Public Employees Retirement Association of Minnesota The Nuts and Bolts of GASB 68 Implementation Dave DeJonge Assistant Executive Director, PERA

Public Employees Retirement Association of Minnesota Agenda GASB 68—Key Concepts GASB 71 Audit Issues Fire Relief Associations 2

Public Employees Retirement Association of Minnesota GASB 68 Replaces GASB Statements 27 & 50 Effective for fiscal years beginning after June 15, 2014 Early implementation is discouraged! 3

Public Employees Retirement Association of Minnesota Why are the Standards Changing? GASB 27 issued in 1994 GASB 34—Government-Wide Financial Statements using Accrual Accounting Concepts Statement No. 4—Defined “Liability” Survey of Financial Statement Users Transparency, Accountability, Comparability 4

Public Employees Retirement Association of Minnesota Fundamental New Approach by GASB Pension expenses tied to when the services are rendered, not when paid Pension costs no longer tied to funding Employers are primarily responsible for the unfunded pension obligation Employers need to book their proportional share of PERA’s unfunded liability as a liability on their government-wide financials 5

Public Employees Retirement Association of Minnesota Total Pension Liability (TPL) Calculated annually by PERA’s actuary, similar to actuarial accrued liability Defined in GASB 67 as the portion of the actuarial present value of projected benefit payments that is attributed to past periods of service but reflects Anticipated benefit increases Projected salary growth Projected future service No anticipation for future members Likely uses a lower discount rate 6

Public Employees Retirement Association of Minnesota Pension Plan’s Fiduciary Net Position Pension plan’s net assets at fair value (GASB 63) Calculated annually by PERA’s accounting staff Determined using the same valuation methods used by the pension plan for purposes of preparing its statement of fiduciary net position 7

Public Employees Retirement Association of Minnesota Net Pension Liability (NPL) Equal to PERA’s Total Pension Liability (TPL) minus PERA’s Fiduciary Net Position (similar to unfunded actuarial accrued liability) Measured as of June 30 annually Proportionate share of the NPL is reported on the employer’s Statement of Net Position Similar to Unfunded OPEB Obligation (GASB 45) TPL - FNP = NPL 8

Public Employees Retirement Association of Minnesota Proportionate Share The NPL will be allocated to all of PERA’s employers and included as a liability on the government-wide financial statements Allocation methodology should be representative of future contribution effort of the employer GASB allows allocation to be based on past contributions GASB does not specify who calculates the proportionate share 9

Public Employees Retirement Association of Minnesota Proportionate Share AICPA White Paper recommends having the pension plan calculate proportionate share PERA’s allocation method will be based on employer’s contributions paid to PERA in relationship to all employer contributions received. 10

Public Employees Retirement Association of Minnesota Proportionate Share 11

Public Employees Retirement Association of Minnesota Proportionate Share Some contributions will be excluded from the allocation because they do not reflect future contribution effort. 12

Public Employees Retirement Association of Minnesota Proportionate Share Schedule of Employer Allocations As of June 30, 2014 Unit IDEmployer Name ContributionsAllocation AITKIN COUNTY 598, % ANOKA COUNTY 6,113, % BECKER COUNTY 814, % BELTRAMI COUNTY 932, % BENTON COUNTY REVENUE 672, % BIG STONE COUNTY 186, % BLUE EARTH COUNTY 1,333, % BROWN COUNTY 683, % CARLTON COUNTY 1,020, % CARVER COUNTY 2,114, % CARVER COUNTY HISTORICAL SOCIETY 9, % CASS COUNTY 849, % CHIPPEWA COUNTY 353, % CHIPPEWA COUNTY SWCD 9, % CHIPPEWA COUNTY HOSPITAL 980, % CHISAGO COUNTY 1,013, % CLAY COUNTY 1,075, % CLAY COUNTY SWCD 17, % … … …… 375,000, % 13

Public Employees Retirement Association of Minnesota Proportionate Share Unit IDEmployer Name ContributionsAllocation CHISHOLM-HIBBING AIRPORT AUTHORITY 28, % LOWER MINNESOTA RIVER WATERSHED DISTRICT 4, % SCHOOLCRAFT LEARNING COMMUNITY 32, % PIONEERLAND LIBRARY SYSTEM 124, % COTTONWOOD-JACKSON HEALTH SERVICE 36, % DOVER-EYOTA ST CHARLES SANITARY DISTRICT 10, % EAST CENTRAL REGIONAL DEV. COMMISSION 30, % RIVERWAY LEARNING COMMUNITY 23, % SOUTHWEST TRANSIT 93, % EAST CENTRAL REGIONAL LIBRARY 103, % RIVER RIDER TRANSIT SERVICE 28, % EXCELSIOR FIRE DISTRICT 1, % EAST RANGE JOINT POWERS BOARD 4, % NATIONAL JOINT POWERS ALLIANCE 250, % HUMAN SERVICES OF FARIBAULT & MARTIN CO 332, % GREAT RIVER REGIONAL LIBRARY 359, % GREENWAY JOINT RECREATION ASSOCIATION 7, % HEADWATERS REGIONAL DEVELOPMENT COMM 37, % RED RIVER WATERSHED MANAGEMENT 5, % GARRISON-KATHIO SANITARY DISTRICT 2, % PENNINGTON-RED LAKE COUNTY NURSING SERVI 36, % MINNESOTA VALLEY EDUCATIONAL DISTRICT 42, % 14

Public Employees Retirement Association of Minnesota Proprietary/Fiduciary Funds Should the NPL be allocated to other statements prepared on an accrual basis? No allocation requirements in GASB 68 NCGA Statement 1, paragraph 42--long-term liabilities should be reported in statement of net position (fiduciary net position) if: Amount is material Liability is directly related to the fund Liability is expected to be paid from the fund 15

Public Employees Retirement Association of Minnesota MEASUREMENT DATE MEASUREMENT PERIOD 16

Public Employees Retirement Association of Minnesota Measurement Date Date at which PERA’s liabilities and assets are valued to determine the Net Pension Liability (NPL) June 30 annually Employers choose appropriate Measurement Date for reporting purposes Measurement date must be no earlier than the end of the employer’s prior fiscal year, consistently applied from period to period 17

Public Employees Retirement Association of Minnesota Measurement Period Period of time from one measurement date to the next, during which pension costs are calculated PERA’s fiscal year (July 1 – June 30) June 30, 2014 June 30, 2015 June 30, 2016 June 30,

Public Employees Retirement Association of Minnesota Scenario 1 Reporting Date = December 31, 2015 Measurement Date = ?? December 31, 2014 June 30, 2015 December 31, 2015 June 30, 2014 Measurement Date Employer’s Fiscal Year End (Reporting Date) Employer’s Prior Fiscal Year End Measurement Date 19

Public Employees Retirement Association of Minnesota Scenario 1 Reporting Date = December 31, 2015 Measurement Date = June 30, 2015 December 31, 2014 June 30, 2015 December 31, 2015 June 30, 2014 Measurement Date Employer’s Fiscal Year End (Reporting Date) Employer’s Prior Fiscal Year End Measurement Period Measurement Date 20

Public Employees Retirement Association of Minnesota Scenario 2 Reporting Date = June 30, 2015 Measurement Date = June 30, 2015 June 30, 2014June 30, 2015June 30, 2013 Measurement Date Employer’s Fiscal Year End (Reporting Date) Employer’s Prior Fiscal Year End Measurement Date Measurement Period 21

Public Employees Retirement Association of Minnesota Annual Timeline June 30—Fiscal year end (Measurement Date) August—Census and asset data sent to actuary November—Actuarial valuations finalized December 1—PERA prepares GASB schedules December—Auditor audits schedules December 31—PERA publishes GASB Schedules 22

Public Employees Retirement Association of Minnesota Scenario 2 Reporting Date = June 30, 2015 Measurement Date = June 30, 2014 June 30, 2014June 30, 2015June 30, 2013 Measurement Date Employer’s Fiscal Year End (Reporting Date) Employer’s Prior Fiscal Year End Measurement Date Measurement Period 23

Public Employees Retirement Association of Minnesota PENSION EXPENSE & DEFERRED AMOUNTS 24

Public Employees Retirement Association of Minnesota Pension Expense GASB 27 Employer contributions made during employer’s fiscal year Easy to calculate Easy to audit 25

Public Employees Retirement Association of Minnesota Pension Expense GASB 68 Tied to when pension liability is incurred (services are rendered), not when it is funded Change in NPL during measurement period +/- deferrals Calculated by PERA’s actuary Will likely be volatile from year to year May be a negative expense (revenue) Can’t be calculated by employers 26

Public Employees Retirement Association of Minnesota Pension Expense Expensed immediately: Current period service cost (normal cost) Interest on the beginning total pension liability Impact of changes in benefit provisions/terms Projected earnings on plan investments Other changes in plan fiduciary net position other than employer contributions or benefit payments (e.g., employee contributions, admin costs) 27

Public Employees Retirement Association of Minnesota Deferred Inflows/Outflows 1. Differences between expected and actual experience with economic & demographic factors (actuarial gains and losses during the year): Mortality Payroll Increases Retirements Employee Turnover 28

Public Employees Retirement Association of Minnesota Deferred Inflows/Outflows 2. Effect of changes in assumptions about future economic and demographic factors (usually as a result of an experience study): Discount Rate Mortality Tables Future Payroll Increases Future Inflation Rate Retirements Employee Turnover 29

Public Employees Retirement Association of Minnesota Deferred Inflows/Outflows 3. Differences between actual and projected earnings on plan investments. 4. Net effect of a change in the employer’s proportional share. 30

Public Employees Retirement Association of Minnesota Pension Expense Change in NPL during measurement period +/- deferrals Source of Change in NPLExpense/Deferral Service (Normal) CostImmediate Interest on the TPLImmediate Projected Investment EarningsImmediate Changes in Benefit ProvisionsImmediate Actuarial Gains and LossesExpense over average remaining service lives of all actives and in-actives Changes in Actuarial Assumptions Changes in Proportionate Share Differences between Projected and Actual Investment Earnings Expense over 5-year closed period Other Changes in the NPLImmediate 31

Public Employees Retirement Association of Minnesota Pension Expense Meas. Date ItemTotal CostAmtz. PeriodExpenseDeferred Inflow/Outflow 6/30/15 Service (Normal) Cost $50,000NA$50,000$0 6/30/15 Interest on the TPL $100,000NA$100,000$0 6/30/15 Projected Inv. Earnings ($110,000)NA($110,000)$0 6/30/15 Employee Contributions ($25,000)NA($25,000)$0 6/30/15 Ben. Provision Changes $20,000NA$20,000$0 6/30/15 Change in Actuarial Assumptions $18,0009 Years$2,000D.O. $16,000 6/30/15 Actuarial Gains/Losses $9,0009 Years$1,000D.O. $8,000 6/30/15 Change in Proportionate Share ($900)9 Years($100)D.I. ($800) 6/30/15 Difference between projected and actual investment earnings ($40,000)5 Years($8,000)D.I. ($32,000) 32

Public Employees Retirement Association of Minnesota Schedule of Pension Amounts COST SHARING PENSION PLAN Schedule of Pension Amounts by Employer As of and for the year ended 6/30/2015 Deferred Outflows of ResourcesDeferred Inflows of Resources Employer Net Pension Liability (NPL) Differences Between Expected and Actual Experience (9 year amtz.) Difference Between Projected and Actual Investment Earnings on Investments (5 year amtz.) Changes in Actuarial Assumptions (9 year amtz.) Differences Between Expected and Actual Experience (9 year amtz.) Changes in Actuarial Assumptions (9 year amtz.) Pension Expense $2,000,000$8,000 $720$4,000$0$10, $1,000,000$4,000 $360$2,000$0$5, $750,000$3,000 $270$1,500$0$3,750 33

Public Employees Retirement Association of Minnesota Expenses/Deferrals Increase (Decrease) in Pension Expense Arising from the Recognition of Differences between Projected and Actual Earnings on Pension Plan Investments Year Difference between Projected and Actual Earnings on Investments Amtz. Period (Years) $ 102,7055 $ 20, Net Increase (Decrease) in Pens Exp $ 20,541 34

Public Employees Retirement Association of Minnesota Expenses/Deferrals Increase (Decrease) in Pension Expense Arising from the Recognition of Differences between Projected and Actual Earnings on Pension Plan Investments Year Difference between Projected and Actual Earnings on Investments Amtz. Period (Years) $ 102,7055 $ 20, $ (159,517)5 $ (31,903) $ (31,905) Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362) 35

Public Employees Retirement Association of Minnesota Expenses/Deferrals Increase (Decrease) in Pension Expense Arising from the Recognition of Differences between Projected and Actual Earnings on Pension Plan Investments Year Difference between Projected and Actual Earnings on Investments Amtz. Period (Years) $ 102,7055 $ 20, $ (159,517)5 $ (31,903) $ (31,905) 2017 $ (114,275)5 $ (22,855) 2018 Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362) $ (34,217) 36

Public Employees Retirement Association of Minnesota Expenses/Deferrals Increase (Decrease) in Pension Expense Arising from the Recognition of Differences between Projected and Actual Earnings on Pension Plan Investments Year Difference between Projected and Actual Earnings on Investments Amtz. Period (Years) $ 102,7055 $ 20, $ (159,517)5 $ (31,903) $ (31,905) 2017 $ (114,275)5 $ (22,855) 2018 $ 117,2855 $ 23,457 Net Increase (Decrease) in Pens Exp $ 20,541 $ (11,362) $ (34,217) $ (10,760) 37

Public Employees Retirement Association of Minnesota Deferred Balances Increase (Decrease) in Pension Expense Arising from the Recognition of Differences between Projected and Actual Earnings on Pension Plan Investments Balances at June 30, 2018 Investment Earnings Less Than Projected Investment Earnings Greater Than Projected Amounts Recognized in Pension Expense through June 30, 2018 Deferred Outflows of Resources Deferred Inflows of Resources Year(a)(b)(c)(a) - (c)(b) - (c) 2015$102,705$82,164$20, $(159,517)$(95,709)$(63,808) 2017$(114,275)$(45,710)$(68,565) 2018$117,285$23,457$93,828 $114,369$(132,373) 38

Public Employees Retirement Association of Minnesota Deferred Balances Footnote Disclosure As of June 30, 2018 Deferred Outflows Deferred Inflows of Resources Difference between projected and actual investment earnings114,369132,373 Changes of assumptions1, Differences between expected & actual experience24,67513,598 Changes in proportionate share8231 Employer contributions subsequent to the measurement date1, ,905146,132 39

Public Employees Retirement Association of Minnesota Scenario 1 Employer contributions paid to PERA between the Measurement Date and Reporting Date are Deferred Outflows of Resources, not expenses. December 31, 2014 June 30, 2015 December 31, 2015 June 30, 2014 Measurement Date Employer’s Fiscal Year End (Reporting Date) Employer’s Prior Fiscal Year End Measurement Period Measurement Date ER Contrib 40

Public Employees Retirement Association of Minnesota Future Expenses Footnote Disclosure Year ended June 30: 20Y0$ (21,372) 20Y111,593 20Y222,198 20Y319,376 20Y412,450 Thereafter33,468 This schedule will indicate when the accumulated deferred amounts are scheduled to be expensed. 41

Public Employees Retirement Association of Minnesota OTHER NOTE DISCLOSURES AND RSI SCHEDULES 42

Public Employees Retirement Association of Minnesota Footnote Disclosures GASB 68  Separate disclosures for each plan  Extensive note disclosures, including:  Description of benefits (terms, policies and authority)  Contribution requirements (rates, basis and authority)  Actuarial assumptions and discount rate used to measure total pension liability  Changes in actuarial assumptions  Investment information (asset allocation, rates of return for each asset class) 43

Public Employees Retirement Association of Minnesota Footnote Disclosures GASB 68 footnote disclosures (contd.)  Employer’s share and percentage of the NPL  Balances of deferred inflows and outflows  NPL using discount rate of +/- one percentage point  Information required will be provided by PERA 44

Public Employees Retirement Association of Minnesota Footnote Disclosures 45

Public Employees Retirement Association of Minnesota Footnote Disclosures Assumptions made about projected cash flows when calculating the discount rate 78.bPERA (Actuary)New Long-term expected rate of return and how it was determined, including significant methods and assumptions used for that purpose. 78.cPERA (SBI)New If the discount rate incorporates a municipal bond, the bond rate used and source of that rate. 78.dPERA (Actuary)New Periods of projected benefit payments to which long-term ROR is used and municipal bond rate is used when determining the discount rate 78.ePERA (Actuary)New Assumed asset allocation of portfolio, long-term expected real ROR for each asset class, and whether ROR is presented as arithmetic or geometric. 78.fPERA (SBI)New Employer’s NPL calculated using discount rates that are 1% higher and lower than the actual discount rate used to calculate the TPL. 78.gPERA (Actuary)New Pension plan’s fiduciary net position has been determined on the same basis used by the pension plan, and a brief description of pension plan’s basis of accounting, including policies regarding benefit payments and the valuation of plan investments. 79PERANew 46

Public Employees Retirement Association of Minnesota Footnote Disclosures Employer’s share of the NPL80.aPERA (Actuary)New Employer’s percentage of NPL, the basis on which its proportion was determined, and change in its proportion since the prior measurement date 80.bPERANew Measurement date of NPL and date of actuarial valuation on which the TPL is based. 80.cPERANew Assumption changes or other inputs that affected measurement of the TPL since the prior measurement date 80.dPERANew Changes of benefit terms that affected measurement of the TPL since the prior measurement date 80.ePERANew Nature of changes between measurement date of collective NPL and employer’s reporting date if they are expected to have a significant effect on the employer’s share of the NPL. 80.f PERA or Employer New Amount of pension expense recognized by the employer in the reporting period. 80.gPERA or Employer New 47

Public Employees Retirement Association of Minnesota Footnote Disclosures Employer’s balances of deferred outflows/inflows related to pensions, classified in 5 categories:  Differences between expected and actual experience  Changes of assumptions/inputs  Difference between expected and actual earnings  Changes in employer’s proportion and differences between contributions made and employer’s proportionate share of contributions  Employer’s contributions to the pension plan subsequent to the measurement date 80.h PERA and Employer New Schedule showing net amount of balances of deferred outflows/inflows that will be recognized in the employer’s pension expense and recognized as a reduction in the collective net pension liability in the future. 80.i PERA and Employer New Amount of revenue recognized for the support provided by non-employer contributing entities, if any. 80.jEmployerNew 48

Public Employees Retirement Association of Minnesota Required Supplementary Information (RSI) GASB 27—None required GASB 68—2 new 10-year schedules required  Schedule of Proportionate Share of the NPL  Schedule of Employer Contributions Separate schedule for each plan Notes to RSI will include significant changes in actuarial assumptions, benefit provisions, etc. that affect the identification of trends in RSI schedules. 49

Public Employees Retirement Association of Minnesota Schedule of Proportionate Share of the NPL 6/30. CITY’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PERA General Employees Retirement Fund Last 10 Fiscal Years* (Dollar amounts in thousands) 50

Public Employees Retirement Association of Minnesota Schedule of Employer Contributions PERA General Employees Retirement Fund Last 10 Fiscal Years (Dollar amounts in thousands) 51

Public Employees Retirement Association of Minnesota GASB 71 52

Public Employees Retirement Association of Minnesota GASB 71 Amends transition provisions found in paragraph 137 of Statement 68 Allows all deferred inflows and outflows related to pensions to start at 0…except employer contributions Employer contributions included in initial measurement period but already expensed (closed to net position) are to be reclassified Adjusts deferred outflows and net position 53

Public Employees Retirement Association of Minnesota GASB 71 Employer contributions already expensed during initial measurement period are reclassified December 31, 2014 June 30, 2015 December 31, 2015 June 30, 2014 Measurement Date Employer’s Fiscal Year End (Reporting Date) Employer’s Prior Fiscal Year End Measurement Period Measurement Date ER Contrib 54

Public Employees Retirement Association of Minnesota Transition Year Journal Entries Employer contributions already expensed during initial measurement period are reclassified December 31, 2014 June 30, 2015 December 31, 2015 June 30, 2014 Measurement Date NPL: $2,650,000 Employer’s Fiscal Year End (Reporting Date) Employer’s Prior Fiscal Year End Measurement Period Measurement Date NPL: $2,500,000 $45,000 55

Public Employees Retirement Association of Minnesota Transition Year Journal Entries 1) To record beginning net pension liability (6/30/14) Net Position$2,500,000 Net Pension Liability$2,500,000 2) To record ER contributions expensed in previous year but fall within measurement period Deferred Outflow$ 45,000 Net Position$ 45,000 56

Public Employees Retirement Association of Minnesota AUDIT ISSUES 57

Public Employees Retirement Association of Minnesota Audit Issues AICPA issued 3 whitepapers Issues Related to Information for Employer Reporting—Cost Sharing Plans Issues Associated with Testing Census Data Issues Related to Information for Employer Reporting— Agent Multiple-Employer Plans Issued Interpretations to 3 AU-C sections AU-C 500 AU-C 600 AU-C 805 Moving to audit guide next year Links on (Search for “GASB Matters”) 58

Public Employees Retirement Association of Minnesota Audit Issues--Problem Audited financial statements of the plan only include disclosure of the collective net pension liability for the plan as a whole. They do NOT include: Deferred outflows/inflows of resources by category Pension expense Each participating employer’s share of collective pension amounts Audited financial statements of the plan may not include necessary information to calculate allocation percentages 59

Public Employees Retirement Association of Minnesota Audit Issues--Problem GAAP financial statements of the plan and additional unaudited information from the plan will NOT provide sufficient appropriate audit evidence for the governmental employer auditor. Absent additional audit evidence from the cost-sharing plan, the employer auditor would not likely be able to accumulate sufficient appropriate audit evidence. If unable to accumulate sufficient appropriate evidence, the employer auditor should modify the audit opinion. (AU-C section 9500, Question 2) 60

Public Employees Retirement Association of Minnesota Audit Issues--Solution Plan prepares “schedule of employer allocations” for which plan auditor is engaged to provide opinion Use allocation method based on covered payroll or actual contributions if they are expected to be representative of future contributions This schedule does not need to be included in the plan’s CAFR 61

Public Employees Retirement Association of Minnesota Audit Issues--Solution 62

Public Employees Retirement Association of Minnesota Audit Issues--Solution Plan prepares “Schedule of Pension Amounts by Employer” for which plan auditor engaged to provide opinion Schedule includes the following elements for each employer: Net pension liability Deferred outflows of resources by category Deferred inflows of resources by category Pension expense An alternative would be to prepare a “Schedule of Collective Pension Amounts” for the plan as a whole 63

Public Employees Retirement Association of Minnesota Audit Issues--Solution COST SHARING PENSION PLAN Schedule of Pension Amounts by Employer As of and for the year ended 6/30/2015 Deferred Outflows of ResourcesDeferred Inflows of Resources Employer Net Pension Liability (NPL) Differences Between Expected and Actual Experience (9 year amtz.) Difference Between Projected and Actual Investment Earnings on Investments (5 year amtz.) Changes in Actuarial Assumptions (9 year amtz.) Differences Between Expected and Actual Experience (9 year amtz.) Changes in Actuarial Assumptions (9 year amtz.) Pension Expense $2,000,000$8,000 $720$4,000$0$10, $1,000,000$4,000 $360$2,000$0$5, $750,000$3,000 $270$1,500$0$3,750 64

Public Employees Retirement Association of Minnesota Audit Issues—Census Data Underlying census data from employers should be tested by plan’s auditor Risk-based approach by plan auditor to select employers to test (review payroll registers). Size of Employer: Largest employers (e.g. > 5% of plan) tested on a 5- year cycle (Hennepin County) Smallest employers will never be tested (e.g employers represent 2% in aggregate of plan) Everyone else tested on a 10-year cycle 65

Public Employees Retirement Association of Minnesota Audit Issues—Census Data Other risk factors to consider: Past errors or control deficiencies of an employer New employer Whether employer financial statements have received unmodified opinions Length of time since procedures last performed for an employer News stories 66

Public Employees Retirement Association of Minnesota Audit Issues—Census Data Plan auditor selects which employers should be tested each year Plan auditor may engage local government auditors in accordance with AT (Attest) Section 101 to provide opinion on accuracy of census data reported to plan 67

Public Employees Retirement Association of Minnesota Audit Issues Actuarial valuation reports will be posted on PERA’s website Two valuation reports for each plan GASB 67/68 Compliant Funding Use to verify collective level pension costs 68

American Institute of CPAs ® Governmental Audit Quality Center Cost-Sharing Plans: Employer Responsibilities Complete and accurate census data to plan Appropriateness of information used to record financial statement amounts Whether plan auditor’s report on schedules are adequate and appropriate for employer purposes Amounts in schedules specific to employer employer amount used in allocation percentage (numerator) recalculate allocation percentage of employer recalculate allocation of pension amounts based on allocation percentage of employer Report Evaluate Verify & Recalculate 69

American Institute of CPAs ® Governmental Audit Quality Center Cost-Sharing Plans: Employer Auditor Responsibilities Sufficiency and appropriateness of audit evidence Whether plan auditor’s report on schedules are adequate and appropriate for auditor purposes (e.g., evidence) Review plan auditor’s report and any related modifications Evaluate whether plan auditor has necessary competence and independence Determine whether named as specified user Amounts in schedules specific to employer Employer amount used in allocation percentage (numerator) Recalculate allocation percentage of employer Recalculate allocation of pension amounts based on allocation percentage of employer Census data submitted to plan Determine Evaluate Verify & Recalculate Test 70

Public Employees Retirement Association of Minnesota FIRE RELIEF ASSOCIATIONS 71

Public Employees Retirement Association of Minnesota Fire Relief Associations Office of the State Auditor’s June 2014 Pension Division Newsletter Cities that prepare financial statements in accordance with GAAP need to include the NPL and pension expense of the affiliated relief association If amounts are material If the fire department is a city fire department (not an independent non-profit firefighting corporation) Alternative to costly actuarial valuation—accept liability amounts calculated using State Auditor’s annual Schedule Form if difference is not significant 72

Public Employees Retirement Association of Minnesota Fire Relief Associations Most relief associations are overfunded, so NPL will be a Net Pension Asset. Work with relief associations and cities now! Cities/Townships whose fire departments have joined PERA’s Statewide Volunteer Firefighter Retirement Plan will be provided with GASB 68 schedules 73

Public Employees Retirement Association of Minnesota Single/Agent Plans Fewer footnote disclosures One additional footnote schedule Schedule of Changes in the Net Pension Liability One additional RSI schedule 10-year Schedule of Changes in the NPL 74

Public Employees Retirement Association of Minnesota Changes in the NPL Note Disclosure Increase (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability (a)(b)(a) - (b) Balances at 6/30/X8$2,853,455$2,052,589$800,866 Changes for the year: Service cost 75,864 Interest on the TPL 216,515 Differences between expected and actual experience (37,539) Contributions--employer 79,713 (79,713) Contributions--employee 31,451 (31,451) Net investment income 196,154 (196,154) Benefit and refund payments (119,434) - Administrative expenses (3,373) 3,373 Other changes 8 (8) Net changes 135, ,519 (49,113) Balances at 6/30/X9 2,988,861 2,237, ,753 75

Public Employees Retirement Association of Minnesota More Information PERA’s Website   Employers tab  GASB 68 Toolkit Contact Dave DeJonge 76