FASAB Update Improving Federal Financial Reporting May 18
FASAB Update: Improving Federal Financial Reporting May 18, 2015 1
Disclaimer �Views expressed are those of the speaker. �The Board expresses its views in official publications. 2
OVERVIEW �Review of Current Projects ◦ Reporting Model ◦ Do. D Implementation Guidance ◦ Internal Use Software ◦ Tax Expenditures ◦ Leases ◦ Public-Private Partnerships ◦ Risk Assumed 3
Reporting Model �Which is Better? 4
Reporting Model �Objective ◦ Better achieve �Users’ needs �Reporting objectives 5
Reporting Model � Input ◦ ◦ ◦ ◦ to the Board: User needs surveys, focus groups, and roundtables FASAB Task Force on Government-wide Financial Reports (Dec 2010) CFO Act 20 -Year Report Input from task forces focusing on agency level reporting on cost, budget and performance Statement of spending pilots Study of other sovereign government practices NAPA Study Expert presentations �Budget �Component Level Reporting 6
Reporting Model Users sought ◦ Cost Information �Cost of programs or functions ◦ Budget Information �More understandable �Budget to Actual Comparison ◦ Performance Information �What were the results? ◦ Integration �Cost, Budget, and Performance 7
Reporting Model Challenges observed Presently… However… � Financial statements � ◦ highly aggregated ◦ Static ◦ Present cost by strategic goals � Multiple sources of information available through websites ◦ GAAP ◦ Non-GAAP � Multiple measurement bases ◦ Accrual, budget, projections � Spending is mostly mandatory not discretionary Users also looking to ◦ Review functions or programs ◦ Make comparisons ◦ Drill-down ◦ Access data ◦ Create their own reports ◦ Identify trends, patterns ◦ Analyze performance ◦ Compare budgeted to actual 8
Reporting Model How should financial reporting… �Relate GAAP and non-GAAP sources �Help users understand ◦ Differences between government-wide and component financing ◦ The relationship among the different measurement bases ◦ Mandatory vs. discretionary spending �Facilitate multi-dimensional analyses 9
Reporting Model Given the variety of issues the model can take different paths 10
Reporting Model - Example 11
Reporting Model - Example 12
Reporting Model - Example 13
Reporting Model – Example 14
Reporting Model - Example 15
Reporting Model – Example 16
Reporting Model �Project Status ◦ Board developing concepts statement ◦ Concepts should guide development of ideal reporting model 17
Do. D Implementation Guidance �Assisting Do. D ◦ Valuation of legacy inventory and operating material & supplies ◦ Research & Development Costs (now focus w/AAPC Internal Use Software) ◦ As needed with Do. D FIAR (Financial Improvement and Audit Readiness) �Deployed Assets- closed with no need for FASAB action �STATUS-Board reviewing two draft documents expected to be exposed this spring /summer 18
Internal Use Software �Drafting implementation guidance to: ◦ Clarify standards ◦ Provide practical examples of implementation �Requires input ◦ Agencies who have successfully undergone an audit of their IUS balances 19
Tax Expenditures �Objective ◦ Explore what information users need to help them understand government financial operations �What are tax expenditures ◦ Revenue losses attributable to provisions of Federal income tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability. (Section 3(3) of Public Law 93 -344) 20
Leases � FASAB partnering with GASB to develop standards for governmental organizations. � Tentative decision to establish a single model (with exceptions for short-term arrangements). ◦ Leases create assets consisting of the “right to use” a resource. ◦ Leases create liabilities consisting of the obligation to pay for the resource. � The focus may be on the interest cost associated with leases. � Intragovernmental exceptions. 21
Leases Tentative Timelines �GASB – ED expected early 2016 and final standard early 2017 �FASB/IASB 2015 – Final standards expected late �FASAB – ED expected early 2016 and final standard early 2017 (to align with GASB’s timeline) 22
Public-Private Partnerships � Due to budget pressures, federal agencies have increasingly turned to public-private partnerships (e. g. , PPPs, P 3 s) to accomplish goals. ◦ In some cases P 3 s are off-budget and off-balance sheet. � Overall objective - Transparency of the full costs and disclosure of risks. � Specific objectives include: ◦ Phase 1 - Establishing a P 3 definition, exclusions, risk-based characteristics and disclosures. ◦ Phase 2 - Providing guidance for the recognition and measurement of: �assets and liabilities, �revenues and expenses, and risks. � Current status – Phase 1 ED comments are in & Board is re-deliberating. 23
RISK ASSUMED Project objectives are to: � Determine what risks the federal government assumes when implementing policy initiatives to provide safety and stabilize financial markets and the economy. � Update current standards that are limited to insurance contracts and explicit guarantees (other than loan guarantees). � Account for and report all significant risks assumed in order to meet the stewardship and operating performance objectives of federal financial reporting. 24
RISK ASSUMED -Three Phases: � Phase I: Insurance Programs � Phase II: Entitlement Programs, including: �National Defense, �Security and Disaster response �Other potential effects on future outflows: ◦ regulatory actions, ◦ Government Sponsored Enterprises (GSEs), etc. � Phase III: �Commitments �Obligations �Other risk areas 25
Risk Assumed – Insurance Programs Developing exposure draft to: � Define federal Insurance programs � Improve terminology � Address measurement uncertainty regarding estimated losses on open contracts ◦ Determine best measurement model ◦ Improve disclosures � Disclose with: risk assumed for insurance programs ◦ Narrative including risk factors ◦ Coverage in force (maximum loss) 26
Questions? 27
Contact and Website Information �General inquiries can be directed to fasab@fasab. gov �Phone: 202 512 -7350 �www. FASAB. gov ◦ Listserv (sign up for emails) ◦ Exposure Drafts ◦ Active Projects – assigned staff �Presenters’ Contact info: ◦ gilliamr@fasab. gov (202) 512 -7356 ◦ simmsr@fasab. gov (202) 512 -2512 28
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