LGC UPDATE Revaluation by MikeJenny

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LGC UPDATE Revaluation

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									    LGC Update

NCLGIA Winter Conference
                   February 9, 2010
                        Ken Wease
                      Sara Shippee
DEPOSIT / INVESTMENT
       ISSUES




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LGC 203
   Reminder – LGC 203s were due on
    January 25 for the December 31, 2009
    reporting date
   If you have not yet submitted it, do so as
    soon as possible
   Late letters will go out by March 15 to
    units that have not submitted as of March
    1.


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Inv-91s (Notification of Public Deposits)
   Must be filed with each depository as of
    June 30 of each year
   Copy must be submitted to the State
    Treasurer
   Purpose - Identify all funds on deposit with
    each depository as public funds
   Necessary to identify deposits required to
    be collateralized
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CDARS
   More questions about CDARS which is allowed
    under GS 159-30(b1)
   Funds are first deposited in an official depository in
    North Carolina
   This depository arranges for these funds to be
    deposited into CDs of one or more federally
    insured banks or savings and loans wherever
    located
   This depository receives deposits of customers of
    other federally insured institutions equal to or
    greater than the amount deposited by the local
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CDARS (continued)
   None of the recipient institutions can
    already hold deposits of the local
    government or public authority
   All deposits (principal and accrued interest)
    must be federally insured
   The official depository bank acts as
    custodian of the CDs

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Ineligible Investments
   Finance officers need to be knowledgeable
    on what is allowable
   Interest rates are at historic lows and units
    are looking for higher rates
   Banks and investment firms are more
    aggressive in offering new products
   When in doubt – ask questions

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    Ineligible Investments (continued)
    Be wary of institutions trying to add local
     governments to their clientele
    May not be fully knowledgeable about NC
     laws and regulations
    Contact our office before making a decision
    Remember – easier to avoid ineligible
     investment than getting out of an ineligible
     investment
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Indexed CDs
   Hybrid investment with rate of interest tied to
    a market index (such as S&P 500)
   Term is longer than conventional bank CDs –
    3 to 5 years is common
   Early withdrawal carries a penalty and no
    interest return
   Initial deposit is insured by the FDIC
   BUT interest earnings ARE NOT FDIC
    insured
   Therefore not an eligible deposit in North
    Carolina
                 NCLGIA Winter Investment Conference   9
    Items of Note on LGC203 Filing
   Some units are using older forms – please use most
    recent form as posted on our website
   Especially important if submitting the form in the
    Excel workbook format via email
   Boards of Education – make sure you complete the
    LGC 203-S schedules for the Individual School
    Funds.
   Units with funds in Dedicated method banks must
    attach collateral information

                   NCLGIA Winter Investment Conference   10
Items of Note on LGC203 Filing
(continued)

   How to submit attachments
       Any attachments should clearly show the
        name of the unit and reporting date
       Prefer they be converted to PDF format and
        emailed along with the LGC203
       Fax or US Mail(or FedEx/UPS etc.) is
        acceptable – just make sure the name of the
        unit and reporting date is on the document

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Items of Note on LGC203 Filing
(continued)

   Enter dedicated method institutions in
    dedicated section and pooling method
    institutions in pooling section




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Contact Information
   Cash /Investments/203 Process:
       Ken Wease                919-807-2391
       Tabitha Mbaka            919-807-2383
   Cash/Investments/New developments:
       Sara Shippee             919-807-2356
   Email format
       first name.last name@nctreasurer.com

                 NCLGIA Winter Investment Conference   13
LGC Update
    Retirement Contribution Rates
   LGERS Board approved increasing rates
       4.8% to 6.35% for general employees
       5.27% to 6.82% for law enforcement officers
   Changes result from investment losses in 2008
   Rates are expected to increase steadily in each
    of the next several years
   While market has rebounded it has not yet
    returned to previous highs
   See Memos 1117 and 2010-20

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    Summary of ARRA Debt Vehicles
   Qualified School Construction Bonds (QSCB)
         Market tenuous – 2 counties with closed deals; 5 with
          pending deals
   Build America Bonds (BABs)
         Marketable – 5 counties; 1 municipality; 2 quasi State
   Recovery Zone Economic Development Bonds
    (RZEDB) – 45% interest subsidy; Dept of Commerce
         2 counties and Winston Salem
   Recovery Zone Facility Bonds (RZFB) – tax exempt debt
    for private facilities
         2 Issues
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    Derivatives / GASB 53
   All derivatives will be recorded in the Statement of
    Net Assets and full accrual balance sheets
   If your swaps are not effective “hedges” the change in
    value will be run through the income statement
        Effective June 30, 2010
        Effects about 30 units with interest rate swaps
        See Memo 2010-18 issued 1-25-2010
        Consider contracting for consulting services
         if you are effected

                       NCLGIA Winter Investment Conference   17
GASB Statement No. 54
   Effective for reporting in 2011
   We are rolling it out in 2 pieces:
    1.   Effect on fund types– may effect budget
         preparation for 2010-2011
    2.   Effect on fund balance reporting/presentation
         for 2011 financial statements and board
         adopted fund balance policies


                  NCLGIA Winter Investment Conference    18
GASB Statement No. 54
     New Definition for Special Revenue Funds:
      Proceeds of specific revenue sources that are
      restricted or committed to expenditures for
      specified purposes other than debt service
      or capital
     Effects two statutory funds in North Carolina
       Capital Reserve Funds
       Tax Revaluation Funds




                NCLGIA Winter Investment Conference   19
    GASB Statement No. 54
   Capital Reserve Funds can no longer be
    classified as special revenue funds under GASB
    based on our use of setting funds aside for capital purposes
       Funds do not necessarily have to go away – can
        just be a presentation issue where you would
        present differently for CAFR purposes
          For debt purposes          goes to GF or Debt service
          For capital        goes to capital project
          Have the option to move permanently in your budget
           process rather than doing as a reclassification

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    GASB Statement No. 54
   Tax Revaluation Funds can no longer be
    classified as special revenue fund unless it has a
    specific revenue source …. therefore
       To keep as special revenue fund must bring tax
        revenue directly into the Tax Revaluation Fund
       Must be documented as part of budget ordinance
        that $xxx of property tax (or other revenue) will
        be appropriated to the tax revaluation fund
       If not – revaluation moves into the general fund
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GASB Statement No. 54
     Have conferred with GASB
     Currently waiting on a response from GFOA
     Memo will be forthcoming in the Spring
     You will hear much more at the Spring
      GFOA conference




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    Article 44 Hold Harmless
    effective 10/1/2009

    Article 44 was repealed in Session law 2007-
     323 as part of the Medicaid relief
         Counties are held harmless in the swap in that
          each county is guaranteed to be $500,000 to the
          good as a result of the deal
         City hold harmless gets netted against Article 39
         As time goes by this will more and more be in
          the form of savings rather than in actual cash
          payments from the State
                          NCLGIA Winter Investment Conference   23
Article 44 Hold Harmless
effective 10/1/2009

   Article 44 was repealed in Session law
    2007-323 as part of the Medicaid relief – cont.
       Municipalities will receive hold harmless
        funds that fluctuate with the overall
        sales tax receipts
       When towns are budgeting the hold harmless
        funds each year they need to consider the
        direction in which they expect sales taxes to go

                      NCLGIA Winter Investment Conference   24
OPEB Challenges Continue
   Valuations were not done on a timely basis
    delaying the 2009 financial statements
       3 counties
   One county had assets accumulated but not
    set up in an irrevocable trust resulting in
    issues of how to properly present
   ARC adjustment & interest expense
    required in Year 2 – actuary didn’t always provide

                     NCLGIA Winter Investment Conference   25
OPEB Challenges Continue
   Problems with calculation –
       What is eligible for contribution
       Calculation for Year 1
   Not allocating their OPEB cost/liability
    over all funds
   Not recording the liability or prepaid asset
    – saw this issue with the LEO Separation
    Allowance too
                  NCLGIA Winter Investment Conference   26
OPEB Challenges Continue
   Memo 2010-19 on the OPEB journal
    entries should be ignored … Error in our
    understanding of GASB’s requirements
       Revert back to 2010-1
       All transactions for the OPEB plan must be
        presented in the Trust fund regardless of
        where they occur
           GF and enterprise fund pay go activity must be
            recorded in the pension trust fund {the Plan}
                    NCLGIA Winter Investment Conference      27
    New Technology
   LGC Listserve – ready in early February
        To send out notification of memos & provide
         platform to answer questions
   Indexing of Memos on the website
   Financial Indicators Project
        Roll-out at Summer Conference
        Benchmark against 5 other units with 20
         different indicators – cities and counties
                     NCLGIA Winter Investment Conference   28
    Odds and Ends
   Wrapping up audit season
        Still have outstanding reports
          1040 reported out of 1231 units
          191 outstanding
               10 counties; 37 municipalities
        We’re finalizing financial reviews
        Growing list of small governments on the watch
         list with weak financial conditions


                         NCLGIA Winter Investment Conference   29
Odds and Ends
   2010 Audit Contract
       No major changes expected
       Ready by the end of February
       Can use the 2009 contract form as well
   Reporting on ARRA funds continues
       Be timely and accurate
   State Treasurer’s OPEB Trust Fund
       Fiscal year rate of return = 13.48%
       2009 Calendar year rate of return = 17.596%
                  NCLGIA Winter Investment Conference   30
Odds and Ends
   Spring Projects:
       GASB 54
       Evaluating our in-house audit
        review process
       Assisting Phase III govt’s with OPEB
       Illustrated financials
       Treasurer’s conference
                NCLGIA Winter Investment Conference   31
Odds and Ends
   Treasurer’s Conference
       May 20th – Thursday    Statesville
       May 21st - Friday New Bern

   Dave Bean will be keynote speaker
    for the GASB update
   Please save the date


                 NCLGIA Winter Investment Conference   32

								
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