Advisory Committee on Financial Management

MDE Advisory Committee on Financial Management, Accounting and Reporting

Meeting Minutes – April 16, 2013

Members Attending: Jennifer Charles, Tracey Fiereck, Dianna Groskreutz, Janet Halonen, Chuck Herdegen, Greg Hierlinger, Stella Johnson, Lorrie Larson, Willie Larson, Nancy Schulzetenberg, and Sarah Slaby

Members Absent: Tiffany Rodning, Heide Miller

MDE Staff Attending: Audrey Bomstad, David Day, Karen Dykoski, Sarah Miller, Patti Scott

Presenter: Darwin Viker

Call to Order: Chair Janet Halonen called the meeting to order at 12:05 p.m.

Agenda Approval: Nancy Schulzetenberg made the motion to approve the agenda and Sarah Slaby seconded the motion.

Approval of February 20, 2013 Meeting Minutes:

Chuck Herdegen requested a correction to the minutes that his position was the Finance Manager for Charter Schools. Chuck Herdegen moved to approve the minutes with the correction and Tracey Fiereck seconded the motion. The committee approved the minutes on a voice vote.

Darwin Viker Presentation – GASB Statements 67 and 68 (New – June 2012)

Darwin Viker began his presentation and referenced American Institute of Certified Public Accounts (AICPA) PowerPoint slides specific to school districts in regards to Governmental Accounting Standards Board (GASB) Statements 67 – Pension Plans (June 30, 2014) and 68 – Pensions-Employers (June 30, 2015).

The key concept in GASB 67 and 68 is in the reporting of pension liabilities and expenses under the economic resources measurement focus from a “funding” approach to an “earnings” approach. If the school is not funding pension plans adequately, there will be a liability for the unfunded portions. Under the new approach, pension liability will be reported as employees earn their pension benefits by providing services. Pension liability will be immediately recognized as a pension expense or reported as deferred outflows/inflows of resources.

There are no significant changes to accounting for pensions in governmental funds; it will not impact UFARS but will affect entity-wide statements. The question at hand was “How do we audit the information and incorporate into the financial statements.”

GASB 67 and 68 will affect employer’s cost-sharing plan calculations – net pension liability, pension expenses and deferred outflow/inflow resources. Calculation considerations:

Standard is silent on who should calculate allocation percentages
Audited financial statements of the plan may not include necessary information to calculate allocation percentages
Standard provides flexibility in approach to determine allocations.
Standard encourages an allocation method that will be extremely difficult to audit as it is based on projected future contributions.

He explained that calculations would depend on information provided by TRA and PERA. He suggested that it would be important to organize groups to meet with TRA and PERA representatives to discuss a process. He mentioned that involvement with TRA and PERA would be a good project for CPAs to determine how they (TRA/PERA) will provide accurate information to the schools for reporting dependability. Future implementation guidance on Statements 67 and 68 will be provided by GASB for reporting entities.

UFARS Submission Edit Updates

Patti Scott recapped the progress of implementation of suggested UFARS edits/warnings discussed at the February 20, 2013 meeting. Several of the changes have already been moved over to the programmer to be used in UFARS Submission Turnaround Edit Reports for FY 2013:

1) The existing course code edit has been updated for the new Course Code 667 – School Improvement Implementation Set-Aside (Current Year). *WARNING*COURSE 621-632,634-639 and 667 ALLOWED ONLY WITH FINANCE 401 AND 414.

2) The existing third year Fund 02 edit has been updated to replace Balance Sheet Code 422 with Balance Sheet Codes 460 (Nonspendable), 463 (Unassigned), and 464 (Restricted). *WARNING*G.L. FUND 2 EDIT, HAS BEEN NEGATIVE FOR 3 YEARS; PLEASE SEE MS124D.111.

3) The ‘proposed’ organization code edit has been postponed. Before this edit can be implemented, the UFARS Team needs to determine the programming rules for the existing fatal error “BAD ORG” which prevents a UFARS submission from processing.

4) To improve the quality of revenue reporting, a new revenue edit will prevent charter schools (Type 07) from coding to source codes 001-020, 072, 213-299, 301, 631 or 635. *ERROR*A DISTRICT TYPE 07 IS NOT PERMITTED TO USE SOURCE CODE XXX.

5) To improve the quality of revenue and expenditure reporting, new revenue and expenditure edits will prevent charter schools (Type 07) from coding to finance codes 315 (Integration Aid and Levy), 339 (Safe Schools Levy $3 Set-Aside) or 342 (Safe Schools Levy). Additional codes may be added to this list. *ERROR*A DISTRICT TYPE 07 IS NOT PERMITTED TO USE FINANCE CODE XXX.

6) For 400-Series Fund Balance Accounts, a new edit will identifies discrepancies between the prior years ending balance and the current years beginning balance for each 400-level account. *WARNING*FOR GENERAL LEDGER NUMBER xxx, THE CURRENT YEAR BEGINNING BALANCE DOES NOT EQUAL THE PRIOR YEARS ENDING BALANCE.

7) The underlying edit for Object Code 895 – Federal and Nonpublic Indirect Cost (Chargeback) will be changed to from Object Code 895 must be greater than zero to Object Code 895 must be zero. Historically, the programming language permitted 895 to be greater than zero. Committee members agreed that Object Code 895 must be zero and the UFARS Team will revise this edit based on committee recommendation.

8) A proposed change to identify the software vendor in the UFARS submission file has been postponed for FY 2013.

Other Considerations on the table include:

• Putting the software vendor in the header to track state approved/non-approved software vendors
• Review of Object Code 895 (Federal and Nonpublic Indirect Cost (Chargeback))

In review, Patti discussed that the COBOL programming language was written to state that Object Code 895 must be greater than zero. Jeff Yeager recalled that in region meetings, this object code was regarded as a chargeback and must be zero prompting the UFARS turnaround report to indicate an error. Patti would continue to research Object Code 895 to include communication with Greg Sogaard in regards to its usage according to non-public requirement.

Student Activity Fund (MAFA Manual) Update

David Day reported that from past advisory committee discussions, auditor and school district comments, the general consensus has been that the manual needs updating and refining. David has compiled a tentative list of committee members and is still seeking a representative from a school who is “not under board control”. Tracey Fiereck recommended Stella Johnson as a good candidate. Stella said Rosemount’s student activity fund was “not under board control”. She agreed to serve as a committee member. David said the intended timeline for committee review/completion of the MAFA Manual was FY 2014.

Operating Capital Committee Update

Audrey Bomstad reported the committee reviewed information from previous meetings. The committee is in agreement to add two new program codes. They agreed the Object Code series 400 (Supplies and Materials) and 500 (Capital Expenditures) needed minimal updates. The Object Code 500 series does include capital items that do not reach the level of capitalization.