Prepared by Client (PBC) List Chapter 9 Presented by KPMG LLP KPMG LLP

Focus of today’s presentation – FS PBC list Overview Process for updating the PBC lists – financial statements (FS) and A-133 Focus of today’s presentation – FS PBC list Organized by audit area Items that are either new for this year or have been modified from prior year Refresher on existing PBC items from prior year Due dates Cross-reference to example schedules (exhibits) in Chapter 9 Systemwide Revenue Bonds (SRB) audit Jessica

PBC List – Update Process The PBC list was reviewed extensively by a task force Coordinated with IT audit Clarified PBC items Deleted duplicate or obsolete items More exhibits added to Chapter 9 to aid campuses Required format schedules are indicated on the PBC list, otherwise format is optional The PBC list is preliminary As the audit progresses, more items will be requested If new items are added on a systemwide level, they will be added to the end of the list. No re-numbering!

Campus PBC Binders Campus PBC binders should have a labeled divider tab for every single PBC item Provide PBC items to the audit team electronically –flash drive provided last year could be used For any electronic PBC items – refer to the file on flash drive on the PBC binder index “ORIGINAL, DO NOT REMOVE” should be clearly marked All files and schedules provided should be clearly labeled and cross-referenced to the PBC list Example: “General #1” Campus should maintain their own set of PBC binders in a central location for reference Jessica

Sample Selections and Interviews PBC items used for sample selections are indicated on the PBC list Will be made by the audit team within the first week of fieldwork Campuses interested in receiving selections earlier should coordinate directly with their manager/senior Potential sample expansions if errors found Interviews with the Auditors Audit team will communicate the list of individuals that they will need to interview within first 2 weeks of fieldwork. PBC items related to interviews are not included on the PBC list Please ensure that the meeting time is agreed to by both parties Jessica

The PBC List – General Section #1 – Completed and Campus approved Reporting Package, including comprehensive analytical review Revisions to the Reporting Package – covered in separate presentation Analytical review explanations should not be entered into YES - submit a separate Word document following the format in Exhibit 27 Analytical review for the Statement of Cash Flows (SCF) – new this year #2 – Trial balance of CMP/CSU/GAP for periods 1-12 The outcome should line up the three campus business units ledger data to show that the derived data in the xxGAP ledger is a complete population A write up is included in Exhibit 29 that shows multiple methodologies to gather the data to create the schedule Jessica

The PBC List – General Section (cont.) #3 – Cash flow worksheet and supporting documentation for the SCF #4 – Supporting documentation for YES, Note 14 Transactions with Related Entities The Chancellor’s Office (CO) will pre-populate amounts for interagency charges to the campus (e.g. state pro-rata) Auxiliary amounts included in Note 14 must be reconciled with the auxiliary note input sheet, Note 8 Jessica

The PBC List – General (cont.) #5 – Detail and supporting documentation for nonexchange transactions included on the SRECNA: Between campus and auxiliary organizations Between auxiliary organizations #6 – Access to original GAAP journal entries with attached supporting documentation Do not make a separate copy of GAAP journal entries for the audit team (indicate “ORIGINAL, DO NOT REMOVE”) Where applicable, note reference to the GAAP journal entry number in exhibits and schedules provided to the audit team Jessica

The PBC List - General Section (cont.) #7 – Prior Period Adjustments Restatement adjustments to beginning net assets must be entered in YES, Note 15 A separate schedule (excel file, Exhibit 21) must be completed which contains a summary of passed prior period audit differences and prior year reclassifications for comparability to current year financial statements Two separate tabs in the excel file for each type of adjustment Schedule must be attached with the submission of the Reporting Package Supporting source documents for all adjustments must be provided in the PBC binders Jessica

The PBC List – General (cont.) # 8 – Analysis of the impact of all non-GAAP accounting policies and procedures Exhibits 28 and 30 illustrate an acceptable write-up Each campus will need to evaluate and quantify the impact of each non-GAAP accounting policy used to prepare the financial statements Supporting source documents must be included in the PBC binders and/or flash drive #9 – #10 – Detail of all legal expenses (excluding CSURMA) and listing of campus specific hired legal counsel #11 – Completed GAAP Financial Reporting Checklist Part A – due on the first day of fieldwork Part B – due with the submission of the revised reporting package to the audit team on 10/6/2009 Jessica

The PBC List – General Section (cont.) #12 – Completed MD&A Checklist Refer to Chapter 7 #13 – Supporting calculations and source documentation for all amounts/percentages disclosed in the MD&A #14 – Completed draft financial statements, including MD&A and all footnotes Submitted version of the draft financial statements should be the campus’ FINAL DRAFT All levels of management should have approved this version before submission to the audit team Jessica

The PBC List – General Section (cont.) #15 – Completed KPMG tax questionnaire #16 – Pollution remediation obligation (PRO) – documentation of the campus’ process/analysis and calculation of PRO in accordance with GASB Statement No. 49 Refer to guidance in Chapter 4-12 #17 – #20 General FS Reporting Auxiliary Orgs Contact information for independent auditors of each of the campus’ auxiliary organizations Copies of all auxiliary organizations audited financial statements and completed GAAP financial reporting checklist for each auxiliary Auxiliary organizations consolidating and individual YES printouts that tie to the audited auxiliary financial statements Reconciliation of YES, Note 14 to the Auxiliary Consolidated Workbook (generated from YES) Jessica

The PBC List – Entity Level Controls #31 – Access to view minutes from meetings of the President/Vice President #32 – Access to view accounting policies and procedures manual #33 – Most recent FISMA report (draft if not issued) #34 – Campus budget to actual analysis for 2008-09 #35 – Campus Risk Assessment Annual Report #36 – Organizational Charts Two charts requested: 1 - President down three levels 2 - Finance department detail from VP down Jessica

The PBC List – Entity Level Controls (cont.) #37 – #38 – Access to view Employee Handbook and Code of Conduct #39 – Job descriptions for 2 newly hired accounting personnel – KPMG to select #40 – Job description/list of responsibilities of finance department personnel – (PBC #36 organizational chart) #41 – Employee turnover statistics or analysis by department or classification of employee Do not create this schedule if it does not exist! See Exhibit 22 for an example report #42 – Contract for one newly hired employee – KPMG to select #43 – Goal setting form and one evaluation form for a finance department individual – KPMG to select (PBC #33 organizational chart) #44 – Completed new hire form/packet, including references, employment contract – KPMG to select Jessica

#48 – #49 – June bank reconciliation The PBC List – Cash #46 – Listing of cash accounts broken out by CSU fund as of 6/30/2009 (cash leadsheet) Exhibit 1 – required format Legal balances must tie out to SAM07, and GAAP balances must tie out to Reporting Package #47 – Supporting documentation for restricted cash (nature of restrictions) #48 – #49 – June bank reconciliation List of outstanding checks Deposits in transit Supporting documentation for other significant reconciling items (including subsequent bank statement) Lily

The PBC List – Investments #50 – Investments leadsheet as of 6/30/2009 – YES, Note 3.2 and 3.3 #51 – For any investments not managed by US Bank/SWIFT pool, access to original June 2009 investment statements or other supporting documentation #52 – Confirmations for any non-US Bank investment balances Lily

The PBC List – Investments (cont.) #53 – Consolidated rollforward by type of investment, including investment purchases and sales with supporting documentation (Exhibit 2) The CO will provide the SWIFT information via a passdown schedule #54 – Detail leadsheet of investment income and accrued interest receivable as of and for the year ended 6/30/2009 that agrees to the SRECNA and SNA Exhibit 18 – required format for SRB audit #55 – Legal to GAAP rollforward of SWIFT investments schedule Exhibit 32 – required format for SRB audit Lily

The PBC List – Accounts Receivable #56 – Leadsheet of accounts receivable with 6/30/2009 and 6/30/2008 balances - YES, Note 4.1 #57 – #58 – Reconciliation of the SCO Tab Run Report 6/30/2009 balances to the state appropriations receivable balances (Exhibits 3a and 3b) #59 Listing of students and customers with their outstanding balances at 6/30/09 (aging report). Must agree to leadsheet. #60 – Detail of accounts receivable from the CO #61 – Detail of other accounts receivable as presented in YES, Note 4.1 Lily

The PBC List – Accounts Receivable (cont.) #62 – #63 – Grants and contracts receivable summary schedule with a breakdown of portion billed and unbilled for federal, state, local and nongovernmental including supporting calculation/documentation for unbilled portion #64 – Detail of accounts receivable by invoice due from grants and contracts (i.e. billed portion) #65 – Policy for establishing allowance for doubtful accounts (ADA) and writing off uncollectible receivables (Exhibit 5) #66 – #67 – ADA leadsheet should include: Allowance balance for each type of receivable Calculation and analysis of the 6/30/09 allowances established for each type of receivable (Exhibit 4)

The PBC List – Leases/Notes Receivable #68 – Copies of new lease or note agreements entered into during FY 09 (operating and/or capital), including agreements with auxiliary organizations. #69 – Support for YES, Notes 4.2 and 4.3 Schedule of future lease income, by individual lease, to be received in the 5 succeeding years and thereafter for operating/capital leases and CY lease income Schedule of notes receivable to be received in the 5 succeeding years and thereafter, less amounts representing interest, and less current portion #70 – Detail of lease/note payments received during the year (KPMG to make selections) Lily

The PBC List – Student Loans Receivable #71 – Student loans receivable aging and reconciliation (review for collectibility) – KPMG to select 2 months #72 – Student loans receivable leadsheet Balances by loan type (e.g. Perkins, Nursing, etc.) with 6/30/09 and 6/30/08 gross and net balances, including related allowances by loan type #73 – Calculation and analysis of the 6/30/209 allowance for uncollectible student loans receivable #74 – June 2009 ECSI Report Must agree to item #72 Lily

The PBC List – Other Assets Pledges Receivable #75 – Detail of pledges receivable at 6/30/09 #76 – Supporting documentation for any new pledges received during the FY #77 – Calculation of NPV of pledges receivable #78 – Calculation and analysis of the 6/30/09 allowance for uncollectible pledges receivable Prepaids and Other Assets #79 – Detail of prepaid expenses and other assets at 6/30/09 Other Noncurrent Assets #90 – Detail of other assets at 6/30/09 #91 – Documentation of realizability Refer to GASB Concept Statement No. 4 Lily

The PBC List – Capital Assets #80 – Capital assets rollforward Exhibit 9 – required format Interim testing is optional, but encouraged KPMG will test at interim if campus can complete the rollforward – see item #81 below Depreciation expense not required to be recorded at interim Rollforward from interim to final is required if tested at interim – see Exhibit 9 #81 – Detail of capital assets additions Two options Provide by project, then further detail will be requested Provide all detail initially If additions are tested at interim, a detail listing of additions must still be provided at final

The PBC List – Capital Assets (cont.) #82 – Calculation performed to determine library book valuation #83 – Detail listing of vendor payments for library books #84 – Summary equipment transfer schedule from the Chancellor’s Office #85 – CWIP rollforward schedule allocated by CO #86 – Most recent physical inventory of capital assets

The PBC List – Capital Assets (cont.) #87 – Sales (disposals) of capital assets #88 – CWIP rollforward by project as of 6/30/09 Include project start date and projected completion date For the additions column, ensure column contains only positive balances #89 – Analysis of interest expense calculation incurred on CWIP projects capitalized into CWIP (SFAS 62) Refer to Chapter 5-7

#92 – State payroll file reconciliation The PBC List – Accounts Payable (A/P), Accrued Salaries and Benefits, and Accrued Compensated Absences (cont.) #92 – State payroll file reconciliation Provide one month as selected by KPMG at interim and June 2009 at final #93 – Listing of employees using timecards KPMG to select 15 or 30, depending upon total population size #94 – A/P leadsheet at 6/30/09 Detail by invoice supporting A/P leadsheet #95 – Access to July/Aug/Sept/Oct check registers and all open invoices to date

#96 – Calculation of accrued salaries and wages The PBC List – Accounts Payable (A/P), Accrued Salaries and Benefits, and Accrued Compensated Absences #96 – Calculation of accrued salaries and wages PIMS H43 or the Chancellor’s Office query may be used #97 – Supporting source documentation for the compensated absences accrual balance #98 – Support for additions/reductions in accrued compensated absences, including current portion PIMS H46 Report or query may be used #99 – Salaries and benefits expense leadsheet Detail by month per SCO tapes plus changes in accrual Exhibit 20 – required format #100 – Commitments and Contingencies Supporting documentation for YES, Note 12

The PBC List – Deferred Revenue #101 – Deferred revenue leadsheet at 6/30/09 (Exhibit 11) #102 – Detail of students enrolled in summer/fall sessions that have paid their tuition as of 6/30/09 KPMG to make selections from this detail #103 – Deferred tuition and fees calculation/ reasonableness test Exhibit 12 – required format for SRB audit Campus may need to modify schedule accordingly for any other types of fees Related to summer/fall 2009 advanced enrollment (include # of students, advanced enrolled, fees & tuition) Supporting documentation for each input

The PBC List – Leases and Long-Term Debt #104 – Debt rollforward – YES, Notes 7 and 8 Includes capital leases #105 – New operating/capital lease agreements entered into during FY09 #106 – SFAS 13 Analysis (operating vs. capital) #107 – Capital leases Schedule of future minimum lease payments including amounts that represent interest #108 – Operating leases Schedule of future minimum lease payments for amounts payable under non-cancelable lease agreements

The PBC List – Leases and Long-Term Debt (cont.) #109 – Access to journal entries used to record Public Works Board Energy Efficiency Revenue Bonds Systemwide, Housing, Student Union, and Parking Revenue Bonds #110 – New debt agreements for debt incurred independently by the campus #111 – Campus-originated debt confirmation #112 – Short-term debt rollforward Copies of debt agreements, check/wire received/paid #113 – Detail of interest expense and calculation of accrued interest as of 6/30/09

The PBC List – Other Areas Self-Insurance Claims Liabilities #114 – Passdown entry provided by the Chancellor’s Office Grants Refundable #115 – Grants refundable balance detail Leadsheet of grants refundable broken out by asset type refundable to the federal government Depository Accounts #116 – Depository accounts detail at 6/30/09 Other Liabilities #117 – #119 – Other liabilities detail Current and non-current Support for significant additions Rationale for classification as noncurrent

The PBC List – Other Areas (cont.) Net Assets #120 – Completed and signed off GAAP Preparation List Fund Balance Clearing #121 – Access to journal entries made to eliminate fund balance clearing with supporting documentation attached #122 – Copy of fund balance clearing account schedule at 6/30/09 sent from the Chancellor’s Office

The PBC List – Revenues and Expenses KPMG – various means of testing revenues and expenses and likely audit approach Reasonableness test Trend analysis Specific items detail testing Other Note 13 – Natural classification of operating expenses Substantive analytical procedures for operating expenses by natural classification type for each functional category

The PBC List – Revenues #123 – Deposit slips KPMG will select 15 days of deposit slips and agree to supporting documentation #124 – FY 2008-2009 appropriations schedule summary, capital and noncapital, by campus #125 – Reconciliation of State appropriations revenue, noncapital to appropriations schedule summary #126 – Tuition and fees leadsheet Exhibit 33 – required format for SRB audit #127 – 130 – Tuition and fees reasonableness test Campus catalog detailing fees charged to students Census data by semester and type of student Support for fee waivers

The PBC List – Revenues (cont.) #131 – Tuition discounting calculation for scholarships given Supporting documents for relevant components #132 – Listing of the components of federal, state, and local governmental and nongovernmental grants and contracts revenue KPMG to select agreements for review #133 – Sales and services of auxiliary enterprise revenues leadsheet and reasonableness test Exhibit 16 – required format for SRB audit Broken out by types of housing and parking #134 – #135 – Other operating and nonoperating revenues detail listings #136 – Supporting schedules for (if significant): Sales and services of educational activities Grants and gifts, capital Gifts, noncapital

#137 – #138 – Listing of expenditures for FY 2008-2009 The PBC List – Expenses #137 – #138 – Listing of expenditures for FY 2008-2009 Testing will cover expenditures requiring bids and those that do not #139 – Auxiliary enterprise expenses leadsheet #140 – Support for PERS contributions Should reconcile with benefits expense (legal object code 603005) #141 – Resident assistants (RA) housing schedule containing: # of RA’s for the year-ended 6/30/09 Related costs of housing provided to RA’s Detail of how these costs are accounted for in the SRECNA

SRB audit performed at the CO This year, the PBC items for the SRB audit have been incorporated into the FS PBC list in order to: Facilitate efficiency of the SRB audit testwork Help minimize the number of inquiries made by the SRB audit team to the campuses to the extent possible All PBC items related to the SRB audit are required format schedules Cross-reference to example schedules (exhibits) in Chapter 9

PBC items listed within the related audit areas on the PBC list SRB Audit (cont.) PBC items listed within the related audit areas on the PBC list #54 – Detail leadsheet of investment income and accrued interest receivable as of and for the year ended 6/30/2009 that agrees to the SRECNA and SNA (Exhibit 18) #55 – Legal to GAAP rollforward of SWIFT investments schedule (Exhibit 32) #103 – Deferred tuition and fees calculation/ reasonableness test (Exhibit 12) #126 – Tuition and fees leadsheet (Exhibit 33) #133 – Sales and services of auxiliary enterprise revenues leadsheet and reasonableness test (Exhibit 16)

Separate section added to PBC list for SRB audit SRB Audit (cont.) Separate section added to PBC list for SRB audit #142 – Fund 0576 fund balance clearing reclassification entries #143 – Legal balances fluctuation analysis (Exhibit 34) #144 – Query of all GAAP adjusting entries recorded in the SRB Fund during the current year (Exhibit 35)

The PBC List – Start Your PBC’s Early!!!

Questions?