As we previously reported, the American Institute of Certified Public Accountants (AICPA) has recognized FASAB as the body that promulgates generally accepted accounting principles for Federal reporting entities (see FASAB News Issues 58, 59 and 60). As a result of that action, the Auditing Standards Board has published Statement on Auditing Standards 91, Amendment to Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles in the Independent Auditor’s Report. This will be codified in AICPA’s Professional Standards, vol. 1, AU sec. 411). This establishes the generally accepted accounting principles, or GAAP, hierarchy for Federal financial reporting entities. Statement of Federal Financial Accounting Concepts (SFFAC) 2, Entity and Display, defines Federal financial reporting entities. The new federal GAAP hierarchy is as follows:

1. Category (a), officially established accounting principles, consists of Federal Accounting Standards Advisory Board (FASAB) Statements and Interpretations, as well as AICPA and Financial Accounting Standards Board (FASB) pronouncements specifically made applicable to Federal governmental entities by FASAB Statements or Interpretations. FASAB Statements and Interpretations will be periodically incorporated in a publication by the FASAB.
2. Category (b) consists of FASAB Technical Bulletins and, if specifically made applicable to Federal governmental entities by the AICPA and cleared by the FASAB, AICPA Industry Audit and Accounting Guides and AICPA Statements of Position.
3. Category (c) consists of AICPA Accounting Standards Executive Committee (AcSEC) Practice Bulletins if specifically made applicable to Federal governmental entities and cleared by the FASAB, as well as Technical Releases of the Accounting and Auditing Policy Committee of the FASAB.
4. Category (d) includes implementation guides published by the FASAB staff, as well as practices that are widely recognized and prevalent in the Federal government.
5. In the absence of a pronouncement covered by rule 203 or another source of established accounting principles, the auditor of financial statements of a Federal governmental entity may consider other accounting literature, depending on its relevance in the circumstances.

Statement of Federal Financial Accounting Standards (SFFAS) 18, Amendments to Accounting Standards for Direct Loans and Loan Guarantees in SFFAS No. 2, was adopted in February 2000. It was the first FASAB standard to undergo the new approval procedures established in October 1999. SFFAS 18 went through a 90-day review by FASAB Principals, and became final on May 19, 2000.

SFFAS 18 provides new requirements to improve financial reporting for subsidy costs and performance of Federal credit programs. (See FASAB News Issue 60 for details on both the Rule 203 procedural changes, and on the content of SFFAS 18).

The Board originally addressed accounting for Federal loan programs in 1993 in its Statement of Federal Financial Accounting 2 (SFFAS 2), Accounting for Direct Loans and Loan Guarantees. On May 19, 2000, as described in the above article, the Board issued SFFAS 18, Amendments to Accounting Standards for Direct Loans and Loan Guarantees. SFFAS 18 provides entity-wide reconciliation of the loan subsidies (see FASAB News Issue 60 for more details).

On May 10, 2000, the Board issued an exposure draft on reconciling the subsidy cost allowance for direct loans and loan guarantees on a program level within each agency. The exposure draft was issued to refine the reconciliation requirement adopted in SFFAS No. 18.

The proposed standard would require that in a note to their financial statements, reporting entities display for each major program as well as for the entity as a whole (per SFFAS 18) reconciliations between the beginning and ending balances of (a) the subsidy cost allowance for direct loans and (b) the liability of loan guarantees. Entity management would be responsible for identifying major programs based on each reporting entity’s circumstances. The proposed standard states that the major programs that are reconciled individually should constitute at least 75 percent of the face amount of the reporting entity’s outstanding direct or guaranteed loans. The reconciliation of other programs should be displayed in aggregate.

Respondents are requested to comment on the specific questions posed by the Board, and on the program-by-program reconciliation requirement. Since the entity-wide reconciliation requirement has been adopted in SFFAS 18, it is not a subject for comment. Respondents also are requested to comment on proposed technical amendments to SFFAS 2.

In the world of Federal accounting and reporting, Stewardship Responsibilities as defined by the FASAB include:

• "risk assumed" information (SFFAS 5, Accounting for Liabilities of the Federal Government),
• the "current services assessment" (CSA) (SFFAS 8, Supplementary Stewardship Reporting), and
• "social insurance" information (SFFAS 17, Accounting for Social Insurance).

In that same world, Stewardship Property, Plant, & Equipment (PP&E) (SFFAS 6, Property, Plant, & Equipment, and SFFAS 8, Supplementary Stewardship Reporting) includes:

• "heritage assets,"
• "stewardship land," and
• "National defense PP&E."

Information about these items is currently designated "Required Supplementary Stewardship Information" (RSSI). RSSI is a category unique to Federal financial reporting. The Board intended RSSI to be similar to basic information in terms of the auditor’s reporting requirements, but the Board contemplated that special guidance regarding the auditor’s fieldwork would be provided.

In April the Board made tentative decisions about the future classification of information on stewardship responsibilities, heritage assets, and stewardship land (National defense PP&E is being addressed in a separate project) if the RSSI category is eliminated. These tentative decisions are describe below. After being confirmed by the Board, the decisions will be exposed for public comment.

The Board agreed that information about "risk assumed," should be Required Supplementary Information (RSI) rather than basic information. One member, while acknowledging the difficulty in auditing the information, said that it should be basic because it is important. The other members believe the information should be RSI because the numbers are not sufficiently reliable and measurement methods are still experimental.

Some Board members expressed reservations about requiring the CSA as currently defined. For purposes of April’s discussion, however, the Board focused on how to classify the CSA as currently defined. Within that context, all members prefer RSI treatment.

One member said that social insurance information should be RSI because of the nature of the information. The other members believe it should be basic information.

The Board generally agreed that information on these items was of importance in meeting the Board objectives of providing useful, reliable data to users and decision-makers, was auditable, and therefore should be basic information. However, the Board supported the notion that information on condition should continue to be RSI because those numbers are not sufficiently reliable and measurement methods are still being developed.

At the April Board meeting, Woody Jackson, of KPMG gave a slide presentation to the Board on KPMG’s study of the Department of Defense’s acquisition process for property, plant, and equipment (PP&E) (see FASAB News Issue 60 for more background). The slide presentation showed that for national defense’s property, plant, and equipment:

• the acquisition and investment process is complex and lengthy, and involves multiple acquisition phases, decision milestones, and continuous modifications;
• the costs include Research, Development, Test, and Evaluation (RDT&E), prime equipment, and components critical to national defense property effectiveness;
• a weapons system generally consists of assets that may come from multiple acquisition programs; and
• the current reporting:

• focuses on 1) budget authority and 2) estimates of cost, scheduling, and performance, and
• is designed for 1) internal management oversight and 2) Congressional oversight of major acquisition programs.

The Board will review the presentation materials and provide any questions to KPMG.

On May 11, 2000, the Accounting and Auditing Policy Committee (AAPC, or the Committee) held its first meeting of the calendar year. The AAPC noted the departure of Joe Kull, of the National Science Foundation, and James Short, of the Office of Management and Budget. It also welcomed two new members, De Ritchie, representing the Department of Defense and the Chief Financial Officer’s Council, and David Zavada, representing the Office of Management and Budget.

Liabilities Covered and Not Covered by Budgetary Resources: FASAB staff continues to work with the Office of Management and Budget to more clearly define "liabilities covered by budgetary resources" and "liabilities not covered by budgetary resources."

Inter-entity Costs: The Committee reviewed a draft Survey on Inter-Entity Costs prepared by the FASAB staff. The draft survey is designed to assess the scope of inter-entity costs that are not reimbursed, or only partially reimbursed. Once the survey has been reviewed and approved, the AAPC will distribute the survey to the Chief Financial Officers of Federal agencies, who will have until the end of the summer to respond. The committee will use the survey results to identify specific inter-entity costs incurred by agencies and determine whether they meet the recognition criteria in SFFAS 4, Managerial Cost Accounting Concepts and Standards.

Stewardship Land and Heritage Assets: The AAPC task force on Stewardship Land and Heritage Assets is continuing its regular meetings to develop an implementation guide for agencies to report stewardship land and heritage assets in consonance with the changes to stewardship reporting being deliberated by the FASAB.

Investments in Treasury Securities Not Expected to be Held to Maturity: The Railroad Retirement Board submitted this issue to the AAPC. After initial research, the Committee determined that there may be a need for an accounting standard. Consequently, they decided to refer the issue to the FASAB.

Proposed Implementation Guide to SFFAS 10, Accounting for Internal Use Software. The CFO Council submitted this issue. AAPC member Frank Sullivan, Deputy Chief Financial Officer of the Department of Veteran’s Affairs, will chair this task force.

Request for Guidance on Grant Accounting: This issue, submitted by the Federal Aviation Administration, deals with recognizing a liability for expenses incurred by a grantee after a letter of intent has been issued but before the grant agreement is executed. AAPC member Luise Jordan, Inspector General for the Corporation for National and Community Service, will chair this task force.

June 8-9

July 3 *

August 10-11

October 5-6

December 7-8

*There will be a special FASAB meeting held on July 3 in San Francisco at the Association of Government Accountants Professional Development Conference.

July 13

September 14

November 9