1. Auxiliary Organizations Update Chapter 8 Presented by Lily Wang CSU, Chancellor’s Office

2. Reporting Deadlines (Chapter 8) Highlight (Chapter 8)
Agenda
Reporting Deadlines (Chapter 8)
Highlight (Chapter 8)
Updates on the Supplementary Information Templates (Chapter 8, Attachment A & A-1)
Jessica

3. Reporting Deadlines
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4. Reporting Deadlines 4th quarter FIRMS
Audited Financial Statements, Independent Auditors’ Letter to Management, and Supplementary Schedules (3 hard copies and 1 soft copy)
FIRMS for IPEDS
Campus President’s review of auxiliary organizations’ audited financial statements
A-133 Single Audit reports (1 hard copy and 1 soft copy) for those entities required to have a single audit
Due July 31, 2009
Due September 30, 2009
Due October 30, 2009
Due December 1, 2009
Due December 15, 2009
Jessica

5. Highlight
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6. Highlight
Planning and Coordination Between Campus and Auxiliary Organization
Auxiliary Organization meets required timeframe and manner that is necessary for inclusion in the basic financial statements of the campus.
Campus reviews a draft of the auxiliary organization’s financial statements to ensure the accuracy and completeness of the supplementary information.
Campus should attend the entrance and exit conferences of the Auxiliary Organizations and their independent audit firms or develop another method of monitoring the Auxiliary Organizations’ audit process
Notify the Auxiliary Organizations of the timing of the campus audit to ensure that key Auxiliary Organizations personnel are available during audit fieldwork and during the time surrounding the submission deadline of the campus reporting package to the Chancellor’s Office
Auxiliary Organizations are required to complete a GAAP financial reporting checklist (included in Chapter 8, Attachment A‑1).
It is important that all inter-entity accounts and transactions be reconciled with the respective Auxiliary Organizations prior to the issuance of the Auxiliary Organizations’ financial statements.
Jessica

7. Highlight
Reconciliation of Related Entity Transactions With The Campus
It is important that significant related entity transactions between the auxiliary organization and the campus are reconciled and disclosed in the related entity transactions footnote in the supplementary information template (included in Chapter 8, Attachment A‑1). Below are the information auxiliary organization needs to provide in the footnote:
Reimbursements to University for salaries of University personnel working on contract, grants and other programs
Reimbursements to University for other than salaries of University personnel
Payments received from University for services, space and programs
Gifts-in-kind to the University from Auxiliary Organizations
Gifts (cash or assets) to the University from Auxiliary Organizations
Accounts payable to University
Other amounts payable to University
Accounts receivable from University
Other amounts receivable from University
Jessica

8. Highlight Systemwide Revenue Bonds (SRB) with Auxiliary Organizations
Auxiliary Organizations who are participating in the SRB financing should work with the campus, and consult the Chancellor’s Office, independent auditors of the auxiliary organization and the independent auditor of the campus to determine the:
Proper accounting treatment for the transaction
Consistency in accounting treatment within the CSU as a whole.
Jessica

9. Highlight Deferred Revenues (Sponsored Programs)
Defer resources received prior to applicable eligibility requirements being met relating to voluntary nonexchange transactions (i.e. grant funds received for sponsored programs)
Grant funds received for sponsored programs prior to all applicable eligibility requirements being met are unearned income. Until the requirements are met, the provider does not have a liability, the recipient (i.e. campus) does not have a receivable, and the recognition of expenses or revenues for resources transmitted in advance should be deferred. (GASB Statement No. 33; ¶ 19).
Eligibility requirements comprise one or more of the followings:
Required characteristics of recipients: The recipient has the characteristics specified by the sponsor.
Time requirements: Time requirements specified by enabling legislation or the sponsor have been met. This is the period when the resources are required to be used (sold, disbursed, or consumed) or when use is first permitted has begun, or the resources are being maintained intact, as specified by the sponsor.
Reimbursements: The sponsor offers resources on a reimbursement ("expenditure-driven") basis and the recipient has incurred allowable costs under the applicable program.
Contingencies: The sponsor's offer of resources is contingent upon a specified action of the recipient and that action has occurred.

10. Highlight
UPMIFA
In July 2006, the National Conference of Commissioners on Uniform State Laws approved the Uniform Prudent Management of Institutional Funds Act (UPMIFA).
UPMIFA is designed to replace the existing Uniform Management of Institutional Funds Act (UMIFA).
On September 30, 2008, the Governor approved Senate Bill No
This Bill repealed the provisions of UMIFA and enacted the UPMIFA.

11. Highlight UPMIFA (cont’d)
In light of UPMIFA, FASB issued FAS 117-1, Endowments of Not-for-Profit Organizations:
Guidance on net asset classification of donor-restricted endowment funds for not-for profit organization that is subject to UPMIFA.
Improves disclosures about an organization’s endowment funds (both donor-restricted endowment funds and board-designated endowment funds), whether or not the organization is subject to UPMIFA.

12. Highlight UPMIFA (cont’d)
Effective for fiscal years ending after December 15, 2008 (June 30, 2009 for CSU FASB Auxiliary Organizations)
When initially applying the net asset reclassification, organizations should report the reclassification as a separate line item on the statement of activities.
Recording of the training:
PowerPoint presentation

13. Highlight Underwater Endowment Investments
Current market conditions have created a situation whereby the value of endowment investments at year-end may have decreased below the original amount of the endowment.
Such decrease in value must be determined and accounted for on a fund by fund basis and not for the endowment fund in total.
FASB auxiliary organizations should analyze their endowment investments in accordance with Financial Accounting Standard Board (FASB) Statements 117 and 124, and also the FASB Staff Positions (FSP) of FASB Statements
GASB auxiliary organizations should review Governmental Accounting Standard Board (GASB) Comprehensive Implementation Guide Question to ensure the net asset classification is properly presented at year end. Excerpts from GASB and NACUBO on accounting and reporting of underwater endowments for GASB auxiliary organizations are included as Attachment G of chapter 8 of the GAAP manual.
Jessica

14. Highlight Underwater Endowment Investments (Cont’d)
Accounting of underwater endowment for FASB organizations (FSP FASB No )
In the absence of donor stipulations or law to the contrary, losses on permanently restricted endowment funds are recorded as follows:
first to reduce temporarily restricted net assets to the extent that there is appreciation from the specific underwater fund accumulated there.
second to reduce unrestricted net assets
the historical dollar value of permanently restricted endowment funds is not changed by gains or losses unless donors have indicated that can be accumulated in such funds.
subsequent gains that restore the fair value of permanently restricted endowment funds to the required level are classified as increases in unrestricted net assets
Below is an example for accounting of underwater endowments relating to a specific endowment fund:
Jessica

15. Highlight
Underwater Endowment Investments (Cont’d)
Disclosures needed of underwater endowment for FASB organizations (FSP FASB No )
Disclose information to enable users to understand the net asset classification, net asset composition, changes in net asset composition, spending policy (ies), and related investment policy (ies) concerning its endowment funds (both board-designated and donor-restricted)
Description of governing board's interpretation of relevant law underlying net asset classification
Composition of endowment by net asset class
Endowment roll-forward by net asset class
Total underwater amounts, reason for funds being underwater and disclosure of how accounted for.
Depending on the severity of underwater endowments, a discussion of the institution’s liquidity and operating needs as impacted by these underwater endowments.
Jessica

16. Highlight Underwater Endowment Investments (Cont’d)
Disclosures needed of underwater endowment for FASB organizations (FSP FASB No ) (Cont’d)
Description of endowment investment policy (ies)
Return objectives and risk parameters
How the objectives relate to spending policy (ies)
Strategies for achieving objectives
Description of endowment spending (distribution) policy (ies)
Any change in institution’s spending rate based on underwater endowments should also be disclosed.
Nature of any significant underwater endowments and how this has affected endowment distributions in the current year.
Below is a footnote disclosure excerpted from a non-profit organization’s financial statements provided by KPMG:
Jessica

17. Highlight Underwater Endowment Investments (Cont’d)
Accounting and disclosures needed of underwater endowment for GASB organizations (SGAS 31 & GASB’s Comprehensive Implementation Guide Chapter 7, Q&A )
SGAS 31 is the governing standard for investments.
GASB’s Comprehensive Implementation Guide Chapter 7, Q&A provides additional guidance for underwater endowment investments.
Allow decreases in donor restricted endowments to directly reduce the restricted non-expendable net asset class.
There is no specific guidance or example related to disclosures needed for underwater endowments.
Jessica

18. Other Postemployment Benefits (OPEB) Obligation Under GASB No. 45
Highlight
Other Postemployment Benefits (OPEB) Obligation Under GASB No. 45
As an agency of the State, the CSU is included in the State’s OPEB actuarial study. Therefore, the amounts of annual required contribution (ARC), employer contributions, and net OPEB obligation (NOO) are provided to the CSU by the State Controller’s Office. These amounts provided by the State are related to the University only and do not include auxiliary organizations.
Each year, the auxiliary organization should have its own actuarial study performed in order to report the auxiliary organization’s OPEB obligation and related footnote disclosures in accordance with GASB No. 45.
Jessica

19. Highlight Internal Revenue Service (IRS) Form 990 Preparedness
For the year ended June 30, 2009, the IRS has updated information required to be included in the filing of the Form 990.
Each Auxiliary Organization needs to read and consider the “Form 990 – Best Practices Document” which is provided by KPMG and summarizes the changes as well as provides suggested steps, best practices, and safe harbors. This document is included as attachment E of chapter 8 of the GAAP manual.
It is important that each auxiliary organization ensure that the necessary steps and processes/procedures are in place prior to year-end in order to be able to properly complete the Form 990.
Jessica

20. Updates on the Supplementary Information Template
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21. Updates on the Supplementary Information Template
Statement of Net Assets (SNA) Update
A new line item called “Other postemployment benefits obligation” (OPEB) has been added.
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22. Updates on the Supplementary Information Template
Statement of Net Assets (SNA) Update (cont’d)
Pollution remediation obligations (GASB 49) should be reported under other liabilities.
Jessica

23. Updates on the Supplementary Information Template
Statement of Revenues, Expenses, and Changes to Net Assets (SRECNA) Update
No major changes. State and local financial aid grants, noncapital revenues is broken down into 2 separated lines.
Jessica

24. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update
Note 2.1 Composition of investments
Current investments are separated into restricted and unrestricted columns.
Noncurrent investments are separated into restricted and unrestricted columns.
Classify as short-term investment if investment is used for current operations. Include investment accounts that may be accessed on a short‑term basis (i.e. within the next 12 months) even if the underlying pool is invested in long-term securities.
Classify as other long-term investments if investment is:
1) restricted for withdrawal or use for other than current operations (i.e. endowments or Perkins loans)
2) designated or restricted for the acquisition or construction of noncurrent assets
3) designated or restricted for the liquidation of the noncurrent portion of long-term debt
4) restricted as to the liquidity of the investments
Jessica

25. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update (cont’d)
Note 2.1 Composition of investments (cont’d)
Common funds will continue to be separately disclosed.
Land and other real estate held as investments should be recorded in fair value (GASB No. 52).
Jessica

26. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update (cont’d)
Note 2.2 Investments held by the University under contractual agreements - NEW
Only include investments recorded by the auxiliary organization as investments.
Do not include accounts receivable of investments from University in this line.
Campus coordinator needs to make sure the total of this note for all auxiliary organizations tied to the “On behalf of auxiliary organizations (Auxiliaries recorded as investments)” line in note 3.3 of the university footnote.
Jessica

27. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update (cont’d)
Note 2.3 Restricted current investments
List what the restriction is related to and enter the amount
The total must agree to the total restricted current investments in note 2.1
Note 2.4 Restricted noncurrent investments
The total must agree to the total restricted noncurrent investments in note 2.1
GASB 40 disclosure footnote template for auxiliaries participating in SWIFT will be available on September 1.
Jessica

28. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update (cont’d)
Note 7.2 Calculation of net assets - Restricted for nonexpendable – endowments - NEW
Created to reconcile endowment investments to endowment net assets.
The total balance in this note should tie to the restricted for nonexpendable endowments net assets balance on the Statement of Net Assets.
Jessica

29. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update (cont’d)
Note 8 Transactions with Related Entities
In addition to gifts-in-kind, created another gift line for cash or asset gifts.
In addition to accounts receivable and payable from/to auxiliary organizations, two new lines; other amounts receivable and payable from/to auxiliary organizations have been added. These lines should be used for all other receivables or payables that are not disclosed in accounts receivable or accounts payable from/to University.
Transactions with University should agree to the University’ note 14. Auxiliary organization needs to work with campus coordinator for the reconciliation of this note between the auxiliary organization and the University.
Jessica

30. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update (cont’d)
Note 9 Other Postemployment Benefits Obligation (OPEB) - NEW
the OPEB obligation must be presented separately in the SNA.
the NOO ending balance reported in this note must agree with the OPEB obligation reported on the SNA.
Jessica

31. Updates on the Supplementary Information Template
Footnote (Note) Disclosures Update (cont’d)
Note 10 Pollution remediation obligations (GASB 49) - NEW
Result of GASB Statement No. 49
Provide a brief description of the liability and enter the amount
Report as other liabilities (current and noncurrent) on the Statement of Net Assets
For PowerPoint presentation of pollution remediation obligations, please refer to the below link:
Jessica

32. References
Financial Accounting Services Training, Education & Development Portal
GAAP Manual 2009
Auxiliary Organization FIRMS Template 2009
IPEDS Template 2009
Jessica