June 3 2003

2:00 – 3:30 pm EDT

Moderated by:

Jerry Farley

Washburn University

Welcome to Today’s NACUBO Webcast:

Statement 39—Overview

AGENDA

Introduction to Desktop Interface

Presentations

Audience Surveys

Question & Answers

Evaluation

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Today’s Featured Speakers

David BeanGASB Director of Research

Charles TegenClemson University Comptroller

and Former Chair of the APC

Larry Goldstein NACUBO Senior Fellow

and GASAC representative

Background to GASB 39

David Bean

Statement 14—The Genesis

Financial reporting entity Primary government Organizations for which the primary government is

financially accountable Other organizations for which the nature and

significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete.

Financial Accountability

Appoint a voting majority of an organization's governing body

Either it is able to impose its will on that organization (five specific criteria) or

There is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government (three specific criteria).

A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it.

Misleading to Exclude

Matter of professional judgment to determine whether the nature and the significance of relationship with the primary government warrants inclusion.

Organizations affiliated with governmental units, agencies, colleges, universities, hospitals, and other entities may warrant inclusion.

An example of an affiliated organization that may be evaluated for inclusion is a nonprofit corporation whose purpose is to benefit a governmental university by soliciting contributions and managing those funds.

The Potentially Misleading Sentence

The GASB is studying circumstances under which foundations, similarly affiliated organizations, and PERS might be included in the financial reporting entity. Result—Very few entities used professional

judgment

Statement 39

Dedicated to the memory of

Joe Blythe, GASB project manager

Statement 39 History

Added to the agenda in 1990—during the final deliberations on Statement 14

First exposure draft issued in 1994

Second exposure draft issued in 2001

Final statement released in 2002

Statement 39—Approach

Guidance applies to legally separate, tax-exempt entities

Criteria Solely (or almost solely) serves reporting entity or

its constitutes Entitled or has the ability to access a majority of resources Individual organization significant to primary government or its

component units

Display—discrete presentation

Effective Date

Periods beginning after June 15, 2003

Institutional Perspective of GASB 39

Charles Tegen

Institutional Issues

Review your institutional status Primary government Component unit Agency of the primary government

Review each potential component unit GASB 14 criteria GASB 39 criteria

Review display options

Institution and sole component unit in separate columns on same page

Component unit on succeeding page (when presentation requires)

Institution and multiple component units in separate columns on same page

Multiple component units in separate columns on succeeding page (when presentation requires)…

Review display options (cont.)

Combined totals for component units in a single column on same page as institution or succeeding page (when presentation requires)

Requires separate component unit statements in note

Compatibility Compatibility of terms Program expenses Natural expenses

Footnotes Management’s Discussion and Analysis

Audit Issues

Responsibility of auditor for financial reports

Assess impact on audit schedule Timing of audits Different fiscal year end

Assess impact on audit fees

Develop communication strategy

Next level of government

Board / Executive Management

Affiliated Organizations

Foundation Issuesfor GASB 39

Larry Goldstein

Work with the institution

Compliance by institution is mandatory, if applicable

Better to cooperate than have decisions made without foundation’s input

Various options are available

Financial statement implications

GASB 39 does not affect foundation financial statements directly

FASB allows various options—some may be better than others

Various options for treatment of foundation in institution’s financial statements

Audit implications

Primary audit focus should be institution, not foundation

Absent state legal requirement or very unique situation, institution’s auditor should rely on audit opinion expressed by foundation auditor

Foundation’s audit schedule may be accelerated—especially if fiscal year-end is same as institution’s Could affect foundation’s audit fees

Develop Communication Strategy

Foundation board / executive management

Institution

Donors

Consequences of Non-cooperation

Direct None—unless special state statutes apply

Indirect Strained relationship with institution Rescission of authority to use institution’s name

in fundraising

QUESTION & ANSWER

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