Nswtc15-02 Mandatory Early Close Procedures

Transcript

Treasury Circular NSW TC15-02 30 January 2015 Mandatory Early Close Procedures for 2014-15 Summary of the main changes to the Early Close Procedures for 2014-15:  All early close procedures to be conducted as at 31st March unless otherwise agreed with Treasury  Complete supplementary return information as part of the TOES return as at 31st March unless otherwise agreed with Treasury  A copy of the financial statements as at 31st March (unless otherwise agreed with Treasury) provided to the Audit Office as part of early close must also be provided to Treasury  Emerging issues updates are to be reported in February, April and June.  A separate circular on year-end requirements and timetable for the 2014-15 year-end will be issued.  Inclusion of some procedures previously covered by the Treasury Circular on Financial Accounting Arrangements for the Crown Entity o The Contingent Assets and Liabilities return (Appendix G(i)), which is expanded to include all Contingent Assets and Liabilities not just for those that are the responsibility of the Crown Entity. o The Financial Guarantees return (Appendix G(ii)), which is expanded to include all Financial Guarantees not just those from the Crown Entity. This circular applies to all NSW public sector agencies including State Owned Corporations. Background The Public Accounts Committee (PAC) Report on Quality & Timeliness of Financial Reporting, October 2010 included a recommendation that annual reports be tabled in Parliament within three months of year-end. The Government has supported this recommendation and the Early Close Procedures have been introduced to both facilitate earlier completion and improve the quality of year-end financial statements by providing, in part, more timely resolution of emerging accounting issues. Treasury is continuously developing Early Close Procedures, taking into account feedback from agencies and the Audit Office. These procedures are a step towards introducing a 31st March hard close which Treasury is considering in the near future. The focus on improving the quality and timeliness of financial reporting is paying dividends. Agency and Audit Office feedback is that the Early Close Procedures have assisted in ensuring a smoother year-end process and more effective resolution of issues. Continued improvements by agencies have reduced the reported number of misstatements and resulted in an unqualified TSSA audit opinion - a significant achievement. The Auditor-General reported that agency 2013-14 financial statements submitted for audit and used for the whole-of-government reporting, contained 10 monetary misstatements each exceeding $20 million compared to 15 such misstatements in 2012-13 and 30 in 2011-12. Despite this, the focus going forward will remain on reducing misstatements, and the underlying causes. 52 Martin Place Sydney, NSW 2000, GPO Box 5469, Sydney, NSW 2001. Phone: (02) 9228 4426. Promoting State resource management to achieve a stronger NSW economy and better public services Early Close Procedures “Early Close Procedures” refer to the preparation of a set of pro forma financial statements, which bring forward certain aspects of financial statement preparation from the 30 June year-end and require the confirmation that key controls over agency balances are being carried out. The purpose of these procedures is to ensure the integrity of the year to date position and highlight issues to be resolved before the end of the financial year. Treasury mandates all early close procedures to be conducted as at 31 March. Agencies that are unable to do so must obtain Treasury’s written consent to conduct early close at a month-end other than 31 March In preparing pro forma statements agencies must: Complete revaluations of property, plant and equipment - Revaluations of property, plant and equipment for 2014-15 must be completed. Treasury must be notified of any exceptions. Cluster CFOs must be kept informed on the progress and outcome of any asset revaluations. Asset revaluations should be supplemented by consideration of relevant indices to roll forward revalued amounts to the year-end. Further, relevant and reliable indices can be used to annually revalue assets between comprehensive revaluations. Management may need to consider using more than one index where, for example, assets are not of a similar nature and/or location. Agencies must review any assumptions about sampling and valuation techniques, and demonstrate that valuation and valuation techniques adopted are appropriate under AASB 13 Fair Value Measurement and TPP14-01 Valuation of Physical Non-Current Assets at Fair Value, including how it maximises observable inputs. In particular, focus on classification and adjustments arising from revaluations should consider the difference between changes in accounting policies and changes in estimates and errors. Update employee annual leave provisions - Reconciliation and calculation of annual leave provisions must be completed. At 30 June, the balances calculated for the early close statements can be rolled forward with adjustments for monthly accruals and actual payments. Agree and confirm inter and intra (cluster) agency balances – The agency providing the service (the debtor) should take the lead in agreeing each balance. A breakdown for each account-SDC combination with a year to date balance of greater than $10 million (by Agency) must be provided. The format in Appendix H can be used as a guideline. Document significant management judgements and estimation uncertainty - AASB 101 Presentation of Financial Statements requires an entity to disclose assumptions and other key sources of estimation uncertainty and any judgements and changes to judgements made in applying the entity’s accounting policies where these have a significant effect on the financial statements. (Refer Appendix A) Agencies should collect and retain appropriate documents to support significant judgements, any assumptions made when estimating transactions and balances (Refer Appendix A), and to record the process used to arrive at those assumptions. For more complex accounting issues, documentation should summarise the issue, set out management’s evaluation and conclusion. Accounting issue resolution papers should be concise, ideally no longer than 3 pages in length. Appendix F provides a template for the reporting of the resolution of accounting issues. Materiality should drive the decision about what to document. NSW TC Mandatory early close procedure s for 2014-15 2 Notes to the accounts - Agencies should prepare note disclosures including prior year comparative information and all narrative disclosures. In preparing pro forma statements agencies do not have to: Recalculate insurance, superannuation, and other employee liabilities - Under accounting standards, insurance, superannuation and other employee liabilities, which are estimated using actuarial techniques, require a 30 June liability discount rate. Agencies should use amounts accrued year-to-date in the early close financial statements but these will be required to be updated as part of the year-end procedures at 30 June. Update financial instruments - Annual Hour-Glass managed fund distribution statements and other financial instrument information for disclosures is not available until after year-end. Calculate the liability to the Consolidated Fund – this must be calculated as at 30 June, but there is no requirement to calculate this as part of the Early Close Procedures. To facilitate Early Close Procedures and the preparation of early close financial statements, Treasury plans to issue accounting policy updates and mandates of options by February 2015. Appendix B, Early Close Procedures Checklist defines the minimum requirement for the Early Close Procedures. Agencies may wish to perform additional procedures as part of a strategy to improve the quality and timeliness of financial reporting. The completed, signed checklist must be provided to Treasury at the same time as the early close financial statements are submitted to the Audit Office and Treasury. Where the procedures in Appendix B are not followed, the reasons for this must be notified to Treasury. Agencies should consider reconciling the March 2015 month-end TOES submission to the pro forma financial statements prepared as part of early close – also as at 31 March 2015. This is strongly recommended. Learnings from 2013-14 Based on 2013-14 experiences, there are a number of areas that agencies should focus on in carrying out the 2014-15 Early Close Procedures. Focus Areas: 1. 2. 3. 4. 5. Review and resolution of past audit issues, misstatements and disclosure deficiencies and matters that resulted in qualification in the auditor’s report Identify financial reporting implications as a result of changes to accounting standards - for 2014-15 the key standard change is AASB 10 consolidation Agree and confirm inter-agency and intra (cluster) agency balances over $10 million Ensure the impact of significant transactions or new and revised accounting standards on the 2014-15 projection, the 2015-16 Budget and the forward estimates are incorporated as part of the 2015-16 budget process Ensure the opening balances in the early close supplementary return agrees to the 2013-14 agency audited financial statements and the closing balance of the early close supplementary return agrees to the 2014-15 early close financial statements NSW TC Mandatory early close procedure s for 2014-15 3 Audit implication of early close procedures Agencies will need to agree the audit requirements for Early Close with the Audit Office. The Audit Office may determine that limited or no audit procedures are appropriate at Early Close on some smaller agencies. Early Close Procedures should be completed and ready for audit as soon as possible but no later than 27 April 2015. Agencies will need to agree the timing and format of feedback with the Audit Office. The deadline for feedback should be consistent with the timetable for the preparation of final financial statements. The Audit Office has committed to Treasury to provide feedback to agencies by 29 May 2015 to enable agencies to take corrective action on material audit issues. The effective completion of the Early Close Procedures may limit the need for more extensive audit procedures to be carried out after 30 June. It also enables the early identification of potential audit issues. To maximise the effectiveness of Early Close Procedures, agencies need to consult with the Audit Office, to include:  what procedures will be performed  what account areas will be subject to Early Close Procedures  the agency timetable to carry out the Early Close Procedures, including the provision of the pro forma financial statements and supporting documentation  the timing and the scope of the review by auditors, which needs to allow sufficient time for agencies to consider audit feedback in year-end financial statements  the impact on the timing and scope of the auditor’s work at year-end. The Audit Office is committed to providing timely feedback on the early close procedures to the agencies in 2014-15. Agencies should proactively ensure that any material findings or concerns being raised by the Audit Office as part of early close are acted on in a timely manner for early corrective actions to be implemented and resolved at year-end. Treasury requests that findings by the Audit Office as part of the early close be communicated by the agency to the Treasury, preferably through provision of the interim management letter issued by the Audit Office. Emerging Issues Reporting Emerging Issues Reporting is required at three points before year-end as follows:  16 February - to gain early sight of issues and potential impact on the year-end projection and forward estimates  27 April - to accompany the early close procedures, including an update on resolution of issues identified in February.  26 June - to update potential impacts to the year-end, including issues identified by the Audit Office as part of the Early Close procedures and the resolution of previously identified issues. Emerging issues should include all issues that have the potential to affect either the numbers in the year-end financial statements or the agency year-end process. Agencies should err on the side of greater caution in reporting potential issues. Please see Appendix E for details. Crown Entity requirements The Financial Accounting Arrangement for the Crown Entity circular (TC14/07) has previously addressed Crown requirements of agencies to manage the Crown’s statutory reporting obligations at year-end. The following three requirements previously requested by the Crown at year-end are now required as part of early close.  Unpaid cheque accounts operated on behalf of the Consolidated Fund NSW TC Mandatory early close procedure s for 2014-15 4   Contingent Assets and Contingent Liabilities Return Crown Financial Guarantees Return – which is now replaced by the Financial Guarantees return Please see Appendix G for details. Application of this Circular The Circular is issued as a Direction in accordance with sections 9 and 45E of the Public Finance and Audit Act 1983. A specific reference to this Treasury Circular will also be included in the Statement of Corporate Intent of Statutory State Owned Corporations. This Circular withdraws and supersedes the previous NSW Treasury Circulars Mandatory Early Close procedures for 2014 (NSW TC14/02) and the 2013-14 Financial Accounting Arrangements for the Crown Entity (NSW TC14/07). Karen Sanderson Executive Director FEFR Further Information: NSW Treasury Internet: Fiscal Estimates & Financial Reporting Division Email: [email protected] (with ‘Early Close’ in the Reference Title) www.treasury.nsw.gov.au NSW TC Mandatory early close procedure s for 2014-15 5 This page is left blank intentionally NSW TC Mandatory early close procedure s for 2014-15 6 Directory of Appendices Appendix # Name Pages Appendix A 2015 Early Close Reporting Timetable 8 Appendix B Early Close Procedures Checklist 11 - 13 Appendix C Discontinued/Abolished Statutory Bodies 14 Appendix D Changes to Accounting Standards 2014-15 15 - 16 Appendix E 2014-15 Information on Emerging Issues 17 Appendix F Accounting Issue Resolution Paper (Template) 18 - 19 Appendix G The Crown Entity Requirements 20 Appendix G (i) Contingent Assets and Contingent Liabilities Return 21 - 22 Appendix G (ii) Financial Guarantees Return 23 - 25 Appendix H Breakdown of Interagency Balances 26 Appendix I Where to go for help 27 - 28 Appendix J Resources/Links 29 NSW TC Mandatory early close procedure s for 2014-15 7 Appendix A: 2015 Early Close Reporting Timetable The intention of this timetable is to facilitate the earlier preparation of agency financial statements and the Total State Sector Accounts, as well as improve the quality of financial statements and minimise risk of audit qualifications or errors in financial statements submitted for audit and to Treasury. A second circular will be issued before 30 June 2015 outlining the year-end reporting timetable. Agencies need to develop a detailed plan with key stakeholders, including auditors, to achieve these deadlines. Plans should allow sufficient time for management review and involvement of Audit and Risk Committees as applicable. Early Close Procedure Treasury issues updated accounting policies 28 February 2015 Agencies submit their Return on Emerging 1 Accounting Issues (Appendix E) to Treasury 16 February, 27 April and 26 June 2015 Agencies provide action plans to address prior year audit issues (see Appendix B) 31 March 2015 Period 9 TOES return (including supplementary return) 14 April 2015 Agencies provide early close procedures checklist to Treasury (Appendix B) – no later than 27 April 2015 Agencies provide results of early close procedures to the Audit Office and Treasury – no later than 27 April 2015 Agencies provide Contingent Asset and Liability return and Financial Guarantees return (Appendix 1 G(i) and (G(ii)) 27 April 2015 Audit Office feedback on early close procedures 1. 2. 2015 as agreed with agencies (but a suggested target 2 date is 29 May) Nil returns will be accepted prior to the deadline The deadline f or f eedback should be consistent with the timetable f or the preparation of f inal f inancial statements. NSW TC Mandatory early close procedures for 2014-15 8 Practical guidance in implementing early close procedures Key points Agencies should review and where possible, resolve all past audit issues, identified misstatements and disclosure deficiencies and matters that resulted in qualification of the Independent Auditor’s Report. Regular meetings with the Audit Office and other key stakeholders are required to develop and monitor year end plans for financial statement preparation. Plans should allow sufficient time for management review and involvement of Audit and Risk Committees as applicable. Quality work papers supporting balances and variance analysis should provide evidentiary support for the balances and provide meaningful explanations for movements in those balances. Agencies should ensure that they: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. identify and document approaches with regard to changes to legislation impacting agency structures and/or financial reporting requirements including changes to accounting standards agree with the Audit Office the pro forma financial statements ensure the opening balances in the early close supplementary return agrees to the 2013-14 agency audited financial statements and the closing balance in the early close supplementary return agrees to the 2014-15 early close financial statements categorise accounting adjustments particularly arising from changes in accounting policies, changes in accounting estimates and errors with an assessment of requirements for any prior period(s), opening balance adjustments, or future year impacts – in particular focus on classification and adjustments arising from revaluations review and resolve issues identified in the Early Close letter, prior year Management Letter and Client Service Report from the Audit Office correct classification of accounting balances and transactions in accordance with ABS GFS classifications in conjunction with Treasury, ensuring correct TOES coding for whole of government reporting complete the revaluation of all material property, plant and equipment where it is due agree and confirm inter agency balances carry out the reconciliation and valuation of employee leave and other key provisions resolve outstanding items of bank and other key (debtor/creditor) reconciliations on a monthly basis to reduce the items remaining unresolved at early close. identify and document accounting issues including all material, complex or one-off transactions document significant management judgements and estimation uncertainty provide evidence of appropriate delegations for all material transactions Documentation requirements Approvals for certain transactions within Delegation Under the Public Finance and Audit Act 1983, all transactions require a relevant authority. Agencies need to ensure financial statement work papers include evidence of authorities and approvals within delegations for significant items such as:  restructured arrangements  material, complex or one-off transactions  equity transfers. Relevant authority might be evidenced by such things as:  Treasurer’s Directions  Secretary/Chief Executive/CFO Delegations (financial). NSW TC Mandatory early close procedure s for 2014-15 9 Significant management judgements and estimation uncertainty All significant accounting issues and judgements should be documented as part of the early close procedures. This documentation should summarise the issue, set out management’s evaluation of the issue and its conclusion. Accounting issue resolution papers should be conc ise, ideally no longer than 3 pages in length. Appendix F provides a template for the reporting of the resolution of accounting issues. Management judgement may be required in determining, for example whether:  an entity is classified as for-profit or not-for-profit  major assets are classified within the AASB 13 hierarchy  the entity controls a subsidiary (AASB 10 and 11) with less than half the voting power  a lease is classified as finance or operating  an asset meets the criteria to be classified as held for sale  a property qualifies as an investment property  the going concern basis of accounting is appropriate. Agencies should collect and retain appropriate documents to support significant judgements any significant assumptions made when estimating transactions and balances, and to record the process used to arrive at those assumptions. Examples include:  discount rates used in determining present values  estimated useful lives of assets  inputs into actuarially determined balances  asset revaluations and impairment  valuation of and accounting for financial instruments. Restructures and Discontinued/Abolished Agencies Restructures, discontinued and/or abolished agencies may impact financial reporting requirements. The effects of such changes need to be assessed for each entity. For part year financial reporting requirements of an agency that has been abolished or dissolved or its name removed from Schedule 2 of Public Finance and Audit Act 1983, please refer to Appendix C Discontinued /Abolished Statutory Bodies. Early close financial statements should reflect all necessary disclosures which may be required due to restructures. Agencies should refer Treasury Policy TPP 09-3 Contributions by Owners and AASB 1004 Contributions for guidance on the designation of asset/liabilities transfers as transfers of equity. Other Agencies can use amounts accrued year-to-date (for Hourglass, based on unit price information) in early close financial statements but these will need to be updated as at 30 June. NSW TC Mandatory early close procedure s for 2014-15 10 Appendix B: Early Close Procedures Checklist Forward to Treasury at the same time, as early close procedures are completed and submitted to the Audit Office (no later than 27 April 2015) Email: Agency Name [email protected] or Fax: 9228 3031 _________________________________________ Agency No. (TOES) _________ Annual Procedures Prepare pro forma financial statements which include:        For yes “” and no “x” comparative information current year-to-date figures an updated accounting policy note Notes to the accounts application of new and revised accounting standards (refer to Appendix D) and NSW Treasury policies, and consideration of the possible effects of accounting standards issued but not yet effective impact of restructures considered updated note disclosures for new and revised accounting standards and Treasury policies In preparing the above:  Confirm the agency complies with Treasury’s mandatory accounting policies with a detailed explanation if it does not comply  Explain any unresolved prior year audit issues including the proposed action plan to resolve them  Attach journal, explanation and proposed disclosure where 2013-14 comparatives are amended due to the correction of a material error, or a change in accounting policy  Assess the impact of new and updated accounting standards, in particular - AASB 10, 11, 12, 127, 128 and other amending Standards regarding Consolidated / Separate financial statements and also AASB 1055 on Budgetary Reporting      Ensure supporting work papers evidence how the agency has considered and addressed the requirements of the new standards disclosing significant judgments and assumptions in determining the interest in another entity (e.g. control/lack of control over an entity, classification as joint venture or joint operation) more detailed financial information on material joint ventures interests in unconsolidated structured entities commitments to support controlled entities / joint ventures  Identify and document accounting issues including all one-off, complex or significant transactions       document the transactions using the template at “Appendix F” engage effectively with all affected stakeholders and agreed financial implications and accounting treatments, including with Treasury to ensure whole-of-government impacts are properly classified for consolidation outline and submit to Treasury the management judgements, assumptions undertaken, estimates and the basis of treatment document management review and endorsement of the accounting treatment using the template at “Appendix F” update the ledgers, financial statements and note disclosures to reflect the treatment make available to Treasury where necessary any formal advice from external consultants NSW TC Mandatory early close procedures for 2014-15 11 Appendix B (continued)  Review prior year Management Letter and Client Service Report from the Audit Office:       st provide Treasury with action plans to address issues raised by the Audit Office by 31 March 2015 (qualifications, monetary misstatements & reclassification errors/disclosure deficiencies) document evidence of management’s review and endorsement of the solutions/approach assign responsibility for issue resolution to appropriate staff update the ledgers, financial statements and note disclosures to reflect the solutions/approach retrospectively restate comparative information where applicable to reflect new treatment and advice Treasury of such effectively engage with auditors, Treasury and other stakeholders as required  Ensure management review of the statements and work papers and endorsement of the pro forma financial statements  Complete the revaluation of property, plant and equipment by early close (i.e. where comprehensive revaluations are due or where there are material difference compared to fair value):   obtain independent valuations or perform the annual assessment of fair value schedule and appropriately resource valuation processes  confirm the valuation reports contain sufficient detail to support the disclosures in the financial statements (i.e. alignment with the requirements of AASB 13, inputs used in the valuation, key assumptions, discount rates used etc). conduct annual assessment for impairment indicators and confirm useful life assumptions where relevant, update impairment calculations with current year information document management judgements, assumptions and valuation methodologies undertake a management review of valuations reconcile the fixed assets register or underlying records to the updated valuation update the ledgers, financial statements and note disclosures to reflect the valuation ensure correct classification of the adjustments arising from revaluation on restructures, engage with sending and receiving agencies to document transfers to support accounting treatment and disclosures and ensure whole of government impacts are properly classified for consolidation          Undertake a management review of service groups including validity of apportioning transactions and balances between service groups for expenses, revenue and capital expenditure Monthly Procedures  Reconcile key account balances and perform monthly accruals, which include:     identify accounts that are significant to the financial statements reconcile these accounts clear reconciling items update ledgers for this treatment  Improve monthly reviews and increase accountability, which include:    perform variance analysis with meaningful explanations, for actuals versus budget, and year-to-date actuals for the previous year document management’s review and endorsement of the monthly reports consider public reporting of quarterly or half-yearly reports NSW TC Mandatory early close procedure s for 2014-15 12 I confirm that the above early close procedures have been complied with, as indicated. Where early close procedures have not been complied with, an appropriate explanation is attached. Signed: ____________________Chief Finance Officer_______________________(Name of CFO) Agency Contact: (Name) __________________________ (Tel) ________________ __/___/2015 NSW TC Mandatory early close procedure s for 2014-15 13 Appendix C: Discontinued/Abolished Statutory Bodies In accordance with Public Finance and Audit Act 1983, where a statutory body ceases to be a statutory body because it is abolished or dissolved or its name removed from Schedule 2 of the Act, it should comply with section 43A of the Act. This means a final financial report must be prepared from 1 July to the date of abolition. Section 43A General audit of former statutory bodies states, (1) This section applies where a statutory body ceases to be a statutory body because it is abolished or dissolved or its name is removed from Schedule 2. The statutory body is referred to in this section as the body. 1 (2) Unless other provision is made by or under any Act : (a) a financial report for the portion of the financial year ending when the body ceased to be such a statutory body (and for any previous financial year) is to be prepared and submitted, and (b) the financial report is to be audited, and (c) a statement referred to in section 41C (1B) in relation to the financial report is to be prepared and submitted, in the same way that it would have been required to be prepared, submitted and audited if the financial year had ended on that day and the body had not ceased to be such a statutory body. (3) The financial report and statement may be prepared and submitted by any person or persons who could have done so had the body not ceased to be a statutory body or by any successor to or continuation of the body, or by any entity that controlled the body. (4) The Auditor-General may make such arrangements, and enter such agreements, as may be appropriate or necessary for the purposes of this section. An arrangement or agreement may provide for the affairs of the body and of any successor to be treated in a composite way. (5) The Treasurer may direct that this section is not to apply to the body if, in the opinion of the Treasurer, it is unnecessary or inappropriate for it to apply. 1. The Admin Order issued in relation to GSE Act prov ides relief f or these requirements. Where a body has been abolished or diss olv ed under this legislation, agencies should consider the relev ant relief s. NSW TC Mandatory early close procedure s for 2014-15 14 Appendix D: Changes to Accounting Standards 2014-15 Below is a list of all new/revised Accounting Standards applicable for the first time in 2014-15. Of these new requirements, the following standards will potentially have the greatest impact for NSW public sector agencies. However, the impact of different standards depends on the circumstances of each agency, so agencies must consider how the new/revised standards may affect them.  AASB 10, 11, 12, 127, 128 and other amending Standards regarding Consolidated / Separate financial statements These amendments apply to not-for-profit agencies for the first time in 2014-15. AASB 10 Consolidated Financial Statements broadens the definition of control and requires more professional judgement to assess whether an entity is controlled. An investor controls an investee if and only if the investor has: a) power over the investee b) exposure, or rights, to variable returns (note: returns may be financial or non-financial) from its involvement with the investee, and c) the ability to use its power over the investee to affect the amount of the investor’s returns. AASB 11 Joint Arrangements requires joint arrangements to be accounted for based on their contractual arrangements, and distinguishes between joint operations and joint ventures. AASB 12 Disclosure of Interest in Other Entities contains all the disclosure requirements associated with other related entities (i.e. subsidiaries, associates and joint ventures) that were previously located in AASB 127, 128 and 131 and Interpretation 112 and 113. AASB 12 introduces enhanced and increased disclosures particularly in respect of:     disclosing significant judgments and assumptions in determining the interest in another entity (e.g. control/lack of control over an entity, classification as joint venture or joint operation) more detailed financial information on material joint ventures interests in unconsolidated structured entities commitments to support controlled entities / joint ventures. All agencies will need to reassess and document their relationships with subsidiaries, associates, joint arrangements and other related entities (including entities that are not currently consolidated) and assess whether there are any impacts for 2014-15. As facts and circumstances indicate a change to one or more of the three elements of control, AASB 10 para 8 requires control to be reassessed.  AASB 1055 Budgetary Reporting AASB 1055 Budgetary Reporting sets out in a single standard the budgetary disclosure requirements for the whole of government, General Government Sector (GGS) and not-for-profit entities within the GGS. Previously Treasury mandated disclosure of the original budgeted financial statements presented to Parliament as adjusted for section 24 transfers under the Public Finance and Audit Act 1983. With the introduction of the new standard, any section 24 adjustments resulting in material variances between budget and actual figures must now be included in the agency’s explanation of material variances , rather than as an adjustment to the original budget. The 2014-15 Financial Reporting Code will address the key impacts of AASB 1055. NSW TC Mandatory early close procedure s for 2014-15 15 Appendix D (continued) New or revised Accounting Standards applicable to 2014-15 Accounting Standards AASB 10 Consolidated Financial Statements (applicable to not-for-profit entities for annual financial periods beginning on or after 1 January 2014) AASB 11 Joint Arrangements (applicable to not-for-profit entities for annual financial periods beginning on or after 1 January 2014) AASB 12 Disclosure of Interests in Other Entities (applicable to not-for-profit entities for annual financial periods beginning on or after 1 January 2014) AASB 127 Separate Financial Statements (applicable to not-for-profit entities for annual financial periods beginning on or after 1 January 2014) AASB 128 Investments in Associates and Joint Ventures (applicable to not-for-profit entities for annual financial periods beginning on or after 1 January 2014) AASB 1031 Materiality AASB 1055 Budgetary Reporting AASB 2011-7 regarding consolidation and joint arrangements (applicable to not-for-profit entities for annual financial periods beginning on or after 1 January 2014) AASB 2012-3 regarding offsetting financial assets and financial liabilities AASB 2013-1 regarding amendments to AASB 1049 – relocation of budgetary reporting requirements AASB 2013-3 regarding recoverable amount disclosures for non-financial assets AASB 2013-4 regarding novation of derivatives and continuation of hedge accounting AASB 2013-5 regarding accounting for investment entities AASB 2013-6 regarding amendments to AASB 136 arising from Reduced Disclosure Requirements AASB 2013-7 regarding amendments to AASB 1038 arising from AASB 10 AASB 2013-8 regarding consolidated financial statements and Australian implementation guidance for notfor-profit entities (control and structured entities) AASB 2013-9 Part B regarding materiality AASB 2014-1 Parts A, B and C regarding employee benefits and materiality AASB 2014-2 regarding amendments to AASB 1053 – Transition to and between Tiers, and related Tier 2 disclosure requirements – Treasury is likely to mandate tier 1 reporting requirements; i.e. RDR will not be available in the NSW public sector Interpretation 21 Levies ERR AASB 10 regarding cross-reference in AASB 10 to support the approach to investment entities NSW TC Mandatory early close procedure s for 2014-15 16 Appendix E: 2014-15 Information on Emerging Issues Forward by 16 February 2015, 27 April 2015, and 26 June 2015 Email: [email protected] or Fax: 9228 3031 Agency Name _______________________________ Agency No. (TOES) _________ Where appropriate attach further information e.g. extract from pro-forma notes to financial statements  Do you have any emerging issues with an impact of more than $5 million? Yes / No If yes, what is the nature of the issue(s)? ............................................................................................................................................... ............................................................................................................................................... ............................................................................................................................................... ..............................................................................................................................................           Examples of emerging issues include: unresolved accounting policy issues or other matters which the Audit Office has indicated may lead to the qualification of the Independent Auditor’s Report. key risk areas that could impact the quality or timeliness of your financial statements significant asset revaluations particularly those involving estimation uncertainty significant revenue /expense items – i.e. significant in size compared to the previous year (It is not necessary to report to The Treasury about superannuation, as it is generically volatile) significant adjustments direct to equity – for example from agency restructures new disclosures resulting from the adoption of accounting standards, changes in accounting policies discontinuing operations, sale of a significant asset, new business acquisitions etc. the accounting treatment of new privately financed projects new or significant changes to contingent liabilities/assets Does management plan to amend the 2014-15 financial statements for the emerging issue? Yes/No If no, the reasons for not amending are: ............................................................................................................................................... ...............................................................................................................................................  Have management’s positions on the above emerging issues been provided to the Audit Office? Yes / No / N/A Audit Office  What date has the audit team indicated that it plans to report to your organisation its observations from the procedures that it conducts on the early close? ____/____/2015 or N/A Signed: ____________________Chief Finance Officer_______________________(Name of CFO) Agency Contact:(Name) __________________________ (Tel) _________________ ___/___/2015 NSW TC Mandatory early close procedure s for 2014-15 17 Appendix F: Accounting Issue Resolution Paper Agency Consideration: Date Prepared [insert date prepared] Date Updated [insert date revised if applicable] Agency [insert name of Agency that the issue relates] Preparer [insert name of the preparer of this Position Paper] Issue [insert brief description of the nature of the issue being addressed] Agency # [insert] Background: [Describe the background to the current issue and any related information which better frames how the issue arose and the current difficulties being faced by the agency] Stakeholders: [Describe the key stakeholders impacted by this issue and how they have been consulted] Description of Issue: [Provide a detailed description defining the current issue faced by the agency] Consideration of Accounting Treatment: Agency Policy: [Identify any accounting policies or standards which directly relate to addressing the issue. Consideration should include:    Accounting Standards Treasury Policies & Circulars Agency Specific Policies] Are adopted accounting policies/treatment aligned with Accounting Standards? NSW TC Mandatory early close procedure s for 2014-15 Yes / No 18 Technical Analysis & Options: [Describe the agency’s position and interpretation of policies and accounting standardsincluding any advice provided by an accounting firm or other specialist. Further, outline any options available in how the issue may be interpreted and addressed – e.g. through interpretations of the policy and standards or through differences of opinion] Proposed Accounting & Finance Impact including Disclosures: Does the transaction require retrospective or prospective adjustments (refer AASB 108)? Yes / No If retrospective adjustments are required, demonstrate that the adjustment required is ‘material’, indicate the historical periods and amounts that require adjustment in the template below. Please complete journals in the attached ‘Journal Quantification Template’. Journals should consider any impact to prior year financial statements and all impacts to the financial statements, including the reasons for the transaction. TOES Journals.xlsx Financial Impact ($000) 2014-15 2015-16 2016-17 2017-18 2018-19 2009-10 2010-11 2011-12 2012-13 2013-14 Budget Result (-ve worsens) Operating Result Net Lending Financial Statement (-ve worsens) Balance Sheet Operating Statement Financial Impact ($000) Prior Year Financial Statements (-ve worsens) Balance Sheet Operating Statement Concluding Position: [Describe the final position/option that the Agency has identified to be the most appropriate recommendation] Agency Sign Off & Review: Sign-off [insert name] [insert name] [insert name] Role Signature Date Financial Accountant (Preparer) Financial Manager (Reviewer) Agency CFO (Reviewer) NSW TC Mandatory early close procedure s for 2014-15 19 Appendix G: The Crown Entity requirements Unpaid cheque accounts operated on behalf of the ConFund A number of larger agencies operate a Treasurer’s Unpaid Cheque Account on behalf of the ConFund. As these accounts form part of the ConFund's cash at bank total, the Crown Entity requires reconciliations of these accounts for its early close work papers. The reconciliations and related working papers are to be emailed to [email protected] by 27 April 2015. Note: the balance of the unpaid cheque account must not include cheques unpaid/ dishonoured for more than 2 months. These are to be cleared, with appropriate deposit made to the credit of the Treasurer’s Unpaid Cheque account as per Treasurer’s Direction 140.04. Contingent Assets and Contingent Liabilities Return Accounting Standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires disclosure of contingent assets and contingent liabilities in the financial statements. The Crown Entity will report on contingent assets and contingent liabilities that are not the responsibility of any other State Sector agency (i.e. not disclosed in the financial report of the agencies) but are the responsibility of the Crown Entity. Contingent assets and liabilities that are the responsibility of specific agencies should be disclosed in the agency’s own financial statements and also be included in this return. All NSW public sector agencies are required to complete and submit Appendix G(i) Contingent Assets and Contingent Liabilities as at the end of March by 27 April 2015. A Nil return is required if no such contingencies exist. Financial Guarantees Return AASB139 Financial Instruments: Recognition and Measurement requires recognition of any liability for financial guarantee contracts in the Statement of Financial Position. All NSW public sector agencies are required to complete and submit Appendix G(ii) Financial Guarantees Return as at the end of March by 27 April 2015. A Nil return is required if no such guarantees exist. Agencies must separately identify in this return the instruments of assurance that are issued with the Crown’s backing as well as those issued without it. NSW TC Mandatory early close procedure s for 2014-15 20 Appendix G(i): Contingent Assets and Contingent Liabilities return A1. Contingent assets of the Crown (NOT appearing in the financial statements (including notes) of the agency completing this return) Provide details of the contingent assets i) Quantifiable contingent assets $’000 as at 30 June 2015 Total quantifiable contingent assets ii) Non quantifiable contingent assets A2. Contingent assets of the Agency (appearing in the financial statements (including notes) of the agency completing this return) Provide details of the contingent assets i) Quantifiable contingent assets $’000 as at 30 June 2015 Total quantifiable contingent assets ii) Non quantifiable contingent assets B1. Contingent liabilities of the Crown (NOT appearing in the financial statements (including notes) of the agency completing thi s return) Provide details of the contingent liabilities i) Quantifiable contingent liabilities $’000 as at 30 June 2015 Total other quantifiable contingent liabilities ii) Non quantifiable contingent liabilities NSW TC Mandatory early close procedure s for 2014-15 21 B2. Contingent liabilities of the Agency (appearing in the financial statements (including notes) of the agency completing thi s return) Provide details of the contingent liabilities i) Quantifiable contingent liabilities $’000 as at 30 June 2015 Total other quantifiable contingent liabilities ii) Non quantifiable contingent liabilities Please provide details of a contact should there be any enquiries: Name: __________________________ Phone: __________________________ I verify that all known contingent assets and contingent liabilities of the Crown and our Agency are listed above Signed: __________________________ Chief Finance Officer Name: __________________________ Dated: __________________________ * The certifying officer must be the Chief Finance Officer of the agency. NSW TC Mandatory early close procedure s for 2014-15 22 Appendix G(ii):Financial Guarantees return Due date: 27 April 2015 Email: [email protected] Agency name: _________________________ Agency number: ______ Page: _____ of _____ Note: - - A1. This example is for financial guarantees, a separate return is required for each type of instruments of assurance. Refer to Treasury Policy Paper Guidelines for Issuing and Managing Indemnities, Guarantees, Warranties and Letters of Comfort for more information. $’000 Crown Financial Guarantees 1. Amount of Crown financial guarantee $ 2. Start date of Crown financial guarantee 3. Termination date of Crown financial guarantee 4. Description of guarantee (including the form of the guarantee (e.g. s22B), who and what is being guaranteed) 5. Is the debt that is being guaranteed, recognised in the agency’s own financial statements? 6. Likely loss arising from default-estimate at date of guarantee Yes / No $ 7. Probability of default-estimate at date of guarantee % (consider and provide details of factors such as the level of gearing / solvency and liquidity) 8. Is this guarantee disclosed or recognised in the agency’s own financial Yes / No statements 9. Would the agency need supplementation from the Consolidated Fund in case of a default? (Or reduce dividends, or require a grant?) If so, how much? $ 10. How stable is the industry/ sector the guaranteed party operates in? 11. What is the overall capital management framework that the guaranteed party operates in? (e.g. if the guaranteed party is a NSW public sector agency, is the agency subject to the Commercial Policy framework?) 12. Probability of default – current estimate (If in default - 100%) NSW TC Mandatory early close procedure s for 2014-15 % 23 13. If the guarantee relates to debt of parties outside of the NSW public sector, what was the interest differential at inception? (i.e. the difference between the interest rate at which the debt was provided, compared to the interest rate that would have applied had there been no financial guarantee) A2. $’000 Non-Crown Financial Guarantees 1. Amount of financial guarantee 2. Start date of financial guarantee 3. Termination date of financial guarantee 4. Description of guarantee (including who and what is being guaranteed) $ 5. Is the debt that is being guaranteed, recognised in the agency’s own financial statements? 6. Likely loss arising from default-estimate at date of guarantee Yes / No $ 7. Probability of default-estimate at date of guarantee % (consider and provide details of factors such as the level of gearing / solvency and liquidity) 8. Is this guarantee disclosed or recognised in the agency’s own financial statements Yes / No 9. How stable is the industry/ sector the guaranteed party operates in? 10. Probability of default – current estimate (If in default - 100%) % 11. If the guarantee relates to debt of parties outside of the NSW public sector, what was the interest differential at inception? (i.e. the difference between the interest rate at which the debt was provided, compared to the interest rate that would have applied had there been no financial guarantee) B. Letters of Comfort / Indemnities / Warranties 14. Description of Letters of Comfort/Indemnities/Warranties provided (please provide copy of documentation) NSW TC Mandatory early close procedure s for 2014-15 24 14. Description of Letters of Comfort/Indemnities/Warranties provided (please provide copy of documentation) Please provide details of a contact should there be any enquiries: Name: __________________________ Email: __________________________ Phone: _______________________ I verify that all known instruments of assurance of the Crown and our Agency are listed above Signed: __________________________ Chief Finance Officer * Dated: _______________________ * The certifying officer must be the Chief Finance Officer NSW TC Mandatory early close procedure s for 2014-15 25 Appendix H: Breakdown of interagency balances Inter agency confirmation.xlsx NSW TC Mandatory early close procedure s for 2014-15 26 Appendix I: Where to go for help People at Treasury who can help TOES Questions Creation of new TOES accounts General Govt Agencies Andrew Azar 9228 5164 Sheryn Ho 9228 3970 Scott Ellis 9228 3250 For Public Trading/Financial Enterprises Paddy Walsh 9228 5809 Wendy Fung 9228 5306 "S" Agency Data Paddy Walsh 9228 5809 System Queries, e.g. TOES software installation and system access, TOES upload facility Davis Ho 9228 4034 TOES Functionality (including Training) David Tonkin 9228 4638 Supplementary Return - definitions and classifications Fehraz Fallil 9228 3508 Paddy Walsh 9228 5809 Wendy Fung 9228 5306 David Tonkin 9228 4638 (Technical issues) Emerging Issues, Correction of Material Prior Period Errors Fehraz Fallil 9228 3508 Paddy Walsh 9228 5809 Angela Capo 9228 3352 Wendy Fung 9228 5306 Accounting Policy 9228 4095 Treasury's Return Address Remember to “transmit” the TOES files back to Treasury upon completion. The rest of the Annual Return should be forwarded electronically to Treasury by the due date to: [email protected] NSW TC Mandatory early close procedure s for 2014-15 27 Appendix I: Where to go for help (Crown Entity) Banking arrangements Ronelle Bach 9228 4112 Banking contract Henriette Prego 9228 3873 Jin Kang Ronelle Bach 9228 4150 9228 4112 Mitra Karmakar Charles Cheung 9228 5839 9228 4604 Mitra Karmakar Charles Cheung 9228 5839 9228 4604 Cash management Debt management Advances Financial assets and liabilities enquiries Charles Cheung Leigh Nguyen 9228 4604 9228 4148 Fringe Benefit Tax (FBT) and Goods and Services Tax (GST) Henriette Prego (FBT) Matt Conrow (GST) 9228 3873 9228 5382 Crown guarantees Leigh Nguyen Alison Savary 9228 4148 9228 5697 Jin Kang Ronelle Bach 9228 4150 9228 4112 Interest payments Liability to the Consolidated Fund Agency Treasury Analyst Hayley Lawler Various 9228 5642 Long service leave arrangements Charles Cheung Alison Savary 9228 4604 9228 5697 Payment of recurrent and capital allocations Ramesh Nand Angel Yu 9228 3138 9228 5071 Reimbursement of expenses - superannuation and long service leave payments Ramesh Nand 9228 3138 Angel Yu 9228 5071 Commonwealth grants Jin Kang (Commonwealth Grants) Crown accounting policy Alison Savary Leigh Nguyen Charles Cheung 9228 4150 9228 5697 9228 4148 9228 4604 Other correspondence: Email: [email protected]. au NSW TC Mandatory early close procedure s for 2014-15 28 Appendix J: Resources/Links Treasury Resources Treasury Circulars, Treasury Analysis of Australian Accounting Standards, and other Treasury publications www.treasury.nsw.gov.au NSW Treasury Policy Papers http://www.treasury.nsw.gov.au/Treasury_Policy_Papers_Index_Page NSW Treasury Circulars http://www.treasury.nsw.gov.au/Publications_Page/NSW_Treasury_Circulars Public Finance and Audit Act 1983 http://www.legislation.nsw.gov.au/maintop/view/inforce/act+152+1983+cd+0+N External Resources Public Accounts Committee of the Legislative Assembly Final Report on Quality and Timeliness of Financial Reporting, October 2010 http://www.parliament.nsw.gov.au/prod/parlment/committee.nsf/0/6C5FEEADA29B51E8CA2577 B8008182C6 Government Sector Employment Act 2013 http://www.austlii.edu.au/au/legis/nsw/consol_act/gsea2013346/ Institute of Chartered Accountants in Australia Business Insights https://www.charteredaccountants.com.au/Industry-Topics/Business-management/Businessguidance-notes.aspx Australian National Audit Office Preparation of Financial Statements by Public Sector Entities http://www.anao.gov.au/uploads/documents/ANAO_FinStat_BPG.pdf NSW TC Mandatory early close procedure s for 2014-15 29