FASAB Update The Reporting Model and More AGA

FASAB Update: The Reporting Model and More AGA Professional Development Training Tom Allen, FASAB Chairman Ross Simms, FASAB Assistant Director Monica Valentine, FASAB Assistant Director Tuesday, July 15, 2014 10: 45 – 12: 00 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 and the NAPA Study ◦ Leases ◦ Public-Private Partnerships ◦ Risk Assumed �Potential Projects �Questions 3

Current Projects 4

Reporting Model � Seeking to enhance the benefits of accrual basis financial statements � 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 5

Reporting Model (cont) -NAPA Results�Data highly accurate and granular, but challenges in ◦ Analyzing and transforming data ◦ Linking budget, cost, and performance �Revenue source and operational approach influence financial data usage �CFO organizations need to shift focus 6

Reporting Model (cont) -NAPA Results • Agencies should strengthen the program knowledge of CFOs so they can provide better information for managing the business. • Certain skill sets are needed. Specifically finding people that are both data oriented and that have an understanding of the business of the agency is difficult. • Agencies should link budget information to costs and performance. • Agencies should develop programmatic and financial dashboards that executives can use to support quicker decision making. • Agencies should enhance existing information systems and integrate them better. • Congress and OMB should develop initiatives to encourage agencies to focus on different ways to report costs and results. 7

Reporting Model (cont. ) – Additional Research Results – What We’ve Learned from Users 1. Contextual Information 2. Budget Information and Comparison of Budget to Actual (SBR hard to understand. ) 3. Accrual Information Useful to Citizens ü Hold managers accountable for more than use of “appropriations” ü Want to know the cost of programs and what they got ü Interested in long-term needs (liabilities) ü Various perspectives on cost are being sought and offered (but rarely cost of programs) 4. ü ü 5. 6. 7. Revenue Whether exchange revenues cover related costs Who pays what taxes What did we get and how much did it cost? Performance information! Users want broad context – effect on the nation. Trends 8

Reporting Model (cont. ) – Research Results – How Users Want Information v. Interactive v. Plain-Language v Charts, Graphs, or Pictorial Illustrations v Brief Video v Summarized information with timely access to details. v Easily accessible v Ability to perform queries 9

Reporting Model – Next Steps – (cont. ) Board will begin developing conceptual guidance focusing on flows ◦ ◦ Accrual Budgetary How should accrual and budgetary flows be aligned How should flows be disaggregated 10

Reporting Model DISCUSSION 11

Leases Are all leases financings? 12

Leases (cont. ) � FASAB is 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. 13

Leases (cont. ) � Tentative decision to treat intra-governmental leases as a separate class of lease activity. ◦ Simplified approach similar to current operating lease accounting. ◦ Disclosures to answer questions about cash flows in future years. 14

Leases DISCUSSION 15

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 � Transparency of the full costs and risks of such partnerships is the overall objective � Specific objectives include: �Defining terms (e. g. , service concession arrangements, P 3 s) �Providing guidance for the recognition and measurement of: �assets and liabilities �revenues and expenses �risks ◦ Consider implications for other arrangements related to P 3 s (sale-leaseback or other long-term arrangements). 16

Public-Private Partnerships DISCUSSION 17

RISK ASSUMED � The federal government assumes risk through policies to stabilize financial markets and the economy � Current FASAB standards are limited to: ◦ Insurance contracts, and ◦ Explicit guarantees (other than loan guarantees) � Updated standards will address ◦ All risk assumed by the government ◦ In order to meet the stewardship and operating performance objectives of federal financial reporting 18

RISK ASSUMED (cont. ) - Three Phases �Phase I: Insurance and Non-Loan Guarantees �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 19

RISK ASSUMED (cont. ) - Insurance & Non-Loan Guarantee Phase The Task Force : � Has defined federal Insurance and Non-Loan Guarantee programs: ◦ To ensure all current and future programs are captured in updated standards/disclosures � In defining the measurement methodology: ◦ Has compared Insurance/Non-Loan Guarantee programs to Credit Reform programs and accounting ◦ Continues to monitor FASB Insurance Contracts Exposure Draft Status � Will determine the measurement model ◦ To ensure consistent reporting by all Insurance and Guarantee programs 20

Risk Assumed DISCUSSION 21

Potential Projects �What topics do you think should be addressed in the near future? 22

Questions? 23

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 24