1. Responses to 2008 GAAP Feedback Presented by Sherry Pickering CSU KPMG LLP

2. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 2 Agenda The Feedback Process Review of the Top 5 Campus Comments Highlights and Changes Resulting from Comments

3. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 3 Feedback Process At the end of the GAAP reporting cycle each year, the Chancellor’s Office requests feedback The opportunity to participate in the process is extended to all of the campuses, the Chancellor’s Office reporting staff and KPMG. It is your chance to communicate your experience during that year and to provide any information or insight that may be useful to others.

4. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 4 Feedback Process Responses are gathered and organized with like responses from others to assess the frequency of a comment. The combined list is reviewed by Chancellor’s Office Systemwide staff along with the KPMG Systemwide team. – In this way, the teams can agree to continue to incorporate items that went well and to make improvements where needed.

5. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 5 Feedback Process The feedback process is an important source of information – Changes to PBC List – Updates to Exhibits – Changes to GAAP Manual Explanations or Literature Citations added for clarity Reminders about upcoming changes Cross referencing of linked Chapters and ideas – Changes to the Reporting Package Changes to footnotes Additional explanations or definitions added to the manual to clarify how the data should be reported

6. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 6 Feedback Data This year the feedback was used as the starting point for the edit of the GAAP manual. The campus feedback was combined with the working notes from the Chancellor’s Office staff about needed changes in 2009. The PBC taskforce entered a recommended approach to address each item noted. – Some required no action as they had been addressed during the prior year reporting cycle. – The majority of the comments provided sparked a change.

7. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 7 2008 Top Five Comments 1. Weekly campus conference calls were helpful in keeping everyone informed. There were some suggestions about format and content of these calls. The weekly campus conference calls will begin August 7 th and continue every Friday until November 20 th.

8. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 8 2008 Top Five Comments - Continued 2. Various positive feedback about the KPMG managers and teams and the way that they approached the audit in 2008. Timely reviews and communication of open items by KPMG manager. Sample selections provided at the beginning of the audit fieldwork Campus requests for the same team

9. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 9 2008 Top Five Comments - Continued 3. Numerous revisions to the stand-alone financial statement template was a challenge The template delivery to campuses has been moved back by one week. – To allow for upper management to review prior to hand off to KPMG for their acceptance And – Resolve the conflict in the schedule experienced last year.

10. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 10 2008 Top Five Comments - Continued 4. Interim fieldwork helped with audit workload and expedited the selections of samples for testing. All but one campus has scheduled interim fieldwork for 2009 Requests for additional substantive testing to take place during interim rather than final fieldwork Suggestion from a campus that took this approach in 2008 to tackle Higher Scope A-133 procedures during interim

11. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 11 2008 Top Five Comments - Continued 5. Chancellor’s Office staff in the Reporting and Training groups were timely in responding to questions/issues. We hope that such responsiveness can continue The Training group, Lily and Sherry, are working on a project away from the office Monday – Thursday weekly. – However, that project is scheduled to end in August 2009 just in time for the start of final fieldwork.

12. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 12 Highlights and Changes from Comments The mapping matrices in Chapter 3 updated for: – Additional values allowed in CSU Fund 501, such as interest expense – Changes to functional classifications allowed in Lottery, Health Facilities and CSU fund 541 – The Systemwide Revenue Bond (SRB) CSU funds are clearly identified. Pass down Entries for SRB Change – Reclassify the Accounts Receivable related to interest income for the debt reserves in SCO fund 0578 to Unrestricted Net Assets.

13. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 13 Highlights and Changes from Comments Various changes and updates to Chapter 4 – Data source reference updated to include queries Compensated Absences and Accrued Salaries and Benefits due to implementation of HR Absence Management System – Reference to NACUBO FARMS manual added in support of expensing library periodicals and subscriptions – Reimbursement of Expense section has been rewritten for clarity Ex. Faculty release time transactions with an Auxiliary should appear as expenses in the university column and in the applicable Auxiliary column on the face of the financial statements

14. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 14 Highlights and Changes from Comments There are several new requirements to facilitate the SRB audit – Required Schedules – Specific SRB section on the PBC list – Updates to Chapter 3 Matrices to clearly indicate the SRB CSU funds Other Exhibit and Lead Sheet Changes – Investment Income – SEFA Reconciliation

15. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 15 Highlights and Changes from Comments Changes to Reporting Package – Notes 8 and 14 – Auxiliary and Campus notes for Related Party Transactions Line item definitions are included in Chapters 8 & 9 – A-133 Perkins Loan Receivable formula adjusted – Additional Line added to note 6.1 for carrying value of assets related to capital leases with the State Public Works Board – New Lines added to Note 3.3 “"On behalf of auxiliary organizations (Auxiliary organizations as investments)" and "On behalf of auxiliary organizations (Auxiliary organizations as accounts receivable)”

16. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 16 Highlights and Changes from Comments Changes for New Pronouncements GASB 49 – Accounting and Financial Reporting for Pollution Remediation Obligations – GAAP manual update (chapter 4-12) – Exhibit 21 update. – A new section in note 12.3 in YES. – A new PBC item. – Adjust Beginning Net Assets and report in separate Excel file note 15.3.

17. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 17 Highlights and Changes from Comments Changes for New Pronouncements GASB 45 - Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions – GAAP manual update (chapter 5.6). – A new note 19 in YES.

18. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 18 Highlights and Changes from Comments Changes for New Pronouncements GASB 51 – Accounting and Financial Reporting for Intangible Assets – KPMG led training January 2009 http://www.calstate.edu/sfo/documents/GASB_webcast.pdf – Adjust Beginning Net Assets and report in separate Excel file note 15.3.

19. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 19 Highlights and Changes from Comments Changes for New Pronouncements GASB 52 – Land and Other Real Estate Held as Investments by Endowments – Applicable to 3 auxiliary. Record investment in fair value. GAAP manual update (chapter 8) Uniform Prudent Management of Institutional Funds Act (UPMIFA) – Underwater endowment - GAAP manual update (chapter 8). No change to YES and PBC.

20. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 20 Feedback Reminder Please participate in the feedback process – Take a few minutes to look at your notes and emails from the GAAP Reporting cycle to jog your memory – It is just as important to communicate what went well – Don’t be shy about sending your comments Frequently less than half of the campuses respond to the request.

21. © 2009 KPMG LLP, the U.S. member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in U.S.A. KPMG and the KPMG logo are registered trademarks of KPMG International. 14055ORA 21 Q & A