Heinfeld Meech & Co. - State and Local Government Conference (Tempe, 1/28/2016)

1. GOVERNMENTAL UPDATES:
UNIFORM GUIDANCE (UG) AND GASB
Presented by
Brittney Williams, CPA, CGFM
Heinfeld, Meech & Co., P.C.

2. Agenda
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• Uniform Guidance (UG) Refresher
• GASB Updates
• New GASB Pronouncements
• Major Projects
• Practice Issues
• Pre-Agenda Research

3. Part 200 – UniformAdministrative Requirement, Cost Principles,
andAudit Requirements for FederalAwards
Subpart A - Acronyms and definitions
Subpart B - General provisions
Subpart C - Pre-Federal Award requirements
and Contents of Federal Awards
Subpart D - Post Federal award Requirements
Subpart E – Cost Principles
Subpart F – Audit Requirements
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4. Objectives
Goals of COFAR based on guidance from Executive Office
• Streamline guidance for Federal awards to ease administrative burden
• Strengthen oversight over Federal funds to reduce risks of waste, fraud
and abuse
• Eliminate duplicative and conflicting guidance
• Focus on performance over compliance for accountability
• Use of grant agreements, cooperative agreements and contracts including
provisions for fixed amount awards
• Encourage efficient use of information technology and shared resources
• Provide for transparent and consistent treatment of costs
• Limit allowable costs to make the best use of Federal dollars
• Setting standard business processes using data definitions
• Encourage non-Federal entities to have family friendly policies
• Strengthen oversight
• Target audit requirements on risk of fraud, waste and abuse
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5. Post-Award Requirements
Internal Controls (Section 200.303)
• Moved from audit requirements to post-award requirements
• Organization must establish and maintain effective internal
control over Federal awards to provide reasonable assurance
that awards are being managed in compliance with laws and
regulations
• Internal controls should be in compliance with COSO and the
Standards for Internal Control in the Federal Government (the
“Green Book”)
• Must take prompt action when noncompliance is identified
• Must take reasonable measures to safeguard personally
identifiable information and other information deemed sensitive
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6. Post-Award Requirements
Procurement (Section 200.318)
• “Integrity Rules”
• Must maintain written standards of conduct covering conflicts of
interest with respect to employees engaged in the selection,
award, and administration of contracts, including disciplinary
actions for violations
• No real or apparent conflicts of interest permitted
• Must maintain written standards of conduct covering
organizational conflict of interest for affiliates of subsidiary
organizations
• Mandatory disclosure requirements for violations
• Non-Federal entities may set standards for non-substantial
interests or gifts of nominal value
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7. Post-Award Requirements
Procurement (Section 200.318)
• Must avoid acquisition of unnecessary or duplicative items
• Encourages the use of excess or surplus property
• Encourages the use of inter-entity agreements
• Must maintain records sufficient to detail the history of the
procurement
• Must maintain oversight to ensure contractors perform the
terms and conditions of contract
• “Federal agency will not substitute its judgment for that of
the non-Federal entity unless the matter is primarily a
Federal concern”
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8. Cost Principles
Indirect Cost Rates (Section 200.414)
• Non-Federal entities that have never had a negotiated
indirect cost rate may use a de minimis rate of 10%
• Must use the 10% de minimis rate on all awards until
negotiated
• Costs must be consistently charged and may not be
double charged in order to utilize the de minimis rate
• The SEFA must include a note as to whether or not the
entity elected to use the 10% de minimis indirect cost rate
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9. Cost Principles
Other Revisions
• Measures to safeguard personal and sensitive information
• Encouragement of family-friendly policies
• Conference hosts must ensure conference costs
managed in manner to minimize costs to Federal award
• Definition of supplies clarified to include computer
equipment with an acquisition cost of less than $5,000
• Computer equipment may be charged as a direct cost if
essential to performance of a Federal award, even if it is
not solely dedicated to an award cost objective
• Annual reports and payment requests must include a
certification by an authorized official
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10. Cost Principles
Required Certification
“By signing this report, I certify to the best of my knowledge
and belief that the report is true, complete, and accurate,
and the expenditures, disbursements and cash receipts are
for the purposes and objectives set forth in the terms and
conditions of the Federal award. I am aware that any false,
fictitious, or fraudulent information, or the omission of any
material fact, may subject me to criminal, civil or
administrative penalties for fraud, false statements, false
claims or otherwise. (U.S. Code Title 18, Section 1001 and
Title 31, Sections 3729–3730 and 3801–3812).”
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11. Audit Requirements
Basic Structure Remains the Same
Single Audit Threshold Changes
Changes in the Type A/B Program Threshold
Changes to the risk assessment of the Type A/B Programs
Percentage of Coverage Rule adjustment
Changes to the risk assessment of the entity
Changes for reporting audit findings
DCF Changes
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12. Additional Considerations
Uniform Guidance provides for a government-wide audit
quality project once every 6 years beginning in 2018
Included language to allow for future combining of the audit
reporting and the data collection form
OMB to evaluate implementation of guidance against
previously developed metrics
Reduction of compliance requirements may be revisited in
the future
Possible new COFAR guidance
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13. GASB UPDATES
GASB Statements
Major Projects
Practice Issues
Pre-Agenda Research
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14. Effective Dates – June 30
• 2016
• Statement 72 – fair value measurement and application
• Statement 76 – GAAP hierarchy
• 2017
• Statement 73 – pensions not within the scope of Statement 68 and
amendments to Statements 67 and 68
• Statement 74 – financial reporting by OPEB plans
• Statement 77 – tax abatement disclosures
• 2018
• Statement 75 – OPEB accounting for employers and nonemployer
contributing entities
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15. Statement 72: Fair Value Measurement
and Application
Statement Summary
• Defines Fair Value
• Describes measurement techniques, approaches
• Describes what should be reported at fair value
• Describes what should be disclosed for fair value
measurements
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16. Investment Measurement (Fair Value
Application)
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• Fair value is the price
that would be received
to sell an asset or paid
to transfer a liability in
an orderly transaction
between market
participants at the
measurement date.
Fair
Value

17. Fair Value Hierarchy
The fair value hierarchy categorizes the inputs to valuation
techniques used to measure fair value into three levels.
• Level 1 inputs are quoted prices (unadjusted) for identical
assets or liabilities in active markets that a government
can access at the measurement date.
• Level 2 inputs are inputs-other than quoted prices
included within Level 1-that are observable for an asset or
liability, either directly or indirectly.
• Level 3 inputs are unobservable inputs for an asset or
liability.
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18. Valuation Approaches
Apply valuation approach(s) that best represent fair value in the
circumstances using one of the three approaches:
Market approach:
Uses prices and other relevant data derived from market transactions
for identical or similar assets, liabilities, or a group of assets and
liabilities.
Cost approach:
Reflects the amount that would be required currently to replace the
present service capacity of an asset.
Income approach:
Converts future amounts to a single discounted amount. The fair value
measurement would also reflect any current market expectations for
future amounts.
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19. Investment Measurement (Fair Value
Application)
Assets that meet the definition of an Investment should be
reported at Fair Value
• Alternative investments
• Equity securities, stock warrants, and stock rights that don’t have
readily determinable fair values
• Commingled investment pools that are not government sponsored
• Intangible assets
• Land and land rights
• Real estate If they meet the definition
• Lending assets of an investment
• Natural resource assets
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20. Investment Measurement (Fair Value
Application)
• Investments Not Reported at Fair Value
• MM investments and participating interest-earning investment
contracts that have a remaining maturity at time of purchase of one
year or less, reported by governments other than external
investment pools
• Investments in 2a7-like pools (LGIP)
• Investments in life insurance
• Investments in common stock that meet the criteria for applying the
equity method
• Non-participating interest earning investment contracts
• Unallocated insurance contracts
• Synthetic guaranteed investment contracts that are fully benefit
responsive
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21. Required Disclosures
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• The fair value measurement at year end
• The level of the fair value hierarchy (level 1, 2, 3)
• A description of the valuation technique used in the fair
value measurement
• If there has been a change in the valuation technique that
has a significant impact on the result
Recurring fair
value
measurements
• The reason for the measurement
Nonrecurring
fair value
measurements

22. Standard Note Disclosure for Fair Value
Narrative Format
NOTE 2 –Fair Value Measurements
The City categorizes its fair value measurements within the fair value hierarchy established by
generally accepted accounting principles. The hierarchy is based on the valuation inputs used
to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for
identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are
significant unobservable inputs.
The City has the following recurring fair value measurements as of June 30, 20X1:
• U.S. Treasury securities of $45 million are valued using quoted market prices (Level 1 inputs)
• Corporate bonds of $12 million are valued using a matrix pricing model (Level 2 inputs).
The City also has a nonrecurring fair value measurement as of June 30, 20X1, for a closed
performing arts hall that will no longer be used by the government and therefore is considered
to be impaired. The hall has been written down from $5.6 million to $3.4 million based on an
appraisal of the property (Level 3 inputs).
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23. Standard Note Disclosure for Fair Value
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Tabular Format
NOTE 2 –Fair Value Measurements
The Plan categorizes its fair value
measurements within the fair value
hierarchy established by generally
accepted accounting principles. The Plan
has the following recurring fair value
measurements as of December 31, 20X1:

24. GAAP Hierarchy: Statement 76
• Effective for periods beginning after June 15, 2015
• Revised Comprehensive Implementation Guide
• Highlights
• The hierarchy of generally accepted accounting principles (GAAP
hierarchy) comprises the types of guidance that state and local
governments follow when preparing financial statements
• The GAAP hierarchy lists the order of priority for pronouncements
to which a government should look for guidance
• Statement 76 reduces the GAAP hierarchy to 2 categories of
authoritative GAAP
• Previously 4 categories under GASB Statement 55
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25. GAAP Hierarchy: Statement 76
• 2 Categories of Authoritative Guidance
• Category A
• GASB Statements
• Formerly issued Interpretations
• Category B
• GASB Technical Bulletins
• GASB Implementation Guides (Q&As)
• AICPA literature cleared by the GASB
• Nonauthoritative
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26. GAAP Hierarchy: Statement 76
Authoritative GAAP
Category A must meet
ALL of the following:
• Formally approved
by the Board
• For the purpose of
creating, amending,
superseding, or
interpreting
standards
• Exposed for a period
of public comment
Category B must meet
ALL of the following:
• Restricted to
providing limited
clarification
• Cleared by the Board
• Specifically made
applicable to s&l
governmental entities
• Exposed for a period
of public comment
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27. GAAP Hierarchy: Statement 76
NonAuthoritative
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If no authoritative GAAP
exits:
• Consider authoritative
GAAP for similar
transactions
• If no analogy possible,
may consider
nonauthoritative
literature that does not
conflict or contradict
authoritative GAAP
Consider all of the
following:
• Consistency with the
GASB Concepts
Statements
• Relevance to particular
circumstances
• Specificity of the
guidance
• General recognition of
the issuer or author as
an authority
Sources:
• GASB Concepts,
FASB, FASAB, PSASB,
IASB
• AICPA literature
• Widely used practices
in S&L government
• Literature of other
professional
associations/regulatory
agencies

28. Accounting and Financial Reporting for
Postemployment Benefits Other Than
Pensions- GASB 75
• What: GASB Issued Statement 74 (plans) and 75 (employers),
making OPEB accounting and financial reporting consistent
with the pension standards in GASB Statements 67 and 68
• Why: Pension and OPEB standards were updated subsequent
to a review of the effectiveness of the standards- objective was
to establish a consistent set of standards for all
postemployment benefits, providing more transparent reporting
of the liability and more useful information about the liability
and costs of benefits.
• When: Effective for periods beginning after June 15, 2016
(plans) and June 15, 2017 (employers)
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29. Accounting and Financial Reporting for
Postemployment Benefits Other Than
Pensions- GASB 75
• Key Points
• Employers will have to report a net OPEB liability (total OPEB
liability less fiduciary net position) on the accrual-based statement
of net position.
• Employer expense recognition will be separated from funding.
• All employers will be required to sue the same actuarial cost
allocation method for measurement, regardless of the actuarial
method used for funding purposes.
• Employers that participate in cost-sharing plans will be required to
report their proportionate share of the net OPEB liability and
expense of all participating employers.
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30. Accounting and Financial Reporting for
Postemployment Benefits Other Than
Pensions- GASB 75
New disclosure requirement for Health-care trend
rates.
1% decrease
(8.5% decreasing
to 4.5%
Health-Care Cost
Trend Rates
(9.5% decreasing
to 5.5%)
1% increase
(10.5%
decreasing to
6.5%)
Net OPEB
Liability (asset)
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1% decrease Discount Rate 1% increase
Net OPEB
Liability (asset)

31. Tax Abatement Disclosures: Statement 77
• Transaction must meet this definition:
A reduction in tax revenues that results from an agreement
between one or more governments and an individual or entity in
which (a) one or more governments promise to forgo tax revenues to
which they are otherwise entitled and (b) the individual or entity
promises to take a specific action after the agreement has been
entered into that contributes to economic development or otherwise
benefits the governments or the citizens of those governments.
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32. Tax Abatement Disclosures: Statement 77
Key Points:
• A principal distinction between tax abatements and other tax
expenditures is the existence of an agreement with an
individual or entity
• The agreement generally is in writing but not necessarily
• The agreement may or may not be legally enforceable
• The agreement must precede the reduction of taxes and the
recipient’s fulfillment of the promise to act
• The tax reduction may occur before, during or after fulfilment
of the promise- as long as it occurs after the agreement has
been entered into
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33. Tax Abatement Disclosures: Statement 77
• General Disclosure Principles
• A government should disclose information separately for:
• Its own tax abatements
• Tax abatements that are entered into by other governments that reduce the
reporting government’s tax revenues
• Disclosure information may be presented for individual agreements or
may be aggregated:
• Its own abatements –organized by major tax abatement program
• Other government abatement- Organized by the government entering into
the abatements and the specific taxes being abated
• Disclosure should commence in the period in which a tax abatement
agreement is entered into and continue until the tax abatement
agreement expires:
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34. Tax Abatement Disclosures: Statement 77
34
Descriptive
Information
Government’s Own
Abatements
Other Government’s
Abatements
Name of program X
Purpose of program X
Name of government X
Tax being abated X X
Authority to abate
taxes
X
Eligibility criteria X
Abatement mechanism X
Recapture provisions X
Types of recipient
commitments
X

35. Tax Abatement Disclosures: Statement 77
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Other Disclosures Government’s Own
Abatements
Other Government’s
Abatements
Dollar amount of taxes
abated
X X
Amounts received or
receivable from other
governments associated
with abated taxes
X X
Other commitments by
the government
X
Quantitative threshold for
individual disclosure
X X
Information omitted due
to legal prohibitions
X X

36. Standard Setting Process
• Pre-Agenda Research
• Added to Agenda
• Initial Deliberations
• Preliminary Views (PV)
• Followed by a comment period
• Exposure Draft (ED)
• Followed by a comment period
• Exposure Draft Redeliberations
• Final Pronouncement
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37. MAJOR PROJECTS
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38. Asset Retirement Obligations
• What: GASB is considering establishing accounting and
financial reporting standards for legal obligation to retire
certain capital assets such as nuclear power plants.
• Why: Existing standards (Statement 18) address only
municipal landfills but governments have retirement
obligations for other types of capital assets.
• When: Exposure Draft has been issued and the comment
period ends 3/31/16
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39. Fiduciary Activities
• What: GASB reviewing the standards that clarify when a
government has a fiduciary responsibility and is required
to present fiduciary fund financial statements.
• Why: Existing standards require reporting of fiduciary
responsibilities but to not define what they are; use of
private purpose trust funds and agency funds is
inconsistent; business-type activities are uncertain about
how to report fiduciary activities.
• When: Exposure Draft has been issued, comment period
ends 3/31/16
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40. Financial Reporting Model-
Reexamination of Statements 34, 35, 37,
41 and 46 and Interpretation 6
• What: In September of 2015, the Board added a project to the agenda to examine
the effectiveness of the financial reporting model.
• Why: The GASB is committed to ensuring standards remain effective; most of the
requirements of Statement 34 became effective between 2002 and 2004
• When: Currently in initial deliberations. A due process document is expected by
the end of 2016. The project is projected to extend into 2020/2021.
• Potential Areas of Improvement
• MD&A
• GW
• Major Funds
• Governmental Fund f/s
• Proprietary/BTA f/s
• Extraordinary and special items
• Fiduciary f/s
• Budgetary comparisons 40

41. Leases – Reexamination of NCGA
Statement 5 and GASB statement 13
• What: GASB is redeliberating its proposed revisions to
existing standards on lease accounting and financial
reporting based on the 2014 preliminary views.
• Why: The existing standards have been in effect for
decades without review to determine appropriateness.
FASB and IASB have been conducting a joint project to
update their lease standards. Opportunity to increase
comparability and usefulness of information and reduce
complexity for preparers.
• When: ED expected 1st Q of 2016
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42. PRACTICE ISSUES
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43. Blending Requirements for Certain
Component Units
• What: GASB proposed revising the standards regarding
how certain component units should be presented in the
financial statements of the primary government.
• Why: There is diversity in practice, with some component
units.
• Final Pronouncement due Q1 2016
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44. Certain Debt Extinguishments Using
Existing Resources
• What: The GASB is considering improvement to the
existing guidance related to all types of debt
extinguishments.
• Why: The project is intended to resolve certain issues in
the existing guidance and provide improvements.
• ED is expected in August 2016, currently in initial
deliberations
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45. Other Practice Issues
• Implementation Guidance- Update
• Currently in ED Rediliberations
• Implementation Guide for Statements 74 and 75 on OPEB
• Initial deliberations
• Irrevocable Split – Interest Agreements
• ED issued in June 2015, currently in rediliberations
• Pension Issues
• ED issued in December 2015, currently in rediliberations
• User Guides- Updates
• Added to agenda
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46. Pre-Agenda Research
• Debt Disclosures, including Direct Borrowing
• Reexamination of Statements 34, 38 and 62
• Going Concern Disclosures
• Reexamination of Statement 56
• Revenue Recognition for Exchange and Exchange-Like
Transactions
• Reexamination of Specific Statement 62 Provisions
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47. Questions