The meeting was convened at 1:35 PM in Room 4N30 of the GAO Building, 441 G St., N.W., Washington, D.C.

ADMINISTRATIVE MATTERS

Attendance

Members Payne, Dacey, David, Friedman, Lane, Lund, Pugh, Schaeffer, and Short attended.
Attending for Mr. Kull was Mr. Al Muhlbauer, Deputy CFO of the National Science Foundation. Ms. Jordan was absent.

Minutes

Copies of the final June 11 minutes were at each member's place, having been approved by members via e-mail.

AGENDA ITEMS

Credit Reform

Ms. Payne noted that the Credit Reform Task Force has prepared a revised draft, dated today, of the Technical Release, which was just distributed to AAPC members. Ms. Payne noted that changes, including the ones supplied by Ms. Jordan and others made as a result of the June AAPC meeting, have been made and are marked in the new draft. The primary change is to make the language less prescriptive and provide for more auditor judgment. AAPC members agreed that the changes satisfied their concerns and that the task force had done an excellent job.

There is ongoing discussion among task force members on the application of the 90% disbursement rule when doing a reestimate. A proposed change, not in the version just prior to the current version, is on page 16, paragraph 47, which deals with the expressed concern that the 90% rule may not be within the bounds of the accounting standard. After the task force has dealt with this concern and is satisfied with their changes, they will then send it to the AAPC for approval. Because of this ongoing consideration, the vote will not be taken by AAPC until the task force has completed the document.

Inter-entity Costs

Mr. James Short, chair of the inter-entity costs task force, reported on the status of work done so far. By way of background of the task force, Mr. Short said that Ed deSeve, OMB Deputy



Director for Management, has asked AAPC to set up a work group to look into the whole issue of inter-entity costs. Mr. Short reported that he has had 11 people so far to volunteer to be members of the task force. He has met with various key people from AAPC, FASAB, GAO, and OMB to brainstorm on the whole area of inter-entity costs.

A result of this meeting was the realization that the topic of inter-entity costs is so large that it will need to be broken down into three parts:

(1) Broad-based inter-entity costs programs that impact the government overall. He cited a July letter from Ed deSeve to all agency heads which identifies four areas of such broad-based inter-entity costs that are to be included in FY 1998 and FY 1999 financial statements. (Examples are OPM pension costs, Judgement Fund costs, and health insurance costs); he noted that a previously done study on cost accounting had identified certain large programs that benefit other government agencies;

(2) Broad-based program inter-entity costs that impact many agencies; and

(3) Those inter-entity costs shared among just two or three agencies.

An Inter-Entity Home Page will be established to provide background information on the inter-entity cost task force work; to communicate and educate people on what the task force is doing; and to solicit additional volunteers from people of various financial management backgrounds, such as budget analysts and auditors. Information on this very large undertaking will be provided in the FASAB Newsletter.

Mr. Bill Pugh, chair of the Nonvalued Seized and Forfeited Property AAPC task force, led off the discussion. He said that the task force has considered what information should be presented in agency financial statements. They also considered how consistent the information should be between agencies. The Departments of Treasury and Justice are the main agencies with property-seizing authority. He noted that some comments have been received on the document distributed to AAPC members at the June meeting. The document will be posted on the AAPC home page, with comments invited. No vote will be taken on the document today. He invited members of the Nonvalued Seized and Forfeited Property task force to discuss the various issues the task force has raised. The members of the task force present were: Co-chairs Marla Friedman (Treasury IG staff) and Marilyn Kessinger (Justice), members Clayton Byers (Treasury), Neil Ryder (Justice), Rick Wascak (FASAB), and Tom Smith (Customs Service).

Ms. Friedman briefly summarized the history of the task force development. She identified the two issues before the task force as follows:

- Issue 1. Should Statement of Federal Financial Accounting Standard No. 3, Accounting for Inventory and Related Property, apply to non-valued seized items in the same manner as it applies to non-valued forfeited items?

- Issue 2. Should terms contained in Statement of Federal Financial Accounting Standard No. 3, Accounting for Inventory and Related Property, be clarified for consistent and meaningful reporting among Federal agencies?

She also highlighted the "Measurement of Non-Valued Items" table at the end of the document being considered. Discussion centered on the issue of consistency of units of measurement for the various categories. A related element of this discussion was the observation of complications for reporting for agency financial statement and performance statements caused by inconsistent units of measurement.

Mr. Pugh, Chairman of the Agenda Committee, reported that the National Oceanic and Atmospheric Administration (NOAA) in a letter, dated July 20, 1998, posed four questions regarding two areas affecting NOAA's FY 1998 consolidated financial statements and accompanying supplemental reporting information. Their query, as Issue 16, follows:

Issue 16

NOAA has submitted four questions regarding accounting treatment for sanctuaries, estuarine resources, multi-use heritage assets and custodial activities.

Agenda Committee Recommendation

Questions 1 and 2 - on sanctuaries and estuarine resources - in NOAA's letter appear to be narrow technical issues regarding the application of SFFAS #8 to NOAA operations. Questions 3 and 4 - on multi-use heritage assets and custodial activities - are issues that are already addressed in current standards. The Agenda Committee recommends that the AAPC respond to each of these questions to NOAA in a technical guidance letter.

In discussion, AAPC members opted to consider the issues further, as members differed on their interpretations of portions of the standards and form & content. Mr. David suggested that Ms. Payne also talk informally with NOAA.

After further discussion on various ways of responding to the specific points in the issue, AAPC members agreed to collaborate on a substantive response and be prepared to act on it at the September AAPC meeting.

During the discussion on how best to respond to the request from NOAA, AAPC members felt that, in cases where the AAPC does not formally add a particular issue to its agenda, as an alternative, AAPC could discuss the issue with the requesting agency and provide support and assistance in that way. This would be in addition to sending a letter to the agency. This kind of approach would not only help the agency but also identify any aspect of the review of the issue AAPC may have missed.

Other Matters

Ms. Payne noted that AAPC is now one year old, the first meeting having been held July 16, 1997. Ms. Payne encouraged members to suggest any changes they may wish to the AAPC Mission Statement and to the operating procedures. She has copies of the various documents.

Mr. David felt that AAPC has done a good job in problem-solving and is achieving its mission. Specifically, he noted that the strength of AAPC is that it has identified and implemented several methods to help agencies deal with accounting auditing issues, such as task forces, seminars, etc. These efforts have been a real strength of AAPC and should continue.

NEXT MEETING

The next scheduled meeting will be held Thursday, September 10 at 1:30 P.M. in Room 4N30.

ADJOURNMENT

The meeting was adjourned at 2:40 P. M.