AGA Today
Highlights of
March 9-10, 2006 GASAC Meeting
TO: Sam McCall,
National President, Association of Government Accountants
FROM: Sharon R. Russell, CGFM, AGA
Representative to GASAC
DATE: March 21, 2006
These highlights
are based on my observations as the AGA representative to the
Governmental Accounting Standards Advisory Council (GASAC) and are not
the official minutes of the Council.
The GASAC held its
first 2006 meeting on Thursday, March 9 and Friday, March 10, 2006, at
the GASB Offices, 401 Merritt 7, Norwalk, CT.
Welcome and Opening
Remarks
Chairman Keith
Johnson called the meeting to order and welcomed four new GASAC members.
The new members are: Dr. G. Robert Smith, Jr., Associate Professor of
Accounting, Middle Tennessee State University, representing the American
Accounting Association, Mr. Eric Lupher, Director of Local Affairs for
the Citizens Research Council of Michigan, representing the Government
Research Association, Mr. Thomas Lee, Executive Director of the State
Retirement and Pension System of Maryland, representing the National
Association of State Retirement Administrators, and Ms. Susan Menditto,
Director of Accounting Policy for the National Association of College
and University Business Officers (NACUBO) representing the same. The
minutes of the November 3 and 4, 2005, meeting held in New York City,
NY, were approved after a minor modification recommended by the GASAC
Vice Chair, Mike Crawford.
Report on
Meetings and Activities of the Financial Accounting Foundation (FAF)
Richard
Johnson, FAF Trustee, reported that the FAF had a conference call on
11/28/2005 and approved the budget. The FAF met the first part of March
and approved the reappointments of Richard Tracy and Cynthia Green to
the Governmental Accounting Standards Board. Work is continuing on the
search for a Chairman of the Financial Accounting Standards Advisory
Council (FASAC).
Steve Getz,
FAF staff, provided a report on the results of GASB’s fundraising
efforts. He reported $118,000 was raised in 2005 as opposed to $123,000
in 2004. He stated that the efforts appear to be plateauing. They have
experienced a high percentage of turnover but the contribution total and
number of contributors appears to be remaining relatively constant. He
told GASAC members that he would be in touch shortly to begin the 2006
funding efforts. The mailout will take place in May. A meeting was
held with representatives of the National State Comptrollers, the
Government Finance Officers Association (GFOA), the National Association
of State Auditors, Comptrollers and Treasurers (NASACT), and the Bond
Market Association to discuss ways to make the voluntary assessment
program more successful. They discussed moving from the current
approach of “opting in” to an “opt out” approach. They also discussed a
Single Audit filer fee. This method was proposed by NASACT. The pros
and cons were discussed. The disadvantage being that it will look like
an audit fee and will place audit firms in the position of being a
collection agent. Robert DeSantis, President, FAF, reported that he met
with AICPA President, Barry Melancon and that Mr. Melancon agreed to
submit a proposal to AICPA member firms asking auditors to separately
bill clients for support of GASB who are single audit filers.
GASAC Feedback on the Elements of Financial
Statements Project
Roberta
Reese, GASB staff, provided GASAC members with an update on the Elements
of Financial Statements Project. The Board has tentatively decided that
separate elements of financial statements should be established for
deferred outflows and deferred inflows of resources. A discussion
followed with GASAC members asking GASB staff specific questions about
the tentative decisions.
Status of GASB Strategic Plan Implementation
with GASAC Feedback
Dean Mead,
GASB Staff, reported that GASB is now working to provide plain language
articles on each of its due process documents and pronouncements. In
addition, GASB is now measuring its own performance and posting the
results on its website. GASB is also conducting more surveys. GASB had
contracted with a research firm to survey its constituents regarding
their perceptions of the GASB and its standards-setting activities.
GASB staff will be conducting a survey of the staff and member
leadership of GASAC organizations to ascertain their awareness and
perceptions of GASB’s outreach and communication efforts.
Report of GASB Chairman
Robert
Attmore, GASB Chairman, provided the following overview of the GASB’s
activities for the period November 1, 2005 to February 28, 2006: 1)
Conceptual Framework Project – Elements of Financial Statements
- the Board has reached tentative
conclusions on the definitions of assets, liabilities, deferred inflows
and deferred outflows, inflows, and outflows based upon inherent
characteristics of each element. The Board is using the term inflows
and outflows to encompass the various measurement focuses found in the
governmental model, 2) Derivatives and Hedging
– the Board has tentatively decided
that derivatives should be reported at fair value in government
financial statements and is now considering criteria for transactions
that would qualify for hedge accounting, as well as criteria for
measuring and monitoring hedge effectiveness, 3) Fund Balance
Reporting – the Board has considered
staff research findings and has been exploring potential clarifications
of fund type definitions and alternatives to the current fund balance
components that could enhance the presentations of fund balance
information, and 4) Economic Condition Reporting
– the Board reach a tentative conclusion on the definition of economic
condition. In recognition of the coming research phase of this project,
the Board moved the project from the current technical agenda to the
research agenda in January.
Mr. Attmore
also discussed the “White Paper” which GASB has prepared entitled “Why
Governmental Accounting and Financial Reporting Is – And Should Be –
Different”. He encouraged all GASAC members to read the document and to
share with their constituent organizations.
Report of the Director of Research and
Technical Activities of the Governmental Accounting Standards Board
Dave Bean,
GASB Director of Research, reported that a GASB survey will be sent out
to approximately 5,500 users, preparers and auditors. He encouraged
everyone who receives the survey to complete it. The purpose of the
survey is to gather information about constituents’ perception of GASB
in general, as well as its standards, other documents produced by the
GASB, and the GASB’s outreach efforts.
GASAC Feedback on the Derivatives Project
Randy
Finden, GASB staff, provided an overview of the Board’s tentative
decisions on the Derivatives Project. Derivatives will be reported on
the balance sheet at fair value. The Board is proposing that if a
derivative is used for heading and meets certain criteria, it would be
accounted for using hedge accounting. Hedge accounting would require
recognizing the fair value changes in the derivative as either deferred
charges or deferred credits. Derivatives that do not qualify for hedge
accounting would recognize changes in their fair value in a government’s
change statement as a gain or a loss.
GASAC
members stressed the importance of the plain-language document. They
stated many governments which may have derivatives do not fully
understand them but enter into derivative agreements based on the advice
of financial advisors.
Dave Bean
reminded GASAC members that GASB will be holding a public hearing in
conjunction with the AGA Professional Development Conference to be held
in San Diego, CA on June 21, 2006. If anyone is interested in
testifying before the GASB, they will be provided with the pre-ballot
draft (by the end of March) to allow them additional time to review the
proposed Preliminary Views (PV) document in order to prepare to
testify. He stated a roundtable will also be held in New York City in
July to discuss the Derivatives PV.
Dean Mead
will prepare the plain language document on the Derivatives PV document
and stressed that it will be geared toward the financial statement users
and as a result, will not go into great detail about the three methods
of gauging the effectiveness of a hedging instrument.
GASAC Feedback on the Fund Balance Reporting
Project
Ken
Schermann, GASB Staff, briefed the GASAC on alternatives that are
currently being developed for exposure in either an Invitation to
Comment (ITC) or a PV regarding governmental fund type definitions, and
on options for fund balance reporting. Currently four methods are being
considered. Method 1 provides information on where restricted and
unrestricted resources “reside”. Method 2 is the closest to the
current model but with an added requirement to display information about
designations. Method 3 is similar to Method 2 except it includes some
of the concepts of Method 1 as well. Method 4 provides information
about how much money is available for appropriation and provides a
breakdown between “Committed to Specific Uses” and “Undesignated.” Some
GASAC members expressed a preference for one model over another, but
there was no clear favorite.
Discussion
followed regarding the four proposed methods as well as a discussion
regarding whether special revenue funds should be used to account only
for funds used for specific purposes, or whether they should be more
revenue driven. The additional issue of whether special revenue funds
should be used to capture the total costs of providing a service
or should they emphasize accounting for specific revenue sources.
Following
the committee reports, the meeting was adjourned.
Cc:
Relmond Van Daniker, Executive Director