Finance systems face changes

Finance systems face changes

Wooster, Ohio, will produce Statement 34-compliant financial statements in two months, finance director James Pyers says.

New accounting standards prompt a sea change in reporting

By Claire E. House

GCN Staff

Shrewd state and local accounting shops are hammering out plans to comply with recent landmark changes to financial status reporting. Forward-looking systems shops will call on asset management systems to help.

In June, the Governmental Accounting Standards Board handed down GASB Statement No. 34, Basic Financial Statements'and Management's Discussion and Analysis'for State and Local Governments. The reporting standards group greatly altered how state and local governments must track and report their financial activity.

'I've been in this business a long time and been through a lot of changes, and this is really a big one,' Wisconsin controller William J. Raftery said.

Most governments are just beginning to figure it all out. Although the changes are numerous, they fall under two major categories:

' Fund reporting. First is a change in the way governments break down and report funds in general. Governments typically categorize finances into fund groupings such as general funds, enterprise funds and special revenue funds.

The new model will reclassify monies into more specific individual fund listings and also require an aggregate, governmentwide financial report as a basic financial statement.


















Wooster, Ohio
MichiganWisconsin

Asset management

and fund reporting

Asset management

Fund reporting
One government that's ahead of the game is Wooster, Ohio. The city of 25,000 and a $62 million budget began performing full accrual accounting and capitalizing its infrastructure in 1980. It expects to generate its first 34-compliant reports at the end of its 1999 fiscal year in December, finance director James Pyers said.
''

Wooster purchased the Interactive Fund Accounting System from Bi-Tech Software Inc. of Chico, Calif., last year. IFAS runs under HP-UX 10.2 on a 180-MHz Hewlett-Packard Co. 9000 D28 server with 256M RAM and six 4G hard drives. It integrates asset management and general ledger components.
''

Bi-Tech is working with Wooster on some modifications to IFAS for 34 but doesn't expect to need source code changes, sales and marketing vice president Drake Brown said. The company plans to add standard 34-compliant reports to the package, he said.
''

Pyers plans over the next couple of years to tap an IFAS component that will pull the city's financial data from IFAS and put it on the Web for public access.

Michigan is looking to integrate its financial system with its geographic information system for asset reporting.
''

The Michigan Information Center, a statewide GIS clearinghouse, already collects data from several agencies about state-owned land, facilities and infrastructure assets.
''

The center is working with the state financial arm to determine its asset data needs and add any necessary attributes to the data it holds and receives. The financial system would then tie into the GIS to generate financial reports.
''

'It's proving itself to be a great technology to support our Office of Financial Management and its day-to-day business accounting,' center director Eric Swanson said.
''

The state is still evaluating its financial system from KPMG Peat Marwick of New York to assess fund reporting needs, Michigan Administrative Information director Doug Johnson said.

Participants at a recent National Association of State Accountants, Comptrollers and Treasurers conference expressed concern that for financial systems running on mainframes, modifications would be expensive, Wisconsin controller William Raftery said.
''

But that's not necessarily so. In Wisconsin, simple Microsoft Excel spreadsheet modification is the name of the game for the fund reporting changes.
''

Wisconsin runs AMS Advantage 2000 from American Management Systems Inc. of Fairfax, Va., which holds data in a VSAM database on a state data center mainframe. About 2,000 users throughout the state access it daily on PCs.
''

To create annual financial statements, staff members rekey data from Advantage reports into Excel spreadsheets, financial reporting chief Marilyn Klemens said. The approach allows flexibility for changes in reporting and takes advantage of PC power, Raftery said.
''

The department used the same financial data it has used in previous years to meet the new regs. It simply built new fund structures from current accounting codes and created new formulas in Excel to calculate them. It took some time for Raftery's staff of six accountants to modify the spreadsheets, but they didn't have to use a programmer.
''

'If you're going to go back and use mainframe technology, you're using a sledgehammer to kill ants,' he said, adding that governments should explore all kinds of options to help them comply.
''

Wisconsin plans to tackle asset management over time.




' Asset management. The second and most daunting task is managing and reporting assets. Governments typically record infrastructure and other fixed assets once, as expenditures, during the year of their procurement. Statement 34 requires that they record these items as capital assets and monitor their cost and value on an annual basis.

Together, they will make government financial reporting more like that of the private sector by requiring comprehensive financial data on all current assets, liabilities and operations on a detailed, long-term basis.

'It's a more businesslike approach with the bottom line being, has the government's financial position improved or deteriorated during the last year's operations?' GASB chairman Tom L. Allen said.

Each change has a distinct but different effect on systems. For fund reporting, state and local governments will have to modify financial systems to report data differently, and some may need to capture new data. Options run the gamut: Governments might rewrite code, install middleware, install new financial software, modify current software or simply modify spreadsheets.

For asset reporting, all governments with annual revenues of more than $10 million will have to deploy some kind of asset management system. Those that don't have detailed historical infrastructure asset data on the books'and many don't'are going to have to get it.

Wooster, Ohio, finance director James Pyers said governments can take several approaches toward setting up systems for 34, depending on how they want to use the information.

If they want to simply run reports once a year for legislators and other officials, they can probably take a PC, set up schedules and be done with it.

But if they want to use detailed financial information monthly or even more frequently as an integral management tool, they should consider using 34 as an opportunity to develop a sophisticated system.

'I think when you start looking at information differently, especially financial information, your view starts to change on things,' he said. 'I think it will bring about change and it will be a beginning for us, not an end.'

An outgrowth of that thinking would be to tie financial reporting systems into the Web, said Laurie Burr, senior principal at American Management Systems Inc. of Fairfax, Va. Sites could be very sophisticated, with drill-down capabilities for specific data, she said.

Another benefit of re-engineering could be more timely reporting, Michigan Financial Management Director Leon E. Hank said. Many states take four to six months after the fiscal year's close to publish reports.

Deadlines for day-forward compliance are staggered based on annual revenue; the first of three categories will have to comply for fiscal years beginning after June 15, 2001. Statement 34 also allows four years beyond each initial deadline to collect and incorporate historical asset data.

Many governments will hold off a bit to see what others do first, Orlando chief financial officer G. Michael 'Mickey' Miller said.

Ultimately, the reports will help officials decide whether to raise taxes or redistribute funds, and whether their government is running as efficiently as possible, Burr said.





















Statement 34 requirements will likely prompt systems changes

Typical current practice

Statement 34 change

Likely systems needs

Finances tracked by fund types such as general fund, enterprise fund: no governmentwide report required

Budget-to-actual reports list the final amended budget only, track funds by fund type and serve as a basic financial statement

Financial reports not required to come with explanatory narrative


Finances tracked as major individual funds and joint smaller funds; all finances also compiled into one aggregated governmentwide statement

Budgetary comparisons list original and final amended budgets, and they report
general fund and individual major special revenue funds; comparisons are required only as nonaudited supplemental information, but governments retain the right to include them as basic statements for audit

Financial statements must have narrative introduction and analytical overview in form of management's discussion and analysis


' Some software manipulation of financial system to compile and, in some cases, capture data differently than current system can; will vary based on current system, but numerous approaches are feasible

' Optional implementations include sophisticated Web-accessible reports with drill-down capabilities for specific info


Infrastructure and other fixed assets recorded at purchase as expenditure

Assets recorded as capital assets and tracked annually, either by depreciation of value or by reporting maintenance outlays and providing periodic condition assessments

' Use of asset management system integrated with financial system, opportunities for GIS intergration; data collection requirements for many governments


inside gcn

  • HPE SGI 8600

    New supercomputers headed to DOD

Reader Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group