1. Public Employees Retirement Association of Minnesota GASB 68 Audit Issues for Cost-Sharing Plans Presented by Jim Riebe, PERA Principal Accounting Officer 1

2. Public Employees Retirement Association of Minnesota Agenda GASB 68 Audit Issues for Cost-Sharing Plans PERA’s Approach for Cost-Sharing Plans (based on AICPA “Whitepaper”) Employer and Employer Auditor Responsibilities for pension amounts included in employer financial statements 2

3. 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 and they do NOT include: Deferred outflows/inflows of resources; Pension expense; or Each participating employer’s share of collective pension amounts Audited financial statements of the plan may not include necessary information to calculate allocation percentages 3

4. 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) 4

5. Public Employees Retirement Association of Minnesota Audit Issues--Solutions AICPA “whitepaper” titled “Governmental Employer Participation in Cost-Sharing Multiple- Employer Plans: Issues Related to Information for Employer Reporting” recommends: Plan prepares a “Schedule of Employer Allocations” and a “Schedule of Pension Amounts by Employer” Plan auditor provides an audit opinion on both allocation schedules PERA adopted the whitepaper recommendations and will issue a separate report. 5

6. Public Employees Retirement Association of Minnesota Schedule of Employer Allocations Schedule of Employer Allocations (General Employees Retirement Fund) As of June 30, 2014 Unit IDEmployer Name ContributionsAllocation 0002-00AITKIN COUNTY $598,5400.1573% 0006-00ANOKA COUNTY 6,356,6101.6701% 0008-01BECKER COUNTY 814,6650.2140% 0010-00BELTRAMI COUNTY 932,2240.2499% 0012-00BENTON COUNTY REVENUE 672,2790.1766% 0014-00BIG STONE COUNTY 186,6340.0490% 0016-00BLUE EARTH COUNTY 1,333,6360.3504% 0018-00BROWN COUNTY 683,2270.1795% 0020-00CARLTON COUNTY 1,020,2410.2681% 0022-00CARVER COUNTY 2,114,1270.5555% 0022-09CARVER COUNTY HISTORICAL SOCIETY 9,9790.0026% 0024-00CASS COUNTY 849,6240.2232% 0026-00CHIPPEWA COUNTY 338,5180.0968% 0027-00CHIPPEWA COUNTY SWCD 9,9830.0026% 0028-00CHIPPEWA COUNTY HOSPITAL 980,1000.2575% 0030-00CHISAGO COUNTY 1,051,2660.2762% 0032-00CLAY COUNTY 1,119,3690.2941% 9115-00CLAY COUNTY SWCD 17,5000.0046% … … …… $380,612,334100.00000% 6

7. Public Employees Retirement Association of Minnesota Schedule of Pension Amounts by Employer PERA allocates collective pension amounts provided in Gabriel, Roeder, Smith’s GASB 67/68 actuarial valuation based on employer’s proportionate share GASB 67/68 valuation includes the plan’s collective: Net pension liability Deferred outflows of resources by category Deferred inflows of resources by category Pension expense NPL +/- 1% sensitivity analysis 7

8. Public Employees Retirement Association of Minnesota Schedule of Pension Amounts by Employer (1 of 2) 8

9. Public Employees Retirement Association of Minnesota Schedule of Pension Amounts by Employer (2 of 2) 9

10. Public Employees Retirement Association of Minnesota Audit Issues Plan financial statement auditor (Legislative Auditor’s Office) decided not to audit the GASB 68 pension allocation schedules. Plan auditor is still responsible for the plan net pension liability disclosed in plan footnotes. Plan auditor hired Milliman to review PERA’s GASB 67/68 actuarial valuations. PERA contracted with Abdo, Eick, and Meyers, LLP to audit and provide opinion on both pension allocation schedules. 10

11. Public Employees Retirement Association of Minnesota Audit Approach Abdo, Eick, and Meyers: Performed risk assessment Evaluated and tested plan controls over employer contributions and census data Confirmed contributions with sample of employers Reconciled GASB 68 employer contributions to PERA’s audited financial statements Performed analytical procedures on sample employers’ financial statements Tested sample of employee census data at the plan (inactive and retirees) and at a sample of employers (active) Recalculated allocations for both pension schedules Will provide audit opinion on the allocation schedules 11

12. Public Employees Retirement Association of Minnesota 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 12

13. Public Employees Retirement Association of Minnesota 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 13

14. Public Employees Retirement Association of Minnesota Summary Every year PERA will provide audited GASB 68 information on its website (Financial Reporting Toolkit) Independent Auditor’s Report and Management Letter Schedule of Employer Allocations Schedule of Pension Amounts by Employer Notes to the pension allocation schedules The information should be available by late July/August in 2015 for employers with a June 30 fiscal year, and in January in future years 14