OSA Update
Katie Thigpen, Audit Supervisor
Holli Harrison, IS Audit Supervisor
NC Office of the State Auditor
Session Etiquette
• Please turn off all cell phones.
• Please keep side conversations to a minimum.
• If you must leave during the presentation, please do so
as quietly as possible.
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Session Topics
Financial Audit Update
Information Systems Audit Update
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Financial Audit Update
Financial Audit Update - Topics
• Summary of Financial Reporting for 2012
• Preview of Financial Reporting for 2013
• Audit Standards Update
• Federal Compliance Audit Scope for 2013
• Materiality and Risk in a Financial Statement Audit
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Summary of Financial Reporting - 2012
Findings/Issues Noted
•
Statement on Auditing Standard 115
Communicating Internal Control Related
Matters Identified in an Audit
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Summary of Financial Reporting - 2012
Findings/Issues Noted
•
No pervasive reportable findings… TOUCHDOWN!
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Summary of Financial Reporting - 2012
Audit Adjustments Posted – Pervasive Items
• Classification
• Invested in Capital Assets, Net of Related Debt
•Unspent Debt Proceeds
•Retainage and Accounts Payable
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Summary of Financial Reporting - 2012
North Carolina Accounting System
•
Fiscal year 2011 – 4 pilot Universities
•
Fiscal year 2012 – all Universities
•
OSA concern – completeness of data file
•
Feedback
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Preview of Financial Reporting – 2013
Financial Reporting Standards Update (GASB)
• GASB 60 – Service Concession Arrangements
• GASB 61 – Financial Reporting Entity (amends GASB 14 & 34)
• GASB 62 – Codification of pre-1989 FASB
• GASB 63 – Deferred Outflows / Deferred Inflows
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GASB 60
Accounting and Financial Reporting for Service Concession
Arrangements
• Definition / Criteria
• Financial Reporting / Required Disclosures
• GASB 60 Flowchart
• Pro forma Impact
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GASB 60
GASB 60 Appendix C
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GASB 61
The Financial Reporting Entity Omnibus (an amendment of
GASB Statements No. 14 and No. 34
• Fiscal Dependency AND Financial Benefit/Burden for
Component Unit Treatment
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GASB 61
The Financial Reporting Entity Omnibus (an amendment of
GASB Statements No. 14 and No. 34
• Fiscal Dependency AND Financial Benefit/Burden for Component
Unit Treatment
• More Restrictive Blending Criteria for Identified
Component Units
13
GASB 61
The Financial Reporting Entity Omnibus (an amendment of
GASB Statements No. 14 and No. 34
• Fiscal Dependency AND Financial Benefit/Burden for Component
Unit Treatment
• More Restrictive Blending Criteria for Identified Component Units
• Additional Criterion for Blending for Identified
Component Units
14
GASB 61
The Financial Reporting Entity Omnibus (an amendment of
GASB Statements No. 14 and No. 34
• Fiscal Dependency AND Financial Benefit/Burden for Component
Unit Treatment
• More Restrictive Blending Criteria for Identified Component Units
• Additional Criterion for Blending for Identified Component Units
• Condensed Combining Information for Blended
Component Units
15
GASB 61
The Financial Reporting Entity Omnibus (an amendment of
GASB Statements No. 14 and No. 34
• Fiscal Dependency AND Financial Benefit/Burden for Component
Unit Treatment
• More Restrictive Blending Criteria for Identified Component Units
• Additional Criterion for Blending for Identified Component Units
• Condensed Combining Information for Blended Component Units
• Reporting an Asset for Equity Interest in Discretely
Presented Component Units
16
GASB 61
The Financial Reporting Entity Omnibus (an amendment of
GASB Statements No. 14 and No. 34
• Fiscal Dependency AND Financial Benefit/Burden for Component
Unit Treatment
• More Restrictive Blending Criteria for Identified Component Units
• Additional Criterion for Blending for Identified Component Units
• Condensed Combining Information for Blended Component Units
• Reporting an Asset for Equity Interest in Discretely Presented
Component Units
• Going Forward / Pro Forma Impact
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GASB 62
Codification of Accounting and Financial Reporting
Guidance Contained in Pre-November 30, 1989 FASB and
AICPA Pronouncements
• No new requirements
• Add to the GASB codification
• No change required for financial reporting
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GASB 63
Financial Reporting of Deferred Outflows of Resources,
Deferred Inflows of Resources, and Net Position
• Background
• Reporting Requirements
• Statement of Net Assets becomes Statement of Net
Position
• Statement of Revenues, Expenses and Changes in
Net Assets becomes Statement of Revenues,
Expenses, and Changes in Net Position
• Pro Forma Impact
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GASB 63
____________________ University
Statement of Net Position
Exhibit A-1
June 30, 2013
Page 1 of 2
ASSETS
Current Assets:
Cash and Cash Equivalents
Restricted Cash and Cash Equivalents
Short-Term Investments
Restricted Short-Term Investments
Receivables, Net (Note _)
Due from Primary Government
Due from State of North Carolina Component Units
Due from University Component Units
Inventories
Hedging Derivatives
Notes Receivable, Net (Note _)
Other Assets
Total Current Assets
Noncurrent Assets:
Restricted Cash and Cash Equivalents
Receivables, Net (Note _)
Restricted Due from Primary Government
Restricted Due from State of North Carolina Component Units
Endowment Investments
Restricted Investments
Other Investments
Hedging Derivatives
Notes Receivable, Net (Note _)
Capital Assets - Nondepreciable (Note__)
Capital Assets - Depreciable, Net (Note _)
Total Noncurrent Assets
Total Assets
$
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
DEFERRED OUTFLOWS OF RESOURCES
Current Deferred Outflows of Resources:
Accumulated decrease in fair value hedging derivatives
Other Deferred Outflows of Resources
0.00
0.00
Total Current Deferred Outflows of Resources
0.00
Noncurrent Deferred Outflows of Resources:
Accumulated decrease in fair value hedging derivatives
Other Deferred Outflows of Resources
0.00
0.00
Total Noncurrent Deferred Outflows of Resources
0.00
Total Deferred Outflows of Resources
0.00
Total Assets and Deferred Outflows of Resources
0.00
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GASB 63
LIABILITIES
Current Liabilities:
Accounts Payable and Accrued Liabilities (Note _)
0.00
Due to Primary Government
0.00
Due to State of North Carolina Component Units
0.00
Deposits Payable
0.00
Funds Held for Others
0.00
Unearned Revenue
0.00
Interest Payable
0.00
Obligations Under Reverse Repurchase Agreements
0.00
Hedging Derivative Liability
0.00
Short-Term Debt
0.00
Long-Term Liabilities - Current Portion (Note _)
0.00
Total Current Liabilities
0.00
Noncurrent Liabilities:
Deposits Payable
0.00
Funds Held for Others
0.00
U. S. Government Grants Refundable
0.00
Funds Held in Trust for Pool Participants
0.00
Hedging Derivative Liability
0.00
Long-Term Liabilities (Note _)
0.00
Total Noncurrent Liabilities
0.00
Total Liabilities
0.00
DEFERRED INFLOWS OF RESOURCES
Current Deferred Inflows of Resources:
Deferred Inflows of Resources Under Service Concession Arrangements (Note _)
0.00
Accumulated increase in fair value hedging derivatives
Other Deferred Inflows of Resources
Total Current Deferred Inflows of Resources
0.00
0.00
Noncurrent Deferred Inflows of Resources:
Deferred Inflows of Resources Under Service Concession Arrangements (Note _)
0.00
Accumulated increase in fair value hedging derivatives
Other Deferred Inflows of Resources
Total Noncurrent Deferred Inflows of Resources
0.00
0.00
Total Deferred Inflows of Resources
0.00
Total Liabilities and Deferred Inflows of Resources
0.00
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GASB 63
NET POSITION
Invested in Capital Assets, Net of Related Debt
0.00
Restricted for:
Nonexpendable:
Scholarships and Fellowships
0.00
Research
0.00
Endowed Professorships
0.00
Departmental Uses
0.00
Loans
0.00
Restricted for Specific Programs
0.00
Other
0.00
Expendable:
Scholarships and Fellowships
0.00
Research
0.00
Endowed Professorships
0.00
Departmental Uses
0.00
Loans
0.00
Capital Projects
0.00
Debt Service
0.00
Restricted for Specific Programs
0.00
Other
0.00
Unrestricted
Total Net Position
0.00
$
0.00
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Highlights for Financial Reporting – 2013
Pro Forma Update – 2013
Financial reporting follows GAAP.
The pro forma is provided to be a guide (not all
inclusive)
Availability of Pro Forma (www.ncauditor.net)
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Auditing Standards Update – 2013
No impact on fiscal year 2013 audits
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Federal Compliance Audits – 2013
Federal Programs Selected For Audit
• Research and Development Cluster
• Student Financial Assistance Cluster
• Higher Education Grant
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Audit Risk and Materiality
Concept of Materiality
• Financial Reporting
• Auditing
Determining Materiality
• Quantitative Factors
• Qualitative Factors
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Information Systems Audit Update
• Summary of 2012 IS Audit Procedures
• Common Opportunities for Improvement - 2012
• Preview of IS Audit Procedures for 2013
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Summary of 2012 IS Audit Procedures
2012 – Third Year of Financial/IS Audit Partnership
Years one & two – no formal communication of IS issues to
Universities
• Concerns were communicated verbally to frontline IT
staff
• Issues with potential financial impact noted in financial
audit workpapers
• Financial auditors found end-user controls to mitigate
IS audit concerns
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Summary of 2012 IS Audit Procedures
2012 – Third Year of Financial/IS Audit Partnership
Year three – formal communication of IS issues to CIO
• NOT findings in the Financial Statement audit
• “Opportunities for Improvement”
Goal – help you avoid findings in an IT audit
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Common Opportunities for Improvement - 2012
• IT Risk Assessments incomplete or outdated
• Disaster Recovery plans not tested
• Inadequate separation of duties between programmers
and DBAs
• Lack of access rights recertification on the server,
database and/or network
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Common Opportunities for Improvement - 2012
• Less than optimal password settings
• End users with local administrator access (can override
controls)
• Insufficient monitoring of network equipment and events
• Excessive number of privileged users on the network
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Preview of IS Audit Procedures for 2013
• Continue to work with Financial Audit
• New workpaper methodology this year – different
understanding of IT controls
• Goal – improve efficiency of partnership so we have time
for in-depth IT audits
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