Members Payne, Dacey, David, Friedman, Jordan, Lane, Pugh, Schaeffer, and Short attended. Also, attending for the first time was Mr. Allan Lund, from FMS in the Department of the Treasury. Mr. Lund is replacing Ron Longo, who has retired from Treasury. Attending for Mr. Kull was Mr. Al Muhlbauer, Deputy CFO of the National Science Foundation.

Copies of the final May 14 minutes were at each member's place, having been approved by members via e-mail.

Ms. Payne noted that the AAPC members had been asked to approve a document prepared by the AAPC task force on Credit Reform (formerly the Government-wide Audited Financial Statements Task Force on Credit Reform) and entitled Preparing and Auditing Direct Loan and Loan Guarantee Subsidies under the Federal Credit Reform Act. She explained that the task force had made some changes based on ASAB staff input and that the changes had been faxed to them on June 10th. A brief review of the changes was undertaken and no objections were noted.

AAPC members were concerned that the document did not provide for auditor judgment and was too prescriptive for auditors. A member asked if flexibility is allowed for the auditor to deviate from stated procedures and wondered how prescriptive the document should be. Should the guidance be couched in terms of "preferred practices"? Mr. Short, chair o the task force, sees the document as technical guidance, a document that both preparers and auditors can use. A question was raised about the use of sensitivity analysis.

In the last paragraph under "Identifying Key Estimate Assumptions" on page 23, it was agreed to change the first sentence to read as follows: "Auditors might consider performing a sensitivity analysis." There was also discussion about the revised paragraph (c) on page 20 on the treatment of the materiality of major events following the Jne 30 re-estimate.

The members agreed that there should be flexibility to permit auditor judgment and that changes should be made to the document. Ms. Jordan and Mr. Pugh will provide their notes on the draft to Ms. Shirley Abel (GAO), who led the group authoring the document. Also, AAPC members agreed that changes would be made throughout the text of the draft that deal with aditing procedures to eliminate text that, for example, specifies the minimum an auditor must do. That is, the thrust of the document must be on the flexibility of the auditor to exercise professional judgment. Additionally, it was noted and AAPC members agreed that the draft provide that an auditor should consider the possible need for an expert during the course of an audit.

Mr. David asked for consideration of the issue of conflicting definitions of "modifications" raised in the USDA IG May 26 letter to the AAPC. The letter points out that the Balanced Budget Act of 1997 changed the definition of modifications in a manner that appears to include administrative workouts, which conflicts with the language in the AAPC draft. Also, the letter says that USDA has received conflicting guidance from OMB on whether the change in the definition of a modification impacts the accounting treatment of direct loans and loan guarantees.

The letter requests that the AAPC consider the impact of the changed definition on the SFFAS 2 standards. The task force members agreed to work with USDA IG and with FASAB staff to resolve the issue in the next draft.

AAPC Credit Reform Task Force members will send a revised version of the draft Technical Release to AAPC members for their review, and have it ready for their approval at the August meeting. It was noted that the draft should include some identification of the changes made since the first draft was provided.

A member asked for a status report on the issues that are before FASAB relating to Credit Reform. Ms. Payne noted that FASAB staff is currently conducting a user needs survey to assist the Board in considering amendments to the disclosure requirements in SFFAS 2. She will convey the survey results to AAPC members.

Mr. Pugh, Chairman of the Agenda Committee, provided the following three recommendations for consideration by the AAPC:

- Issue 13. When should bills issued by the Royalty Management Program (RMP) of the Mineral Management Service (MMS), Department of the Interior, be recorded as an accounts receivable? The MMS request related to specific and clear guidance in SFFAS 7, Accounting for Revenue and Other Financing Sources, for treatment of MMS revenue. The recommendation was not to add this issue to the AAPC agenda now, since the accounting treatment proposed by MMS would require a change in FASAB revenue accounting standards. The AAPC agreed not to add it to its agenda; Ms. Payne will respond to the request letter from Interior, declining to add the issue to AAPC's agenda and explaining why.

-Issue 14. Should AAPC sponsor a task force to consider guidance on stewardship reporting for stewardship land and heritage assets? The recommendation was to accept this request to sponsor the task force. However, each issue will be further developed before being considered for AAPC action. To help ensure equitable representation on the task force, Ms. Payne recommended that AAPC member Dacey (GAO) and someone from Interior serve as co- chairs of the task force. In addition, it was proposed that the working group of the task force be large enough to encompass all affected groups.

-Issue 15. Should the issues raised by a task force comprised of representatives from agencies with property-seizing authority, primarily Treasury and Justice, with recommendations for consistent reporting of non-valued and forfeited items in accordance with SFFAS 3, be added to the AAPC agenda? The AAPC agreed to add this item to its agenda. Mr. Pugh agreed to chair the AAPC group to review the work of the task force and make appropriate recommendations to the AAPC. Additional members will be AAPC members Lund and Kull, FASAB staff member Rick Wascak, as well as representatives from other interested agencies.

On inter-entity costs, AAPC member Short reported that he has about 11 people to meet in late July on the issue.

It was decided to cancel the July meeting. The next scheduled meeting will be Thursday, August 13 at 1:30 P.M.in Room 4N30.

The meeting was adjourned at 3:25 P.M.