Nfp seminar---audit-update

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Not-for-Profit & Government Webcast Series

Government Accounting, Auditing, and Regulatory UpdateMay 10, 2012

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WELCOME

Please make sure you’ll be able to hear us when we start!

Computer audio• Automatically connected when you logged in• Computer speakers or headphones required• You do not need to join the conference call

Conference Call• If you do not have computer speakers or headphones, join the

conference call for the audio

• Number: 866-244-8528, participant code: 929600

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MODERATOR

Carol SummersMarketing ManagerNot-for-Profit & Government Group

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THE VIRTUAL CLASSROOM

Q&A

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Polling slides

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Handouts

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CPE CREDIT

To be eligible for CPE credit, you must:

o Log-in to the meeting with your full name

o Respond to the polling questions

o Attend for the duration

If attending as a group:

o Complete a CPE attendance sheet (“sign-in”)

o Designate a Location Group Leader

o Send completed attendance sheets to [email protected]

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DISCLAIMERS

The material appearing in this presentation is for informational purposes only and is not legal, accounting or investment advice. Communication of this information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship or advisor-client relationship. Although these materials may have been prepared by professionals, they should not be used as a substitute for professional services. If legal, accounting, investment or other professional advice is required, the services of a professional should be sought.

Assurance, tax and consulting services offered through Moss Adams LLP.

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PRESENTERS

Jim Lanzarotta, CPA

Business Assurance Partner

Moss Adams LLP

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Government Accounting, Auditing, and Regulatory Update

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SESSION OBJECTIVES

• Review recent regulatory issues facing governments

• Share impact of recent auditing standards changes

• Discuss likely audit emphasis this year

• Discuss implementation of new accounting standards

• All the above to assist with your preparation for your 2012 audit

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POLLING QUESTION #1

• What type of organization are you representing?

o Higher education institution

o State & local government

o Tribal government

o Power, water, and/or sewer utility

o GASB reporting not-for-profit

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REGULATORY

o HR 674, Three Percent Withholding Repeal and Job Creation Act

o Signed by President Obama 11/21/11

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REGULATORY

• SEC studies the Municipal Securities Markets

• Dodd-Frank Wall Street Reform Act – directed GAO to study role of GASB in the municipal securities market

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REGULATORY

• Among other changes, significant change to independence requirements

• * Audit adjustments

• * Preparation of financial statements

• * New conceptual framework

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REGULATORY

• Proposed changes to Single Audit requirements

• Less than $1M in federal expenditures – no audit

• Between $1M - $3M – a more ‘focused’ audit

• Testing of allowable costs, and one other compliance requirement

• Greater than $3M – a full single audit

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POLLING QUESTION #2

Historically, my federal expenditures have been

• Between $500K and $1M, so I would no longer require a single audit

• Between $1M and $3M, so I would be eligible for the smaller scope ‘focused’ audit

• Over $3M so I would still require a full scope audit

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REGULATORY

• Proposed changes to Single Audit requirements

• If the changes are approved, it is estimated that

• 11,000 audits will no longer be required affecting 3,300 CPA firms

• 700 CPA firms will lose their only single audit

• 3,700 CPA firms will be providing limited scope audits

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AUDITING STANDARDS CHANGES

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• SAS 118 – what should management know?

• Includes unaudited information including letter of transmittal, statistical section, other

• Auditor focused on consistency with audited financial information

• Auditor required communications with governing Boards

• Guidance when material inconsistencies exist

• Provides guidance on report modifications

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• Audited financial data including combining, individual fund, budgetary schedules

• Procedures required to test consistency with underlying accounting records, applicable criteria

• Additional management requirements – provide report on SI with separately issued SI, overall audit report provided or readily available

• Specific reporting requirements/modifications

• Additional management representations required

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• Information required by a recognized standard setter

• Procedures required to test consistency with prior knowledge, applicable criteria

• Required representations from management

• Stronger language required in auditor opinions – if omitted or incomplete, contains material departures, or auditor unable to complete audit procedures

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LIKELY AUDIT EMPHASIS

• Auditing management estimates

• Claims and judgments

• Pension/OPEB liabilities and disclosures

• Self-insurance programs

• Pollution remediation liabilities

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LIKELY AUDIT EMPHASIS

• Auditing going concern assertion, disclosures, discussion in MD&A

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POLLING QUESTION #3

My government, or a governmental entity I know, is experiencing significant fiscal stress calling into question its ability to

• Continue over the next 18 months

• Continue after 18 months but questionable beyond 36 months

• I don’t know any entities encountering significant fiscal stress sufficient to question it as a going concern

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FUTURE AUDIT STANDARDS CHANGES – ASB CLARITY PROJECT – GROUP AUDITS

• Clarity standards in general - many impacts to auditors

• Group audits – impacts management as well

o Communication required with component auditors

o Evaluation of component auditors

o Management controls over consolidation process

o Subsequent events for components

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ACCOUNTING ISSUES

• Examples

• Entities created/acquired by governmental hospitals, universities, utilities, Indian tribes

• University foundations and auxiliaries

• Pension plans sponsored/administered by a government

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ACCOUNTING ISSUES

• Guidance provided by AICPA in SLG, NFP, EBP Audit Guides

• Popular election, or appointment of majority of the Board by a governmental entity

• Ability to dissolve an entity and access its assets

• The power to enact a tax levy

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POLLING QUESTION #4

For those with component units…

• I routinely scrutinize the organizational documents sufficient to confirm the correct reporting standards being followed

• I only review the organizational documents the first time a component unit comes into my reporting unit

• I rely on management of the component unit for determination of its correct reporting framework

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ACCOUNTING ISSUES

• GASB 54 implementation

• Pressure to ‘legitimize’ special revenue funds

• Inability to automatically track constrained resources

• Spending prioritization led to unwanted results

• Boiler plate footnote disclosures did not get revised

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ACCOUNTING ISSUES

• New standards implementation dates

o FYE June 30, 2012

• GASB 57 – OPEB measurement dates

o FYE June 30, 2013

• GASB 60 – Service concession arrangements

• GASB 61 – Reporting entity

• GASB 62 – Codification of pre-1989 FASB’s

• GASB 63 – Deferred inflows/outflows

o FYE June 30, 2014

• GASB 65 – Items previously reported as assets/liabilities

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ACCOUNTING ISSUES

• A suggestion…

o Implement a standard early…either

• GASB 60 – Service concession arrangements

• GASB 61 – Reporting entity

• Waiting may make FYE 6/30/13 a real bear of a year…

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ACCOUNTING ISSUES

• GASB 60 – Service Concession Arrangementso Conveyance of right/obligation to use

capital assets to provide public services for $$

• Operator receives fees from third parties

• Transferor retains certain control

• Transferor retains residual interest in the assets

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ACCOUNTING ISSUES

• GASB 61 – Reporting Entity

• Additional element – existence of ‘financial benefit/burden’

• Clarification on when to blend

• Flowchart in Appendix C

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POLLING QUESTION #5

What should I be doing now in preparation for GASB 60 and 61 implementation…

• Reviewing contracts and agreements

• Reviewing organizational documents of related organizations

• Internal discussions with our legal department

• Inquiries of department managers

• Documenting analysis and conclusions, perhaps use of GASB flowchart tools

• All of the above

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QUESTIONS?

Jim Lanzarotta

[email protected]

mailto:[email protected]

Nfp seminar---audit-update

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