GASB 39 – Affect on Colleges and Universities Kathleen T. McNeely Indiana University

Agenda Pre GASB 39 reporting of these units Pre GASB 39 reporting of these units Process for analysis Process for analysis Collaboration with external auditors Collaboration with external auditors Final conclusion on units Final conclusion on units IU difficulties IU difficulties Additional difficulties in higher education Additional difficulties in higher education

Pre GASB 39 Reporting Note Disclosure of Related Organizations Note Disclosure of Related Organizations Entities were: Entities were: Fund raising foundationFund raising foundation Research & technology instituteResearch & technology institute Childrens hospital foundationChildrens hospital foundation Disclosed: Disclosed: RelationshipRelationship Net AssetsNet Assets Other relevant historical informationOther relevant historical information

Process for Analysis Started from scratch regardless of past analysis Started from scratch regardless of past analysis Identified list of related organizations Identified list of related organizations Tools for analysis: Tools for analysis: Financial statements of entities or tax returnsFinancial statements of entities or tax returns By-LawsBy-Laws Articles of IncorporationArticles of Incorporation Individual meetings with each entity when necessaryIndividual meetings with each entity when necessary

Process for Analysis – continued Ran these organizations through GASB 39 Flowchart Ran these organizations through GASB 39 Flowchart Started with first question: Is the PCU legally separate? Started with first question: Is the PCU legally separate? All entities went through review, regardless of materiality All entities went through review, regardless of materiality Result was a white paper on each entity evaluated Result was a white paper on each entity evaluated

Collaboration with External Auditors Required by Law to use State Board of Accounts Required by Law to use State Board of Accounts Discussed major implementation issues and decisions with Purdue University Discussed major implementation issues and decisions with Purdue University Created Grid of decisions and resolved discrepancies Created Grid of decisions and resolved discrepancies Met with State Board of Accounts and Auditor of State Met with State Board of Accounts and Auditor of State Came to agreement on almost all issues Came to agreement on almost all issues

Decisions Made Materiality set at 5% of university total net assets Materiality set at 5% of university total net assets Will not restate FASB statements to GASB Will not restate FASB statements to GASB Will round component units statements to thousands Will round component units statements to thousands Statements will be on separate page from universitys financial statements Statements will be on separate page from universitys financial statements

Decisions Made – continued Required statements: Required statements: Statement of Net AssetsStatement of Net Assets Statement of Revenues, Expenses, and Changes in Net AssetsStatement of Revenues, Expenses, and Changes in Net Assets Cash Flow not required Cash Flow not required Impact on MD&A based on significance Impact on MD&A based on significance Required deadline for CAFR Required deadline for CAFR Notes are sole outstanding issue Notes are sole outstanding issue

Conclusion on Units Fund raising foundation with net assets of approximately $1 billion is a component unit Fund raising foundation with net assets of approximately $1 billion is a component unit Alumni Association is not a component unit Alumni Association is not a component unit Research & technology institute is a component unit but is not significant Research & technology institute is a component unit but is not significant Medical Private Practice Plans are component units, question of significant has not been answered Medical Private Practice Plans are component units, question of significant has not been answered Childrens hospital foundation still to be determined Childrens hospital foundation still to be determined

IU Difficulties Sensitivity of separate entities to: Sensitivity of separate entities to: External AuditorsExternal Auditors Possible change in relationship with primary governmentPossible change in relationship with primary government Different year end datesDifferent year end dates Deadlines on completion of THEIR financial statementDeadlines on completion of THEIR financial statement Potential for additional costsPotential for additional costs Access to Documentation Access to Documentation

Additional Difficulties in Higher Education State requirements: State requirements: Restatements to GASBRestatements to GASB Consolidation for CAFRConsolidation for CAFR Eliminations due to consolidationsEliminations due to consolidations Timing of receipt of component units statements Timing of receipt of component units statements Not enough clear guidance in standard Not enough clear guidance in standard When restatements are mandatory, notes

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