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GASB Update

GASB Update. GFOAz 43 rd Annual Conference March 8, 2007. Presented by Corey Arvizu, CPA Heinfeld, Meech & Co . Retroactive Reporting of Infrastructure. Effective for fiscal year 2007 for phase 2 governments

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GASB Update

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  1. GASB Update GFOAz 43rd Annual Conference March 8, 2007 Presented by Corey Arvizu, CPA Heinfeld, Meech & Co.

  2. Retroactive Reporting of Infrastructure • Effective for fiscal year 2007 for phase 2 governments • Phase 3 governments are not required to retroactively report general infrastructure • Discussions with your auditor and/or consultant should have begun • Standard provides for various estimation methods for valuing the infrastructure

  3. Net Assets Restricted by Enabling Legislation • Effective for fiscal year 2006 • Intended to prevent blanket determinations • External party can compel the government to abide by the internally created restriction • Matter of professional judgment • Net assets restricted by enabling legislation should be disclosed in the notes

  4. Net Assets Restricted by Enabling Legislation • Example disclosure for pledged revenues: • Note 10: Net Assets • The government-wide statement of nets assets reports $10,758, 421 of restricted assets, of which $3,124,021 is restricted by enabling legislation.

  5. Other Postemployment Benefits • Effective for fiscal year 2008 for phase one governments • Implementation follows GASB No. 34 format • Perform an actuarial study of OPEB prior to required implementation • Study may be performed up to two years prior to the beginning of the implementation year • Plan and budget for costs of actuarial study • Ensure governing body and other parties are aware of the financial impact of benefits plans

  6. Other Postemployment Benefits

  7. Other Postemployment Benefits • Implicit Rate Subsidy: • Employer provides healthcare benefits to active employees and retirees • Blended premium rate of $240 for all participants • Employer pays 100% of premium for active employees • Employer pays 0% of premium for retirees • Group based (age adjusted) premiums – • $200 for active employees, $400 for retirees • The employer has committed to subsidize the retiree benefit with an indirect cash outlay • $400 actual group rate - $240 paid by retiree = $160 subsidy

  8. Other Postemployment Benefits • Required note disclosures - • Plan description and funding policy • Annual OPEB cost and Net OPEB obligation schedule • Three-year OPEB cost schedule • Funded status and funding progress • Actuarial methods and assumptions • Three-year schedule of funding progress as required supplementary information

  9. Other Postemployment Benefits • Annual OPEB cost and Net OPEB Obligation Schedule

  10. Other Postemployment Benefits • Three-year OPEB Cost Schedule

  11. Other Postemployment Benefits • Actuarial Methods and Assumptions

  12. Other Postemployment Benefits • Required Supplementary Information - Three-year Schedule of Funding Progress

  13. Sales and Pledges of Receivables • Effective for fiscal year 2008 • Assumes all “sales” transactions are borrowings, or pledges, unless certain criteria are satisfied • Control based checklist determines sale of receivable and revenues • Revenue from sale should typically be recognized over duration of agreement • Note disclosure required for pledged revenues

  14. Sales and Pledges of Receivables • Example disclosure for pledged revenues: • Note 10: Utility Revenues Pledged • The City has pledged future water customer revenues, net of specified operating expenses, to repay $5.7 million in water system revenue bonds issued in December 2003. Proceeds from the bonds provided financing for the construction of the 17th Street filtration plant. The bonds are payable solely from water customer net revenues and are payable through 2028. Annual principal and interest payments on the bonds are expected to require less than 22 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $8,849,250. The total principal and interest paid for the current year and total customer net revenues were $470,250 and $2,612,500.

  15. IntangibleAssets • Exposure draft issued in December • Issues addressed in draft - • Characteristics • Classified as capital assets • When to capitalize • Internally generated software • Possible indefinite useful lives for certain assets • Retroactive implementation • Effective for fiscal year 2010

  16. Pension Disclosures • Exposure draft issued in December • Align pension disclosures with OPEB disclosures • GASB 25 and 27 with GASB 43 and 45 • Funded status will be a required note disclosure • Reference in notes to RSI if funding progress presented as such • Will require slight modifications to ASRS and public safety notes

  17. Derivatives • Exposure draft to be issued April 2007 • Examples – • Interest rate lock • Futures contract • Variable-rate management agreement • GASB characteristics – • Little or no initial investment • Can be settled early with cash payment • Typically a debt instrument for governments • Disclosures will be “risk” based

  18. Fund Balance Reporting • Exposure draft to be issued June 2007 • GASB position and arguments - • Most utilized element of governmental financial information • Users want to clearly identify discretionary resources • Governments report reserved fund balance that should be unreserved • Provide method to categorize components of fund balance • Original guidance provided in NCGA Statement No. 1 • Fiscal year 2010 effective period?

  19. Fund Balance Reporting

  20. Fund Balance Reporting,Part I - Definitions • Expect narrow definition of special revenue funds • Enhances definitions of debt service and capital projects funds • Encumbrances must be appropriated to be reported as reserved • Term “legally limited” will likely appear as additional guidance

  21. Fund Balance Reporting, Part II – Reporting Models • Model A – • New definitions to be primary change • Limited other revisions or changes to current model • Fund perspective drives reporting • Detail of designation presumed to be reported in the notes

  22. Fund Balance Reporting, Part II – Reporting Models • Model B – • Three balance sheet categories • Revised language – reserved and unreserved terms no longer used • Distinguishes between resources available for appropriation and those not available • Not available = reserved but narrower • Note disclosure required for “committed” fund balance • Legally limited and intended use (designated)

  23. Fund Balance Reporting, Part II – Reporting Models • Model C – • Three balance sheet categories • Revised language – reserved and unreserved terms no longer used • Uses the terms restricted, unrestricted, and assigned • More detailed information on balance sheet • No note disclosure requirement specified • General Fund is the only fund with unrestricted and unassigned fund balances

  24. Other GASB Projects and Agenda Items • Service efforts and accomplishments • Electronic financial reporting • Intergovernmental dependency • Public/private partnerships • Component units • Accounting for leases • Popular reporting

  25. Lead the Way “Governments should lead by example, we should be as good or better than those we are regulating.” David M. Walker, Comptroller General of the United States

  26. Thank You! Corey Arvizu (520) 742-2611 ext. 101 carvizu@heinfeldmeech.com

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