Public Private Partnerships

Project Objective:

This project was added to the agenda because federal agencies have increasingly turned to public-private partnerships (P3s) to accomplish goals. Budget pressures are likely to further increase the use of P3s. Making the full costs of such partnerships transparent would be the overall objective of the project. Active work on this project would begin in FY2013 with final standards or guidance expected following a two to three year effort..

Specific objectives could include:

• Defining terms (e.g., service concession arrangements, P3s)
• Providing guidance for the recognition and measurement of:
  • assets and liabilities
  • revenues and expenses
  • establishing disclosure requirements
• Considering guidance for other arrangements related to P3s (sale-leaseback or other long-term arrangements)

Why Why is a project on Public-Private Partnerships needed?		What What questions / issues does the Public-Private Partnerships Project plan to address?
Federal agencies have increasingly turned to public private partnerships (P3s) to accomplish goals Budget pressures are likely to further increase the use of P3s		Making the full costs of such partnerships transparent would be the overall goal of the project

HISTORY OF BOARD DELIBERATIONS (reverse chronology)

June 19, 2013 Board Meeting

The Public-Private-Partnership (P3) project is in its early stages and the June Board meeting broadly focused on several issues affecting both scope and approach to the project.

Staff noted that for those P3s that are in essence long-term leases, the Board could address such arrangements/transactions through a technical bulletin when the leases project is substantially finalized.  However, in those cases where long-term leases are part of a broader set of agreements, P3 risk could create fiscal exposure and such matters would be best addressed through an overarching standard that emphasizes substance over form.

As a result, staff recommended that the Board look at the risks and rewards of P3s (i.e., a P3s’ underlying business model) and first consider fiscal exposures before addressing what assets and liabilities may need to be reported.

Board members and staff then discussed 2 areas of concern (1) the relationship of the P3 project to the Risk Assumed project and (2) the financial component of P3s.  In addressing these areas of concern, staff and members discussed the P3 touch-points among active projects by reviewing a chart entitled P3 Project in Relation to the Other Active FASAB Projects and the 17 Major P3 Accounting Practice Issues on pages 26 and 29 of the staff briefing paper, respectively.

The Board then reviewed the preliminary Potential P3-Centric Reporting Characteristics/Criteria shown on page 49 of the staff briefing paper.  Each of these preliminary  characteristics/criteria have been organized under very general P3 life-cycle stages and would be used by preparers to distinguish those P3s that should be considered for reporting through disclosures in connection with entity-specific materiality tolerances.  The intention of the criteria is to eliminate from this reporting those P3 arrangements/transactions that pose no (1) financial asset/liability recognition or de-recognition concerns, or (2) other fiscal exposure/risk that could lead to a liability.  Members agreed to await further development of the characteristics/criteria and asked staff to simplify their presentation so that the potential for increased fiscal exposure/risk can be more readily apparent.

Staff noted that the next steps of the project include finalizing the potential P3-centric reporting characteristics/criteria and further evaluation of the 17 major P3 accounting practice issues.  The project was tentatively scheduled to issue guidance on additional disclosures about fiscal exposure/risks in fiscal year 2015 with final standards or technical bulletin(s) following in fiscal year 2017.  Some members were concerned that recognition matters were not being addressed before guidance on additional disclosures about fiscal exposure/risks.  Staff reassured members that recognition matters were intended to be worked concurrently with other aspects of the project.

During the meeting Mr. Allen stated that a significant value he sees arising from this project is in assisting and guiding preparers to the applicable accounting literature when reporting on P3 arrangements/transactions.

In conclusion, although the Board generally supported the direction of the project of identifying and disclosing P3 risks (fiscal exposure), it deferred specific decisions on other aspects of the project, including pursuing guidance to address the identified 17 major accounting practice issues, pursuing technical bulletins to address P3s that are in essence long-term leases, and determining whether the characteristics/criteria to identify reportable P3s are appropriate.

Issue Paper for June 2013 (PDF)

April 24-25, 2013 Board Meeting

The P3 Project was not discussed at the April Board meeting. In consultation with the P3 Task Force, Staff is continuing research and conducting agency and industry fact-finding meetings. If you are interested in serving on the P3 Task Force or would like to discuss any aspects of the project, please contact Mr. Savini.

February 27-28, 2013 Board Meeting

The inaugural meeting of the P3 Task Force was held on February 13th at the GAO Building, Washington, DC.  The meeting was well attended with a good mix of federal agency, commercial sector, and citizen-centric points of view.  Participants came from diverse disciplines such as accounting, auditing, facilities management, financial reporting, housing, information technology (IT), commercial and investment banking, procurement, and program management.

The majority of participants agreed that there is significant interest in P3’s across the diverse disciplines represented. It was noted that conditions such as current budget constraints and capacity (i.e., contingency) planning are driving some agencies to look at various types of P3 models to accomplish mission.

Interestingly, both federal and private participants agreed that there is a strong counter-pressure against the use of P3’s noting that this probably arises from the “off-balance sheet” or “off-budget spending” stigma associated with these arrangements.

A citizen viewpoint that was raised stated that absent empirical evidence supporting the notion that P3’s in fact work, a citizen’s concern is that the government is assuming more risk than it would otherwise and in light of the fact that many private companies are flush with cash, while agency budgets are tight, seems to suggest that this be an area of careful consideration.

Participants discussed the pros and cons of (1) developing a federal-wide P3 definition, (2) surveying agencies to ascertain nature and type of P3’s that exist to help with refining P3 project scope, and (3) P3 accounting asymmetry (opposite-view accounting).  Participants also offered suggestions as to the types of issues that the federal accounting community might wish to consider as it moves forward with the project.

Our next meeting is scheduled for April 11^th and if you would like to join the P3 Task Force or attend any of its meetings, please contact Dom at the contact information shown below.  We always welcome additional members and their viewpoints.

December 19, 2012 Board Meeting
Due to scheduling changes the P3 session was moved to the last session of the day and significantly abbreviated. Mr. Allen began the meeting by asking members to take a few minutes each to not debate matters but rather limit comments to tentative feedback to staff’s proposal. Staff indicated that the most important question in TAB C was the one dealing with scope. Staff is proposing that if the Board wants to address public-private partnerships in the Federal space, we have to go broader than both GASB and the IPSASB standards; both of which limit coverage to Service Concession Arrangements (SCAs).

Although members did not object to expanding the project scope beyond service concession arrangements they noted that (1) the complexities involved may necessitate us to later re-focus to a more narrow scope, (2) we should look to establish uniform principles-based guidance to enhance comparability among agencies, (3) gaps in existing guidance should be highlighted, and (4) we should avoid duplicating guidance and standards-overload.

The Board briefly discussed the matter of whether to issue technical guidance as a form of educating preparers and users or a separate set of P3 standards. Much will depend upon whether there are significant gaps in our current guidance. Regardless of the form that the final deliverable may take, the Board was clear that forthcoming guidance must be consistently applied and grounded or covered by an overarching principle(s).

We are seeking volunteers at this time and if you or someone you know would like to join our task force, please notify the staff person identified below.

Issue Paper for December 2012 (PDF)

August 30, 2012 Board Meeting
Two major issues were addressed by the Board at this meeting; (1) whether to defer the
P3 project and (2) consider issuance of a Technical Bulletin in lieu of a Standard.

Deferring the P3 Project - Staff detailed initial concerns earlier in the year which led to
asking the Board whether the project should be deferred until additional progress was
made on the following two related projects:

1. Federal Entity – Staff noted that in light of progress the P3 project is in a much
   better position to proceed.
2. Leases – due to the transactional complexity of many P3 arrangements that
   currently exist, if operating leases are retained and in some manner changed, P3
   reporting could be affected.

Staff noted continued concern with the uncertainty of the Leases project.

Members did not see a compelling reason to delay the project and were in general
agreement that staff should continue its efforts coordinating with both the Federal Entity
and Leases initiative.

Technical Bulletin - The Board reviewed staff’s recommendation to issue a Technical
Bulletin instead of a Statement. Staff noted that it would like to avoid duplication with
existing FASAB GAAP which is fairly robust in providing guidance to help preparers
account and report for P3’s. Staff indicated that a Technical Bulletin or “How to” guide
would be beneficial to preparers.

Members generally noted that P3’s are complex and would require significant study
before such a conclusion could be reached noting that staff might in fact find gaps in
existing guidance. As a result, the Board reserved judgment in this regard.

The next step will be revising a detailed project plan. Staff invites volunteers who would
like to either sit on a Task Force or serve as “go-to” subject matter experts.

Issue Paper for August 2012 (PDF)

April 26, 2012 Board Meeting
As part of FASAB’s technical agenda-setting process, this project was added to April’s agenda because federal agencies have increasingly turned to public-private partnerships to accomplish goals and are facing budget pressures that are likely to further increase the use of public-private partnerships.

Staff recommended deferring this effort until more progress has been made on the reporting entity and leases projects because many of the public-private partnership issues will be addressed through those standards now under consideration. Staff further noted that as a minimum, standards for public-private partnership should be consistent with standards developed in these related areas. To assist the Board in deciding whether to defer this project, members asked staff to provide illustrations highlighting some of the more important issues arising from the use public-private partnerships.

Issue Paper for April 2012 (PDF)