1. Review FAS 117-1 and Auxiliary Organization Supplemental Template Presented by: Lily Wang, CO AUDIT

2. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 2 Agenda Review FSP FAS 117-1 Auxiliary Organization Supplemental Template May 2010Year-End GAAP Training

3. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 3 ReviewFAS 117-1 On August 6, 2008, FASB issued FASB Staff Position (FSP) FAS 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds. The FSP does primarily two things: 1. Changes the accounting for donor-restricted endowments, in general requiring the unexpended portion of the endowment that exceeds the original corpus be reflected as temporarily restricted net assets instead of unrestricted net assets as previously reported. 2. Significantly expands the disclosures relating to endowments. May 2010Year-End GAAP Training

4. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 4 Effective DateFAS 117-1 Required to be adopted for June 30, 2009 financial statements. Applicable to all FASB auxiliary organizations that have endowments (both donor-restricted endowments and board designated ‘quasi’ endowments). May 2010Year-End GAAP Training

5. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 5 Net Asset Classification FAS 117-1 Classify a portion of a donor-restricted endowment fund of perpetual duration as permanently restricted net assets. The portion of a donor-restricted endowment fund that is classified as permanently restricted net assets is not reduced by losses on the investments of the fund, except to the extent required by the donor. Likewise, the amount of permanently restricted net assets is not reduced by an organization’s appropriations from the fund. Classify the portion of the fund that is not classified as permanently restricted net assets as temporarily restricted net assets (time restricted) until “appropriated for expenditure”. Appropriation for expenditure: – Occurs upon approval for expenditure (e.g., annual budget, or during the year as unexpected needs arise such as for emergency relief efforts). – If approval is for a future period, appropriation occurs when that period is reached. Financial statement reclassifications required: – Upon appropriation for expenditure, the time restriction expires to the extent of the amount appropriated and, in the absence of any purpose restrictions, results in a reclassification of that amount to unrestricted net assets. – If fund is also subject to a purpose restriction, the reclassification of that amount to unrestricted net assets would not occur until that purpose restriction is met, in accordance with the provisions of ¶ 17 of Statement 116. May 2010Year-End GAAP Training

6. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 6 Net Asset Classification FAS 117-1 May 2010Year-End GAAP Training

7. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 7 Enhanced Disclosures for All Endowment Funds FAS 117-1 Not-for-Profit organizations, whether or not subject to UPMIFA, shall disclose information to enable users of financial statements to understand the net asset classification, net asset composition, changes in net asset composition, spending policies, and related investment policies of its endowment funds (both donor-restricted and board-designated) May 2010Year-End GAAP Training

8. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 8 Enhanced Disclosures for All Endowment Funds FAS 117-1 At a minimum, organization shall disclose the following information in its financial statements: a. Description of governing board’s interpretation of the laws that underlie the organization’s net asset classification of donor-restricted endowment funds. b. Description of organization’s policies for the appropriation of endowment assets for expenditure (its endowment spending policies). c. Description of organization’s endowment investment policies (include return objectives and risk parameters; how they relate to the organization’s endowment spending policies; and strategies employed for achieving those objectives). d. Composition of organization’s endowment by net asset class at the end of the period, in total and by type of endowment fund, showing donor- restricted endowment funds separately from board-designated endowment funds. e. Reconciliation of the beginning and ending balance of organization’s endowment, in total and by net asset class, including, at a minimum, (as applicable): Investment return, separated into investment income (e.g., interest, dividends), and net appreciation or depreciation of investments; contributions; amounts appropriated for expenditure; reclassifications, and other changes. May 2010Year-End GAAP Training

9. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 9 Enhanced Disclosures for All Endowment Funds FAS 117-1 Organization also shall provide information about the net assets of its endowment funds, including: a. Nature and types of permanent restrictions or temporary restrictions (¶ 14 and 15 of Statement 117). b. Aggregate amount of deficiencies for all donor-restricted endowment funds for which fair value of the assets is less than the level required by donor stipulations or law. Below is an illustrative example of the Disclosures from FAS 117-1 May 2010Year-End GAAP Training

10. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 10 Errors and OmissionsFAS 117-1 Findings from review of FASB Foundation Financial Statements with endowments: – Notes referenced new FSP, but it is apparent entity did not implement any of the requirements. – Disclosure with internal inconsistencies – Financial statements showed no cumulative effect of adoption when it is clear from statements that there should have been a cumulative effect. – Auditor opinions don’t reflect implementation of new FSP. – Underwater endowment determined by netting positive endowments with negative ones. Should be done on an individual endowment basis, with positive endowments reflected in temporarily restricted net assets and negative endowments in unrestricted net assets. May 2010Year-End GAAP Training

11. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 11 Errors and OmissionsFAS 117-1 – Board designated endowment funds that total a negative number.? – Note disclosures with different amounts than amounts reflected as cumulative effect on face of statement of activities. – Missing required minimum disclosures. – One disclosure states that Board has interpreted the law to require all earnings from endowment are to be preserved. Why take endowment if income earned can’t be spent … – Omission of all or virtually all of the required elements of the FSP. – GASB foundations that mentioned adoption of FAS 117-1. May 2010Year-End GAAP Training

12. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 12 Errors and OmissionsFAS 117-1 Some of the errors will likely require net asset restatements/reclassifications to correct. May 2010Year-End GAAP Training

13. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 13 Changes to NotesAuxiliary Organization Supplemental Template Note 2 - Investments May 2010Year-End GAAP Training

14. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 14 Changes to NotesAuxiliary Organization Supplemental Template Note 3 - Capital Assets May 2010Year-End GAAP Training

15. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 15 Changes to NotesAuxiliary Organization Supplemental Template Note 8 - Transactions with Related Entities May 2010Year-End GAAP Training

16. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 16 Changes to SNAAuxiliary Organization Supplemental Template Schedule of Net Assets May 2010Year-End GAAP Training

17. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 17 TemplateAuxiliary Organization Supplemental Template Always use the template issued from the current year GAAP manual in Chapter 8. http://www.calstate.edu/SFSR/Workshops/index.shtml May 2010Year-End GAAP Training

18. © 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15996ORA 18 Resources Year-End Training Website (PowerPoint) – http://www.calstate.edu/SFSR/Workshops/index.shtml http://www.calstate.edu/SFSR/Workshops/index.shtml FAST-ED Portal (Audio Recording) – https://coweubr101.calstate.edu/portal/page/portal/IP_S ITE_74 https://coweubr101.calstate.edu/portal/page/portal/IP_S ITE_74 May 2010Year-End GAAP Training