LGC UPDATE Revaluation by MikeJenny


LGC UPDATE Revaluation

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									    LGC Update

NCLGIA Winter Conference
                   February 9, 2010
                        Ken Wease
                      Sara Shippee

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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

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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
   Purpose - Identify all funds on deposit with
    each depository as public funds
   Necessary to identify deposits required to
    be collateralized
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   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
   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
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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
   Therefore not an eligible deposit in North
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    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
   Units with funds in Dedicated method banks must
    attach collateral information

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Items of Note on LGC203 Filing

   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

   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

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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

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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

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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

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    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
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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 – 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

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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

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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
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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}
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    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
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    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

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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%
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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
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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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