June :00 – 3:30 pm EDT Moderated by: Jerry Farley Washburn University Welcome to Today’s NACUBO Webcast: Statement 39—Overview

AGENDA  Introduction to Desktop Interface  Presentations  Audience Surveys  Question & Answers  Evaluation

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Today’s Featured Speakers David Bean GASB Director of Research Charles Tegen Clemson University Comptroller and Former Chair of the APC Larry Goldstein NACUBO Senior Fellow and GASAC representative

Background to GASB 39 David Bean

Statement 14—The Genesis  Financial reporting entity  Primary government  Organizations for which the primary government is financially accountable  Other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete.

Financial Accountability  Appoint a voting majority of an organization's governing body  Either it is able to impose its will on that organization (five specific criteria) or  There is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government (three specific criteria).  A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it.

Misleading to Exclude  Matter of professional judgment to determine whether the nature and the significance of relationship with the primary government warrants inclusion.  Organizations affiliated with governmental units, agencies, colleges, universities, hospitals, and other entities may warrant inclusion.  An example of an affiliated organization that may be evaluated for inclusion is a nonprofit corporation whose purpose is to benefit a governmental university by soliciting contributions and managing those funds.

The Potentially Misleading Sentence  The GASB is studying circumstances under which foundations, similarly affiliated organizations, and PERS might be included in the financial reporting entity.  Result—Very few entities used professional judgment

Statement 39 Dedicated to the memory of Joe Blythe, GASB project manager

Statement 39 History  Added to the agenda in 1990—during the final deliberations on Statement 14  First exposure draft issued in 1994  Second exposure draft issued in 2001  Final statement released in 2002

Statement 39—Approach  Guidance applies to legally separate, tax-exempt entities  Criteria  Solely (or almost solely) serves reporting entity or its constitutes  Entitled or has the ability to access a majority of resources  Individual organization significant to primary government or its component units  Display—discrete presentation

Effective Date  Periods beginning after June 15, 2003

Institutional Perspective of GASB 39 Charles Tegen

Institutional Issues  Review your institutional status  Primary government  Component unit  Agency of the primary government  Review each potential component unit  GASB 14 criteria  GASB 39 criteria

Review display options  Institution and sole component unit in separate columns on same page  Component unit on succeeding page (when presentation requires)  Institution and multiple component units in separate columns on same page  Multiple component units in separate columns on succeeding page (when presentation requires)…

Review display options (cont.)  Combined totals for component units in a single column on same page as institution or succeeding page (when presentation requires)  Requires separate component unit statements in note  Compatibility  Compatibility of terms  Program expenses  Natural expenses  Footnotes  Management’s Discussion and Analysis

Audit Issues  Responsibility of auditor for financial reports  Assess impact on audit schedule  Timing of audits  Different fiscal year end  Assess impact on audit fees

Develop communication strategy  Next level of government  Board / Executive Management  Affiliated Organizations

Foundation Issues for GASB 39 Larry Goldstein

Work with the institution  Compliance by institution is mandatory, if applicable  Better to cooperate than have decisions made without foundation’s input  Various options are available

Financial statement implications  GASB 39 does not affect foundation financial statements directly  FASB allows various options—some may be better than others  Various options for treatment of foundation in institution’s financial statements

Audit implications  Primary audit focus should be institution, not foundation  Absent state legal requirement or very unique situation, institution’s auditor should rely on audit opinion expressed by foundation auditor  Foundation’s audit schedule may be accelerated— especially if fiscal year-end is same as institution’s  Could affect foundation’s audit fees

Develop Communication Strategy  Foundation board / executive management  Institution  Donors

Consequences of Non-cooperation  Direct  None—unless special state statutes apply  Indirect  Strained relationship with institution  Rescission of authority to use institution’s name in fundraising

QUESTION & ANSWER  Please submit your questions using the Quick Question box to the left.  Select “ Expert ” from the Quick Question dropdown.  Type your question.  Click on Submit

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