1. Certain External Investment Pools and Pool Participants
Robert M. Apple, CPA, MSA

2. Certain External Investment Pools and Pool Participants
Understanding GASB statement number 79

3. Certified continuing professional education class
1-hour credit
Must remain for the entirety of the class to receive CPE credit
Must sign in and sign out to receive CPE credit
Certificates of attendance will be ed for CPE credit

4. Certain External Investment Pools and Pool Participants
Who/what are Governmental Accounting Standards Board (GASB) and Generally Accepted Accounting Principles (GAAP)?
Qualifying criteria
Specifics for criteria
Noncompliance individually or in aggregate
Effective June, 2015

5. What is GAAP? Proper accounting Decades of accounting practice
No authoritative book

6. What is GAAP? Does not account for every situation
Make the best choice
Rule makers leave room for options

7. What is GAAP? The grey area of materiality Qualitative aspects
Quantitative aspects

8. Who Sets Up GAAP? GASB sets the GAAP rules GASB provides:
Accounting principles
Interpretations
Guidance for implementation

9. GASB Statement No. 76 Category A Category B GASB Statements
GASB Technical Bulletins
GASB Implementation Guides
American Institute of Certified Public Accountants (AICPA) literature cleared by GASB

10. GASB Statement No. 76 If not Specified in Category A or B
AICPA literature not cleared by the GASB
Practices widely practiced by state and local government agencies
Literature from professional organizations, regulatory agencies, and authoritative accounting texts

11. Part 1 Scope and Applicability of This Statement
GASB Statement No. 79

12. What is an External Investment Pool?
GASB 31: “An arrangement that commingles (pools) the moneys of more than one legally separate entity
And invests, on the participants behalf, in an investment portfolio;
One or more of the participants is not part of the sponsor’s reporting entity”

13. Scope and Applicability of This Statement
Establishes accounting and financial reporting standards
Specifically those who elect to measure all investments at amortized cost

14. Part 2 Accounting and Financial Reporting for Qualifying External Investment Pools
GASB Statement No. 79

15. Compliance with Amortized Cost Criteria
GASB Statement No. 79

16. Compliance with Amortized Cost Criteria
Not going to cover variant security rules that cover items such as credit support, demand and guarantee features, etc.
Refer to GASB 79 to see these additional rules and where they are significant.

17. Compliance with Amortized Cost Criteria
Must meet all the following (discuss later):
Transacts with its participants at a stable net asset value per share (e.g.; $1.00 a share)
Meets portfolio maturity requirements
Meets portfolio quality requirements

18. Compliance with Amortized Cost Criteria
Meets portfolio diversification requirements
Meets portfolio liquidity requirements
Meets shadow pricing requirements

19. Compliance with Amortized Cost Criteria
Noncompliance results in not measuring at amortized cost for that reporting period
Professional judgement is used for noncompliance determination individually or in aggregate

20. Portfolio Maturity Requirements
GASB Statement No. 79

21. Portfolio Maturity Requirements
Investment has a remaining maturity of 397 calendar days or less
Maintain a weighted average maturity of 60 days or less (when investments become due and payable)
Maintain a weighted average life of 120 days or less

22. Portfolio Quality Requirements
GASB Statement No. 79

23. Portfolio Quality Requirements
The security is denominated in U.S. dollars
Has a credit rating within the highest category of short-term credit ratings
Credit rating established by a nationally recognized statistical rating organization (NRSRO)

24. Portfolio Quality Requirements
Securities not rated by any NRSRO must be of comparable credit quality
To other securities with highest category short-term credit ratings
At reporting date, no securities rated below second-highest category should be held

25. Portfolio Diversification Requirements
GASB Statement No. 79

26. Portfolio Diversification Requirements
No more than 5 percent of the total investment in any one issuer of securities
At reporting date no more than one-half of 1 percent can be second-highest category

27. Portfolio Diversification Requirements
U.S. government securities exempt from prior mentioned rules
U.S. government insured certificates of deposits exempt as well
Two or more issuers of securities are considered one issuer if one issuer controls the other or under common control

28. Portfolio Liquidity Requirements
GASB Statement No. 79

29. Portfolio Liquidity Requirements
Must hold liquid assets sufficient to meet reasonably foreseeable redemptions
Should have knowledge of the expected cash needs of its participants
Illiquid investments (not easily converted to cash within 5 days) can be no more than 5 percent

30. Portfolio Liquidity Requirements
At least 10 percent has to be daily liquid assets
Cash
Direct obligation U.S. government securities
Securities maturing in one day
Securities on demand exercisable within one day
Portfolio security receivables due in one day

31. Portfolio Liquidity Requirements
At least 30 percent has to be weekly liquid assets
Cash, demand deposits, and cd’s maturing within 5 days
Direct obligation U.S. government securities
Non direct obligation U.S. government securities issued at a discount maturing within 60 days or less

32. Portfolio Liquidity Requirements
Securities maturing in five days
Securities on demand exercisable within five days
Portfolio security receivables due in five days

33. Shadow Pricing Requirements
GASB Statement No. 79

34. Shadow Pricing Requirements
This is the net asset value per share
Calculated using total investments measured at fair value at the calculation date (minimum monthly)
No deviation by more than one half of 1 percent at each calculation date from amortized cost

35. Part 3 Accounting and Financial Reporting for Participants in External Investment Pools
GASB Statement No. 79

36. Accounting and Financial Reporting for Participants in External Investment Pools
If amortized cost criteria is met, the participants report the investments the same
Otherwise participants report at fair value

37. Part 4 Notes to Financial Statements
GASB Statement No. 79

38. Qualifying External Investment Pools
GASB Statement No. 79

39. Qualifying External Investment Pools
Disclose the fair value measurements
Disclose presence of limitations or restrictions on participants withdrawals such as:
Redemption notice periods
Maximum transaction amounts

40. Participants in External Investment Pools
GASB Statement No. 79

41. Participants in External Investment Pools
Participants measuring the investment at amortized cost disclose the same as previously mentioned

42. Closure
Enhances comparability of financial statements among governments
Establishes criteria for determining election of amortizing instead of fair value measurement
Provides consistent application

43. Questions?
GASB Statement No. 79