FASAB Update on Recently Issued Standards May 23, 2006 DOI Annual Business Conference Melissa Loughan, CPA

1. FASAB Update on Recently Issued StandardsMay 23, 2006DOI Annual Business ConferenceMelissa Loughan, CPA

2. FASAB Update on Recently Issued Standards DISCLAIMER Views expressed are those of the speaker. The Board expresses its views in official publications.

3. Federal Accounting Standards Advisory Board • What is FASAB? • What do we do?

4. Focus of today’s discussion… • Standards completed in 2005 • SFFAS 30 Inter-Entity Cost Implementation • SFFAS 29 Heritage Assets and Stewardship Land—Issued July 7, 2005 • SFFAS 27 Identifying and Reporting Earmarked Funds • Current Projects

5. Inter-entity Costs (SFFAS 30) • Objective: full cost of programs • Requires full implementation of the inter-entity cost provision in SFFAS 4 • Par. 110 rescinded • Effective for FY 2009 • Earlier implementation encouraged

6. SFFAS 30 Challenges • Identifying material costs Recognition is limited to material items that : • are significant to the receiving entity, • form an integral or necessary part of the receiving entity’s output, and • can be identified or matched to the receiving entity with reasonable precision.

7. SFFAS 30 Challenges • Identifying “broad and general support” Support services provided by an entity to all or most other entities should not be recognized unless such services form a vital and integral part of the operations or output of the receiving entity.

8. AAPC Guidance • Guidance / Technical Release to be issued by end of year • Implementation Issues • Broad and General for all entities • Discussion of Materiality Factors • Collect individual inter-entity requests for guidance on specific cases and forward to OMB

9. Heritage Assets and Stewardship Land (SFFAS 29) • Objective: Fair presentation of assets not recognized on the balance sheet • Requires line item on the Balance Sheet but no dollar amount • Requires disclosure of non-financial information • Phased implementation through FY 2009

10. Heritage Assets and Stewardship Land Project • Project Objective • Determine categorization of HA & SL information within the traditional model & disclosure requirements for the U.S. Government-wide F/S • Exposure Draft Feedback • Need more specific guidance, such as categories and reporting standards, on reporting for HA/SL. • Board should consider audit implications, especially the additional audit costs. • Proposed standard would result in less useful information presented by agencies. • Board Response • Technical Release from the AAPC will address issues • Additional Language added regarding categorization, unitization & supporting documentation • Phased-In Implementation based on a phase-in of required reporting disclosures that are classified as basic

11. Highlights from SFFAS 29 Heritage Assets and Stewardship Land • Reclassifies HA & SL information as basic which means more audit coverage • Line on the balance sheet--KEY CHANGE • Non-financial information in the notes • Condition reporting considered RSI • Minor changes to the disclosure requirements for HA & SL • Disclosure requirements for the U.S. Government-wide Financial Statement • Incorporates all standards for heritage assets and stewardship land into one document

12. Highlights from SFFAS 29 Heritage Assets and Stewardship LandDisclosures • A concise statement explaining how HA & SL relate to the mission of the entity. • A brief description of the entity’s stewardship policies for HA & SL. • A concise description of each major category of HA & land use for SL. The appropriate level of categorization should be meaningful and determined by the preparer based on the entity’s mission, types of assets, and how it manages the assets.

13. Highlights from SFFAS 29 Heritage Assets and Stewardship LandDisclosures • Heritage assets should be quantified in terms of physical units. The appropriate level of aggregation and physical units[1] of measure for each major category should be meaningful and determined by the preparer based on the entity’s mission, types of heritage assets, and how it manages the assets. For each major category of heritage asset the following should be reported: see next slide… [1] Defining physical units as individual items to be counted is neither required nor prohibited. Particularly for collection-type heritage assets, it may be more appropriate to define the physical unit as a collection, or a group of assets located at one facility, and then count the number of collections or facilities.

14. Highlights from SFFAS 29 Heritage Assets and Stewardship LandDisclosures 1.) The number of physical units by major category; major categories should be classified by collection or non-collection type heritage assets for which the entity is the steward as of the end of the reporting period; 2.) The number of physical units by major category that were acquired and the number of physical units by major category that were withdrawn during the reporting period; and

15. Highlights from SFFAS 29 Heritage Assets and Stewardship LandDisclosures 3.) A description of the major methods of acquisition and withdrawal of heritage assets during the reporting period. This should include disclosure of the number of physical units (by major category) of transfers of heritage assets between Federal entities and the number of physical units (by major category) of heritage assets acquired through donation or devise, if material. In addition, the fair value of heritage assets acquired through donation or devise during the reporting period should be disclosed, if known and material.

16. Highlights from SFFAS 29 Heritage Assets and Stewardship Land • Disclosure requirements for the U.S. Government-wide F/S • provides for a general discussion • direct users to the applicable entities’ financial statements for more detailed information on heritage assets and stewardship land • Incorporates all standards for heritage assets and stewardship land into one document • SFFAS 6, par. 57-76 rescinded • SFFAS 8, Chapter 2 & 4 rescinded • SFFAS 14, par. 10-11 rescinded • SFFAS 16 rescinded

17. Effective Date—Phased In-Implementation • FY 2006 • How relates to mission • Description of stewardship policies • Condition reporting as RSI • Reference multi-use heritage assets • FY 2008 • Previous year requirements • Description of major categories and ending balances • FY 2009--all disclosure requirements • Previous year requirements • Number of units added and withdrawn by major category • Description of major methods of acquisition and withdrawals • Exceptions reported as RSI until phased-in

18. AAPC Guidance • Guidance / Technical Release to be issued by end of year • Standardized Categories • Definitions of Units of Measurements • Two sub-groups • Heritage Assets • Stewardship Land

19. Identifying and Reporting Earmarked Funds (SFFAS 27) • Objective: Fair presentation of restricted use revenues and their impact on the government’s finances. • Effective FY 2006 • Impacts • Balance Sheet • Statement of Changes in Net Position • Required Note Disclosures

20. Earmarked Funds: Definition Three required criteria: • A statute committing the Federal Government to use specifically identified revenues and other financing sources only for designated activities, benefits or purposes; • Explicit authority for the earmarked fund to retain revenues and other financing sources not used in the current period for future use to finance the designated activities, benefits, or purposes; and • A requirement to account for and report on the receipt, use, and retention of the revenues and other financing sources that distinguishes the earmarked fund from the Government’s general revenues.

21. Earmarked Funds: Balance Sheet • The portion of cumulative results of operations (and unexpended appropriations, if any) attributable to earmarked funds should be shown separately on the face of the Balance Sheet. • Display format is not prescribed: sub-lines, “stacked” approach or columns may be used.

22. Earmarked Funds: Statement of Changes in Net Position • Earmarked non-exchange revenue and other financing sources, including appropriations, and net cost of operations should be shown separately on the Statement of Changes in Net Position. The portion of cumulative results of operations attributable to earmarked funds should also be shown separately. • Display format is not prescribed: sub-lines, “stacked” approach or columns may be used.

23. Earmarked Funds: Note Disclosure • A component entity should disclose all earmarked funds for which it has program management responsibility by either a list, by official title, or a statement indicating where the information can be obtained. • The information required for individual earmarked funds may be presented separately on the face of the entity's basic financial statements or disclosed in the accompanying notes. • Information for funds not presented individually may be aggregated, but must be provided even if the aggregate total is immaterial.

24. Earmarked Funds: Note Disclosure Required narrative disclose for each individually reported earmarked fund, or portion thereof, for which a component entity has program management responsibility: • A description of each fund's purpose, how the entity accounts for and reports the fund, and its authority to use those revenues and other financing sources. • The sources of revenue or other financing for the period and an explanation of the extent to which they are inflows of resources to the Government or the result of intragovernmental flows. 3. Any change in legislation during or subsequent to the reporting period and before the issuance of the financial statements that significantly changes the purpose of the fund or that redirects a material portion of the accumulated balance.

25. Earmarked Funds: Note Disclosure The following information should be disclosed for individual earmarked funds: • Condensed information about assets and liabilities showing investments in Treasury securities, other assets, liabilities due and payable, other liabilities, cumulative results of operations and net position. 2. Condensed information on gross cost, exchange revenue, net cost, nonexchange revenues and other financing sources, and change in net position. 3. The total cumulative results of operations shown in the note disclosure should agree with the cumulative results of operations for earmarked funds shown on the face of the component entity’s basic financial statements.

26. Earmarked Funds: Note on Investments Investments in Treasury securities for earmarked funds should be accompanied by a note that explains the following issues: • The U.S. Treasury does not set aside assets to pay future expenditures associated with earmarked funds. Instead, the cash generated from earmarked funds is used by the U.S. Treasury for general Government purposes. • Treasury securities are issued to the earmarked fund as evidence of earmarked receipts and provide the fund with the authority to draw upon the U.S. Treasury for future authorized expenditures (although for some funds, this is subject to future appropriation). • Treasury securities held by an earmarked fund are an asset of the fund and a liability of the U.S. Treasury, so they are eliminated in consolidation for the U.S. Government-wide financial statements. · When the earmarked fund redeems its Treasury securities to make expenditures, the U.S. Treasury will finance those expenditures in the same manner that it finances all other expenditures.

27. Current Projects • Fiduciary Activities • CFR – Disclosures • Conceptual Framework • Objectives • Elements • The Financial Report (to begin this year) • Entity Issues (to begin this year) • Social Insurance and Liabilities • Natural Resources

28. FASAB On-Line Resources • www.fasab.gov • All exposure drafts and final pronouncements. • Electronic mailing list for updates including newsletter and requests for comment. • Active project pages including briefing materials.

29. FASAB Contact Information • SFFAS 29 and 30 Point of Contact: • Melissa Loughan • 202-512-5976 • Loughanm@fasab.gov • SFFAS 27 Point of Contact: • Eileen Parlow • 202-512-7356 • Parlowe@fasab.gov • AAPC Point of Contact for Task Forces • Monica Valentine • 202-512-7362 • Valentinem@fasab.gov

30. DOI Collaboration • The Office of Financial Management (PFM) tracks and coordinates DOI responses to all FASAB projects • PFM is chairing a CFO Council workgroup to provide a coordinated council-wide response to emerging issues

31. Current PFM Focus • Working with AAPC Taskforce to develop the guidance for Standard 29 (HA and SL) and 30 (Inter-Entity Costs) • Responding to technical inquiries regarding the draft Exposure Draft for Oil and Gas recognition • Developing Departmental response to implications of Fiduciary Activity Standard requirements for full accrual based accounting related to DOI managed Trust Accounts

32. HASL AAPC Taskforce • AAPC group controlled by three members from OMB, FASAB and GOA • Broken out into three separate workgroups to address Heritage Assets, Stewardship Land and Materiality • Workgroups consist of many members from interested Agencies and the audit community to recommend specific guidance

33. Heritage Assets Challenges • Determining materiality thresholds when no dollar value is recognized • Aggregation of cultural resources that provides useful information while maintaining verifiable audit evidence • Addressing condition and deferred maintenance issues for collectible and natural heritage assets

34. Stewardship Land Challenges • Addressing condition requirement for land as defined by the standard as the solid part of the surface of the earth excluding all natural resources • Developing verifiable units of measure for vast expanses of land that can be tested by auditors • Reconciling management and budget objectives with financial reporting summarization objectives from a consolidated agency and government-wide basis

35. Inter-entity Costs Challenges • Addressing materiality issues on an item basis as opposed to total financial statement presentation basis • Identification of costs that benefit other components

36. Fiduciary Activity Challenges • Accrual based recognition may infer liability to beneficiary before legal liability to those recipients • Costs of compliance may exceed funding realities • Reconciling fiduciary responsibilities of Federal government with standard industry practices

37. Asbestos Liability • FASAB to issue a Technical Bulletin based upon current guidance clarifying: • Federal entities should recognize a liability and related expense for all friable and non-friable asbestos related cleanup costs that are probable and reasonably estimable • Federal entities should disclose information in a note to the financial statements related to friable and non-friable asbestos related costs that are probable but not reasonably estimable • Effective date for this bulleting will be all periods beginning after September 30, 2008