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Federal Accountability - Evolution

Explore the evolution of federal financial reporting models and the controversy surrounding Social Insurance liabilities, with a focus on fiscal sustainability disclosures and economic stabilization activities. Stay informed about the latest developments and remaining issues in reporting models. Contact FASAB for more information.

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Federal Accountability - Evolution

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  1. Federal Accountability - Evolution Wendy Payne Executive Director

  2. Disclaimer • Views expressed are those of the speaker. The Board expresses its views in official publications.

  3. Overview___________________________ • Social Insurance • Fiscal Sustainability • Federal Financial Reporting Model • Economic Stabilization Activities • General PP&E • Deferred Maintenance

  4. Accounting for Social Insurance

  5. When does a liability exist for future social insurance benefits? • Liability: a present obligation of the federal government to provide assets or services to another entity at a determinable date, when a specified event occurs, or on demand. (SFFAC 5, par. 39)

  6. Historical Controversy • Liability debate centers on whether an obligation exists: • after work in covered employment occurs; • when fully insured status is reached; or • when a payment becomes due and payable. • Liability debate impacts costs recognition: • Costs arise as a result of work; or • Costs arise as benefits are due. • Evolving disclosure of information over the years.

  7. Preserving and Enhancing Current SI Information – A Compromise___________________________ • Critical information in management’s discussion and analysis • Closed group measure on the balance sheet but not totaled • Summary section for the statement of social insurance presenting the closed and open group summary totals • New basic financial statement explaining changes • Disclose the accrued benefit obligation (future benefits attributable to work completed as of the balance sheet date)

  8. Latest Developments • Consensus support for: • Statement of Changes in Social Insurance • MD&A emphasis on critical information from statements. • Some aspects of the compromise not well received. Debate regarding relationships between the balance sheet and projections remains open.

  9. Fiscal Sustainability Reporting • Reporting to help users assess the likelihood that future budgetary resources will be sufficient to sustain public services and meet obligations as they come due.

  10. Illustrative Statement of Fiscal SustainabilityBased on GAO’s Alternative Simulation75 Year Projection Period aThis specific illustration does not include a breakdown of receipts as these amounts are not broken out in GAO’s model. However, disaggregated amounts for Social Security and Medicare would be reported under the ED. Source: GAO’s April 2008 and April 2007 simulations. Note: Numbers may not add to totals due to rounding.

  11. Proposed Disclosures and RSI___________________________ • Narrative discussion of fiscal sustainability concepts and caveats— “Plain English” • Major factors • Trends • Historical and projected annual cash flows • Impact of delay • Alternative scenarios/sensitivity • Analysis of annual changes

  12. Remaining Issues___________________________ • Amount of information • Projection period • Finite/Infinite • Flexibility • Understandability

  13. Federal Financial Reporting Model___________________________ • Why? • User needs inventory • Voids or Overkill • Link to audit and internal controls

  14. Economic Stabilization Activities • Raises Issues Regarding: • Valuation of assets and liabilities, particularly in illiquid markets • Accounting basis • Applicability of Credit Reform accounting and appropriate discount rates • Scope of federal reporting – Federal Reserve, GSEs, AIG, etc. • FASAB believes the hierarchy can resolve immediate issues. Long-term these issues will be addressed in related projects.

  15. General PP&E • Proposal to extend guidance in SFFAS 23 regarding the use of estimates for general PP&E • Accounting and Auditing Policy Committee task force developing implementation guidance • Acquisition of PP&E • Use of PP&E • Cleanup Cost • Record Retention • Evaluation of Existing Standards • Replacement Cost?

  16. Deferred Maintenance and Asset Impairment • Deferred Maintenance • SFFAS 6 as amended results in RSI - experimental • Deferred maintenance viewed as critical management issue. • Task force formed • Asset Impairment • SFFAS 6 covers complete impairment • How does deferred maintenance relate to: • Depreciation • Asset Impairment

  17. Contact and Website Information • General inquiries can be directed to fasab@fasab.gov • Phone: 202 512-7350 • www.FASAB.gov • Listserv • Exposure Drafts • Active Projects

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