TASSCUBO Accounting Principles Committee Summer Meeting July 25, 2011

1. TASSCUBOAccounting Principles CommitteeSummer MeetingJuly 25, 2011

2. AGENDA 1. Welcome and Introductions 2. H.R. 2146 – ARRA Type Reporting to all Federal Awards 3. Advisory Draft – Voluntary Uncommitted Cost Sharing 4. SAM Restricted Research Reporting Guidelines – Anthony Turrietta 5. 3 Percent Withholding Requirement 6. SEFA Checklist 7. GASB Update 8. NACUBO APC Update 9. Other Issues

3. H.R. 2146 – ARRA Type Reporting for All Federal Awards

4. H.R. 2146 • Intent is to greatly improve the tracking of federal spending • Would require recipients of Federal funds, as either Prime or Sub-recipient, to report various characteristics of the received grants • Bill requires creation of a single collection platform for this information • Very similar to ARRA required reporting

5. H.R. 2146 • At a minimum, the following will be required not less than every quarter: • Identification of recipient • Identification of executive agency • Identification of federal award and source • Amount of federal funds received, expended, or obligated • Detailed list of projects/activities for which funds were expended • Status as prime or sub-award, and any sub-awards issued • Additional information reasonably related to the receipt and use of Federal funds as the Board shall, by rule, require

6. H.R.2146 • Already approved by House Committee on Oversight and Government Reform • Bill is very popular among lawmakers-they cite accountability, reduction of fraud, transparency • Bill is unpopular among universities, who cite increased bureaucracy and cost • Copy of bill can be found at: http://oversight.house.gov/images/stories/Markups/Amendments/ISSA_043_xml.pdf or

7. Advisory Draft – Voluntary Uncommitted Cost Sharing

8. Advisory Draft-VUCS • NACUBO is working on how VUCS should be treated for functional expense purposes • Guidance based on hypothetical question – can institutionally funded research effort (instruction, research, public service) be reported as VUCS if the activities are separately budgted?

9. Advisory Draft-VUCS • VUCS are effort or other costs incurred that are over and above the amount committed and budgeted for in a sponsored agreement • In essence, the institution is incurring costs related to a research project as cost sharing • OMB issued clarification in 2001 related to treatment of VUCS in F&A calculation

10. Advisory Draft-VUCS • “VUCS should be treated differently from committed effort and should not be included in the organized research base for computing the F&A rate or reflected in any allocation of F&A costs” • OMB Guidance did not dictate VUCS treatment for classification of functional expenses in Financial Statements

11. Advisory Draft-VUCS • Guidance is still in draft form: “Functional expense reporting should not be driven solely by budget allocations, but rather by the actual amounts spent on a particular function” • To the extent that VUCS can be associated with a specific institutional research objective, it should be included in the functional expense category of research

12. SAM Restricted Research Reporting Guidelines

13. SAM – Review • Standards and Accounting Methods for Reporting Restricted Research Expenditures (SAM) was issued by the THECB in 2005 • Sets standards and accounting for reporting restricted research • Defines the concept of “restricted research” • Definition excludes Indirect Cost Recovery funded expenditures from consideration in “restricted research”, although IDC can be reported in the research survey for total research

14. SAM – Advisory Committee • Advisory Committee on Revision to SAM met on February 10th • Editorial changes were proposed to SAM to add clarity • To add further clarity, SAM for Reporting Restricted Research Expenditures for the Research Development Fund was issued after May 24, 2011 • Guidance in this is very similar to original SAM

15. SAM – Advisory Committee • Threshold for SAM for RDF is $250,000 • Revisions were made again on July 11, 2011, and will be available for public comment on or about July 29, 2011 • Gives clear definition of restricted research as it relates to RDF: “Only selected state appropriated grant programs having a competitive award process may be considered restricted research (See Appendix A). State appropriations directly to institutions through formula or special item funding do not qualify as restricted research.”

16. SAM – Advisory Committee • New draft that will be posted in late July:

17. 3% Withholding Requirement – IRC 3402(t)

18. IRC 3402(t) • Applicable to Governmental Entities • Exclusion for entities – less than $100 million in payments for goods and services • Originally effective January 1, 2011 • Now set for January 1, 2013 • Affects all payments for goods & services • Applies to individuals, trusts, estates, partnerships, associations, companies, or corporations

19. IRC 3402(t) • Does not apply to other non-profit and governmental entities • Real property transactions are exempted, construction costs are not • All transactions over $10,000 • Credit Card Transactions • Some exemptions for pass through entities • Withheld amounts are to be reported on Form 945 • Report to recipients on 1099-M

20. IRC 3402(t) • More complete copy of regulation and exceptions:

21. SEFA Checklist

22. SEFA Checklist - Background • PY Audit finding, 10-555-26, Agencies and Higher Education Institutions Should Strengthen Their Reviews of Their Schedules of Expenditures of Federal Awards, was related to 17 institutions of Higher Ed • Deficiencies related to SEFA • In order to prevent this, a checklist was created • Points taken from State Comptroller website – Reporting Requirements for Annual Financial Report of State Agencies and Universities

23. SEFA Checklist • Created checklist does not include all areas on CPA website - only those applicable to Universities • Can be modified to institution needs • https://fmx.cpa.state.tx.us/fmx/pubs/afrrptreq/sefa/index.php

24. GASB Update

25. Statement 59 • Financial Instruments Omnibus • Effective FYE June 30, 2011 • Clarifies Statements 31 and 40, and amends 53

26. Statement 60 • Accounting and Financial Reporting for Service Concession Arrangements • Effective for FYE June 30, 2013 • SCAs are a type of public-private or public-public partnership, including service arrangements and management arrangements • SCAs are also a type of lease • Certain criteria have to be met to meet scope of statement • Statement deals with revenue and liability recognition

27. Statement 61 • Financial Reporting Entity: Omnibus • Effective FYE August 31, 2013 • Updates inclusion data from Statement 14 for component units

28. Statement 62 • Codification of Pre-November 30, 1989 FASB and AICPA Guidance • Effective for FYE August 31, 2013 • Supersedes Statements 20 and 29 • Earlier application is encouraged

29. Other Issues

30. Other Issues • CPA adopted TASSCUBO guidance on tuition discount reporting • Will increase consistency and comparability of this financial reporting element

31. NACUBO APC Update J. Carlos Hernandez

32. APC Mission and Members • Accounting guidance and advocacy • APC members are your colleagues • Council appointments typically do not exceed 5 years • APC’s principal charge is to inform and advise NACUBO

33. Bi-annual meeting with GASB • APC provided information concerning: • Alternative SRECNA • Endowments held by public institutions • Treatment of PELL grants • GASB provided information on: • Pension project • Deferred inflows and outflows of resources

34. Reporting Changes/ConcernsGASB • NACUBO Comment Letters: • Service concession arrangements (60) • The financial reporting entity (61) • Deferred inflows and outflows of resources (63) • Termination of Hedge Accounting (64) • Pension accounting

35. Other Projects • Fair value measurement • Fiduciary responsibilities • Electronic reporting • Lease • Reporting inconsistencies • Revenue survey • Defining an operating measure • Agency transactions

36. Questions