Download Changing World of the CFO: FASAB and the Future of GAAP

Federal Accountability Evolution
Wendy Payne
Executive Director
Disclaimer
• Views expressed are those of the speaker. The
Board expresses its views in official publications.
Who Said It?
• We may next turn to the organization of
finance. There must accordingly be a
separate office for finance which receives
and audits the accounts of other offices,
and is only concerned with this one
function.
• Aristotle, “The Politics”
Who Said It?
• As a very important source of strength and security, cherish public
credit. One method of preserving it is, to use it as sparingly as
possible; avoiding occasions of expense by cultivating peace, but
remembering also that timely disbursements to prepare for danger
frequently prevent much greater disbursements to repel it;
avoiding likewise the accumulation of debt, not only by shunning
occasions of expense, but by vigorous exertions in time of peace
to discharge the debts, which unavoidable wars may have
occasioned, not ungenerously throwing upon posterity the
burthen, which we ourselves ought to bear.
• GEORGE WASHINGTON, Farewell Address, Sep. 17, 1796
Who Said It?
• About the time we can make the ends meet,
somebody moves the ends.
• Blessed are the young for they shall inherit the
national debt.
• President Hoover
Who Said It?
• Transparency promotes accountability and
provides information for citizens about
what their Government is
doing. Information maintained by
the Federal Government is a national
asset.
• President Obama, 2009
Overview
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• Fiscal Sustainability
• Social Insurance
• Federal Financial Reporting
Model
• Economic Stabilization Activities
• General PP&E
• Deferred Maintenance
Fiscal Sustainability Reporting
• Reporting to help users assess the likelihood
that future budgetary resources will be sufficient
to sustain public services and meet obligations
as they come due.
Illustrative Statement of Fiscal Sustainability
Based on GAO’s Alternative Simulation
75 Year Projection Period
Receiptsa
FY 2008-2082
PV dollars % of PV
(in trillions) of GDP
$ 150.0 18.5%
FY 2007-2081
PV dollars % of PV
(in trillions) of GDP
$ 131.6 18.5%
Change
PV dollars % of PV
(in trillions) of GDP
$ 18.4 0.0%
Spending
Medicare
Medicaid
Social Security
Rest of Federal
Government
Total Spending
$ 51.1
$ 25.2
$ 46.3
6.3%
3.1%
5.7%
$ 47.1
$ 23.8
$ 41.9
6.6%
3.3%
5.9%
$ 4.0 (0.3%)
$ 1.4 (0.2%)
$ 4.4 (0.2%)
$ 79.0
$ 201.7
9.7%
24.9%
$ 68.2
$ 181.1
9.6%
25.4%
$ 10.8 0.1%
$ 20.6 (0.5%)
Spending in
excess of receipts
$ (51.7)
(6.4)%
$ (49.5)
(6.9)%
$ (2.2)
aThis
0.5%
specific illustration does not include a breakdown of receipts as these amounts are not broken out in GAO’s model.
However, disaggregated amounts for Social Security and Medicare would be reported under the ED.
Source: GAO’s April 2008 and April 2007 simulations.
Note: Numbers may not add to totals due to rounding.
Disclosures and RSI
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Alternative scenarios/sensitivity
Assumptions
Narrative discussion of fiscal sustainability
concepts and caveats— “Plain English”
Major factors
Trends
Historical and projected annual cash flows
Impact of delay
•
Analysis of annual changes
Accounting for Social
Insurance
When does a liability exist for future
social insurance benefits?
• Liability: a present obligation of the federal
government to provide assets or services to
another entity at a determinable date, when a
specified event occurs, or on demand. (SFFAC
5, par. 39)
Historical Controversy
• Liability debate centers on whether an obligation
exists:
– after work in covered employment occurs;
– when fully insured status is reached; or
– when a payment becomes due and payable.
• Liability debate impacts costs recognition:
– Costs arise as a result of work; or
– Costs arise as benefits are due.
• Evolving disclosure of information over the
years.
Preserving and Enhancing Current SI
Information – A Compromise
___________________________
• Critical information in management’s discussion and
analysis
• Closed group measure on the balance sheet but not
totaled
• Summary section for the statement of social insurance
presenting the closed and open group summary totals
• New basic financial statement explaining changes
• Disclose the accrued benefit obligation (future benefits
attributable to work completed as of the balance sheet
date)
Latest Developments
• Consensus support for:
– Statement of Changes in Social Insurance
– MD&A emphasis on critical information from
statements.
• Some aspects of the compromise not well
received. Debate regarding relationships
between the balance sheet and projections
remains open.
Federal Financial Reporting Model
___________________________
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Why?
User needs inventory
Voids or Overkill
Link to audit and internal
controls
Economic Stabilization Activities
• Raises Issues Regarding:
– Valuation of assets and liabilities, particularly in illiquid markets
• Accounting basis
• Applicability of Credit Reform accounting and appropriate
discount rates
– Scope of federal reporting – Federal Reserve, GSEs, AIG, etc.
• FASAB believes the hierarchy can resolve immediate issues. Longterm these issues will be addressed in related projects.
Grants
• Evaluation of Existing Standards
– Is the cost of estimating end of period incurred but not
reported amounts worth it?
• Government-wide Implementation Guidance
– Statement of Net Cost focus
– Different types of grants and different estimation
techniques
– Data quality
General PP&E
• Proposal to extend guidance in SFFAS 23 regarding the
use of estimates for general PP&E
• Accounting and Auditing Policy Committee task force
developing implementation guidance
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Acquisition of PP&E
Use of PP&E
Cleanup Cost
Record Retention
• Evaluation of Existing Standards
– Replacement Cost?
Deferred Maintenance and Asset
Impairment
• Deferred Maintenance
– SFFAS 6 as amended results in RSI - experimental
– Deferred maintenance viewed as critical management
issue.
– Task force formed
• Asset Impairment
– SFFAS 6 covers complete impairment
– How does deferred maintenance relate to:
• Depreciation
• Asset Impairment
Contact and Website Information
• General inquiries can be directed to
[email protected]
• Phone: 202 512-7350
• www.FASAB.gov
– Listserv
– Exposure Drafts
– Active Projects