Working Group Meets with CFR Interagency Committee

July 1999 Issue

Working Group Meets with CFR Interagency Committee

The New York State Consolidated Fiscal Report (CFR) Interagency Committee recently met with an NYSSCPA working group to review practice problems, discuss the effects of new professional standards, and consider report changes relating to the CFR filing process.

The CFR--used by four state agencies to monitor costs and other information about those who receive state funds to provide services to the developmentally disabled--requires a report by the recipient's CPA. Seven members of the Society's working group traveled to Albany in May for this year's meeting.

During the open discussion, a CFR Interagency Committee member reported a recurring problem.

"We are still seeing what looks like improper allocations of overhead to programs, especially at some of the smaller agencies," she said.

In response, the Society's working group asked the representatives from the various agencies that comprise the CFR Interagency Committee to refer what appears to be substandard work by CPAs to the NYSSCPA Professional Ethics Committee for investigation. Apparent improper allocation of overhead is an example of a deficiency that the ethics committee would investigate if after inquiries to the provider the matter is not corrected to the state's satisfaction.

Other matters discussed at the yearly meeting include the following:

Recent changes in accounting principles to require expensing of start-up costs that will require a change to the CFR schedules. Present practice is to capitalize and write off start-up costs over 60 months. Fiscal years beginning after December 15, 1998 (calendar year 1999), require this change.

A proposal to use an agreed-upon procedures approach to report on CFRs of organizations that have a calendar year-end but must complete CFR schedules as of June 30. The NYSSCPA working group will review procedures developed by a CPA firm to see if the approach is workable.

CPAs' resistance to putting the date signed (in addition to the date of completion of the fieldwork) on the CFR accountant's report form because they believe the second date extends their responsibility for developments after completion of fieldwork. The working group will recommend wording to clarify the purpose of the two dates.

A proposal made by one of the CFR agencies to permit reviews of financial statements instead of audits for smaller providers. The accountant's report on the CFR schedules would have to change to indicate a lower level of assurance. Review guidelines would have to be developed.

The need to update the accountant's report on the CFR to make it easier to report on consolidated or combined statements and to give the actual names of the financial statements (instead of using the phrase "general purpose" financial statements). The Society's working group will give revisions to the committee in time for the year-end CFR package.

Development of a standard form for reconciliation of CFR schedules to financial statements improvement if a standard format was included in the CFR package. The working group agreed to look into what standard form would make sense.

New accounting standards:

2) Unrealized gains and losses on investments in most cases now are required to flow through current operations under GAAP, but the CFR schedules make no provision for this. The Society's working group suggested either showing unrealized gains on the "other" line or establishing a separate line item on the CFR.

The CFR Interagency Committee also agreed to give NYSSCPA an updated list of common deficiencies noted in desk reviews performed by state officials.

Society working group members Benjamin Lasher, Beatrix G. McKane, Michael L. McNee, Brian O'Reilly, Gerald N. Tischfeld, and Frank Venezia took part in the meeting.

Watch future issues of The Trusted Professional for updates on the topics raised at this meeting and recommendations made by the Society working group. *