GASB 68's Impact on NJ Audits

The Governmental Accounting Standards Board released Statment No. 68 "Accounting and Financial Reporting for Pensions" to improve accounting and financial reporting by state and local governments for pensions.  While the goal is to enhance the value of the the overall financial reports for assessing accountability and interperiod equity through disclosure of net pension liability, the move presents an immedite concern for all New Jersey School Districts in the form of timing and impact on the statutory deadline for submission.

GASB 68 - Wake up call!

Audit Submission N.J.S.A. 18A:23-1 provides that the annual audit must be completed no later than five months after the end of the fiscal year (December 1). N.J.S.A. 18A:23-3 requires “…such accountant shall within five days thereafter file two duplicate copies thereof certified under his signature in the office of the commissioner” (Monday, December 7, 2015). No provision is made for the issuance of extensions beyond the statutory due date. 

The concern centers on the State's ability to deliver the required information to districts by the November 1, 2015 target date based on the field work of KPMG working on behalf of the state to gather this data.  Keep in mind, KPMG is still completing field work and even once the state provides this data to districts, the information (reported information) will have a material impact on audits, reflected in changes to footnotes, schedules A1, A2, statistical J sections and other areas of the budget thus requiring significant modifications and entry on the part of district auditors state wide.  The concern then becomes the auditors ability to wrap up and present such audits in accordance with the statutory deadline of December 1, 2015.

Why this matters... If a district elects to or agrees to a Modified (Qualified) Opionion in order to meet the deadline of December 1 while awaiting the final revisions and inclusion of the GASB 68 Pension Liability reporting, that district faces a host of negative actions including but not limited to:

1.  Impact on QSAC (Quality Single Accountability Continuum) 
2.  Flags the district for potential State Monitoring
3.  Lowers the district's "Bond Rating" which equals potential higher interest rates
4.  Effects ability to apply for National awards such as ASBO's Certificate of Excellence in Financial Reporting [CEFR] and GOA recognition

Most important is the delay on reporting of Surplus status and or deficit position in the face of budgetary planning for the subsequent budget year 2016-2017.

We need a waiver!  Short of a waiver, we need to work through NJASBO to provide a clear understanding of the impact and seek relief.

Accountability starts here! Pension Obligation

Don't Miss Dan Thurmon in person at NJASBO Conference

FRIDAY JUNE 5TH AT THE BORGOTA - DON'T MISS A ONCE IN A LIFETIME OPPORTUNITY TO SEE A WORLD REKNOWNED SPEAKER THAT INSPIRES WHILE MOTIVATING INDIVIDUALS TO REACH BEYOND IN A STRESSFUL ENVIRONMENT!  see Dan's Personal Message for NJASBO in the link below:

https://drive.google.com/file/d/0B9w8bgDMNaPaSmJidFMwT0dLMlU/view?usp=sharing

"If you want to motivate, inform, educate, entertain and deliver a presentation that your team will not forget... by all means pick Dan Thurmon to 'deliver the difference' for you."

− Ken Myers, President, Romacorp, Inc.

"You challenged us to use our gifts, and to take action when we have the chance. On behalf of everyone who attended, and all 72,000 members of the Raytheon team, please accept my deepest thanks and very best wishes."

− William Swanson, CEO, Raytheon Company

"The valuable strategies you were able to visually convey through your presentation gave our participants a strong image and affiliation with our goals and objectives."

− Pam Elledge, Director of Business Development, Delta

"You took the issues, challenges, every day stresses and strains of our plant and turned them into part of an educational but entertaining action-packed message."

− Jack L. Murphy, Johnson Controls, Inc.

Ill-Conceived Legislation (Pending) Opposed by NJASBO

• Ø  A1566-Requires each school district to offer a summer payment plan for school district employees
• Ø  S125/S1674 – Requires school districts to allow charter school students, county vocational school students, and students receiving equivalent instruction elsewhere than at school to participate in interscholastic sports programs on resident district’s sports teams
• Ø  S679 – Allows establishment of county-wide purchasing system for certain school district services in certain counties; offers employment protections for certain food or custodial services employees; and regulates subcontracting by districts and public higher education

Once again we are looking at legislation pending before the NJ Assembly and Senate that is not thought through as to the impact and ultimate value for efficient operations of the public school districts.  Perhaps that is not goal; however, it will be the outcome.  Let's look at these two bills:

First, A1566 requiring all district's to provide a summer pay.  The fact is most district's are moving in the other direction for two reasons: 1) the unmanageable IRS regulations related to tracking and distribution of interest for individuals involved; and 2) the extra time on task for payroll coordinators to accomplish what can very easily be done by the employee in their own bank each pay with savings accounts.

The perspective of practitioners in the field such a School Business Officials and Payroll Coordinators vs. legislators should carry far more weight and understanding of the need to abolish, not mandate this practice.  This practice has created perhaps the most challenge and disruption to the payroll process throughout the year even though payments are dispersed in the summer.  This intensifies during the audit.  Like many district's our participation was around 12% of the total employees eligible.  Based on ROI, not worth the waste of manpower.  Consider those left with the work are also dealing with five tiers of Pension reform and change and let's not get into Health Care Reform or the contribution schedules.  Bad idea!  1/16/2014 Introduced, Referred to Assembly Labor Committee

Second, S125/S1674 - Requiring any student who does not attend the local public school system to participate in extra curricula activities such as athletics and or clubs.  This bill is also opposed by NJASBO for a number of reasons.  Let's consider the obvious cost implications; however, what about the fact that these students and or parents have made the decision to opt out of the public education system for what they perceive or believe lacks the rigor, quality or opportunity in the area of academics.  This is obviously not the case as public schools today face continued pressure to perform and prepare our students for a 21st Century Global Education!

Yet, they recognize the additional benefits of the public education system, such as facilities and programs for extra curricula and clubs.  The fact is they are simply a part of what makes public education work and work well.  These offerings and commitment to our students are simply part of an overall global educational program that remains available to our students.

It should not be used to augment or supplement the short comings of a Charter/Private school experience.

As a strong advocate for Public Education since before working in schools, I have espoused the concept of inclusion and involvement in working towards progress and achievement in our schools. Their is always room for improvement and we should never become complacent.  Rather than looking to replace or provide alternative school choices, we should work to address and improve our Public Schools by supporting them!  That is what led me to become a School Board Member in 1997 in my own community.  That is what drives me to lead in 2015 as upcoming President of the New Jersey Association of School Business Officials.

Budget and Transparency - An 'Open' Conversation

With each passing year another budget cycle culminates in a public hearing on the annual budget and the necessary funding approval to authorize spending for our most valuable resources: our students! 

NJSBA Webcast on Budget
Laws and Regulations in 2009

Although the process is governed by budgetary laws and regulations requiring dissemination of budget materials, public advertisement, postings of the district's 'User Friendly Budget' and regulated by the election calendar published by the State of New Jersey; often individuals or groups espouse lack of transparency as a cry for more detailed information.  In truth, district's operate in a climate of heightened openness and awareness of the need to produce budgetary information that is reliable and easy to understand by community residents. 

Pictured here from left to right are participants Louis J. Pepe, business administrator for Summit Public Schools; Michael Kaelber, director of Legal and Policy Services for NJSBA; and Neil K. Cramer, Sussex County Executive County School Business Administrator and state coordinator, Executive County School Business Administrators.

Groups such as New Jersey School Boards Association continue to promote workshops, webcasts and blog information to assist board members in their role of budgetary oversight.

While it is important to engage the community and provide effective dialog on the budget process from development to content and ultimately the tax impact, the responsibility rests with the Board of Education to review and approve the final budget based on the needs of the students and ensure that the budget conforms to the goals of the district.  When comments anchored to 'transparency' are made, they linger against a backdrop of assumed community partnership and question the expectation of, 'working together'.

Each time a challenge to that authority is espoused by individual or as a group it calls into question the trust and confidence of the Board and Administration and serves to weaken or diminish the positive relationship that each group strives to build.  Perhaps the most astonishing fact is the economic climate compared to the fiscal performance of many districts over the past five years which does not warrant such scrutiny.

For decades, New Jersey voters in most districts voted on their school district’s proposed budget and on school board candidates each April.However, legislation enacted in early 2012 eliminated – for districts that moved board member elections to November – the requirement that a school board submit its proposed budget to a public vote as long as the budget remained at or below the state’s 2 percent tax levy cap. The overwhelming majority of boards have chosen this option, and so few districts now submit their budget to a public vote. However it is still important to adequately explain the school board’s and the superintendent’s rationale for choices made in the school budget. The required public budget hearing is an ideal time to do this. Boards which still have an April vote on their budget also hold spring budget hearings.  source - NJSBA School Leader, January/February 2013 - Volume 43.4

What’s New in the World of the Healthy, Hunger-Free Kids Act?

USDA Creates a Process for States to Grant Exemptions to the Whole Grain Requirement

THE GLASS IS HALF-FULL

The USDA has released guidance to state nutrition agencies about how to handle granting exemptions to the Whole Grain Requirement, which has had a significant impact on cafeteria operations throughout the state and country.  The USDA was compelled to set up this waiver process as part of the Omnibus bill (Public Law 113-235).

With this guidance, the New Jersey Department of Agriculture can now offer exemptions to New Jersey school districts which can demonstrate that a hardship was created by the new Whole Grain Requirement.  If the waiver is granted, it would allow a school to return to the pre-2014-2015 standards for meals, which required that at least 50% of the grains offered in the program are whole grain rich.  For a school district to be eligible, they have to be able to prove they experienced a hardship.  This can include: financial hardship, difficulty in securing products, poor student acceptability, etc.  The waiver, if granted, would apply to reimbursable meals only. 

We ask the state to move on this quickly and to develop an efficient process, as school cafeterias need to rebuild their participation.

THE GLASS IS HALF EMPTY

The USDA’s guidance does not allow the states to grant waivers for the whole grain requirement with regard to a la carte sales.  This can include meal entrees that are sold a la carte, as well as bagels, pretzels, cookies, etc.

The directive from Congress to the USDA, it asks them to restore the standards to the pre-2014-2015 level.  This would indicate that schools should be able to restore some of the popular a la carte items that were available in the previous school year.  It is disappointing that the USDA did not follow the directive of Congress.

The economics of a school cafeteria rely heavily on the high profit margin generated by the a la carte sales so that the wholesome meal can be presented to students at a tremendous value.  The USDA should offer expanded guidance, allowing for this exemption.  School districts can continue to vigorously promote a nutritious selection of foods and promote a healthy lifestyle, while being responsive to taste preferences of students.  Each school district can develop a wellness policy that best meets the needs of their community.  The decision-making for the students in our districts should be left to the local community officials.

Get the Waiver

Hello......

The pasta waiver is the USDA’s acknowledgement that the whole grain pasta product is unacceptable/unpopular to students.  If New Jersey follows through with implementing the ability to grant waivers on the other whole grain requirements, this would have more of an impact on the program than the Pasta Waiver alone.

Contact information for the NJ Dept. of Agriculture Officials, which is provided below:

Rose Tricario, Director, Division of Food and Nutrition Services: rose.tricario@ag.state.nj.us

Even Mikey hates it!

Arleen Ramos-Szatmary, Coordinator, School Nutrition Programs:  arleen.ramos-szatmary@ag.state.nj.us    

Northern Region Specialist: Janice Vecchione:   janice.vecchione@ag.state.nj.us
Bergen, Essex, Hudson, Hunterdon, Morris, Passaic, Somerset, Sussex, Union and Warren Counties

New Jersey Department of Agriculture
Division of Food and Nutrition
School Nutrition Programs
22 South Clinton Avenue
Building 4, 3rd Floor
Trenton, NJ 08609-1212

Struggling With the Unintended Effects of the HHFKA

Schools throughout New Jersey, as well as the rest of the country, are struggling with the unintended effects of the School Nutrition programs that resulted from the Healthy, Hunger-Free Kids Act.

While different phases of this act have been implemented over the last few years, the most onerous aspects of the new regulations took effect this September.  Specifically, the Whole Grain requirement mandated that all grains offered be whole grain rich.  This includes all breads, pizza, bagels and more.  Previously, 50% of what was offered had to be whole grain rich.

The offerings were unfamiliar to students and proved to be unpopular.  Districts experienced a drop in participation.  In a recent article from the National School Boards Association (NSBA), they reported that over 75% of districts saw a drop in participation.  NSBA also reported that over 80% of districts experienced an increase in plate waste and 81% noted an increase in costs.  

The drop in students participating, combined with higher operating costs are creating financial hardships for the district’s food service program.  The School Nutrition Association (SNA), with 55,000 food service professional members, revealed results of a study indicating that only 18% of schools anticipate they will be self-sustaining (break even). 

A CALL TO ACTION: At the end of December, 2014, Congress passed the Omnibus Bill (Public Law No. 113-235), allowing states to grant waivers from the least popular elements of this regulation.  To date, the state of New Jersey has not done so and is awaiting guidance from the USDA.  We, as the professionals representing the interests of our communities, need to encourage the federal and state legislators and agencies to move quickly on this topic.  We want our food service operations to deliver healthful, wholesome meals that are popular with our students and their parents.