GASB
STATEMENT 34 ADVISORY COMMITTEE
Minutes
LOCATION
Conference Room 222
Wade Hampton State
Office Building
Columbia, South Carolina
TIME
10:00 AM
ATTENDEES Barbara
Hevener–South Carolina
Office of Comptroller General (OCG), Program
Sponsor
Kathy
Glass–KPMG, Program
Manager
Jenny
Butler–South Carolina
Department of Health & Human Services
Becky
Carver–South Carolina
Department of Mental Health (Guest)
Mel
Commins–South Carolina
State Treasurer’s Office
Bruce
Dorman–South Carolina
Department of Public Safety
Billy
Gossett–South Carolina
Department of Social Services
Lanna
Harris–State Budget and
Control Board, Internal Operations
Darryl
Hentz–South Carolina Department of Transportation (Guest)
Billy
Martin–South Carolina
Employment Security Commission
Renee
Moore–State Budget &
Control Board, Office of Information Resources
Pat
O’Cain–South Carolina
Office of Comptroller General, Data Processing
Donna
Parker–South Carolina
Department of Health & Human Services
Lynda
Robinson–South Carolina
Department of Education
David
Seigler–South Carolina
Office of Comptroller General, Financial Reporting
Ed
Walton–University of
South Carolina (Guest)
Bonnie
Gunter–South Carolina
Office of Comptroller General (Administrative Coordination
and Minutes)
AGENDA
·
Welcome and Introduction
·
Upcoming OCG Activities
·
Discussion of Revenues/Receivables
Potential Issues
and Accounting Treatment
·
Agencies’ GASB 34 Efforts
·
Request for Future Topics
·
Other Questions
At 10:00 a.m.
on Tuesday, January 9, 2001, Barbara Hevener called the meeting to
order and welcomed everyone. Mr. Darryl
Hentz represented the Department of Transportation in the absence of committee
member Debra White.
Barbara stated
that the minutes of the last meeting were not yet available for distribution
due to the heavy workload in the Central State Financial Reporting Division
caused by preparation of the statewide CAFR and materials for the State’s bond
rating agencies. Barbara stated that
minutes would be made available as soon as possible.
Barbara
informed members that their agencies should receive copies of the State’s
1999-2000 CAFR within the next few days.
Barbara updated the members
regarding some of the OCG’s upcoming activities and some of the recent projects
involving the OCG’s Central State Financial Reporting and Data Processing
Divisions. She stated that a package
regarding GASB 34 STARS modifications was mailed to agency finance
directors on January 3, 2001.
Specifically, this package provided standards for STARS changes with
respect to Batch Type “0” (journal voucher) documents. Agencies must adopt these changes effective
July 1, 2001. Distinguishing
internal from external journal vouchers in STARS will allow the OCG to eliminate
and/or reclassify internal revenues and
expenditures/expenses as required by GASB 34.
Barbara and Pat O’Cain
explained further that the OCG would change STARS to automatically make the
following distinctions without requiring any input from agencies:
·
All deposit documents (batch type 2) will be
considered external. (Although the OCG
recognizes that some of these transactions represent deposits of checks
received from other State agencies, such transactions are currently not
considered to be material. If they
become material in the future, the OCG would need to change the procedures and
ask agencies to distinguish between internal and external batch type 2
transactions.)
·
All budget documents (batch type 1), transfer
documents (batch type 3) and IDT documents (batch type 4) will be considered
internal.
·
Payroll transactions (batch type 9) will be
considered external.
·
Disbursement voucher documents (batch type 6)
are considered external except those that are payable to a State agency are
considered internal. These exceptions
will be identified and properly coded based on the vendor code that the paying
agency inputs.
Because journal vouchers
(batch type 0 documents) that affect revenues or expenditures can be related to
either internal or external activity, however, it will be necessary for the
submitting agency to separate and identify each such voucher as either internal
or external. For agencies submitting
automated journal vouchers, a one-character field (IAF) has been added in
position 164 of the document header.
This field will be used to identify the voucher as either internal
(I) or external (E). For
agencies that submit manual journal vouchers, those that affect revenue or
expenditures/expenses must be clearly stamped as “E” (external) or “I” (internal)
in the document header area. The STARS
output file also will be modified to include the internal/external flag (IAF)
in position 182.
Pat
explained that several related STARS changes would be made in addition to
changing the input layout. These
include automated edits that will require any journal voucher document (batch
type 0) that affects a revenue or expenditure/expense account to be identified
as internal or external. Also STARS
will post transactions such that revenue and expenditure/expense account
balances are split into internal and external components on the STARS Operating
File. Agencies with on-line access will
be able to display these component balances through the previous STARS
cycle. Finally, a new report will be
developed that will print these balances.
The package that the OCG mailed to agencies on January 3 included a
memorandum and additional technical information related to these changes,
including record layouts (both input and output) as well as a proposed inquiry
and report example. The OCG suggested
that agency finance directors furnish a copy of the January memorandum and its
attachments to their agency’s information technology provider, so as to allow
them to implement any changes to their systems that may be necessary.
Additionally,
Barbara and Pat spoke about other STARS changes that will become effective for
agencies beginning July 1, 2001, but are not related to implementation of
GASB 34. These changes were
outlined in the January 3 package sent to agencies.
Barbara
stated that only a few questions had arisen from the distribution of the OCG’s
January memorandum. Kathy mentioned a
couple of inquiries that she had received.
One inquiry dealt with the fact that no “identifying code” was specified
in the memo for distinguishing internal from external
transactions. Kathy advised that the
code to be used for classifying internal from external
transactions would be “I” for internal and “E” for external transactions. Further, the field should be left “blank” if
the transaction does not affect revenues or expenditures/expenses. This information also will be covered in the
next agency training sessions. Kathy
stated that she also was asked if there would be a “trial run” to allow
agencies to test their systems before July 1. Pat replied that the OCG’s plan allows for agencies to submit
test transactions for several months before the July 1, 2001,
effective date. Agencies may wish to do
this testing in April. Pat indicated
that he and the staff do not expect too many difficulties to arise from these
changes.
Lanna Harris asked if agencies
would be required to reconcile their books to STARS at the internal/external
detail level. Barbara and Pat both
responded that no additional requirements are anticipated. Barbara stated that she believes the
reconciliation requirements currently contained in the STARS manual are
sufficient for audit purposes.
Pat
reported that Data Processing had spent most of the fall designing the
above-mentioned STARS change as well as installing a “parallel instance” of the
GAAP reporting system, Series Z. Pat
confirmed that all system components were in place and ready to proceed.
Kathy
stated that the Financial Reporting Division has been gearing up to start
working on high-priority GASB 34 accounting issues. Kathy indicated that agencies had expressed
a high level of concern regarding changes required in the capital assets area
and that the Financial Reporting Division already had begun some work in this
area. Kathy indicated that the
committee could expect to see some results of this work at the February or
March meetings with written communications being sent to all agencies soon
afterward.
Kathy
stated that much work remains to be completed on other accounting issues before
significant work can begin on developing the new chart of accounts for
statewide reporting purposes. The OCG
will begin by drafting pro forma government-wide financial
statements. Also discussed was the
Agency Quarterly Progress Reports due from state agencies on January 8 for
the quarter ended December 31, 2000.
The Financial Reporting Division staff is currently evaluating
information received to identify any issues not already under consideration.
Barbara
stated that in addition to capital assets, the following areas would be
reviewed in the near future:
·
Fund structure issues (i.e., GASB 34 has
changed some of the fund type definitions, necessitating changes in GAAP fund
codes associated with certain subfunds.
These changes won’t affect agencies until the fiscal year ending
June 30, 2002);
·
The college and university controllers’ group
has given the OCG a large document outlining GASB 34/35 issues affecting
higher education institutions. The OCG
Financial Reporting Division will review this document early in the process to
determine if there is a need to open up additional dialogue with the
controllers’ organization;
·
Systems issues that don’t directly affect the
agencies but impact the OCG;
·
Planning for the spring training and future
development of training modules.
Renee
Moore inquired as to whether the recording of depreciation, treatment of
revenues, etc., would be handled via changes in closing packages. Kathy responded that those items would be
handled via closing packages adjustments for agencies that currently complete
closing packages. Agencies that prepare
their own financial statements, on the other hand, will be fully responsible
for making all necessary changes to their stand-alone statements. Kathy advised that the spring training
session would address these concepts in additional detail. The spring training sessions will concentrate
on changes that agencies must make to their systems and a description of the
types of new data that agencies must produce.
Subsequent training sessions will describe the amended closing packages
more exactly and will walk agencies through how to enter the data into the
amended closing packages.
Kathy
explained that GASB 34 would require governmental fund activities to
record revenues both on the current modified accrual basis and on a full
accrual basis of accounting. Barbara
mentioned that there already are closing packages that deal with receivables,
but changes will likely be needed in those packages to collect the information
needed to make adjustments to record revenues on the full accrual basis. Kathy stated that estimation of
uncollectible receivables could take on added significance under the new
accounting rules. For significant
receivables, agencies should carefully review past collection trends in order
to estimate the percentage of current receivables balances expected to be
uncollectible.
Kathy stated that GASB 34 requires
segregation of short-term receivables from long-term receivables. Under GASB 34, short-term is
defined as a receivable that is collectible within a year. Any receivable expected to be collected
beyond a year is long-term.
Kathy mentioned that the area of long-term receivables probably has not
been reviewed before and that it will require some focus. Changes will be required in the closing
packages because any long-term receivables must be discounted to present value
using the State’s average borrowing rate as the discount rate. Kathy indicated that this might be an
especially significant issue in the area of social services systems.
Mel
Commins inquired about the need for development of materiality standards. David Seigler agreed that it would be
necessary to set a scope or to establish some guidelines to serve as policy so
that agencies could avoid the necessity of recording accruals for immaterial
receivables. Kathy said that the
American Institute of Certified Public Accountants (AICPA) is working through
this now and is developing some guidelines as to where to apply materiality. Kathy stated that, in the meantime until the
AICPA finalizes its standards, agencies must make some assumptions. Mel mentioned that the State Treasurer’s
Office administers four Installment Purchase Program (IPP) loans that would
need to be reviewed.
Barbara
asked Lanna Harris about General Services’ Clean Water Revolving Loan
Fund. Lanna responded that General
Services actually has five outstanding revolving loan funds. These loans would represent long-term
receivables.
Jenny
Butler mentioned that DHHS has a possible issue that needs to be looked at
regarding funds received from third-party insurance companies. These transactions may need to be reported
in a closing package as receivables.
Jenny will provide more information on this issue in a future meeting.
Bruce
Dorman mentioned that DPS may have some potential issues with federal grant
funds and the possible necessity of recording deferred revenue. Depending on eligibility and various types
of grant restrictions, DPS may need to make some changes in its procedures for
recording revenue. This will be
reviewed and reported on in the near future.
Kathy
stated that GASB 33’s revenue recognition requirements were currently under
review by David Seigler and Kim Elliott at the OCG. More information will be forthcoming to the committee at a later
date. Kathy affirmed that these issues
would be covered in the spring training sessions for state agency accounting
personnel.
Kathy
will take a look at long-term loans receivable to determine what must be
included/excluded and will report her findings at a future meeting.
Barbara
mentioned that nearly all agencies had submitted an Agency Quarterly Progress
Report by the due date and that staff of the Central State Financial Reporting
Division had begun to contact agencies that had not yet submitted a report.
Kathy
asked members for their suggestions regarding agenda topics for future
meetings. The area of capital assets,
including guidelines for depreciable useful lives and the required related
system changes, was mentioned again as the highest priority. During the next four weeks, the OCG will
work through these issues and will plan the agenda for the next meeting
accordingly.
Mel Commins suggested that a document be prepared to recap the most significant GASB 34 issues reported by state agencies to the OCG. Kathy said that some of that documentation was already in place, and she would soon have it finalized.
The
next meeting will be held on Tuesday, February 6, 2001. Members are requested to meet in Conference
Room 222 of the Wade Hampton State Office Building, Columbia, South Carolina,
at 10:00 AM.
Respectfully
submitted,
Barbara
C. Hevener
/bpg
Enclosures
Click here to
view the Agenda provided to Advisory Committee members at the meeting.
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