FOCUS Fall 2005 November 17, 2005

1. FOCUSFall 2005November 17, 2005 Bill Cole Deputy Auditor of Public Accounts Commonwealth of Virginia

2. Agenda • GASB 40 – Work to be done • NCAA Agreed-Upon Procedures – How are “we” doing? • Timely Financial Statements – Is Improvement Possible? • Update on Deferred Maintenance Project • Update on Auxiliary Enterprise Project • Senate Bill 934 – What is its status?

3. GASB 40 - Deposit and Investment Risk Disclosures • Effective 2005 Financial Statements • Amends GASB 3, which focused primarily on custodial credit risk • Requires more comprehensive risk disclosures including custodial credit risk, concentration of credit risk, interest rate risk, and foreign currency risk

4. GASB 40 - Deposit and Investment Risk Disclosures • Categories 1 and 2 are eliminated • Requires disclosure of authorized investments and investment policies

5. NCAA Agreed-Upon Procedures How are WE (collective “we”) doing?

6. NCAA Agreed-Upon Procedures • Replaces financial audit guidelines with agreed-upon procedures • Report purposes: • Ensure CEO is aware of all financial activity (both internal and external) • Assist institution in exercising control over financial activity made by or all behalf of IA programs • Institution must submit financial data annually to the NCAA covering all financial data, including those by affiliated or outside organizations • Due date – January 15

7. NCAA Agreed-Upon Procedures • Revised financial reporting • Improves revenue and expense definitions • Includes data elements missing in prior reporting • Development Costs • Academic Advising Costs • Other minor costs?? • Requires CEO approval • Reporting data through online system

8. NCAA Agreed-Upon Procedures • Supporting schedules for material revenues • Ticket sales • Student fees • Game guarantees, away game settlements • Contributions and gifts (including in-kind & on-behalf) • Other third party support (previously unreported) • Institutional support (i.e. transfers) • NCAA/Conference distributions • Broadcast and Internet rights • Advertising, royalties, sponsorships • Camp revenues • Endowment income • Total of 15 revenue categories

9. NCAA Agreed-Upon Procedures • Expenses • Student athletic aid recipients • Game guarantees • Salaries and benefits (supported by W2s) • Paid by institution • Paid by third parties • Severance payments • Recruiting and travel • Indirect support • Total of 19 expense categories

10. NCAA Agreed-Upon Procedures • Federal reporting requirement under the EADA has not changed • Equity in Athletics Disclosure Act (EADA) • http://surveys.ope.ed.gov/athletics • Data must be available by October 15

11. NCAA Agreed-Upon Procedures • Debt Repayment Schedules – Include in Notes to the NCAA Schedule • Timing of audit procedures • EARLIER, RATHER THAN LATER • Review of schedule – upon its completion • EADA deadline (October 15) • NCAA deadline (January 15) • Prepared by Client (PBC) listing – handout • New Auditor’s Report on Agreed-Upon Procedures - handout

12. NCAA Agreed-Upon Procedures • Note Disclosures (mandated by NCAA) • Contributions that constitute 10% or more of all contributions received • Schedule of athletic-related fixed assets • Substantiated by the general ledger • Including description of policies and procedures for acquiring, approving, depreciating, and disposing of these assets • Debt Repayment Schedules

13. NCAA Agreed-Upon Procedures • Note Disclosures (General) • Basis of Accounting • Athletic Overhead Fees / Administration Fee / Administrative Cost Recoveries • Endowments / Quasi-Endowments • Subsequent Events (if any) • Other

14. NCAA Agreed-Upon Procedures • So what is the answer to the question, “How are we (collective ‘we’) doing?” • Preparation of NCAA Schedule of Revenues and Expenses • Supporting schedules • Support from outside parties (i.e. foundations) • Meeting the deadline

15. Timely Financial Statements Is Improvement Possible?

16. Timely Financial Statements • BOV questions about audit timing • Market pressures for timely reporting • Institutions material and non-material to CAFR • Audit work at varying times during the year • Better use of technological capabilities • Use of web-based systems • Cooperation of institutions

17. Timely Financial Statements • Improvement Possible? – Qualified “YES” • Systems Implementation Issues • Foundation Reporting – must continue to emphasize the importance • (Also, NCAA reporting issues) • Use of estimates, where possible • Commitment of resources to the project • Documentation of financial statement preparation process

18. Deferred Maintenance Project • 2004 General Assembly directed APA to conduct a review to determine amount of deferred maintenance and ongoing major maintenance needs • To assist in determining amount of deferred maintenance, APA acquired a Facility Inventory and Condition Assessment System (FICAS) for agency and higher education use

19. Deferred Maintenance Project • All institutions of higher education were required to participate under a very tight timeframe • Inventory buildings • Perform condition assessment • Good cooperation from institutions • We are now testing the information in the system • Are inventories complete? • Are assessments accurate?

20. Deferred Maintenance Project • Capital Assets Management Team visited selected institutions • Questions concerning discrepancies were emailed this week to contacts (with system access) • Corrective action requested by December 31 • Final report will be issued December 15 • Contact DeAnn Compton or Sue Owens (Capital Asset Management Team) for additional information

21. Auxiliary Enterprises Project • Draft Report in Review Stage • Types of auxiliaries • Activities reported • Current guidance • Funding, balances, reserves

22. Tuition as a Percentage of Total Mandatory Cost of Attendance For the 2005-06 Academic Year

23. Auxiliary Enterprises Project • DRAFT Recommendations • Develop a more detailed definition of auxiliary enterprises • Disaggregation of comprehensive mandatory non-E&G fees • Athletics • Student Health • Best practices of A/E management • Develop specific, consistent procedures for preparing Schedule of A/E operations and reserves

24. Senate Bill 934Internet Database • APA shall compile and maintain on its Internet website a searchable database providing certain state expenditure, revenue, and demographic information. • Updated by October 15 (11/1 for ’05) • All departments, officers, boards, commissions, and institution shall furnish information to the APA and cooperate to fullest extent

25. Senate Bill 934Internet Database • Database shall contain the following for the 10 most recent fiscal years: • Major categories of spending by secretariat and major agencies • # of full-time state employees • Revenues • Comparison with other states • Federal revenues and spending • Population • Student enrollment (K through 12)

26. Senate Bill 934Internet Database • Database shall contain the following for the 10 most recent fiscal years: • Enrollment in public higher ed institutions • Enrollment in private higher ed institutions • Annual prison populations • VA AGI and taxable income by age groups • # of citizens receiving food stamps • # of driver licenses issued • # of registered motor vehicles • # of full-time private sector employees

27. Senate Bill 934Internet Database • Database shall contain the following for the 10 most recent fiscal years: • # of households • # of prepaid tuition contracts and estimated liability • Other data the Auditor deems appropriate • Distribute file to newspapers

28. Senate Bill 934Internet Database • Status – Database was available November 1 through APA webpage • Not fully completed, updated as information is available • Search engine not included but inevitable • Disclaimer for information not provided • Future updates - Quarterly • DEMO !!!

29. QUESTIONS???