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.

The committee reviewed Object Code 820 (Dues, Membership, Licenses and Certain Fees) and discussed putting allowable areas into operating capital while denying areas unacceptable as operating capital. The committee will schedule the next meeting on a separate day other than the Advisory Committee to permit additional discussion time if necessary.

UFARS Data Submissions – Loading Budgets

The committee discussed future consideration of school budget information submitted with annual UFARS financial data. Budget submissions had been discussed in the past and MDE IT programmers had worked with the UFARS Redesign Committee on implementation. Karen Dykoski stated the goal was to work towards providing the Legislature with useful financial data prior to the beginning of the session. Audrey Bomstad stated MDE provides a lot of data to the Legislature – bills are due in September. The committee questioned how useful and accurate the information would be since schools may vary on accuracy of preliminary budget information and different revised budget timelines. Budget revisions are ongoing and rely on the accuracy of student numbers like the October 1 child count. If budget data was required by the first UFARS submission date of September 15, it may be unreliable for legislative decisions. Final UFARS financial data for the prior fiscal year is required by November 30, but unforeseen circumstances may require schools to resubmit beyond the statutory deadline. Delay of accurate/reliable information also hinders the timeliness of fiscal year financial reporting / (P1 – Expense by site and P2 – Revenue by site reports posted on the MDE website).

The UFARS team would work with IT on programming and testing school budget information to see what budget data is available from schools. Patti Scott said we could use the existing program with existing fields: U=Unaudited; B=Budget; A=Audited. Jeff Yeager suggested a budget update in December 2013 to be submitted through a separate electronic load to the state (separate from the existing Databridge system). Patti said we currently do not have a field set aside in the warehouse to test this data. IT would have to test in a separate warehouse. According to Audrey, the data is in the mainframe. The UFARS team would review options and the software vendors would also discuss a process for the future.

Chapter X Revenue Grid

Karen Dykoski reported that the UFARS team would like to develop a Revenue grid like the expenditure Chapter 10 grid. This is a future goal and Karen has begun preliminary work on the grid.

Health Care Penalty

The committee discussed the need to develop an expenditure code to accommodate the option of a penalty for the new affordable health care initiative. Dianna Groskeutz mentioned that we already have Object Code 896 – Taxes, Special Assessments and Interest Penalties. Karen Dykoski suggested that we may be able to update the description to accommodate the affordable health care penalty. It was requested that prior to implementation of any object code additions/adjustments, an article be written in the School Business Bulletin. Tracey Fiereck said some schools consider full-time employees at 30 hours, so some fall under the 30 hour federal guidelines. Schools have not provided health care to those employees and may decide to bypass full coverage and just take the penalty. Darwin Viker mentioned that some smaller schools did away with employee health insurance coverage and increased their employee’s salaries for them to provide their own health insurance. The committee questioned if the penalty might be classified as a tax penalty. If this is the case, a new object code may have to be added.

UFARS Coding for Mobile Devices (IPADS etc.)

The committee discussed coding/classification for mobile devices (IPADS, etc.). The following areas were noted:

· Statutes do not provide definitive guidance for IPADs and need future clarification
· Are IPADS a requirement for learning?
· School purchase of IPADs – Lease/purchase option?
· Schools are providing a variety of options to students:
1) Fees for IPADS
a) Usage fee to families
b) Damage deposits – refund when device returned in good shape
c) Technology fees
d) Signed agreement – damaged device requires payment/fee
2) Student provides device
3) Textbook option for families who cannot afford device
· Do districts carry insurance for damage coverage?
· Authorized Fees (Minnesota Statutes, section 123B.36, Subdivision 1)
· Prohibited Fees (Minnesota Statutes, section 123B.37, Subdivision 1)

It was determined that the fee issue, in regards to IPAD usage/coding, should be discussed at

MDE and would be a good future School Business Bulletin article.

Chapter 10 Grid – Review State Finance Codes

Karen Dykoski reported that the UFARS team would like to review the state finance codes currently recorded in the Chapter 10 grid. It is important to review legislation and make sure the grid follows statutory language for program compliance. When SERVS was developed, state finance codes were reviewed within program areas. Patti Scott said that Finance Code 330 – Learning and Development was reviewed in this manner – statute requirements and program compliance. Jeff Yeager stated that this will be a good process but that it would be important to proceed in a manner that would allow software vendors and schools time to adapt to the updates in the grid. The committee listed a few state finance codes that would be good to research – Finance Code 372 - Medical Assistance/Third Party Revenue; Finance Code 317 – Basic Skills; Finance Codes for Community Education and Success for the Future. Charter School usage of Finance Code 317 was discussed. Chuck Herdegen mentioned that charter schools could utilize locally but crosswalk to zero. Finance Code 317 usage for charter schools would be a good state finance code for future review. The UFARS team would like to begin reviewing state finance codes during FY 2014.

Items for next meeting: Pending

Adjournment: Jeff Yeager made the motion to adjourn the meeting and Dianna Groskeutz seconded the motion. The meeting was adjourned at 2:33 p.m.