State and Local Government Finance Division

1. State and Local Government Finance Division Deposits, Investments, Auditing, and Reporting Update February 12, 2013 Sara Shippee

2. AGENDA • Announcements / Reminders • Audit Review Process • Breaking News … • Deposits and Investment Issues

3. Announcements / Reminders • Staff changes – FISCAL MANAGEMENT • Lisa Olson has left the Fiscal Section • Steven Holmberg has joined us as an Administrative Assistant in Fiscal • He downloads the audits from the portal, approves invoices, and assists with the phones • Preeta Nayak has joined us as a staff accountant • We are currently down one staff accountant in Fiscal and have one accountant on an extended leave of absence

4. Announcements / Reminders • Staff changes – DEBT MANAGEMENT • Alicia Stephens, Markisha Baker, Ken Durham, and Jim Baker have left the Debt Section • Jennifer Wimmer has joined the Debt Section • She is working on issues for the Medical Care Commission and the Facilities Financing Agency • Joe Futima has joined the Debt Section • He is working on installment purchase issues • There are two vacant positions at the moment

5. Announcements / Reminders • 203 Reports • Were due January 25th • Currently 707 of 1175 have been received • Late letters to go out the 4thweek of February • First letter goes to finance officer • Subsequent letters go up the chain as to whom they are addressed

6. Announcements / Reminders • LGC Contacts for Cash & Investments • Tashara Ware (919) 807-2381 • “Has my report been received” questions • Becky Dzingeleski (919) 807-2396 • Cash & investment and form questions • Ken Wease (919) 807-2391 • Sara Shippee (919) 807-2356 • Any other questions

7. Announcements / Reminders • Treasurer’s Conference for 2013 • Save the dates: • Winston-Salem – Thursday, April 25, 2013 • New Bern – Friday, April 26, 2013 • Dave Bean – Keynote speaker

8. Audit Review Process • The 2012 process for submission of audit reports, contracts, and invoice approval continued to work successfully. • Positive response received from auditors and units. Turnaround was faster although we got bogged down due to staff shortage and Princeville demands. • Congratulations on getting 870 or 75% of the audits in before December 1st • As of 2/5/13 we have received 1,075 audits – • We are still missing – 31 municipalities 4 counties • We do not expect changes on your end for 2013

9. Audit Review Process • 2012 was the new SLGF audit review process • Our new system worked very well after an initial learning curve • We had access to last year’s financials, unit letters and responses and five year’s worth of trial balances • As we build the data, the trend information will be really helpful for units experiencing difficulties • For 2013, we hope to tweak it even further to enhance our ability to expedite a comprehensive and thorough analysis

10. Audit Contracts • Audit contracts for FYE 2013 audits • Auditors with peer reviews other than “pass” must contact the LGC before contracting – see Item # 5 on contract. • If pre-issuance review is required by NC CPA Board or by SLGF it must accompany the audit report when sent to the LGC. This means pre-issuance review must be complete before audit is sent to the LGC for our review – see Item # 12 on contract.

11. Audit Contracts • Submit all audit contracts through the Leapfile portal • Include email addresses for parties to contract in portal message box • Contract approval is by email • Approved stamped invoice sent to auditor by email • 2013 audit contract form is not yet available • 2012 form available until the 2013 form is published • Once the 2013 form is published, please use that form

12. Audit Review Process and Everything Else • Reminder: “LGC_News” Listserv • Using to distribute new memos, publications and items of general interest • http://www.nctreasurer.com/DstMcmsWeb/listserv/LGCNews-Signup.aspx • This becomes more and more critical with electronic processing • All critical members of your finance staff need to be signed up, as well as your personal auditor • Any staff member can email address to you

13. Audit Review Process • Units wanting November or December LGC debt approval must have audited financials to us with signed opinions by October 15 or November 15, respectively • Completed set of financial statements including opinion and MD&A • Do not need compliance opinions • DO NEED compliance findings that affect the financials - will need to know what those are • Do not need the final mass publication bound CAFR • Need time for review, possible letter, and unit’s response

14. Breaking News … • DMV Tax Collection System – HB 1779 • Memo coming soon • Prepared by LGC staff • Together with Implementation Team from DOT • Topic to be covered in more depth at … • Spring conference & Treasurer’s conference • Effective July 1, 2013 • In fiscal year 2013-2014 will have 16 months of revenue; one time occurrence

15. Breaking News … • GASB 68 – Financial Report for Pensions : The Department of State Treasurer has started a workgroup between Financial Operations, the Controllers Office, Retirement, the State’s Actuary, and the State Auditor to plan for the implementation of GASB 68. • The objective is to have the data you and your auditors need to meet your requirements under the standard • If you are a member of LGERS, you must record your share of the unfunded liability per the standard • Effective years ending 6/30/2015

16. Breaking News … • Economic Condition Reporting • Has been tabled • Hopefully it is permanently tabled

17. Breaking News … • Presentation Changes for this Year … • GASB 63 goes into effect for June 30, 2013 • Statement of Net Assets becomes the Statement of Net Position including deferred outflows of resources and deferred inflows of resources • There is new language and new structure • Staff will be issuing a memo • The new illustrated statement based on the standard will be ready for the Treasurer’s conference • GASB 65 further defines deferred outflows and inflows and goes into effect 6/30/2014 but can be early implemented

18. Breaking News … • A-133 and “Yellowbook” are changing • Resulting in changes to structure and language of the Independent Auditor’s Opinion • Effective for most 6/30/2013 • Guidance will be coming out soon

19. Deposits and Investment Issues • New products / new vendors • Coming out of the woodwork • In state and out of state • If you are truly interested, please let us know • I can be the police on this front but want to help if that is what you want within the legal boundaries

20. Deposits and Investment Issues • Custody and Proper Safekeeping of Investments • New AG Opinion speaks only to investments held by a bank and that it is no less secure on the commercial side than the trust side if: • There is a legally binding safekeeping agreement • Which holds the assets separate and apart from the assets of the bank • And can readily be identified and accounted for as belonging to the local government • The AG opinion says that these are standard federal banking regulations to which all banks must comply

21. Deposits and Investment Issues • Banking industry is still facing some challenges due to problem mortgage loans and the real estate situation • Be prudent in your banking relationships • Same need for prudency in your investment relationships

22. Deposits and Investment Issues • Markets are still tenuous although seem to be improving and the Banking industry is facing challenges from the unstable real estate situation, global markets and their own errors • Be prudent in your banking relationships and in your investments • No time to gamble for a few extra dollars • If you don’t understand something – ask questions of the vendor and/or call our office. We may have to investigate, but we need to know what you are being pitched.

23. Deposits and Investment Issues • Make sure deposit accounts are identified as public funds, as required by Administrative Code chapter 7.0103(a) • An account not labeled as public funds is not secured by pledged collateral even if the account is with a “pooling method” bank • In the event of a bank failure, funds inthat account in excess of FDIC limit would face possible loss • NC credit unions are not eligible depositories – there have been a few local governments which were not aware that they could not have funds in a credit union

24. Deposits and Investment Issues • It is our hope to bring the 203 process to the Portal but it is not clear when staffing will allow us to start this project • Also, it depends on the time required by the units that are dealing with financial issues • Possibly a new form can be done before the portal process is implemented

25. How to contact us • Website www.nctreasurer.com • Phone • 919-807-2381 (voice) • 919-807-2398 (fax) • Email • Sara Shippeesara.shippee@nctreasurer.com • Becky Dzingeleski becky.dzingeleski@nctreasurer.com • Ken Wease ken.wease@nctreasurer.com • Tashara Ware tashara.ware@nctreasurer.com