GASB STATEMENT 34 ADVISORY COMMITTEE

 

Minutes

 

January 9, 2001

 

 



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

 



Welcome and Introductions

 

                  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.



Minutes

 

                  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.

 

Availability of 1999-2000 Statewide CAFR

 

                  Barbara informed members that their agencies should receive copies of the State’s 1999-2000 CAFR within the next few days.

 

Upcoming OCG Activities

 

                  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.

 

Discussion of Revenues/Receivables--Potential Issues and Accounting Treatment

 

                  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.

 

Agencies’ GASB 34 Efforts


                  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.

 

Request for Future Topics


                  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.

 

Next Meeting

                  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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