by the government that is applicable to a future reporting period Has a credit balance and a negative effect on Net Position, similar to liabilities 7

8 } GASB #65 Deferred Inflows & Deferred Outflows Reporting deferrals for items that don t qualify Netting gains & losses on debt refunding (inflows/ outflows) or missing inflows/outflows in FN disclosures Reporting unavailable revenues in Gov t Wide F/S Unearned items are liabilities, proper classification Unamortized debt issuance costs are no longer deferred. These costs are a period expense Premiums and discounts should be netted with the debt 8

9 } GASB #65 Deferred Outflows Grant paid in advance of meeting time requirements Deferred amounts from refunding of debt Costs to acquire rights to future revenues Deferred loss from sale-leaseback 9

10 } GASB #65 Deferred Inflows Grant received in advance of meeting time requirements 10

11 The easiest comment to address Terminology! } Net Assets à Net Position } Invested in capital asset, net of related Debt à Net Investment in Capital Assets } Search for key words: net assets net of related debt 11

12 Tobacco Settlement $$ Recognition & GASB #48 } G48 superseded technical bulletin , Tobacco Settlement Recognition & Financial Reporting Entity Issues } Revenue from sales of future tobacco settlement payments should be unearned, rather than recognized in the period of the sale 12

13 GASB #65 Deferred Inflows & Deferred Outflows à Deferrals have a strict definition per GASB Examples of items inappropriately reported: Anything captioned as a liability Inventory & prepaid items have not changed Loans receivable generally are reported in fund balance (vs. offset by a deferred inflow) Special assessments 13

14 } GASB #65: Deferred Outflows Deferred Inflows Property taxes received in advance Unavailable revenue 14

15 GASB #65 Deferred Inflows & Deferred Outflows } Resource analysis: earned, unearned revenues or deferred inflow of resources? Federal, State and local grants and award programs required further analysis Have These Criteria Been Met? Financial Repor7ng Line Item Time- Based Restric7ons Other Eligibility Criteria Purpose Restric7ons Revenue Yes Yes Yes or No Deferred Inflow No Yes Yes or No Unearned Revenue Yes or No No Yes or No 15

16 GASB #54 Fund Balance Disclosures } Disclose governmental fund balances by specific purpose vs. the function 16

17 GASB #54 Fund Balance Disclosures: 17

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19 } Assigned can only be Positive } No positive assigned with deficit unassigned } Order for categorizing fund balance: Non-spendable Restricted Committed Assigned - Unassigned 19

20 Resources Category Inflow Expenditure Grant Restricted $ 1,000 $ 800 Hotel tax Committed Transfer - General fund Assigned Total 2,100 1,650 Net Change in Fund Balance 450 Fund Balance Classification Non- spendable - Prepaids 100 Restricted for developer grants 200 Committed for economic development 50 Assigned for economic development 100 Total Fund Balance

21 Resources Category Inflow Expenditure Grant Restricted $ 1,000 $ 800 Hotel tax Committed Transfer - General fund Assigned Total 2,100 1,950 Net Change in Fund Balance 150 Fund Balance Classification Non- spendable - Prepaids 100 Restricted for developer grants 200 Committed for economic development 50 Unassigned (200) Total Fund Balance

22 Resources Category Inflow Expenditure Grant Restricted $ 1,000 $ 800 Hotel tax Committed Transfer - General fund Assigned Total 2,100 2,100 Net Change in Fund Balance - Fund Balance Classification Non- spendable - Prepaids 100 Restricted for developer grants 200 Committed for economic development - Unassigned (300) Total Fund Balance - 22

23 } Special Revenue Funds should not have substantial capital outlay } Substantial % of revenues = Restricted or Committed Have the highest level of authority commit revenue streams. 23

24 General Fund & Major Special Revenue Funds All other budgetary schedules Basic Financial Statements OR Required Supplementary Information Supplementary Information Show at the Legal level of budgetary control Func8on Fund Department 24

25 } Recheck Major Fund Calculation } If it changes don t forget to update: MD&A Footnotes Table of Contents } Deferred outflows + assets, deferred inflows + liabilities 25

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27 Appoint Majority of Board Financial benefit / burden OR Able to impose will Don t Appoint Board Financial benefit / burden & Fiscal dependency 27

28 Any of the following: (S14.27) PG entitled to or has access to CU resources PG obligated or has assumed obligation to cover deficits or provide support Obligated for the debt (Exchange transactions <> support) 28

29 1. Same board (S61.8) AND Financial benefit / burden OR PG operationally runs CU 29

30 2. Services provided entirely or almost entirely to PG, or almost exclusively for the benefit of PG rather than to its citizenry Bon a fide internal service fund Financing authority 3. When the debt is expected to be repaid by PG 30

31 } Revisit each of your component units and why they are included in the financial reporting entity. } GASB-S61:11 disclose the rationale for including each component unit and the manner in which it is included. } Include which fiscal dependency criteria was met 31

32 } GASB S54.32 Disclose purpose for each fund AND identify which revenues are reported in each fund. Example: } The Library fund is used to account for grant revenues received from the State that are restricted to spending on library services. 32

33 Enterprise funds and business-type activities presentations the City has elected to follow all pronouncements of GASB and have elected not to follow FASB pronouncements after November 30,

34 Enterprise funds and business-type activities presentations the City has elected to follow all pronouncements of GASB and have elected not to follow FASB pronouncements after November 30,

35 } Encumbrances do not equal a purpose! } If to be paid from resources that are restricted, committed or assigned no additional adjustment to fund balance. } If to be paid from revenues without restrictions, commitments, or assignments Show as committed or assigned (Z.54.28) Depends on process used to encumber funds 35

36 } Budget appropriations often approved by governing board } BUT they expires at the end of the year no formal action required } Show as Assigned Fund Balance 36

37 } For assignments also identify process to make assignments. GASB-S54:23(b) The Village Board adopted Resolution 100 to Establish a Fund Balance policy which authorized the Village Manager to assign amounts to a specific purpose. 37

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39 } Assigned Fund Balance o Footnote should specifically describe the designee, if there is one, to whom the highest decision-making authority gives the authority to determine assignments } Unassigned Fund Balance May only be a positive residual amount in the general fund or a negative amount in other governmental funds Not sufficient to describe unassigned fund balance as simply the residual amount reported in all funds

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42 Disclose details. Specifically, the infrequent events that need to occur in order to use the monies set aside from such an arrangement.

43 This reserve will be maintained for the purpose of bridging a gap between projected revenue and expenditures during periods of significant revenue declines and/or expenditure growth. Consistent with Governmental Accounting Standards Board Statement No. 54 (Fund Balance Reporting and Governmental Fund Type Definitions), Council adopted parameters for using the EUR are as follows: (1) The City Manager may recommend a release from the EUR when the gap between projected revenue and expenditures is greater than $1 million in the proposed budget. (2) Any release from the EUR must be approved by the City Council. (3) These parameters may only be changed by resolution of the City Council.

44 } } The funds can be spent if one of the following events occurs: 1.) Unanticipated general fund revenues in total fall more than one percent below the original projected revenues, AND Actual revenues for two of the following major revenue sources are projected in the current year to fall below the actual amount from the prior year: property taxes, income tax, recordation tax, state shared taxes, investment interest. 2.) One of the following events occurs that creates a significant financial difficulty for the County and are in excess of the current year s appropriated contingency: a.) Declaration of a State of Emergency by the Governor of Maryland; b.) Unanticipated expenditures as a result of legislative changes from State/Federal governments in the current fiscal year; c.) Acts of Terrorism declared by the Governor of Maryland or the President of the United States; or d.) Acts of nature, which are infrequent in occurrence and unusual in nature.

45 } Some larger governments publish separate budgetary reports for legal compliance. } CAFRs that reference a separate budgetary report in a footnote disclosure should provide a specific location to obtain the report. } Referencing the government s home page may not be specific enough to connect typical users with the separate report.

46 } Not so good: The level of legal control for all agencies is documented in the Appropriation Summary Report, which is available by request from the Comptroller s office. } Good (almost): A copy of this report may be obtained by contacting the State of Alaska, Department of Administration, Division of Finance, P.O. Box , Juneau, AK , or may be viewed online at

47 } For debt refundings, the unamortized gain or loss is classified as a deferred inflow/outflow depending on whether it is a gain or a loss. } The unamortized gain or loss should no longer be displayed with the long-term liabilities note disclosure since it is no longer part of the liability.

48 } The interfund transfer footnote disclosure should not reference reimbursements related to overhead allocation. } Reimbursements should be accounted for as a reduction of expenditures instead of interfund transfers. } Disclosure should provide the principal purposes of interfund transfers

49 } } Many governments make a disclosure that there are no encumbrances outstanding at year end because they lapse at year end. The budgetary encumbrances may lapse at year end, however the underlying commitment may extend into the future and should be disclosed with other commitments by major fund.

50 } Many governments are missing the note disclosures required when revenue bonds are issued: the specific revenue pledged and the approximate amount of the pledge the general purpose for the debt secured by the pledged revenue the term of the commitment (i.e., the period during which the revenue will not be available for other purposes) the relationship of the pledged amount to the total for that specific revenue (i.e., the proportion of the specific revenue stream that has been pledged), if estimable a comparison of the pledged revenues recognized during the period to the principal and interest requirements for the debt directly or indirectly collateralized by those revenues.

51 } When a CAFR disclosure is made that a separate pension plan audit report is issued, it should be easy to find the report The location should be specific The audit should be complete and the report should be available

52 } Even though GASB 67 has been implemented, GASB 27 disclosures are still required. } GASB 68 will replace most GASB 27 disclosures this year } Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans That Are Not Administered through Trusts Will replace remaining GASB 27 requirements For fiscal years beginning after June 15, 2016

53 } Net General Obligation Debt should be net of: Discounts Premiums Other related amounts like deferrals from refundings

54 } Principal and interest expenditures are being deducted from the noncapital expenditures to calculate the ratio of total debt service to noncapital expenditures. The ratio should be: } } Debt Service Principal + Interest (Total Expenditures Capital Outlay Expenditures) NOT } } Debt Service Principal + Interest (Total Expenditures Capital Outlay Expenditures- Debt Service Expenditures)

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