Office of Superintendent of Public Instruction Financial Resources and Governmental Relations School Accounting Manual Update June 2015

A recap of the June 12 School District Accounting Advisory Committee meeting The pending release of the 2015–16 School District Accounting Manual GL 872 Committed to Minimum Fund Balance Policy in relation to GASB 54 GASB 68 Financial Reporting for Pensions Other Miscellaneous

The release of the 2015–16 Accounting Manual The Accounting Manual is in a final review for punctuation and style. The content is ready but 2014–15 issues are not finalized. An Addendum to the 2014–15 Accounting Manual is looming… topics in this addendum will also be an addendum for the 2015–16 Accounting Manual.

A change effecting 2014–15 Fund Balance Classification GL 872 Committed to Minimum Fund Balance Policy was a 2013–14 audit focus. SAO examined Minimum Fund Balance Policies. – Necessary language missing to classify amounts as Committed Fund Balance. GASB 54 describes Fund Balance classifications. z54.10: Committed fund balances are “specific purposes” and “constraints” must be outlined.

Minimum Fund Balance Policies Further examination of GASB 54: Minimum Fund Balance Policies are not considered a “specific purpose” Z54.27: Minimum Fund Balance Policies are Note Disclosure only. (A minimum fund balance policy represents a plan for accumulating resources rather than a limitation on how existing resources can be spent; therefore, a fund balance policy does not affect the classification of fund balance. )

2014–15 year end adjustments No time to overhaul existing board policies. A Minimum Fund Balance Policy should only be a Note disclosure. Amounts recognized in a Minimum Fund Balance Policy should be recorded as Unassigned Fund Balance. If a district elects to continue to record amounts in GL 872, SAO will consider this a misclassification of the Financial Statements and issue a Management Letter.

Other Actions GL 891 Unassigned to Minimum Fund Balance Policy is opened for optional use in 2014–15. – GL 891 will close to GL 890 in the F-196. – This account will be available in the F-195 for Retitle GL 872: “Committed to Economic Stabilization” for 2015–16. Economic Stabilization is a “specific use” under GASB 54 (z.54.20). – Outline specific constraints. – Assist development of an Economic Stabilization Board Policy template.

Examples of Economic Stabilization constraints Expenditures for emergency situations for life, health, or public safety issues for which no appropriation exists. Significant unforeseen revenue decline in excess of 5% of original estimates where no appropriation transfers or other new revenue is available to offset to maintain services. Correcting errors in revenue estimates, budgets, or accounting in excess of 5%. Nonoperational expenditures for capital or technical purposes for items with a useful life of more than 5 years to achieve efficiency improvements. Nonrecurring expenditures with tangible benefits, such as program start-up costs, grant matching-funds, up-front reimbursable grant payments.

Economic Stabilization Policies Q: Our school district would like to implement an Economic Stabilization policy before the end of the 2014–15 school year. Is there a sample board policy for districts to use? A: A sample board policy for school district economic stabilization is not currently available. If a district wishes to implement an economic stabilization policy for 2014–15, they may do so, but the district will have to develop the policy for their use. – Ascertain that constraints described in policy are appropriately specific. – For FY 2014–15, amounts set aside under an economic stabilization arrangement should be posted to GL 870 Committed to Other Purposes. For FY 2015–16 budgeting purposes, amounts set aside for these stabilization arrangements would be budget to GL 872 Committed for Economic Stabilization.

GASB 68–Financial Reporting for Pensions A requirement for government employers to recognize their proportionate share of the Net Pension Liability earned by employees. New Pension Note disclosures. Disclosure on the Schedule of Long-Term Liabilities. School Districts will not recognize the Net Pension Liability on the F-196 Balance Sheet.

Status Update on GASBS 68 SAO completed the DRS Census Data Audit. – Employer contributions to determine Allocation Percentages. DRS has released the Participating Employer Financial Information (PEFI) for 2013 and The current PEFI information has been incorporated into a Pension Reporting Tool for school districts to utilize. The Pension Reporting Tool is under development.

GASBS 68 Subcommittee The GASBS 68 subcommittee will finalize pension reporting requirements. – Finish the Pension Note to the Financial Statements – Work on the Pension Reporting Tool and certain reconciliation issues. – Frame the Pension Reporting Tool for district use Mirror the Tool to pension schedules in the Notes to the Financial Statement and the Schedule of Long-Term Liabilities.

Samples from the draft Pension Reporting Tool

Other elements in the Pension Reporting Tool A prepopulated Schedule of Long-Term Liabilities Beginning Outstanding Debt Amount Issued/ Increased Amount Redeemed/ Decreased Ending Outstanding Debt Amount Due Within One Year Other Liabilities: Net Pension Liabilities: Net Pension Liabilities TRS C/S 492XXXX Net Pension Liabilities TRS 2/ C/S 495XXXX Net Pension Liabilities SERS 2/ C/S 498XXXX Net Pension Liabilites PERS C/S 457XXXX

Other GASB 68 working papers FOR ESDs and CAFR Districts Recognition of the Net Pension Liability as a Prior Period adjustment. Fund Balance net position will reflect this “unrestricted” or “unassigned” deficit. Deferred Inflows & Outflows of Resources will be recognized and amortized. Develop a template for Adjusting entries. New Pension Note (GAAP).

GASBS 68 Final Steps School Districts still need the 2015 DRS PEFI for their financial statements. A potential timing issue exist for the release of the 2015 DRS PEFI. Load 2015 PEFI information into the Pension Reporting Tool and release for district use. Recent development: OSPI has asked GASB if school districts are allowed to use 2013 & 2014 PEFI information for the 2014–15 F-196. – No answer at this time.

Addendum(s) to the Accounting Manual(s) An addendum to the 2014–15 Accounting Manual Pension Implementation guidance – How to use the Pension Reporting Tool – Pension reporting elements incorporated into the Accounting Manual. GL 891 Unassigned for Minimum Fund Balance Policy will be introduced. – Early implementation guidance is coming out ahead of the addendum. Same topics will also be an Addendum to the 2015–16 Accounting Manual.

Other Miscellaneous Began the organization of a Chart of Accounts Subcommittee. – Impact of SB6130 on School District accounting structure. – Separate Fund for Local Revenue Began the organization of an Accounting Manual Maintenance Subcommittee – Uniform Grant Guidance – A host of topical edits under consideration

Questions? Paul Stone Supervisor – SD/ESD Accounting