FASAB Update CIGIE/GAO Financial Statement Audit Conference

1. FASAB UpdateCIGIE/GAO Financial Statement Audit Conference Wendy Payne Executive Director March 30, 2011

2. Disclaimer • Views expressed are those of the speaker. The Board expresses its views in official publications.

3. Overview___________________________ • Recently Completed Projects • Comprehensive Long-Term Fiscal Projections (SFFAS 36 – Sept 2009) • Social Insurance – Additional Requirements (SFFAS 37 - April 2010) • Natural Resources (SFFAS 38 - April 2010) • Subsequent Events (SFFS 39 – August 2010) • Deferred Maintenance (SFFAS 40 – Late Spring 2011) • Current Projects • Measurement • Federal Financial Reporting Model • Federal Entity • Deferred Maintenance • Evaluating Existing Standards • Property, plant & equipment • Earmarked funds

4. SFFAS 36 - Comprehensive Long-term Fiscal Projections_______________________________________________________ • Basic Information (audited) • the present value of projected receipts and non-interest spending under current policy without change including its relationship to projected GDP • changes in the present value of projected receipts and non-interest spending from the prior year • the assumptions underlying the projections • factors influencing trends • significant changes in the projections from period to period

5. SFFAS 36 - Comprehensive Long-term Fiscal Projections, cont. _______________________________________________________ • Required Supplemental Information • the projected trends in: • the relationship between receipts and spending • deficits or surpluses • Treasury debt held by the public as a share of GDP • possible results using alternative scenarios • the likely impact of delaying corrective action when a fiscal gap exists (“cost of delay”)

6. SFFAS 37 - Social Insurance – Additional Requirements _______________________________________________________ • Together in one section in management’s discussion and analysis -- critical information about costs, assets and liabilities, social insurance commitments, budget flows, and the long-term fiscal projections • A new summary section within the statement of social insurance displaying open and closed group measures • A new basic financial statement to present the reasons for changes during the reporting period in the open group measure reported on the statement of social insurance

7. SFFAS 38 - Natural Resources _______________________________________________________ • A schedule of estimated federal oil and gas petroleum royalties: • the present value of future federal royalty receipts on proved reserves known to exist as of the reporting date • the amounts to be distributed to others (state governments) • Required Supplemental Information for 3 years beginning in FY2012 • Deferral has been requested!

8. SFFAS 39 - Subsequent Events • AICPA Audit standards included in accounting standards • Audit standards not included: • Related parties • Going concern

9. SFFAS 40 – Deferred Maintenance and Repairs • Amended the definition only • Repairs – clarify that deferred repairs are included • Capital – clarify that deferred capital improvements are not included • Preserves the notion that management determines acceptable condition

10. Current Projects

11. Measurement Attributes • A statement of concepts to assist the board in establishing standards – Exposure Draft issued 9/13/10 • Identifies how ‘initial amounts’ and ‘re-measured amounts’ contribute to meeting reporting objectives • Defines a suite of measurement attributes • Considering unique information needs in the federal environment, for example: • Value in use • Constant dollar reporting

12. Federal Reporting Model • Concerns exist regarding the benefits of accrual basis financial statements relative to the cost of preparing them • FASAB conducting a user needs study • Federal CFO Council preparing a proposal • Recently developed a report on experiences in other countries with the assistance of OECD and its members (report will be available soon at http://www.fasab.gov/conceptsfinan.html) • FASAB Task Force report issued December 22nd

13. Federal Reporting ModelCFR Recommendations • Web delivery model • Government-wide performance information • Net cost and spending by function • Statement of spending requirements • Intergovernmental financial dependency • Improved reconciliation of deficit and operating cost • Reclassify the reconciliation of cash and debt changes • Re-orient the balance sheet and improve stakeholder link • Explain the difference between net liabilities and fiscal gap • Establish a web-site for reports and raise awareness in the near-term

14. Federal Reporting ModelNext Steps • Consider implications of user needs study and task force recommendations for existing concepts • Study of component entity reporting model

15. Federal Entity • FASAB established concepts in mid-90’s • Standards now being developed • Questions: • What to include in CFR (all entities “established by” the federal government or a subset)? • How to present information (all consolidated, some separately displayed or disclosed)? • Boundary between “related” parties, core and non-core entities?

16. Deferred Maintenance and Asset Impairment • Deferred maintenance viewed as critical management issue • Experimental reporting has been underway since 1998 • Definitions – revised definition and title (deferred maintenance and repairs) • Open Issues: • Measurement techniques • Relevant metrics to report (dollars and/or condition) • Task force of facilities managers, accountants, and auditors formed to assist

17. Evaluating Existing Standards • Why • Cost/benefit issues? • Communication challenges • Expectations • How • Outreach to preparers, auditors and “users” • Development of options • Property, plant and equipment • Implementation issue unresolved • Is replacement cost a better goal? • Earmarked funds – assessing implementation and adjusting reporting requirements

18. Emerging Issues • Internal Use Software • Leases • Risk Assumed • Capacity challenges in a more constrained environment…

19. Contact and Website Information • General inquiries can be directed to fasab@fasab.gov • Phone: 202 512-7350 • www.FASAB.gov • Listserv • Exposure Drafts • Active Projects • I can be reached at paynew@fasab.gov or 202 512-7357