Federal Accounting Standards Advisory Board, 441 G St., 6K17V, NW.Washington, DC 20548

202-512-7350.FAX-202-512-7366.Web Page http://www.fasab.gov/

Issue 63, Aug.-Sep, 2000

FASAB Initiates New Process for

Appointing Non-federal Members

In October 1999, as a result of the American Institute of Certified Public Accountants conferring its Rule 203 status on the FASAB, amendments were made to the Memorandum of Understanding creating FASAB and its Rules of Procedures. Through these amendments, FASAB's Principals – the Secretary of the Treasury, the Director of the Office of Management and Budget, and the Comptroller General of the United States -- established new procedures for selecting FASAB's three non-federal members. As a result, an Appointments Panel was created to advise the FASAB Principals on appointments and re-appointments for these three positions. The Appointments Panel met in June and August to consider both its own procedures and pending re-appointment decisions.

The Appointments Panel's procedures provide for the creation of a Registry of Candidates interested in serving on FASAB. This registry will ensure that FASAB is able to fill any vacancies among the non-federal members quickly and that the public interest is well represented.

The registry is open to non-federal professionals interested in serving on FASAB. If you are interested in serving, the FASAB website includes a Statement of Board Member Responsibilities (www.fasab.gov/pdf/responsib.pdf). The full text of the Appointments Panel Policies and Procedures will be available at the website shortly. These documents provide additional information about both serving on the Board and how the appointment process is conducted.

The three non-federal positions are part-time positions. The Chairman's position is compensated at half of an executive level salary. The two non-federal members are compensated at an hourly rate for attendance at Board meetings and an equivalent amount of time for preparation. These members are typically compensated for approximately 200 hours during one year of Board service.

Candidates may be added to the registry at any time. You may submit your resume by addressing it to Ms. Wendy M. Payne, Executive Director, Federal Accounting Standards Advisory Board, 441 G Street NW, Mailstop 6K17V, Washington, DC 20548.

Table of Contents

FASAB Initiates New Process for Appointing Non-

federal Members – page 1

Assurance-Related Issues Regarding RSSI – page 2

Board Votes to Issue Exposure Draft to Delete Tax

Receivable Disclosures – page 3

Board Issues Natural Resources Report – page 3

Board Hears of KPMG’s Progress on Defense

Contract – page 4

AAPC Update – page 4

FASAB & AAPC Upcoming Meetings – page 6

Assurance-Related Issues

Regarding RSSI

The Federal Accounting Standards Advisory Board confirmed its July decision to prepare a “preliminary views” document to solicit comments regarding the role of Required Supplementary Stewardship Information (RSSI) in the Federal financial reporting model. As part of the related deliberations, on August 30 FASAB held a “roundtable” to discuss assurance-related issues regarding RSSI. Five guests participated:

¨ David Bean—Director of Research and Technical Activities, Governmental Accounting Standards Board (GASB)

¨ Robert Dacey—Director of Consolidated Audit and Computer Security Issues, General Accounting Office; member of Auditing Standards Board

¨ William Maharay —manger with Inspector General’s Office, Department of Energy

¨ Patrick McNamee—partner with PriceWaterhouseCoopers

¨ John Reagan—senior manager with KPMG

Several panelists emphasized the need for clear criteria in accounting standards, and agreed that consideration should be given to developing audit guidance for nontraditional information. One suggested that the Board should not feel constrained by existing auditing standards. He noted that there was interest among state and local governments as well as in the Federal Government in reporting nonfinancial performance information. A range of possibilities exists for providing assurance about this information.

Several panelists noted that questions arise about how to assess materiality for some of the nontraditional items included in RSSI. Would the opinions be expressed in relation to each type of information (e.g., social insurance information, stewardship land, etc.) itself, in relation to the RSSI taken as a whole, or in relation to the financial statements taken as a whole?

It was noted that the Governmental Accounting Standards Board (GASB) is grappling with a communications method project dealing with the scope of GASB’s activities and where information should be reported: in financial statements, notes, RSI, or some new “type X” reporting. It was suggested that at one time AICPA’s view was that “the standard setter sets the reporting standards and the auditor will figure out how to deal with it.” Recent experience at GASB and FASAB demonstrates that may not always be true now.

Another question prompted by these issues is, what does “financial statements taken as a whole” mean in the government environment? It may be relatively clear when one is dealing with three, single-column financial statements in the private sector. But for a state or local government, with fund reporting and the possibility of reporting service efforts and accomplishments (SEA) and financial condition indicators in the future, the meaning of “taken as a whole” becomes less clear. Some believe that similar questions may arise for Federal reporting entities, while others disagree.

Two panelists, saying that time would be needed to resolve such questions, drew an analogy with a child learning to crawl before it can walk. It was not clear whether they meant the FASAB or the audit profession was crawling, or both. In addition to the technical issues discussed, a panelist noted that added demands on preparers and auditors would raise serious resource issues.

For more details, see the minutes for the August meeting at the FASAB web site. Also, FASAB’s August meeting was “webcast” by a private firm for the first time; the archived file is available for a fee at www.hearings.com.

Point of contact: Robert Bramlett, 202-512-7355, bramlettr.fasab@gao.gov.

Board Votes to Issue

Exposure Draft to Delete

Tax Receivable Disclosures

The Internal Revenue Service requested that paragraph 65.2 of Statement of Federal Financial Accounting Standards (SFFAS) No. 7, Accounting for Revenue and Other Financing Sources, be deleted. Par. 65.2 requires entities that collect taxes and duties disclose certain material revenue-related transactions affecting accounts receivable, accounts payable for refunds, and the allowance for uncollectibles. The disclosure should include at a minimum, taxpayer self-assessments, entity assessments, collections on account, refunds, abatements, write-offs, and other information. SFFAS 13, Deferral of Paragraph 65.2 – Material Revenue-related Transactions, had deferred the effective date of par. 65.2 until FY 2001 based on an earlier Internal Revenue Service request.

The Internal Revenue Service presented its views to the Board on August 30, 2000. Although the IRS had been represented on the team that drafted the original par. 65.2, it had come to view the information as irrelevant and misleading. The Internal Revenue Service asserted that some or all of the information required by 65.2 pertains to the compliance process rather than tax receivables and objected to reporting such information in its financial statements.

The rationale for paragraph 65.2 is that disclosures are important for accountability. Disclosure of the dollar amounts of the transactions in the “modified cash basis” revenue stream, from initial recognition by the established assessment process through cash collection and refunds, is important for oversight and performance evaluation. Providing as much accurate and detailed information as possible about the annual flow of taxpayer funds is important because the administration of the collection function is to some degree discretionary.

After considerable discussion, the Board voted to develop and issue an exposure draft proposing deletion of paragraph 65.2. In addition, the Board will consider authorizing a project to analyze what meaningful information could be produced. Point of contact: Richard Fontenrose, 202-512-7355, fontenroser.fasab@gao.gov.

Board Issues

Natural Resources Report

Three years ago, the FASAB formed a task force to address the complex nature of accounting and reporting on the Nation’s natural resources. The FASAB Natural Resources Task Force was comprised of representatives from the Department of the Interior, the U.S. Forest Service, the Office of Management and Budget, the General Accounting Office, the Department of the Treasury, the Department of Defense, the Department of Energy, and the FASAB. The task force was charged with researching and developing options to account for and report on natural resources and identifying implications for existing FASAB standards and laws

In June 2000, FASAB issued the results of the Natural Resources Task Force’s research; a research paper entitled Accounting for the Natural Resources of the Federal Government.

In general, the task force concluded that an agency’s natural resource assets should be reported as required supplementary stewardship information, or RSSI. It believed that stewardship reporting would provide the flexibility