Presentation on theme: "State and Local Government Finance Division"— Presentation transcript:
1 State and Local Government Finance Division Deposits, Investments, Auditing, and Reporting UpdateFebruary 11, 2014Becky Dzingeleski
2 Announcements / Reminders Audit Review Process AGENDAAnnouncements / RemindersAudit Review ProcessAudit Report issues in FYE 2013Audit Contracts / InvoicesBreaking News …Deposits and InvestmentsCommunication
3 Announcements / Reminders Fiscal Management Staff changes –Bonaventure Ezewuzie, CPA joined the fiscal department as a staff accountant October 2013.7 Years experience as a compliance auditor for the NC State TreasurerOne open staff accountant position in Fiscal to be filled soon.
4 Announcements / Reminders Debt Management – One open Position: Deputy DirectorDebt Staff changes (2013)Phil Anderson – Involved in entire local government application process for installment purchase contracts, revolving state loans for water & sewer projects, etc. and the refinancing of existing debt. – Replaced MarkishaJenny Johanns – Administrative Staff: Debt payment notices – Replaced Tina
5 Announcements / Reminders 2014 Treasurer’s ConferenceSave the datesWinston-Salem – Thursday, May 15, 2014New Bern – Friday, May 16, 2014Keynote speaker - Dave Bean, CPA - Government Accounting Standards Board – Topics will includeGASB 67 - Financial Reporting for Pension PlansGASB 68 - Accounting and Financial Reporting for Pensions for Employer Participants
6 Audit Review ProcessSuccessful 2013 process for submission of audit reports, contracts, and invoice approval. No expected changes for approval processes regarding Audit Contract, Audit report submission or invoice for 2014Positive response from auditors and units.Turnaround was faster in 2013.LGC Staff availability was improvedstill issues due to Princeville demands.Congratulations on getting 984 or almost 85% of the audits in before December 15thAs of 2/7/14 we have received 1,089 FYE 2013 auditsWe are still missing – 32 municipalities & 7 counties
7 Audit Review Process Unit Data Input workbook –2013 Clarified the way we asked the questionsFeedback always appreciatedAdditional questions were added in 2013May be additional questions in 2014Restricted Stabilization by State Statute - RSS tabCalculations for RSS and FBA
8 Audit Review Process2013 was the 2nd full year of NEW SLGF audit review processAdditions / changes in Unit Data input workbook to enable us to get better data and to better assess fiscal health.We have easier access to prior year’s financials, unit letters and responses and five year’s worth of trial balancesIntention is the trend information will be helpful for units experiencing difficultiesGoing forward we will continue to enhance our ability to expedite a comprehensive and thorough fiscal analysis
9 Audit Presentation Changes in 2013 GASB 63 went into effect for June 30, 2013GASB 65 goes into effect 6/30/2014LGC required implementation of GASB 65 with GASB 63 in2013 Audit reportsPresentation Issues in 2013 audit reports:Vague deferred inflows note –large amounts of deferred inflows as “other” or “miscellaneousGive thought to why a certain transaction is unearned, from there the classification should be straightforward.
10 Audit Presentation Changes in 2013 Exchange transaction vs. Imposed non-exchange transactionFrom 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 InflowsGrants that have been prepaid but for which the substantive or contractual requirements have not been met are liabilities, not deferred inflows
11 Audit Review Process – Debt Approval Units requesting November or December LGC debt approval must already have submitted to our officeCompleted set of financial statements including signed opinion and MD&ACompliance opinions can come subsequentlyDetailed response to Unit Letter (if applicable)We must know any Compliance findings that affect the financialsOur office must have time to review audit report, write Unit letter (if necessary) and review unit’s detailed response to our letter.We do not need the final bound CAFR for mass publication
12 Audit Report IssuesCost Allocation vs. Transfers – Memo https://www.nctreasurer.com/slg/Memos/ pdfCost allocations should be treated as reimbursements to reduce the cost of operations – it is not revenue but a contra account.Transfers are gifts of financial resources or equipment; they will be treated as revenue/other financing source to the receiving fund.Management Representation LetterSigning this is accepting responsibility for what is in the Audit reportUnit needs to review the prepared statements and be in agreement with the presentation before report is sent to SLGFDManagement Rep letter should be signed before the Audit report comes to the SLGFD2 Stories –Unit had findings for over expenditures very similar to prior year. Reviewer had been working closely with Town and suspected final Budget to Actual was not correct – Auditor had used incorrect budget to actual – no findings.Reviewer noticed there was no budgeted numbers for a Fire District Special Revenue fund – asked Auditor to clarify why there were no budgeted amounts – corrected audit came back with budgeted numbers.
13 2013 Audit Report Issues Other Post Employment Benefits (OPEB) Use of Alternative Method for determining OPEB liability (Pg. 35-I-126 thru 129: City of Dogwood Illustrated financial statements) does require supplementary information (RSI) following the notes to the financial statementsFirefighters & Rescue Squad Workers’ Pension FundIf significant salaries are paid to these individuals, there must be a note in the Audit report (Pg.35-I-67) including On-Behalf Payments for Fringe Benefits and Salaries (Pg. 35-I-82)https://www.nctreasurer.com/slg/GASB%20Documents/CityofDogwoodIllus trativeFinancialStatements.pdf
14 2014 Audit Contract changes Parent Government – Component and DPCUDPCU (TDA) – Public Authority with separate boardMemo https://www.nctreasurer.com/slg/Memos/ pdfSignatures of bothParent Government Board Chairman / MayorBoard Chairman of TDA2013 Group Audit StandardsIf entity is component of another government under the group audit standards - the entity’s auditor will make a good faith effort to comply with the requests of the group auditor.E-VerifySept new language was added: Paragraph # 22 of the LGC-205 (Rev and 2014)The Auditor acknowledges that any private employer transacting business in this State who employs 25 or more employees in this State must, when hiring an employee to work in the United States, use E Verify to verify the work authorization of the employee in accordance with N.C.G.S. §64 26(a). The Auditor acknowledges further that any such private employer and its subcontractors must comply with all of the requirements of Article 2 of Chapter 64 of the North Carolina General Statutes (North Carolina’s E-verify law), and that such private employer has a duty under the law to ensure compliance by its subcontractors. The Auditor further acknowledges that this contract is of the type governed by S.L , which makes it unlawful for a local government to enter into certain types of contracts unless the contractor and its subcontractors comply with North Carolina’s E-verify law, and that failure to comply with such law could render this contract void. The Auditor hereby covenants, warrants and represents for itself and its subcontractors that with respect to this contract the Auditor and its subcontractors shall comply with the provisions of North Carolina’s E-verify law and that failure to comply with such law shall be deemed a breach of this contract and may render this contract void.
15 Audit Contracts – Peer Reviews Auditors with peer reviews other than “pass” must contact the LGC before contracting – see Item # 5 on contract.Pass with Deficiency(ies)Addendums required for each audit contractFailIf pre-issuance review is required by NC CPA Board or by SLGFD it must accompany the audit report when sent to the LGC. Pre-issuance review must be completed before audit is sent to the LGC for our review – see Item # 12 on contract.
16 Audit Contracts / Invoices Submit all audit contracts through the Leapfile portalInclude addresses for parties to receive contract approval in portal message boxContract approval is bycurrently Tashara Ware is contract reviewerSend Invoices via –Approved stamped invoice sent to auditor bycurrently Steven Holmberg sends approved invoicesUntil 2014 audit contract form is availableUse of 2013 form is fine untilWhen the 2014 form is published - please use the most current form
17 Illustrated Financial Statements FYE 2014 Breaking News…Illustrated Financial Statements FYE 2014Change in Tax Schedule due to DMV Tax & Tag changesClarifyingCleaning upNo NEW GASB’s implemented in NC Local Government Illustrated financial statements for FYE 2014Stay tuned for FYE 2015GASB 68
18 Breaking News … Other Post Employment Benefits (OPEB) State task force looking at OPEB issueHelp Units determine their true liabilityStrategies to meet that liability and potentially mitigate itDMV Tax Collection System – HB 1779Effective September 1, 2013In fiscal year will have 16 months of revenue; one time occurrence
19 Breaking News …GASB 68 – Financial Report for Pensions : The Department of State Treasurer has started a workgroup between Financial Operations, the Controllers Office, Retirement, the State’s Actuary, and the State Auditor to plan for the implementation of GASB 68.The objective is to have the data you and your auditors need to meet your requirements under the standardIf you are a member of LGERS, you must record your share of the unfunded liability per the standardEffective years ending 6/30/2015More to come starting with Spring GFOA in March then at Treasurer’s Conference in MayGASB 67 is for this year – Applies to Defined Benefit Pension (State) but does not apply to Special Separation Allowance
20 Statutory Change for FYE 2015 North Carolina Eastern Municipal Power Agency memberspter_159B/GS_159B-39.html§ 159B-39. (Effective July 1, 2014) Permitted uses of revenue from electric power rates.Amount the Electric Fund is allowed to transfer out is statutorily limited.
21 Federal Single Audit requirements Effective date will be for years ending June 30, 2016US 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 $750,000Total amount of financial assistance that is required to be audited reduced to forty percent (40%) and twenty (20%) for low-risk auditees.The amount to determine if a Federal Single Audit is required will be $750,000 of expenditures. This is an increase from $500,000.Among the other changes: the minimum threshold to determine major programs will be $750,000 This is changed from $300,00,Total amount of financial assistance that is required to be audit will be reduced to forty percent (40%) and twenty (20%) for low-risk auditees. Current amounts are 50% and 25%
22 State Single Audit requirements Possible similar changes to State Single Audit requirementsState requirements changes to be determined by our office working with State agencies, local governments, Office of State Auditor, and othersPrevious changes to State Single audit requirements were in 2003 when OMB changed the federal requirementsmore information may be found in the Federal Register issued Thursday, December 26, 2013 Vol. 78, No. 248 or contact us.Jim Burke or Manasa CooperOur office will be getting a memo out on this as we always do on these types of issues.
23 Deposits and Investments LGC-203 ReportsWere due January 25thCurrently 68% - approx. 800 of 1182 have been receivedLate letters to go out the 4th week of FebruaryFirst letter goes to finance officerSubsequent letters go up the Organizations chainNot required for NC Charter SchoolsABC - LGC-203 report forms are accessed at the NC ABC Commission Website:
24 LGC-203 ReportLGC-203EZ - Units that have Deposits in Pooling Method Banks, Investments in NC Cash Management Cash or Trust Portfolio, Finistar, CDARs and have No other investmentsStandard LGC-203 – Schools, PHA’s & everyone who cannot use the EZ formhttps://www.nctreasurer.com/slg/Pages/Deposit-and-Investment- Information.aspx - Forms & InstructionsSupplementary Schedules created by your office required with the Standard LGC-203 FormDescription/detail for each of the investment categories. Example: Custodian, Type-Name of Investment, purchase amount, market value*, purchase date, maturity date, Commercial paper* and any other special features of the investment
25 Deposit & Investment Reporting Issues Finistar or CDARs InvestmentsPlease send statement/ page as of December 31, that includes the list of banks where funds are depositedDPCU - Discretely Presented Component Units that are a public authority under the Local Government Budget and Fiscal Control Act are required to file a Separate LGC 203 from the Parent GovernmentPlease do not combine the DPCU cash & investments in the LGC203 report for the parent governmentMessages left in s to are NOT seen by Review Staff. Automated account
26 Deposit & Investment Reporting Issues Use LGC-203 form modified for the current reporting periodStatus of banks can change due to mergersPooling vs. DedicatedCollateralization - “Dedicated Method” is complicated. Examine agreements – Refer to the collateralization booklet online - https://www.nctreasurer.com/fod/Resources/Collateralization.pdfCustody is tricky – examine custodial agreementsSigners on accounts do not automatically make them official custodians in the eyes of FDIC
27 Deposits and Investment Issues 10 Units with Violations as of June 30, 2013Insufficient collateralization for accounts in non- pooling banks as of report date.REMIC Investments – No authority for moneys of units of local governments to be invested in themAG OpinionBrokered CD Investments issued in out of state banks - violation of §159-30(b) or (b1)Must be handled as a Deposit, not an investmentCorporate CD’s are not eligible in North CarolinaHas to be the Unit depositing the money into the bank, not the Broker
28 Deposits and Investment Bond Question §159-30(c)(3) Obligations of the State of North Carolina.§159-30(c)(4) Bonds and notes of any North Carolina local government or public authority, subject to such restrictions as the secretary may impose.Certificates of Participation – Bond-like but are not Bonds so not allowableLOBs – must evaluate the offering, might be allowableUNC Bonds – only if GO BondsHealth agency bondsMedical Care Commission is a State Agency but is Not an obligation of the State – not allowable investmentIf the product is something you truly want, we can help evaluate if it is within the N.C. Local Government legal boundaries159-30(c)(3) Obligations of the State of North Carolina.(4) Bonds and notes of any North Carolina local government or public authority, subject to such restrictions as the secretary may impose.COPS are not bondsLOBS may be allowable, have to evaluate the offering – is it being offered by a Local Government (probably yes) and not a Corporation (even Not for Profit)
29 Deposits and Investment Issues Custody and Proper Safekeeping of InvestmentsNew AG Opinion speaks only to investments held by a bank and that it is no less secure on the commercial side than the trust side if:There is a legally binding safekeeping agreementWhich holds the assets separate and apart from the assets of the bankAnd can readily be identified and accounted for as belonging to the local governmentThe AG opinion says that these are standard federal banking regulations to which all banks must comply
30 Deposits and Investment Issues Make sure deposit accounts are identified as public funds, as required by Administrative Code chapter (a)An account not labeled as public funds is not secured by pledged collateral even if the account is with a “pooling method” bankIn the event of a bank failure, funds in that account in excess of FDIC limit would face possible lossINV 91 pursuant to 20 NCAC 7 - allows DST Financial Operations to match local government deposit accounts to information provided by their depositories.necessary to ensure that local government funds are sufficiently collateralized in the pool.annual reporting requirement - due July 25NC credit unions are not eligible depositories – some local governments were not aware of this
31 Deposits and Investment Issues Markets appear to be volatile and the Banking industry continues to be unstable due to real estate, global markets and changes in the FedBe prudent in your banking relationships and in your investmentsUnits of Government should have a Governing Board Approved “Official Investment Policy”No time to gamble for a few extra dollarsIf you don’t understand something – ask questions of the vendor until you do understand.
32 LGC Communication Process “LGC_News” ListservUsed to distribute new memos, publications, items of general interest and announcementsCritical with electronic communication/processingYou and your finance staff as well as your Unit’s auditor should be members of the LGC_News listserve.
33 LGC Communication Process REMINDER To register for the LGC_News listserveAnd stay InformedDistribution software has changed; let us know if you are no longer receiving sPlease provide us with your business card today or send an to Tashara Ware if you wish to be registered. Provide name, title/position and address of each person to be registered.
34 How to contact us Website www.nctreasurer.com Phone (voice)(fax)Becky DzingeleskiCash & investment and form questionsTashara Ware“Has my report been received” questionsSara ShippeeAll other questions