GASB UPDATE Presented by Michelle Drew, CPA

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GASB UPDATEPresented byMichelle Drew, CPA
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AGFOA- GASB UPDATE

• 45 - Accounting and Financial Reporting by
  Employers for Postemployment Benefits Other Than
  Pensions
• 44 - Economic Condition Reporting The
  Statistical Section

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GASB 45Accounting and Financial Reporting by
Employers for Postemployment Benefits Other than
Pensions
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GASB 45

• Currently most OPEB are pay as you go
• Fails to measure or recognize cost of OPEB during
  the period earned.
• GASB 45 applies approach consistent with GASB 27
  pension accounting

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GASB 45

• Establishes standards for the measurement,
  recognition, and display of OPEB in state/local
  government financial statements
• Expense/expenditures
• Liabilities/assets
• Required supplementary information
• GASB 45 does not apply to special termination
  benefits
• Retirement incentive programs

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GASB 45

• GASB 45 applies to participants in
• Single-employer OPEB plans
• Agent multiple-employer OPEB plans (PERS
  healthcare)
• Cost-sharing multiple-employer OPEB plans (TRS
  healthcare)

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GASB 45

• What is OPEB cost?
• Defined contribution plan
• Expense the required contribution
• Cost-sharing multiple-employer defined benefit
  plan
• Expense contractually required contribution
• Single employer or agent multiple-employer
  defined benefit plan
• Expense Annual required contribution (ARC)

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GASB 45

• Annual Required Contribution - ARC
• Normal cost for the year plus
• Amortization of prior unfunded actuarial
  liability - UAL

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GASB 45

• Normal cost is comprised of projected benefits,
  discounted to present value, allocated to periods
  of service using actuarial cost-allocation
  methods
• Actuarial valuation required
• 200 or more members biennially
• 200 or fewer members triennially
• 100 or fewer members alternative measurement
  method allowed

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GASB 45

• Alternative measurement method is available if
  less than 100 members
• Project benefits
• Discount to present value
• Allocate costs to periods when earned using
  simplified actuarial assumptions in lieu of
  actuarial valuation
• GASB is assuming someone will develop software
  for this purpose

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GASB 45

• Unfunded Actuarial Liability (UAL)
• Results when actuarial liability exceeds
  actuarial value of plan assets
• Not to be confused with net OPEB obligation which
  results when payments are less than the ARC
• UAL is amortized over period not to exceed 30
  years
• UAL amortization is added to normal cost to
  arrive at the ARC

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GASB 45

• Single employer or agent multiple-employer
  defined benefit plan will recognize expense ARC
• Government-wide financial statements
• Financial statements of proprietary funds
• Financial statements of fiduciary funds
• Modified accrual basis in governmental fund
  financial statements

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GASB 45

• Single employer or agent multiple-employer
  defined benefit plan will recognize liability or
  asset
• Net OPEB obligation results from contributions
  over/under ARC
• Government-wide financial statements
• Financial statements of proprietary funds
• Financial statements of fiduciary funds

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GASB 45

• Required supplementary information
• Schedule of funding progress
• Notes to the financial statements
• A brief plan description
• Funding policy
• Employer contribution rates
• Actuarial and economic assumptions
• Investment return assumptions
• Other notes

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GASB 45

• Applies GASB 34 Phase in categories
• Periods beginning after
• Phase 1 governments (Rev 100 million)
• December 15, 2006
• Phase 2 governments (Rev 10 million)
• December 15, 2007
• Phase 3 governments (Rev
• December 15, 2008
• One year following GASB 43 (Plan reporting).
  Earlier application encouraged.

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GASB 44Economic Condition Reporting The
Statistical Section
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GASB 44

• Amends NCGA Statement 1
• Establishes and modifies requirements related to
  the supplementary information in the statistical
  section accompanying the basic financial
  statements for state and local governmental
  entities
• Generally, focus should be on primary government
• Judgment in presenting information on discreet
  component units in consideration of economic
  condition of the primary government

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GASB 44

• Five objectives
• Financial trends changes over time
• Revenue capacity ability to generate own-source
  revenue
• Debt capacity debt burden and ability to issue
  additional debt
• Demographic and economic information
• Operating information

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GASB 44 Trend Data

• Net assets
• Invested in capital assets, restricted and
  unrestricted shown separately
• Governmental activities, business-type
  activities, total primary government shown
  separately
• 10 years - or all years since GASB 34
  implementation

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GASB 44 Trend Data

• Changes in Net Assets (for both governmental and
  business-type activities)
• Expenses by function, program or activities
• Program revenues by category
• Significant charges for services in detail
• Total net (expense) program revenue
• General revenues
• Other change in net assets by type
• Total changes in net assets
• 10 years information

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GASB 44 Trend Data

• Governmental fund information
• Reserved and unreserved fund balances
• General Fund
• All other funds aggregated
• Unreserved by fund type
• Revenues by source, expenditures by function,
  other financing sources/uses, other changes in
  fund balances.
• Debt interest and principal shown separately
• Ratio of total debt service to noncapital
  expenditures

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GASB 44 Revenue Capacity

• Most significant own-source revenue
• Revenue Base
• By major component
• Taxes Real personal property
• Direct rate
• Mill rate, sales tax rate
• If property tax, present both assessed value and
  estimated actual value
• 10 years information

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GASB 44 Revenue Capacity

• Most significant own-source revenue
• Revenue Rates
• Individual direct rates separate from total
  direct rate.
• Overlapping rate information for property taxes
• Excludes States
• 10 years information

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GASB 44 Revenue Capacity

• Most significant own-source revenue
• Principal Revenue Payers
• Current year and nine years prior
• Two years total presented
• Ten largest payers or 50 of revenue base

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GASB 44 Revenue Capacity

• If Property taxes are largest own-source revenue
• Amount levied for that period
• Amount collected prior to end of period
• Amount of levy collected in subsequent years to
  date
• 10 years information

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GASB 44 Debt Capacity

• Ratios of outstanding debt
• Separately identified GO bonds, revenue bonds,
  loans, COPs, capital leases related to
  governmental activities and business-type
  activities separately
• Debt ratio to personal income or other relevant
  base (value of taxable property, etc)
• 10 years information

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GASB 44 Debt Capacity

• Ratio of General Bonded Debt
• Types shown individually and in total
• Accumulated resources to repay principal
  subtracted to arrive at net debt
• Ratio to estimated value of taxable property (or
  other meaningful base)
• 10 years information

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GASB 44 Debt Capacity

• Direct and Overlapping Debt
• Debt attributable to governmental activities
  should present for the current year
• Total amount outstanding
• Percentage of overlap between reporting and
  overlapping government
• Total direct debt
• Total overlapping debt
• States are excluded
• Encouraged but not required by counties and above

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GASB 44 Debt Capacity

• Debt Limitations
• Information for current year for debt margin
  calculations
• Relevant revenue base
• Debt limit amount
• Debt applicable to the limit (reserves deducted,
  net debt)
• Legal debt margin
• 10 years information for total net debt
  applicable to the limit, legal debt margin
  amount, ratio debt margin/net debt or net
  debt/debt limit

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GASB 44 Debt Capacity

• Pledged-revenue coverage (revenue bonds)
• Gross revenues
• Net available revenues, as applicable
• Principal and interest requirements
• Coverage ratio
• 10 years information

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GASB 44 Demographics

• Demographic and Economic Indicators
• Personal income
• Per capita income
• Unemployment rate
• 10 years information

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GASB 44 Economics

• Principal Employers
• Current year and nine years prior (2 years only)
• Ten largest employers in terms of number of
  employees or 50 of total employment
• Include percentage of employment

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GASB 44 Operating Information

• Government Employees
• Number of persons employed by function, program
  or identifiable activity
• Same level of detail as financial statements
• 10 years information

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GASB 44 Operating Information

• Demand or level of service
• Reporting volume
• Number of arrests
• Number of customers served
• Etc.
• Not reporting effectiveness or efficiency

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GASB 44 Operating Information

• Capital Asset related information
• Volume, usage, or nature
• Number of lane-miles of roads
• Miles of water mains
• Etc.

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GASB 44

• Effective for periods beginning after June 15,
  2005
• Encouraged to implement the government-wide
  information retroactively to GASB 34
  implementation
• Encouraged to restate or revise information for
  prior years

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Questions?
Contact information Mikunda, Cottrell Co. 3601
C Street, Suite 600 Anchorage, AK
99503 907-278-8878 mdrew_at_mcc-cpa.com