Solutions September 2007 of the State Comptroller Comptroller pptx

Solutions September 2007 Financial & Audit Solutions September 2007 ♦♦ ♦♦ ♦ Volume IX ♦♦ ♦♦ ♦ Issue 3 This Issue Timber Audit Starts Debate * The New Office of Operations Office of Operations: Announcement of Recent Appointments * GASB: Intangible Assets FOCAS Project * The Payroll Project: Risk-Based Measurement System Office of Operations Contact List Office of the State Comptroller Comptroller Thomas P. DiNapoli Office of Operations Timber Audit Starts Debate routine audit of the Department of Environmental Conservation (DEC) on State Forest Timber Sales (Report 2006-S-9) sparked recent debate when it identified several issues relating to sustainable forests. The audit found that DEC cut about half of the harvestable timber from State forests. As a result, the State was not able to obtain the maximum potential revenue from timber sales. Auditors discovered that between April 2001 and March 2006, the number of foresters working for DEC decreased from 46 to 33 while the amount of State- owned forested land increased by 18,700 acres. Due to staff shortages and competing priorities, DEC foresters A This edition (Volume IX, Issue 3) will be the final edition of the Solutions Newsletter. The Office of Operations within the State Comptroller’s Office will be combining the Solutions Newsletter and the Payroll Express Newsletter into one publication. The new publication will contain articles on both financial management and payroll topics, and will be distributed to the current recipients of both the Solutions and the Payroll Express newsletters. Thank you for reading the Solutions Newsletter over the past several years. We look forward to continuing to provide you timely and useful financial management information through the new publication in years to come. n May 2007, Comptroller DiNapoli established the Office of Operations, led by Joan M. Sullivan, Executive Deputy Comptroller. This Office consolidates into one organization the former State Financial Services Group (Bureaus of Contracts, Expenditures, Accounting Operations, Accounting Systems, Financial Reporting and the FOCAS Project) and the former Payroll and Revenue Services Division (comprised of the Bureau of State Payroll Services and the Office of Unclaimed Funds). The Office of Operations is comprised of two Divisions: the Division of Contracts and Expenditures, headed by Assistant Comptroller John Moriarty, and the Division of Payroll, Accounting and Revenue Services, headed by Deputy Comptroller Dan Berry. The establishment of this Office will create efficiencies across operational lines, The New Office of Operations I develop unity and synergy among the affected Bureaus and projects, and increase the quality and level of customer service provided to agencies across the State. A contact list identifying key staff within each Division is included in this newsletter for your use and reference. Below is a brief description of the responsibilities of each Division. The Division of Contracts and Expenditures Contracts - The Division’s responsibilities relating to contracts are carried out within the Bureau of Contracts. Under Section 112 of the State Finance Law, the Bureau must approve State agency contracts that are above the prescribed threshold before these contracts can become effective and binding on the State. This includes the pre-audit of state contracts and contract Continued on page 7 Continued on page 4 This is trial version www.adultpdf.com Solutions - 2 - September 2007 Joan M. Sullivan, Executive Deputy Comptroller Joan M. Sullivan was named Executive Deputy Comptroller for Operations in May 2007. She is responsible for the oversight of two divisions, the Division of Payroll, Accounting, and Revenue Services, and the Division of Contracts and Expenditures. From February 2004 through May 2007, Ms. Sullivan served as the Assistant Comptroller of the State Financial Services Group. She was responsible for the oversight of five Bureaus — Contracts, State Expenditures, Financial Reporting, Accounting Systems and Accounting Operations — as well as the project to redesign the State’s Central Accounting System. Ms. Sullivan joined the Comptroller’s Office in January 2000 as Assistant Director of Contracts and in September 2001 was appointed Director of Contracts. Prior to joining OSC, she managed the Strategic Technology Assessment and Acquisition Team for the State Office for Technology. Before this assignment, she spent 21 years with the former Department of Social Services, rising to the level of Director of the Office of Contract Management, and later Director of Administration, for the Human Services Application Service Center. Joan is a graduate of Siena College. She lives in Slingerlands with her husband and three children. Division of Payroll, Accounting and Revenue Services Daniel C. Berry, Deputy Comptroller Daniel C. Berry was appointed Deputy Comptroller for the Division of Payroll, Accounting, and Revenue Services in May 2007. His responsibilities include the administration of the State’s Payroll Operations, Abandoned Property Program, Accounting Operations, Financial Reporting, and the FOCAS Project aimed at replacing the current Central Accounting System. Dan has served in the State Comptroller’s Office since 2000 when he assumed the position of Director of the Project to upgrade the State Payroll System. Upon completion of the Office of Operations: Announcement of Recent Appointments Continued on page 3 Suzette Baker and Dave Hasso, Bureau of Financial Reporting Upgrade Project in August 2003, he was appointed Assistant Comptroller for Payroll and Revenue Services with responsibility for the administration of the State’s payroll and abandoned property programs. Prior to joining OSC, Dan served as the State’s Electronic Benefit Transfer (EBT) Director with responsibility for the implementation of EBT in New York State and for coordinating efforts with other states, and at the national level. From 1978 to 2000, his state service included positions in information technology management, procurement, contract management, and customer consulting for the NYS Department of Social Services and its successor agency, the NYS Office of Temporary and Disability Assistance. A native of Rome, New York, he is an MA degree recipient from Andover Newton Theological School and a graduate of Hamilton College. He and his wife currently reside in Delmar. Bureau of Financial Reporting Within the Division of Payroll, Accounting and Revenue Services, the Bureau of Financial Reporting is responsible for preparing GAAP interim financial statements, the New York State Comprehensive Annual Financial Report, the New York State Financial Condition Report and the Financial and Audit Solutions newsletter. The following two recent appointments were made within the bureau: David Hasso, Director David Hasso, CPA, CGFM, was appointed as the Director of the Bureau of Financial Reporting in May 2007. Prior to this assignment, Dave served as Assistant Director of Financial Reporting and as a Project Director who managed project teams charged with installing a new general ledger system and implementing the GASB 34 financial reporting standards for the State. He is a member of the AICPA, Louisiana CPA Society, New York State Society of CPAs, AGA, GFOA and the GFOA Special Review Committee. He is also a member of the New York State Board for Public Accountancy and is Chairman of the Board’s Discipline Committee. Dave attended Siena College, Oxford University, and Imperial College (University of London), and is a member of the Oxford University Society. This is trial version www.adultpdf.com Solutions - 3 - September 2007 Office of Operations: Announcement of Recent Appointments Continued from page 2 Suzette Barsoum Baker, Assistant Director Suzette Barsoum Baker, CGFM, was appointed as the Assistant Director of the Bureau of Financial Reporting in May 2007. Suzette had previously worked on the implementation and upgrade of the Oracle General Ledger System, the GASB 34 Project, and the Agency Financial Reporting Package Database. Suzette is a member of the New York State Government Finance Officers Association (GFOA), the Association of Government Accountants (AGA) and she is a member of the Special Review Committee for the Certificate of Achievement for Excellence in Financial Reporting (CAFR Program). She has a BBA in Accounting from Siena College and an MS in Accounting with a concentration in Information Systems from SUNY Albany. She lives in East Greenbush with her husband and two children. Division of Contracts & Expenditures John Moriarty, Assistant Comptroller John Moriarty was appointed Assistant Comptroller of the Division of Contracts and Expenditures in May 2007. The Division’s responsibilities include auditing all State expenditures prior to payment, and engaging in the pre-audit of state contracts and contract amendments for commodities, technology, services, grant awards to not- for-profit provider agencies , inter- governmental agencies and construction projects. John served as the Director of the Bureau of Contracts since April 2004. Prior to his work with OSC, John served as the Director of Contracts at the Office of Children and Family Services. he Governmental Accounting Standards Board (GASB) recently issued its fifty-first statement of governmental accounting standards, Accounting and Financial Reporting for Intangible Assets. Examples of intangible assets in the governmental arena include easements (which are the right to use land for a specific purpose, such as building a highway), land use rights (such as the right to use a water source or to remove minerals or other resources from land), computer software, patents, and trademarks. The inclusion of the concept of intangible assets in GASB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, prompted many questions about how to identify intangible assets and, GASB Issues Accounting and Financial Reporting Guidance for Intangible Assets if a government has any, how to report them. The issuance of this new Statement is intended to provide clear and consistent answers to those critical questions. By reducing inconsistencies that have developed in accounting and financial reporting for intangible assets, the requirements in this statement should improve financial reporting and foster enhanced comparability among state and local government financial statements. The Nature of Intangible Assets Statement No. 51 identifies an intangible asset as having the following three required characteristics: · It lacks physical substance—in other words, you cannot touch it, except in cases where the intangible is carried on a tangible item (for example, software on a DVD). · It is nonfinancial in nature—that is, it has value, but is not in a monetary form like cash or securities, nor is it a claim or right to assets in a monetary form like receivables, nor a prepayment for goods or services. · Its initial useful life extends beyond a single reporting period. How Should Intangible Assets Be Reported? The standard generally requires intangible assets to be treated as capital assets and follows existing authoritative guidance for capital assets, although certain intangible assets are specifically excluded from the scope of the statement. One key exclusion relates to intangible assets that are acquired or created primarily for the purpose of directly obtaining income or profit. Such intangible assets should be treated as investments. The standard also provides guidance for issues specific to intangible assets. For instance, in order for the historical cost Continued on page 7 Continued on page 8 John Moriarty Assistant Comptroller T This is trial version www.adultpdf.com Solutions - 4 - September 2007 Operations, the Bureau of Financial Reporting and the Bureau of State Financial Systems, which was recently created by merging the former Bureau of Accounting Systems and the FOCAS Project. Some of these bureaus’ accounting responsibilities include: · Maintaining the State’s general ledger system; · Performing accounting for all federal grants, warrants and payment records, State revenues and expenditures/ disbursements; · Keeping appropriation control records and reports; · Preparing monthly, quarterly and annual cash (budgetary) basis financial statements; · Preparing the New York State Comprehensive Annual Financial Report and interim financial statements on a GAAP (Generally Accepted Accounting Principles) basis; · Participating in the single audit process by preparing the schedule of federal and non-federal awards; · Maintaining the State’s current Central Accounting System; and · Engaging in an initiative to replace the 20 year old accounting system and creating a more robust chart of accounts. Revenue Services - The Division’s responsibilities for revenue services are completed within the Office of Unclaimed Funds and include ensuring that holders of unclaimed funds are in complete and accurate compliance with the reporting and remittance provisions of the Abandoned Property Law. Additionally, the Office is responsible for maintaining detailed records showing the names and addresses of the property owners and the funds to which they may be entitled, as part of its efforts to promote the maximum return of property to rightful owners. FOCAS Project Selects Integrator/Developer Consultant eloitte Consulting has been selected as the Integrator/ Developer (I/D) Consultant for OSC’s FOCAS Project. Deloitte Consulting is a consulting firm with a public sector practice having expertise and experience performing public sector efforts. As the contracted I/D, Deloitte will assist OSC with the design, configuration, testing, training, and implementation of the State’s new Central Accounting System (CAS). Deloitte will also recommend changes to OSC’s financial management business practices that will best conform to the design of the Oracle/PeopleSoft Financials application. Deloitte will work in conjunction with KPMG, the on-site quality assurance consultant for the D amendments for commodities, technology, services, grant awards to not-for-profit provider agencies, inter-governmental agencies and construction projects. The Bureau also performs this function for certain public authorities as required by law or by resolution of their respective governing boards. In 2006, the Bureau reviewed approximately 40,000 contract transactions totaling nearly $40 billion, with an average contract approval time of less than 9 calendar days. Additionally, the Bureau reviews vendor responsibility determinations made by agencies seeking to contract with vendors, and is engaging in an initiative to develop and maintain a vendor responsibility system (VendRep) for the preparation, certification and submission of forms for review by contracting agencies of the State. Expenditures - The Bureau of State Expenditures is charged with the responsibility of auditing all State expenditures prior to payment. In 2006, the Bureau processed approximately 19.5 million payments totaling $82.6 billion, and recovered approximately $182 million in payments due to fraud, waste, and abuse. Division of Payroll, Accounting and Revenue Services Payroll - The Division’s payroll responsibilities are carried out within the State Payroll Services Bureau, which has the important responsibility of ensuring that state employees receive timely compensation for their services. The State Payroll Services Bureau handles employees of the executive, legislative and judicial branches, the State University of New York, and the City University of New York senior colleges. Accounting - The Division’s accounting responsibilities are spread among three bureaus, the Bureau of Accounting The New Office of Operations Continued from page 1 FOCAS Project, and with Oracle, the software provider. Deloitte Consulting was sent a letter of notification of award on April 27 th , 2007. They will now enter into contract negotiations with OSC representatives. At the close of negotiations, the contract will be forwarded through the proper channels and then reviewed and approved by the Bureau of Contracts. Once the contract is executed, Deloitte will deploy technical and functional resources to the FOCAS project to begin the effort of designing and implementing the new CAS. It is hopeful that the contract will be executed during the summer. This is trial version www.adultpdf.com Solutions - 5 - September 2007 T The Payroll Project: Risk-Based Measurement System he State Comptroller has oversight responsibility to ensure that legitimate employees on the State’s payroll are paid accurately and timely. New York State’s Constitution and the State Finance Law also require the Comptroller to audit and approve payments of salary before issuing a warrant for payment. Although the Comptroller maintains statutory authority for the oversight of salary payments, State agencies and the Comptroller’s Bureau of State Payroll Services (Payroll) share the responsibility of ensuring that payrolls are properly certified and that salary payments are authorized and paid in accordance with appropriate laws, rules, regulations and contractual provisions. Currently, Payroll applies a risk-based audit approach to achieve an appropriate level of review over payroll transactions. However, this approach relies on State agencies to have sound internal controls over payroll processing. Although Payroll performs various quality assurance reviews of payments, it has not performed on-site reviews or testing to verify agencies’ internal controls over payroll processing. A comprehensive audit approach, including verification testing at agencies to ensure that controls are in place and functioning, was missing. This approach would allow Payroll to establish reliance on its pre-audit of agency payroll transactions. Therefore, in May 2005, Payroll initiated a project to create a new risk- based measurement system. The goal of the Payroll Project is to build a risk-based audit model that will use a risk measurement system to identify high-risk payroll payments, and perform a compliance review of the highest risks. This project was developed in recognition of the importance of communicating and sharing information. As a result, information compiled from this risk- based model will be shared to contribute to a comprehensive picture of agency internal controls. During the first two years of the project, an experienced audit team examined payroll-related controls and exposures in both Payroll and a cross- section of agencies. This team researched potential audit solutions and best practices, and identified and tested data extraction tools. Presented with this information, the project partners agreed on the risk- based audit model, including the level and types of payroll risks to be measured, and on their project expectations and responsibilities. During the third and final year, the project plan calls for the establishment of a new risk measurement unit in Payroll. The new unit, whose staff will be trained in internal control awareness as well as risk assessment and compliance review techniques, will begin data extraction and analysis of payroll data to build the risk measurement system. Ongoing analysis and progression of new risk measures will then keep the risk-based model effective. In summary, the Payroll Project produces a tool to measure risk in payroll transactions over time and a system to evaluate and ultimately Continued on page 8 Did you miss an earlier edition? Features: FOCAS Project Updates Division of State Services Bureau Series GASB Articles Contract Monitoring Fraud Prevention Visit us at our web page: www.osc.state.ny.us This is trial version www.adultpdf.com Solutions - 6 - September 2007 Office of the New York State Comptroller Office of Operations Contact List The Office of Operations Joan M. Sullivan, Executive Deputy Comptroller (518) 402-4103 The Division of Payroll, Accounting and Revenue Services Dan Berry, Deputy Comptroller (518) 408-4149 Bureau of Accounting Operations Thomas Mahoney, Director (518) 474-4017 Bureau of Financial Reporting Dave Hasso, Director (518) 486-1233 Bureau of State Financial Systems (including the FOCAS Project) Roseanne Kryjak, Director (518) 408-3128 Bureau of Payroll Services Robin Rabii, Director (518) 474-3400 Bureau of Unclaimed Funds Lawrence Schantz, Director (518) 473-6318 The Division of Contracts and Expenditures John Moriarty, Assistant Comptroller (518) 474-4622 Contracts Charlotte Breeyear, Director (518) 474-4012 Expenditures Bernie McHugh, Director (518) 402-4104 VendRep Project Diane Taylor, Director (518) 486-3446 This is trial version www.adultpdf.com Solutions - 7 - September 2007 of an intangible asset to be reported in the financial statements, the asset must be identifiable. That means that the asset is separable—the government can sell, rent, or otherwise transfer it to another party. If it is not separable, the asset must arise from contractual or other legal rights, such as water rights acquired from another government through a contract that cannot be transferred to another party. Internally Generated Intangible Assets Although many intangible assets are purchased or received from other parties, some, such as proprietary software systems, are developed internally by a government itself. The outlays related to developing such assets may be incurred over time, rather than being incurred at a single point in time when a purchase occurs. Accounting for such outlays presents unique challenges—including, first and foremost, when to begin recognizing the asset. The standard specifies three circumstances that have to be met in order for outlays related to an internally generated intangible asset to begin to be reported as a capital asset: · The government’s specific objective for the project and the service capacity in which the asset is expected to be used upon the project’s completion has been determined. · The feasibility of completing the project so that it can be used in that capacity has been demonstrated. · The government’s intention to complete or to continue the development of the asset has been demonstrated. Importantly, the standard also provides detailed guidance for applying these circumstances to computer software, a common type of internally generated intangible asset. Indefinite Useful Life Those intangible assets which have no legal, contractual, regulatory, technological, or other factors limiting their useful life should be considered to have an indefinite useful life. A permanent right-of-way easement, for example, should be considered to have an indefinite useful life. An intangible asset with indefinite useful life should not be amortized unless its useful life is subsequently determined to no longer be indefinite due to a change in circumstances. Incorporating Feedback Based on feedback from constituents regarding the proposed version of this standard, the Board decided to ease the transition provisions that originally required retroactive reporting. The Board also clarified the descriptions of the characteristics of intangible assets to make them readily understandable in the final standard. Finally, as noted earlier, the Board added a scope exception, requiring that an intangible asset acquired primarily to obtain income or profit be treated as an investment. When Does the Standard Take Effect? Governments are required to implement Statement No. 51 for periods beginning after June 15, 2009. Early implementation is encouraged. GASB Issues Accounting and Financial Reporting Guidance for Intangible Assets Continued from page 3 could not fully achieve their forest management goals. The DEC did not dispute the facts in the audit, but rather contended that its primary objective of timber harvesting was to maintain the health of the forest, not to generate revenue. One of the debates regarding these issues was a column featured in the Times Union. The columnist mentioned the staff shortages at DEC, noting that the agency’s Division of Lands and Forests, which is responsible for marking and auctioning timber from State forests, was hit the hardest by the loss of employees. A spokesperson from Audubon New York said that many of these employees were forest specialists who were also involved with real estate acquisition, mapping, and monitoring diseases in the forests. Without enough staff, it was difficult for DEC to properly manage the forests and collect revenue. The column also highlighted the need to keep the forests healthy. A representative from the Adirondack Mountain Club explained that forests act as watershed protection and habitats for wildlife, and are used by thousands of New Yorkers for recreational purposes. In addition, the consumption of carbon dioxide by trees is a critical part of the debate concerning the global climate change. Other media coverage highlighted issues such as forests not being managed in a sustainable manner, the State losing money each year by not harvesting all possible timber, and the audit’s recommendation to hire new foresters to work in the program. While no definitive answers have been proposed, discussions have begun on how best to preserve our forests while at the same time ensuring that New York State is maximizing revenue. Timber Audit Starts Debate Continued from page 1 This is trial version www.adultpdf.com Solutions - 8 - September 2007 Financial & Audit Solutions Solutions is published as a customer service by the Office of the State Comptroller, Office of Operations, 110 State Street, Albany, NY 12236. Joan M. Sullivan Executive Deputy Comptroller for Operations Daniel C. Berry Deputy Comptroller Division of Payroll, Accounting and Revenue Services John Moriarty Assistant Comptroller Division of Contracts and Expenditures Editor Dave Hasso, Director Bureau of Financial Reporting Assistant Editors Suzette Baker, Assistant Director Bureau of Financial Reporting Michael Mezz, Associate Accountant Bureau of Financial Reporting Materials may be freely reproduced. For more information about the content or to comment on the newsletter, contact: Bureau of Financial Reporting Office of the State Comptroller 110 State Street - 11th Floor Albany, NY 12236 (518) 486-1235 or email finrep@osc.state.ny.us The Payroll Project: Risk-Based Measurement System Continued from page 5 Office of Operations: Announcement of Recent Appointments Continued from page 3 Throughout his 31-year career in New York State government, John has been actively involved in contract management improvement initiatives, many of which include using technology as a tool for achieving success, cost- effectiveness, and efficiency. He has a bachelor’s degree in Accounting from LeMoyne College, Syracuse, NY. He resides in Castleton with his wife and their two daughters. Bureau of Contracts Within the Division of Contracts and Expenditures, the Bureau of Contracts is charged with the responsibility, under Section 112 of the State Finance Law, for the pre-audit of State contracts and contract amendments for commodities, technology, services, grant awards to not-for-profit provider agencies, inter- governmental agencies and construction projects. The following recent appointment was made within the bureau: improve agency internal controls over payroll. The project provides a more comprehensive audit approach by creating a new function within Payroll that will: · transform the approach to auditing payroll expenditures, and Charlotte Breeyear, Director Charlotte Breeyear was appointed Director of the Bureau of Contracts in July 2007. In this capacity she coordinates and oversees the activities of the Bureau of Contracts, which reviews over 40,000 contract transactions annually, valued at over $34 billion. Prior to this appointment, Charlotte served as Assistant Director of the Bureau for three years. Charlotte joined OSC in 1986 and after various positions in ERS, BITS and State Audit, took a position in the Bureau of Contracts in 1994. Since then, Charlotte has enjoyed working in almost all areas of the Bureau at one time or another. · integrate and coordinate quality control initiatives (both within and outside of Payroll) to provide a comprehensive and ongoing analysis of agency controls. This system will increase transparency and accountability and protect taxpayer dollars, by implementing payroll management improvements in State agencies through compliance reviews and the promotion of standards and best practices. We (taxpayers, State agencies, Payroll and OSC) all win through the success of this project. This is trial version www.adultpdf.com . Issue 3) will be the final edition of the Solutions Newsletter. The Office of Operations within the State Comptroller s Office will be combining the Solutions Newsletter and the Payroll Express Newsletter. has served in the State Comptroller s Office since 2000 when he assumed the position of Director of the Project to upgrade the State Payroll System. Upon completion of the Office of Operations: Announcement. September 2007 Office of the New York State Comptroller Office of Operations Contact List The Office of Operations Joan M. Sullivan, Executive Deputy Comptroller (518) 402-4103 The Division of Payroll,