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LGC UPDATE 2015 NCLGIA – Winter Conference Sara Shippee and Becky Dzingeleski February 9, 2015.

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Presentation on theme: "LGC UPDATE 2015 NCLGIA – Winter Conference Sara Shippee and Becky Dzingeleski February 9, 2015."— Presentation transcript:

1 LGC UPDATE 2015 NCLGIA – Winter Conference Sara Shippee and Becky Dzingeleski February 9, 2015

2 AGENDA Announcements / Reminders 2014 Audit Season 2015 Financial Statements New GASB Statements Future Single Audit Changes Auditing and Reporting Tips Deposit and Investment Issues 2

3 ANNOUNCEMENTS Staff Changes o Darrus Cofield – Administrative staff - joined us at the beginning of November 2014 o Jenny Johanns – sends Debt notices, processes LGC-203 reports, currently doing Audit Invoice approvals “Decide to be happy, it is excellent for one’s health.” Voltaire 3

4 ANNOUNCEMENTS Vance Holloman Director of State & Local Government Finance Division retired on January 16 th 2015 Now working as finance officer for Apex, NC 4

5 NC Department of State Treasurer Relocation 5 NC Department of State Treasurer is moving 3200 Atlantic Avenue Raleigh, North Carolina

6 NC Department of State Treasurer Relocation  All Department of State Treasurer Departments at the same location  Currently under renovation  Second Quarter 2015  Free Visitor Parking 6

7 2015 NC State Treasurer's Conference Save the Date - watch LGC_News listserve Registration will be available through NC School of Government  Hickory – Tuesday, May 12, 2015  New Bern – Wednesday, May 13, 2015 David Bean, Director of Research and Technical Activities at GASB will be our featured speaker Topics to include  GASB 68 Accounting and Financial Reporting for Pensions  Fair Value Measurement and Application  OPEB Accounting and Financial Reporting 7

8 NCGFOA Spring Conference March 4-6 at the Sheraton Imperial Hotel & Convention Center – RTP Panel Discussion regarding Pension Attestation Engagement required by Office of State Auditor o Auditor and Participants 8

9 2015 Treasurer’s Award for Excellence Applications now available for the 2014 Treasurer's Awards for Excellence in Accounting and Financial Management.  To encourage all units of local government in North Carolina to make innovative changes to their accounting and financial management programs, systems, methods, and procedures or improve transparency of financial operations or records. Applications are due by February 16 th, 2015 Winners announced at GFOA Spring Conference Banquet Treasurer’s Award for Excellence Memo Treasurer’s Award for Excellence Rules 9

10 Annual Financial Information Report - Reminder AFIR data purposes: o National statistics such as GNP by the Census o Used by State Legislature, State Agencies, Legislative Research o If legislature needs the info and nothing is there – does not look good. o SOG for Water & Sewer Dashboard o Used by League and County Commissioners Assoc. o Used by peers for comparative purposes o Should be timely & accurate 10

11 2014 Audit Review Process Positive response from auditors and units.  Turnaround was faster.  LGC staff availability was improved  As of February 5th we had received 1,105 FYE 2014 audits o Missing – 45 municipalities & 10 counties Audit review Process is reviewed each year for efficiency Team is in process of making updates for 2015 audit review season 11

12 2014 Audit Review Process Segregation of Duties finding  Letters sent to Units regarding FYE 2014 SOD finding  Internal Controls Memos currently being updated  Memo 569 and Memo 568 Memo 569Memo 568 New Local Government officials? Please alert our office of changes in …  Finance Officer  Mayor or Board Chairman  Manager 12

13 2014 Audit Process FYE 2014 County Audit reports  Late program confirmations from DHHS due to implementation of new software caused delay in obtaining information needed for County Audits  If it happens again, we will work with the County Auditors on 2015 Audit due date. 13

14 Deferred Inflows Notes – please clarify descriptions  Unearned revenues (prepaid cash receipts) from exchange transactions are liabilities; unearned revenues from nonexchange transactions are deferred inflows of resources. [GASBS 65 ¶53, 67] Memo 949 Memo 949 GASBS 33, Accounting and Financial Reporting for Nonexchange Transactions and GASBS 36 Recipient Reporting for Certain Shared Nonexchange Revenues - if you need assistance with exchange vs. non-exchange classifications. 2014 Audit Presentation Issues 14

15 2014 Audit Presentation Issues Exchange transaction vs. Imposed non-exchange transaction From GASBS 65, ¶9: Imposed Nonexchange Revenue Transactions - “Deferred inflows of resources should be reported when resources associated with imposed nonexchange revenue transactions are received or reported as a receivable before (a) the period for which property taxes are levied or (b) the period when resources are required to be used or when use is first permitted for all other imposed nonexchange revenues in which the enabling legislation includes time requirements.” Privilege license is exchange transaction: show as a liability, not Deferred Inflows Grants that have been prepaid but for which the substantive or contractual requirements have not been met are liabilities, not deferred inflows 15

16 2014 Audit Presentation Issues Transfers to Discretely Presented Component Unit reported in error (GASB 34 ¶61) Transfers - Descriptions of purpose often too vague OPEB - Financial Statement liability does not match notes or OPEB Required Supplemental Information (RSI) Pension Note - If pension cost is immaterial, please include a statement explaining that this was the reason that an actuarial study was not performed. Deposits Note - §159-30(b) Certificates of Deposit are allowable in the form of Time Deposits. CDs are not considered an investment and should be included in Deposits note, not listed separately as an investment. 16

17 2014 Audit Presentation Issues  Liabilities  Liabilities payable from Restricted Assets not being broken out separately / identified correctly.  Example: Restricted Cash - loan or bond proceeds likely related to capital project ** Not including Liabilities payable from Restricted Assets when appropriate, can have a significant affect on water & sewer ratio’s 17

18 2015 Audit Contract changes Primary Government – Discretely Presented Component Unit (DPCU) o DPCU (e.g. Tourism Development Authority) – legally separate Public Authority with separate board: Memo 2014-08 DPCU. Annual Audit required but DPCU’s Board decides not to issue separate financial statementsMemo 2014-08 DPCU o Separate Fee / Signature Pages for each legally separate Unit including separate Pre-Audit certificate o Primary Government Board Chairman or Mayor o Board Chairman of TDA o If Tourism Development Authority issues separate financial statements, separate Audit contract is required 18

19 2015 Audit Contracts / Invoices Submit all audit contracts through the Leapfile portal o Include email addresses for parties to receive contract approval in portal message box o Contract approval is by email  currently Steven Holmberg is contract reviewer – Darrus Cofield will soon be assisting Send Invoices via Email – o Approved stamped invoice sent to auditor by email  currently Jenny Johanns sends approved invoices Until 2015 audit contract form is available o Use of 2014 form is fine until the 2015 form is published - please use the form most currently published on the Department of State Treasurer website 19

20 2015 Audit 2015 Illustrated Financial Statements o Being updated for GASB Statement 68 o Clarifying o Cleaning up o Goal is to have Illustrated Statement samples prepared by NC State Treasurer’s Conference in May 2015. 20

21 If you are considering issuance of Debt – please call us sooner rather than later o Begin conversations with the SLGFD Debt Management Section at least 2 to 3 months prior to your anticipated LGC meeting to begin discussions if you expect to issue debt. o Begin discussions ahead of time with your auditor if you are planning issuance of Debt later in the year. Mark your calendar and notify Tim Romocki and your auditor if issuing debt in November or December of 2015, or January of 2016. 21 LOCAL GOVERNMENT DEBT ISSUANCE

22 AUP –Testing eligibility for State funded programs o All NC Counties and certain District Health Agencies. o For District Health Agencies the State Auditor and/or Local Auditor selects to test a certain program, such as WIC. o Local Auditors will likely be relied upon by the Office of State Auditors this year to test eligibility for selected major programs of the State of NC. o Notification of these programs most likely will be available the first week in May. 22

23 GASBS 68 – Financial Report for Pensions Effective years ending 6/30/2015 The Department of State Treasurer, the Office of State Controller, Office of State Auditor, and the State’s have worked together to guide implementation of GASB 68. o You will have the data you and your auditors need to meet your requirements under the standards o Law Enforcement Officers Separation Allowance o Not affected unless in an irrevocable trust as defined by GASB 23

24 AICPA GUIDANCE ON AUDITING PENSION DATA Audit of Census Data: attest engagement separate from the annual financial audit o Auditor comfort with pension numbers and disclosures o OSA chooses sample of participant employers each year for census data testing using risk based approach. o Data being tested on a calendar year basis to coincide with the valuation of the Pension Plans LGC Memo 2015-06: GASB 67 and GASB 68 – for more informationLGC Memo 2015-06: GASB 67 and GASB 68 DST Webpage dedicated to GASB 67 and 68, Webpage - GASB 67 and GASB 68 provides additional guidance and resources.Webpage - GASB 67 and GASB 68 Sharon Edmundson (919) Preeta Nayak (919) 24

25 GASB Other Post Employment Benefits (OPEB) Improve accountability and transparency of OPEB financial reporting regarding the financial effects of employers’ commitments and actions related to OPEB Improve the usefulness of information for decisions or judgments of the various users of the general-purpose external financial reports of governmental employers and OPEB plans  Every unit will have to determine how best to approach implementation since almost all OPEB plans are single employer plans June 2015 GASB expects to issue final statements 25

26 GASB - Fair Value Measurement & Application Purpose: Review and consider alternatives for the further development of (1) the definition of fair value, (2) the methods used to measure fair value, (3) the applicability of fair value guidance to investments and other items currently reported at fair value, and (4) potential disclosures about fair value measurements. Current Stage: Exposure Draft Redeliberations: The Board re- deliberated issues raised by respondents to the Exposure Draft, Fair Value Measurement and Application, at its September, November, and December 2014 meetings and October 2014 teleconference meeting February 2015 – GASB expects to issue final Statement 26

27 Future Federal Single Audit requirements Effective date will be for years ending June 30, 2016 US OMB has announced changes to Federal Single Audit requirements for local governments and public authorities that receive Federal Financial Assistance.  The amount to determine if a Federal Single Audit is required will be $750,000 of expenditures.  Among the other changes: minimum threshold to determine major programs will be $750,000  Total amount of financial assistance that is required to be audited reduced to forty percent (40%) and twenty (20%) for low-risk auditees. 27

28 State Single Audit requirements DST is considering changes to the State Single Audit Act that typically occurs when the Federal changes their thresholds. 28

29 AUDITING AND REPORTING TIPS Statutory limits on Transfers from Electric Funds for Eastern Municipal Power Agency – GS 159B-39 o Effective July 1, 2014 – Permits the following: o Payments in Lieu of taxes based on property taxes – presented as transfers in both funds o Reimbursements treated as reduction in expenditures o Other transfers will be capped at the greater of: o Three percent (3%) of gross electric capital assets at the end of the preceding fiscal year o Five percent (5%) of the gross annual revenues of the electric system for the preceding fiscal year 29

30 DEPOSIT AND INVESTMENT ISSUES LGC-203 Reports  Were due January 25 th  As of February 5 - 65% - approx. 778 of 1200 have been received  June 2014 cycle - 97% or 1165 reports were received  Late letters to go out the 4 th week of February  Not required for NC Charter Schools  ABC - LGC-203 report forms are accessed at the NC ABC Commission Website:  If you cannot find your name or bank, please call Becky 30

31 DEPOSIT AND INVESTMENT ISSUES 8 Units with Investment Violations as of June 30, 2014 – the issues were……. o Insufficient collateralization (Market Value) for accounts in non-pooling banks as of report date. o Credit Union Deposits o Annuity Investment o FNMA and FHLMC REMIC Investments – No authority for moneys of units of local governments to be invested in them AG Opinion 31

32 DEPOSIT AND INVESTMENT ISSUES o Brokered CD Investments issued in out of state banks - violation of §159-30(b) or (b1) CD’s in form of Time Deposits, are not considered an investment Corporate CD’s are not eligible in North Carolina Has to be the Unit depositing the money into the bank, not the Broker o Money Market deposits with FDIC insurance reported as deposits different from Money Market Funds which are not FDIC insured and generally are not an allowable investment 32

33 DEPOSIT AND INVESTMENT ISSUES SEC Municipal Advisor Rules – Dodd/Frank Bill o Primarily about issuing debt o Relates to investment of proceeds as well o Normal brokers cannot advise you if bond proceeds are included with certain exceptions: o Issue RFP to 3 brokers specifying date range, security type, and time for quotes to be returned o Utilize an independent municipal advisor when you come to the market 33

34 DEPOSIT AND INVESTMENT ISSUES SEC Municipal Advisor Rules – Dodd/Frank Bill o Investment of new debt issues will be handled by your trustees or financial advisors but this rule may catch you with left over bond proceeds from older issues … you must certify to broker that no bond proceeds are included in your funds to be invested o If no bond proceeds – business as usual o If bond proceeds comingled then brokers can only show you market information - an inventory with no advice 34

35 Be cautious with investments offered with rates of return that are significantly higher than what appears to be available in the markets Safety, Liquidity, then Yield Avoid any investment you do not understand Questions – call our office at 919-807-2381 DEPOSIT AND INVESTMENT ISSUES 35

36 Best way to stay informed is through listserv: LGC_News Register multiple people on your staff in case you are out of the office. Please give Sara or Becky a business card or send us an email if you wish to be registered. 36 ANNOUNCEMENTS / REMINDERS

37 Investment Questions? o Becky Dzingeleski(919) 807-2396 o Sara Shippee(919) 807-2356 37

38 Thank you! Together, we can build and maintain a fiscally strong and prosperous North Carolina.

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