Auxiliary Organizations Update
Chapter 8
Presented by Lily Wang
CSU, Chancellor’s Office
 Reporting
 Highlight
 Updates
on the Supplementary Information
Templates (Chapter 8, Attachment A & A-1)
June 2009
GAAP Reporting Workshop
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Agenda
Deadlines (Chapter 8)
(Chapter 8)
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GAAP Reporting Workshop
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Reporting Deadlines
3
–
4th quarter FIRMS
Due July 31, 2009
–
Audited Financial
Statements, Independent
Auditors’ Letter to
Management, and
Supplementary Schedules
(3 hard copies and 1 soft
copy)
Due September 30, 2009
–
FIRMS for IPEDS
Due October 30, 2009
Campus President’s
review of auxiliary
organizations’ audited
financial statements
Due December 1, 2009
A-133 Single Audit reports
(1 hard copy and 1 soft
copy) for those entities
required to have a single
audit
Due December 15, 2009
–
–
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Reporting Deadlines
4
June 2009
GAAP Reporting Workshop
June 2009
GAAP Reporting Workshop
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Highlight
5
Highlight

Auxiliary Organization meets required timeframe and manner that is
necessary for inclusion in the basic financial statements of the campus.

Campus reviews a draft of the auxiliary organization’s financial statements
to ensure the accuracy and completeness of the supplementary information.

Campus should attend the entrance and exit conferences of the Auxiliary
Organizations and their independent audit firms or develop another method
of monitoring the Auxiliary Organizations’ audit process

Notify the Auxiliary Organizations of the timing of the campus audit to
ensure that key Auxiliary Organizations personnel are available during audit
fieldwork and during the time surrounding the submission deadline of the
campus reporting package to the Chancellor’s Office

Auxiliary Organizations are required to complete a GAAP financial reporting
checklist (included in Chapter 8, Attachment A-1).

It is important that all inter-entity accounts and transactions be reconciled
with the respective Auxiliary Organizations prior to the issuance of the
Auxiliary Organizations’ financial statements.
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Planning and Coordination Between Campus and
Auxiliary Organization
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GAAP Reporting Workshop
Highlight

It is important that significant related entity transactions between the
auxiliary organization and the campus are reconciled and disclosed in the
related entity transactions footnote in the supplementary information
template (included in Chapter 8, Attachment A-1). Below are the information
auxiliary organization needs to provide in the footnote:
–
Reimbursements to University for salaries of University personnel
working on contract, grants and other programs
–
Reimbursements to University for other than salaries of University
personnel
–
Payments received from University for services, space and programs
–
Gifts-in-kind to the University from Auxiliary Organizations
–
Gifts (cash or assets) to the University from Auxiliary Organizations
–
Accounts payable to University
–
Other amounts payable to University
–
Accounts receivable from University
–
Other amounts receivable from University
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Reconciliation of Related Entity Transactions With The
Campus
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Highlight

Auxiliary Organizations who are participating in the SRB financing
should work with the campus, and consult the Chancellor’s Office,
independent auditors of the auxiliary organization and the independent
auditor of the campus to determine the:
–
Proper accounting treatment for the transaction
–
Consistency in accounting treatment within the CSU as a whole.
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Systemwide Revenue Bonds (SRB) with Auxiliary
Organizations
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June 2009
GAAP Reporting Workshop

Deferred Revenues (Sponsored Programs)

Defer resources received prior to applicable eligibility requirements
being met relating to voluntary nonexchange transactions (i.e. grant
funds received for sponsored programs)

Grant funds received for sponsored programs prior to all applicable
eligibility requirements being met are unearned income. Until the
requirements are met, the provider does not have a liability, the recipient
(i.e. campus) does not have a receivable, and the recognition of expenses
or revenues for resources transmitted in advance should be deferred.
(GASB Statement No. 33; ¶ 19).

Eligibility requirements comprise one or more of the followings:
1)
2)
3)
4)
Required characteristics of recipients: The recipient has the characteristics
specified by the sponsor.
Time requirements: Time requirements specified by enabling legislation or the
sponsor have been met. This is the period when the resources are required to
be used (sold, disbursed, or consumed) or when use is first permitted has
begun, or the resources are being maintained intact, as specified by the
sponsor.
Reimbursements: The sponsor offers resources on a reimbursement
("expenditure-driven") basis and the recipient has incurred allowable costs
under the applicable program.
Contingencies: The sponsor's offer of resources is contingent upon a specified
action of the recipient and that action has occurred.
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Highlight
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June 2009
GAAP Reporting Workshop
Highlight
UPMIFA
July 2006, the National Conference of
Commissioners on Uniform State Laws approved
the Uniform Prudent Management of Institutional
Funds Act (UPMIFA).
 UPMIFA is
designed to replace the existing
Uniform Management of Institutional Funds Act
(UMIFA).
 On
September 30, 2008, the Governor approved
Senate Bill No. 1329.
 This
Bill repealed the provisions of UMIFA and
enacted the UPMIFA.
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 In
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GAAP Reporting Workshop
Highlight
In light of UPMIFA, FASB issued FAS 117-1,
Endowments of Not-for-Profit Organizations:
–
–
Guidance on net asset classification of donor-restricted
endowment funds for not-for profit organization that is
subject to UPMIFA.
Improves disclosures about an organization’s
endowment funds (both donor-restricted endowment
funds and board-designated endowment funds),
whether or not the organization is subject to UPMIFA.
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UPMIFA (cont’d)
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GAAP Reporting Workshop
Highlight

Effective for fiscal years ending after December 15, 2008
(June 30, 2009 for CSU FASB Auxiliary Organizations)

When initially applying the net asset reclassification,
organizations should report the reclassification as a
separate line item on the statement of activities.

Recording of the training:
–

https://zeta.calstate.edu:8250/portal/page?_pageid=74,
1&_dad=portal&_schema=PORTAL
PowerPoint presentation
–
http://www.calstate.edu/sfo/
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UPMIFA (cont’d)
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GAAP Reporting Workshop
Highlight

Current market conditions have created a situation whereby the value of
endowment investments at year-end may have decreased below the
original amount of the endowment.

Such decrease in value must be determined and accounted for on a fund
by fund basis and not for the endowment fund in total.

FASB auxiliary organizations should analyze their endowment investments
in accordance with Financial Accounting Standard Board (FASB)
Statements 117 and 124, and also the FASB Staff Positions (FSP) of
FASB Statements 117-1.

GASB auxiliary organizations should review Governmental Accounting
Standard Board (GASB) Comprehensive Implementation Guide Question
7.24.14 to ensure the net asset classification is properly presented at year
end. Excerpts from GASB and NACUBO on accounting and reporting of
underwater endowments for GASB auxiliary organizations are included as
Attachment G of chapter 8 of the GAAP manual.
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Underwater Endowment Investments
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GAAP Reporting Workshop
Highlight
Underwater Endowment Investments (Cont’d)
Accounting of underwater endowment for FASB organizations (FSP
FASB No. 117-1)
In the absence of donor stipulations or law to the contrary, losses on
permanently restricted endowment funds are recorded as follows:




first to reduce temporarily restricted net assets to the extent that
there is appreciation from the specific underwater fund
accumulated there.
second to reduce unrestricted net assets
the historical dollar value of permanently restricted endowment
funds is not changed by gains or losses unless donors have
indicated that can be accumulated in such funds.
subsequent gains that restore the fair value of permanently
restricted endowment funds to the required level are classified
as increases in unrestricted net assets
Below is an example for accounting of underwater endowments
relating to a specific endowment fund:
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–
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June 2009
GAAP Reporting Workshop
Highlight
Underwater Endowment Investments (Cont’d)

Disclose information to enable users to understand the net asset
classification, net asset composition, changes in net asset composition,
spending policy (ies), and related investment policy (ies) concerning its
endowment funds (both board-designated and donor-restricted)
–
Description of governing board's interpretation of relevant law underlying
net asset classification
–
Composition of endowment by net asset class
–
Endowment roll-forward by net asset class
–
Total underwater amounts, reason for funds being underwater and
disclosure of how accounted for.
–
Depending on the severity of underwater endowments, a discussion of
the institution’s liquidity and operating needs as impacted by these
underwater endowments.
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Disclosures needed of underwater endowment for FASB organizations
(FSP FASB No. 117-1)
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June 2009
GAAP Reporting Workshop
Highlight
Underwater Endowment Investments (Cont’d)
–
Description of endowment investment policy (ies)
–
Return objectives and risk parameters
–
How the objectives relate to spending policy (ies)
–
Strategies for achieving objectives
–
Description of endowment spending (distribution) policy (ies)
–
–
Any change in institution’s spending rate based on underwater
endowments should also be disclosed.
Nature of any significant underwater endowments and how this has
affected endowment distributions in the current year.
Below is a footnote disclosure excerpted from a non-profit
organization’s financial statements provided by KPMG:
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Disclosures needed of underwater endowment for FASB organizations
(FSP FASB No. 117-1) (Cont’d)
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June 2009
GAAP Reporting Workshop
Highlight
Underwater Endowment Investments (Cont’d)
–
–
SGAS 31 is the governing standard for investments.
GASB’s Comprehensive Implementation Guide Chapter 7, Q&A
7.24.14 provides additional guidance for underwater endowment
investments.

–
Allow decreases in donor restricted endowments to directly
reduce the restricted non-expendable net asset class.
There is no specific guidance or example related to disclosures
needed for underwater endowments.
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Accounting and disclosures needed of underwater endowment for
GASB organizations (SGAS 31 & GASB’s Comprehensive
Implementation Guide Chapter 7, Q&A 7.24.14)
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June 2009
GAAP Reporting Workshop
Highlight

As an agency of the State, the CSU is included in the State’s OPEB
actuarial study. Therefore, the amounts of annual required contribution
(ARC), employer contributions, and net OPEB obligation (NOO) are
provided to the CSU by the State Controller’s Office. These amounts
provided by the State are related to the University only and do not include
auxiliary organizations.

Each year, the auxiliary organization should have its own actuarial study
performed in order to report the auxiliary organization’s OPEB obligation
and related footnote disclosures in accordance with GASB No. 45.
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Other Postemployment Benefits (OPEB) Obligation
Under GASB No. 45
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GAAP Reporting Workshop
Highlight

For the year ended June 30, 2009, the IRS has updated information
required to be included in the filing of the Form 990.

Each Auxiliary Organization needs to read and consider the “Form 990 –
Best Practices Document” which is provided by KPMG and summarizes
the changes as well as provides suggested steps, best practices, and safe
harbors. This document is included as attachment E of chapter 8 of the
GAAP manual.

It is important that each auxiliary organization ensure that the necessary
steps and processes/procedures are in place prior to year-end in order to
be able to properly complete the Form 990.
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Internal Revenue Service (IRS) Form 990 Preparedness
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GAAP Reporting Workshop
June 2009
GAAP Reporting Workshop
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Updates on the Supplementary Information
Template
20
Updates on the Supplementary Information
Template

A new line item called “Other postemployment benefits obligation”
(OPEB) has been added.
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Statement of Net Assets (SNA) Update
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GAAP Reporting Workshop
Updates on the Supplementary Information
Template
Statement of Net Assets (SNA) Update (cont’d)
Pollution remediation obligations (GASB 49) should be reported under
other liabilities.
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
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GAAP Reporting Workshop
Updates on the Supplementary Information
Template

No major changes. State and local financial aid grants, noncapital
revenues is broken down into 2 separated lines.
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Statement of Revenues, Expenses, and Changes to Net
Assets (SRECNA) Update
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GAAP Reporting Workshop
Updates on the Supplementary Information
Template
Footnote (Note) Disclosures Update
Note 2.1 Composition of investments
–
Current investments are separated into restricted and unrestricted
columns.
–
Noncurrent investments are separated into restricted and unrestricted
columns.
–
Classify as short-term investment if investment is used for current
operations. Include investment accounts that may be accessed on a
short-term basis (i.e. within the next 12 months) even if the
underlying pool is invested in long-term securities.
–
Classify as other long-term investments if investment is:
1) restricted for withdrawal or use for other than current
operations (i.e. endowments or Perkins loans)
2) designated or restricted for the acquisition or construction of
noncurrent assets
3) designated or restricted for the liquidation of the noncurrent
portion of long-term debt
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
4) restricted as to the liquidity of the investments
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GAAP Reporting Workshop
Updates on the Supplementary Information
Template
Footnote (Note) Disclosures Update (cont’d)
Note 2.1 Composition of investments (cont’d)
–
Common funds will continue to be separately disclosed.
–
Land and other real estate held as investments should be recorded in
fair value (GASB No. 52).
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
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Updates on the Supplementary Information
Template
Footnote (Note) Disclosures Update (cont’d)
Note 2.2 Investments held by the University under contractual
agreements - NEW
–
Only include investments recorded by the auxiliary organization as
investments.
–
Do not include accounts receivable of investments from University in
this line.
–
Campus coordinator needs to make sure the total of this note for all
auxiliary organizations tied to the “On behalf of auxiliary organizations
(Auxiliaries recorded as investments)” line in note 3.3 of the university
footnote.
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
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Updates on the Supplementary Information
Template
Footnote (Note) Disclosures Update (cont’d)


Note 2.3 Restricted current investments
–
List what the restriction is related to and enter the amount
–
The total must agree to the total restricted current investments in
note 2.1
Note 2.4 Restricted noncurrent investments
–
List what the restriction is related to and enter the amount
–
The total must agree to the total restricted noncurrent investments in
note 2.1
GASB 40 disclosure footnote template for auxiliaries participating in
SWIFT will be available on September 1.
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
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Updates on the Supplementary Information
Template

Note 7.2 Calculation of net assets - Restricted for nonexpendable –
endowments - NEW
–
Created to reconcile endowment investments to endowment net
assets.
–
The total balance in this note should tie to the restricted for
nonexpendable endowments net assets balance on the Statement of
Net Assets.
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Footnote (Note) Disclosures Update (cont’d)
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Updates on the Supplementary Information
Template
Footnote (Note) Disclosures Update (cont’d)
Note 8 Transactions with Related Entities
–
In addition to gifts-in-kind, created another gift line for cash or asset
gifts.
–
In addition to accounts receivable and payable from/to auxiliary
organizations, two new lines; other amounts receivable and payable
from/to auxiliary organizations have been added. These lines should
be used for all other receivables or payables that are not disclosed in
accounts receivable or accounts payable from/to University.
–
Transactions with University should agree to the University’ note 14.
Auxiliary organization needs to work with campus coordinator for the
reconciliation of this note between the auxiliary organization and the
University.
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
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GAAP Reporting Workshop
Updates on the Supplementary Information
Template
Footnote (Note) Disclosures Update (cont’d)
Note 9 Other Postemployment Benefits Obligation (OPEB) - NEW
–
the OPEB obligation must be presented separately in the SNA.
–
the NOO ending balance reported in this note must agree with the
OPEB obligation reported on the SNA.
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
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GAAP Reporting Workshop
Updates on the Supplementary Information
Template
Footnote (Note) Disclosures Update (cont’d)
Note 10 Pollution remediation obligations (GASB 49) - NEW
–
Result of GASB Statement No. 49
–
Provide a brief description of the liability and enter the amount
–
Report as other liabilities (current and noncurrent) on the Statement
of Net Assets
–
For PowerPoint presentation of pollution remediation obligations,
please refer to the below link:
http://www.calstate.edu/sfsr/Workshops/2008/GASB_49.pdf
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
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References
Financial Accounting Services Training, Education & Development Portal
–

GAAP Manual 2009
–

http://www.calstate.edu/SFSR/GAAP/Manual2009/gaapmanual.shtml
Auxiliary Organization FIRMS Template 2009
–

https://zeta.calstate.edu:8250/portal/page?_pageid=74,1&_dad=por
tal&_schema=PORTAL
http://www.calstate.edu/SFSR/y-e-r_instructions/20082009/index.shtml
IPEDS Template 2009
–
http://www.calstate.edu/sfsr/
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
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