VGFOA SPRING CONFERENCE 2011
What’s New in Local Government Accounting &
Auditing
_____________________________________
June 8, 2011
Auditor of Public Accounts
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Session Topics
• Discuss results of QCRs of Virginia local
government audits
• Discuss activities within the APA impacting
local governments including recent legislative
changes
• Discuss pending changes in auditing standards
• Discuss potential impact of recent federal
regulations
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Results of 2010 Quality Control Reviews
_____________________________________
Discuss results of QCRs on Virginia
local government audits
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Sampling
• Document all requirement elements
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Is sample representative of the population
Method of selection
Is sample size appropriate
Tolerable deviation rate
Evaluate results of test
• Sample sizes
– AICPA has chart of recommended sizes
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Single Audit Testwork and Documentation
• Test all applicable compliance requirements
and document evidence of tests
• Must obtain an understanding and test
internal control structure surrounding
compliance requirements
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Single Audit Testwork and Documentation
• Ensure Schedule of Federal
Expenditures of Federal Awards is
properly prepared and includes all
required elements
• Ensure sample sizes are appropriate
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Audit Documentation - Overall
• Document all audit evidence to support audit
objective conclusions
• Oral explanations do not provide sufficient
evidence
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Risk Assessment
• Required to perform risk assessment
procedures
– To obtain an understanding of the entity and its
environment
– To assess risk of material misstatement at the
financial statement and relevant assertion levels
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Risk Assessment
• Must gain an understanding of internal
control even if are going to take a
substantive approach
• Can no longer just default to high control
risk without gaining an understanding
• If decide to indicate high control risk
because a substantive approach is more
efficient, must document
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Independence
• When auditor assists with preparing the
financial statements or Schedule of
Expenditures of Federal Awards, ensure
documentation includes consideration of
auditing standards on independence
• Standards require that auditor obtain
documentation that management acknowledges
auditor’s role and approves changes made by
auditor
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Legal Letter
• Legal letter should be obtained prior to the
release of the report
• Provides evidence that supports the audit
opinion
– Report should not be dated earlier than the date
the auditor has obtained sufficient appropriate
audit evidence to support the opinion
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
State Compliance Requirements
• Perform applicable tests of compliance and
accounting transactions unique to Virginia
localities
• Document all evidence to support results of
tests performed and conclusions reached
• When sampling, select appropriate number
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Local Government Update
_____________________________________
Upcoming Changes (Website and Transmittal Forms)
Legislative Update
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Addition of CAFRs to APA Website
• Plan to make available on our website
electronic copies of locality CAFRs
– Most likely on Commonwealth Datapoint
• Will encourage electronic submission in the
future (is voluntary now)
• Reminder that APA website has a section
dedicated to Local Government (Audit Specs,
alerts, Comparative Report)
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Comparative Report
• Continue to move toward distributing the
Comparative Report in electronic format
• Are modifying forms to improve electronic
viewing option
– Currently formatted primarily for printing
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Legislative Update – Senate Bill 1271
• Requires the APA as part of its annual audit
of the Department of Taxation to perform a
review of the collection and distribution of
the Retail Sales and Use Tax focusing on the
collection and distribution of local sales and
use taxes
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Legislative Update – Senate Bill 1271
• Fiscal year 2011 and 2012 review:
– Review Taxation’s policies and procedures and
audits performed
– Review local officials procedures to identify
entities that have not paid sales and use taxes
and how Taxation could coordinate and assist
local officials
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Legislative Update – Senate Bill 1271
• Fiscal year 2011 and 2012 review:
– Review Taxation’s procedures for identifying
proper county or city for distribution of local
sales and use taxes
– Review Taxation’s coordination with local
officials to determine what information both
groups can share and how to coordinate
activities to enhance collections and accuracy of
distribution
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Legislative Update – Senate Bill 1271
• Fiscal year 2011 and 2012 review:
– APA make recommendations for improvements
to Taxation and local officials policies and
procedures
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Legislative Update – Senate Bill 1271
• Fiscal year 2013 review:
– APA recommend annual benchmarks for
evaluating the effectiveness of Taxation’s local
retail sales and use tax collection and
distribution process
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Update to Sheriff’s Manual and Audit Requirements
• Reviewing New Procedures for
– ATMs
– Internet Sales
– Billing for Room and Board and Fines and Cost
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
New Accounting Standards
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Accounting Standards
• GASB 54 is effective for this year.
• One item of note is GASB pension project
which may impact how multiple-employer
report cost sharing pools.
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Potential Impact of Recent Federal Regulations
_____________________________________
Dodd-Frank Act
Tax Increase Prevention and Reconciliation Act
Proposed Public Employee Pension Transparency Act
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Dodd-Frank Act
• Requires studies of municipal securities
market and of the role and importance of the
GASB
– GAO has issued report on GASB Funding and
Role in Municipal Market
(http://www.gao.gov/products/GAO-11-267R)
– Timeliness of financial statements is discussed
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Tax Increase Prevention and Reconciliation Act
• Passed in 2006
• Requires governments to withhold three
percent of their payments for many goods
and services and remit the withheld amount
to the federal government
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Tax Increase Prevention and Reconciliation Act
• Applies to federal, state, and local government
entities with annual aggregate payments of
$100 million or more for goods and services
• Implementation date is December 31, 2011
• Some groups are pushing for repeal of the
requirement
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Tax Increase Prevention and Reconciliation Act
• Withholding requirement applies to most
payments
• IRS has provided some guidance
– Established $10,000 threshold
– Requirement will not apply to payment card
transactions until further guidance is issued
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Tax Increase Prevention and Reconciliation Act
• Exempt payments include:
– public assistance and welfare program payments
where eligibility is needs or income based
– Interest
– Payments for real property
– Payments to tax-exempt entities
– Intra-governmental payments
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Proposed Public Employee Pension Transparency
Act
• Challenges the validity of current state and
local government accounting rules and
practices
• Mandates federal reporting requirements on
state and local governments regarding
pension costs
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Proposed Public Employee Pension Transparency
Act
• Requires reporting of financial data in
accordance with market value of assets and
liabilities, which is contrary to GASB’s
current pension standards
• Prohibits any future federal bailout related to
current or future shortfalls of any state or
local government pension plan
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
Proposed Public Employee Pension Transparency
Act
• State and local governments that fail to meet
the reporting requirements will be denied a
federal tax benefit for any specified bond
issued during the non-compliance period
http://www.apa.virginia.gov
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VGFOA SPRING CONFERENCE 2011
QUESTIONS?
http://www.apa.virginia.gov
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