ACCOUNTING AND AUDITING POLICY COMMITTEE MEETING

 

FINAL MINUTES

July 13, 2000

 

The meeting was convened at 1:32 p.m. in room 4N30 of the GAO Building, 441 G St., N.W., Washington, D.C.

   

Administrative Matters

    

· Attendance

    

Present:  Ms. Payne, Mr. Fred Doggett (for Mr. Friedman), Mr. Eisenhart, Ms. Kim Grier (for Mr. Zavada), Ms. Jordan, Ms. Janet Krell (for Mr. Dacey), Mr. Allan Lund (for Mr. Stout), Messrs. Pugh and Ritchie.

 

Absent: Messrs. Dacey, Friedman, Lane, Stout, and Zavada.

    

· Minutes

 

The minutes of May 11, 2000 were previously approved as final, having been circulated by        e-mail to members.

    

· AAPC Member Vacancy

 

Ms. Payne noted the retirement of Mr. Frank Sullivan from the Department of Veteran Affairs has left a vacancy on the Committee.  The CFO Council has plans to name a replacement for   Mr. Sullivan.

 

· AACP Revised Charter and Operating Procedures

 

 Ms. Payne noted that the AAPC Charter and Operating Procedures were being revised due to the AICPA Rule 203 status gained by the FASAB.  The FASAB Steering Committee is currently reviewing the revisions.  Final changes from the Steering Committee are expected in August.

 

Agenda Status

 

· Open Project Updates

           

Issue #21 Liabilities Covered and Not Covered by Budgetary Resources

 

Ms. Geier noted that OMB plans to address this issue in the new Form & Content Bulletin, which will be applicable for Fiscal Years (FY) beginning 2001.  This ongoing project of the AAPC deals with disclosure of liabilities as either “liabilities covered by budgetary resources” or “liabilities not covered by budgetary resources,” in accordance with SFFAS 1, Accounting for Selected Assets and Liabilities. 

           

Issue #11 Inter-entity Costs

 

The Inter-Entity Costs survey has been revised to include more general questions, that will be followed-up by specific questions.  The survey is made up of a series of questions directed to inter-entity costs that are not fully reimbursed by the receiving entity or are not reimbursed at all. The survey will assist the AAPC in identifying specific inter-entity costs that are being incurred by agencies, study their nature, and determine whether they meet the recognition criteria specified in SFFAS 4.

 

OMB also plans to incorporate its Memorandum on Technical Guidance for the Implementation of Managerial Cost Accounting Standards for the Federal Government (dated April 6, 1998) in the new Form & Content Bulletin for financial statements covering FY 2000.

           

 Issue #24 Supplemental Guidance to SFFAS 10, “Accounting for Internal Use Software”

 

The Chief Financial Officers Council (CFOC) requested that the AAPC consider issuance of an implementation guide, SFFAS 10 Implementation Topics/Issues, developed by a CFO Council task force which provides supplemental guidance to agencies implementing SFFAS 10.

 

The AAPC task force, chaired by Frank Sullivan, met to review the guidance provided by the Council.  The group reviewed the 22 guidance topics and categorized them into the following groups as recommendations to the Committee:   

n   Refer issue to FASAB -- (2 issues)

n   The issue is a non-issue or not within the scope of the AAPC or FASAB -- (12 issues)

n   The issue is adequately covered in the current FASAB standards -- (2 issues)

n   The issue should be addressed by the AAPC -- (6 issues)

 

The two issues referred to the FASAB dealt with allowing Federal entities to retroactively capitalize systems in progress before 9/30/2000, the effective date for SFFAS 10.  The FASAB discussed this subject at its June 8, 2000 meeting.  A proposal to amend the standard to permit retroactive capitalization was voted on by the Board and defeated by a narrow margin.  A letter was sent to the CFOC noting the Board’s action.

 

Mr. Eisenhart suggested that the CFO Council publish a “Question & Answer” article to present its views on those guidance topics noted as “a non-issue, not within the scope, or adequately covered” by the AAPC task force.  Ms. Payne noted that this article could be viewed as “Other Accounting Literature” in the Federal GAAP Hierarchy outlined in AICPA SAS 91, as long as the information in the article does not conflict with any “Established Accounting Principles.”         Ms. Jordan suggested that the Committee consider sponsoring a forum on implementing     SFFAS 10.

 

With respect to the classification of the issues proposed by the task force, none of the committee members offered suggestions to change the categorization.  The task force plans to meet again before the next AAPC meeting to make its final recommendations to the Committee on those guidance topics accepted for review.

 

AAPC member Bill Pugh agreed to take over the position of task force chair since the retirement of Mr. Sullivan.  AAPC members Larry Eisenhart and De Ritchie also serve on the task force.

                   

Issue #25 Federal Aviation Administration’s request for guidance on Grant Accounting

 

At the May AAPC meeting, the Committee agreed to accept a grant accounting issue from the Federal Aviation Administration (FAA).  The FAA requested policy guidance on a grant accounting issue that deals with the liability recognition by FAA (the grantor) for expenses incurred by a grantee when the grantee incurs costs after a letter of intent has been issued by the FAA but prior to the execution of the grant agreement.

 

AAPC member Luise Jordan is chairing the task force and AAPC members Bob Dacey and Jay Lane will also serve on the task force.

 

The task force met in late June to discuss the issues raised by FAA.  The task force agreed that the issues (primarily the recognition of the liability for letters of intent) merited further research and discussion.  Ms. Jordan also obtained additional information from the FAA and DOT audited financial statements and through discussions with DOT OIG in their role as the financial statement auditors.  The task force also plans to hold discussions with the CFO Council Grant Accounting Committee to gather information as to the extent of letters of intent at other agencies and how they are accounting for such agreements.  The task force has also made arrangements to meet with other DOT and FAA officials to learn more about the events surrounding this issue, as well as other letter of intent issues being addressed by other component organizations within DOT (for example, the Federal Highway Trust Fund). 

 

It was noted that on May 1, 2000, Ms. Payne received a letter from FAA’s Acting Director of Financial Management stating that, “FAA had obtained verbal understanding with the Office of Inspector General (OIG) on what would be considered appropriate accounting treatment for expenses that a grantee incurs in one year, pursuant to FAA’s letter of intent, but are billed in a subsequent fiscal year following the related executed agreement.”  The agreement reached by FAA and OIG is to disclose total commitments made under letters of intent, the amount recognized under executed grants, and the amount of letter of intent financing unobligated as of year end.   In addition, FAA will recognize a liability for the executed and obligated grant amounts billed by the grantee and provide an estimated liability for those executed grant amounts incurred by the grantee but not yet billed to FAA.  In light of the agreement reached by FAA and the OIG, FAA believes that this matter is important enough to warrant AAPC’s consideration and guidance.  FAA also requested that their original question be broadened to include the proper accounting treatment for similar expenses incurred on an executed agreement, i.e., a grantee incurs expenses in one fiscal year, pursuant to a duly executed grant agreement, but submits the related invoices in a subsequent fiscal year.  The question is, should these expenses be treated as prior year expenses in the year that the invoices are submitted and paid, or as current year expenses?

 

The task force plans to report back to the full Committee in September on its progress of its work.

 

· History of Issues

 

Mr. Pugh, chair of the Agenda Committee, provided the members with an updated history of AAPC issues addressed since its inception.  The report numbered each of the issues brought to the AAPC and provided an explanation of how the AAPC addressed each issue.

 

Next Meeting

 

The next meeting will be on Thursday, September 14, 2000.  Ms. Payne noted that the 2001 schedule of AAPC meetings would be available soon.

 

 

Adjournment

 

The meeting was adjourned at 2:45 p.m.