Notes
Outline
State Agency Training Session
GASB Statement 34 - Closing Package Agencies
Afternoon Session A
April 30 and May 2, 2001
Course Agenda – Afternoon Session
GASB  33 Implementation Issues
Discussion of Interfund Transactions
STARS Changes
Internal versus External Activity/Balances
Program versus General Revenues
Account Code Additions
Discussion of Segment III Training
Open Forum
GASB 33
Implementation Issues
Statement Summary
Effective for the current fiscal year – June 30, 2001
Most significant expected changes are with grants/entitlements (non-exchange)
Closing package revisions
Definition
Nonexchange transaction – transactions in which the agency gives (or receives) value without directly receiving (or giving) something of equal value in return
Exchange transactions – each party to the transaction receives and gives up something of essentially the same value
Classes of Nonexchange Transactions
Derived tax revenues
Imposed nonexchange transactions
Government mandated nonexchange transactions
*Voluntary nonexchange transactions
*  Most significant changes expected here.
Voluntary Nonexchange Transactions
Legislative or contractual agreements entered into willingly by two or more parties
Examples
non-entitlement grant programs
private donations
*  Changes in receivable/deferred revenue calculations for the grants/entitlement closing packages for 2001.
Grants - Eligibility Requirements
Required characteristics of recipients
Provider specifies certain characteristics which recipient/subrecipient must possess
Example
 The type of entity eligible to receive the grant funds
Grants - Eligibility Requirements
Time requirements
Affect the timing of recognition of nonexchange transactions
Grant provider or legislation specifies time period during which funds may be spent or when use of funds is first permitted
Example
Grant period October 1, 2001 through September 30, 2002
Grants - Eligibility Requirements
Reimbursements
Provider requires a recipient/ subrecipient to first incur allowable costs in order to qualify for funding
Contingencies
Provider may require the recipient/ subrecipient to perform specific actions to qualify for funding
Example - matching funds
Grants – New Statewide Policies
Revenues – recognized once all eligibility requirements have been met
If governmental or expendable trust funds, funds must also be available
Considered available if received on or before June 30 or by July 31
Changes only affect the closing package process – no changes in STARS
Grants – New Statewide Policies
Revenues - once all eligibility requirements have been met,
report any revenues not received by June 30 as receivable in the grants/ entitlements closing package
Grant award less funds received to date = receivable
Received to date includes prior year funds
Grants – New Statewide Policies
Expenses/expenditures – recognized once all eligibility requirements have been met by the recipient/subrecipient
any payments not made by June 30, report as accounts payable in the accounts payable closing package
Grant award less funds paid to date = accounts payable
Paid to date includes prior year funds
Grants – New Statewide Policies
Deferred revenue – record if grant funds are received prior to meeting all of the eligibility requirements
For governmental or expendable trust funds, also record deferred revenue if amounts are not considered available
Considered NOT available if not received by July 31
Case Study No. 1
PRT submits an application for a state park facility grant (funds are available for the period October 1, 2000 through September 30, 2005.  PRT’s application and spending plan are approved.
Grant award - $5,000,000
At June 30, 2001 - $1,250,000 received
On July 20, 2001 – $500,000 is received
Case Study No. 1, continued
If this grant is recorded in subfund 5055-federal, which is a special revenue fund…
What amounts should be reported on the grants/entitlements closing package as of June 30, 2001?
*  Review handout attachment
GASB 34
Discussion of Interfund Activity
Interfund Activity
New GASB 34 requirements
Eliminations of internal balances within governmental activities
Eliminations of internal balances between governmental activities and business-type activities (proprietary funds)
Interfund activity is defined as activity between funds
Types of Interfund Activity
Interfund loans – Fund A makes a loan to Fund B
Reimbursements – Fund A makes an expenditure on behalf of Fund B, which is later reimbursed
Interfund services provided/used – Fund A provides services to Fund B
Transfers – Fund A transfers funds to Fund B
Current OCG Procedures for Reporting Interfund Activities
At year end , the OCG must
Analyze all STARS JV’s, Appropriation/Cash Transfers, IDTs for proper classification
Prepare and post entries to eliminate  intrafund transactions
New OCG Procedures for Reporting Interfund Activities
Prepare and post entries to eliminate certain types of interfund activity, including corrections of errors (unless original entry was NOT eliminated)
GASB 34 adds an additional level of elimination to the current process
The OCG must rely on agencies to follow standard procedures in preparing JV’s, Appropriation/Cash Transfers and IDTs
Errors Which Affect Accuracy of
the State’s CAFR
Several problems have been found by the OCG at year end upon review of these transactions
Coding similar transactions differently
Using an incorrect input form (JV’s when Transfer is more appropriate)
Providing insufficient supporting documentation
Reducing these types of errors will be CRITICAL
Transfers
Move cash and revenue from one agency and/or subfund to another agency and/or subfund
Ex. DPS collects revenue within its DMV function and transfers the cash and revenue to DOT, which is legally authorized to expend it
Use STARS Form 30
Interdepartmental Transfers (IDTs)
Used to record:
the sale of goods or services by one agency and/or subfund to another agency and/or subfund
Award of grant monies by one agency and/or subfund to another agency and/or subfund
Transfers out of the General fund
Use STARS Form 40
Journal Vouchers
Used primarily to:
Correct errors in recording other STARS transactions
Distribute revenue from zero-balance clearing subfunds
Reimburse expenditures
Use STARS Form 01
Code as I (internal) or E (external) if revenue and/or expenditures is effected
Break
STARS Changes Effective for FY Beginning July 1, 2001
Internal Versus External Activity
Internal vs. External Activity and Balances
Government-wide financial statements
 Requires some internal activity and balances must be:
Reclassified
Consolidated
Eliminated
STARS transactions must segregate between internal/external activity/balances
Internal Activity and Balances
Internal activity and balances
result of resource flows between the funds of a primary government
includes blended components, but not discrete component units
Internal Activity and Balances
Examples
Budget and Control Board
Department of Mental Health
SC Retirement Systems
Tobacco Revenue Management Authority
*  Additional examples in handout – Question # 2
External Activity and Balances
External activity and balances
result of resource flows between the primary government and other external parties
i.e. vendors, contractors, legally separate discretely presented component units, etc.
External Activity and Balances
Examples
Private vendors
Public Service Authority
Connector 2000, Inc.
ETV Endowment of South Carolina
*  Additional examples in handout – Question # 3
Changes in STARS Required
Change in Preparation of Journal Vouchers
Batch Type “0” only  (no other batch entries affected)
Addition of an indicator in the document header
Will identify JVs as internal or external
Header Identifier Required
Required, preferably at top right of document header
“Zero-I” – all lines affect internal revenue/expenditure objects
“Zero-E” – all lines affect external revenue/expenditure objects
“Zero-Blank” – no lines affect revenue/expenditure objects
Questions Raised by Agencies
My agency does not have the resources to program its JV creation program to automatically print the I/E indicator in position 164 of the document header.  May I handwrite or stamp the I or E on each document?
Yes, preferably in RED, in the document header area
*  Handout Question # 5
Questions Raised by Agencies
Why do we have to do all of this work?
GASB 34 requires we distinguish between internal and external transactions and balances for the elimination/ reclassification of certain internal balances.  This change will allow the OCG to obtain this information for these batch transactions.
*  Handout Question # 15
Questions Raised by Agencies
I have a question about whether to use an I or E on a particular JV.  Who can help me?
Prior to July 1, 2001, Bryce Wilson or regular contact in OCG’s office for each agency.
Beginning July 1, 2001, direct all questions to the Central State Accounting Division
*  Handout Question # 16
Case Study No. 1
I need to correct a cash transfer or IDT (Batch Type 3 or 4).  Should the correcting JV be coded as I or E?
This is an “I” transaction as STARS will automatically code a transfer or IDT as internal.
*  Handout Question # 6
Case Study No. 2
During March, I deposited various checks from non-State parties an various IDT receipts into my agency’s Revenue Clr’g Subfund.  When clearing these balances out, which indicator should be used?
Both – 2 JVs must be prepared:  one for the checks and one for the IDT’s.
*  Handout Question # 7
Case Study No. 3
Is there any way to shortcut the work described in the previous question?
May request the OCG to establish a 3555 subfund, IDT receiving, for use beginning in FY 2002.
*  Handout Question # 8
Case Study No. 4
Suppose that in Question 7, I also had deposited checks from various State agencies into the Revenue Clearing subfund.  How should the balances for those transactions be cleared?
*  Handout Question # 9
Case Study No. 5
My agency purchased office supplies from General Services using the State credit card, and subsequently needed to change the subfund where part of these supplies are charged.
I or E?
Handout Question # 10
Case Study No. 6
I need to correct the subfund and mini-code for a disbursement voucher (Batch Type 6 document) where the payment (check) was to another State agency.
 I or E?
Handout Question # 11
Case Study No. 7
I need to move the entire balance in a particular revenue/expenditure object code in my agency’s 3035 subfund from mini-code 0057 to 0058.  How can I determine whether or how to split the balance between I and E?
*  Handout Question # 12
STARS Changes Effective for FY Beginning July 1, 2001
STARS Account Code Changes
Identified as of April 2001
STARS Object Code Changes
Changes required in STARS Object Codes to date relate primarily to:
Capital assets
Grant revenues (discussed in previous section)
Other changes identified include the deletion of several revenue codes not used in recent years
STARS Object Code Changes – Capital Assets
Capital Assets
Changes in revenue codes
Changes in expenditure codes
Revenue codes
Changes relate primarily to sales of capitalized and non-capitalized assets
Separate codes for items over and under the capitalization limits
*  See handout attachment
STARS Object Code Changes – Capital Assets
Expenditure codes
Changes relate primarily to purchases of capitalized and non-capitalized assets
Changes for moveable assets and works of art, historical treasures (items between $1,000 and $5,000)
Changes for purchase or construction of other depreciable capital assets classes
*  See handout attachment
STARS Object Code Changes – Grants
GASB 34 requires grant revenues to be reported in the following categories:
Program revenue – operating grants
Program revenue – capital grants
General revenue
Requires a change in current STARS object codes used
STARS Object Code Changes – Grants
Program revenue
restricted for use by a particular agency/ grouping of agencies
General revenue
all other revenue
STARS Object Code Changes – Grants
Capital grants
resources are restricted for capital purposes
Operating grants
Resources are used for operations or capital expenditures at the discretion of the Agency
Review handout materials
STARS Object Code Changes – Grants - Example
Current object code used
2801  Federal revenue
New object codes required to be used
2821  Federal Grants - Unrestricted
2822  Federal Operating Grants - Restricted
2823  Federal Capital Grants – Restricted
Agencies must review grants NOW to determine proper classification at July 1
"Segment III State Agency Training"
Segment III State Agency Training
Segment III Training
Tentative to hold in Spring 2002
Will offer several sessions
Focus of training efforts on revised/new closing packages
Critical to have staff responsible for maintaining related financial data or completing closing packages attend
Open Forum for Questions
Conclusion