KEEPING STATE FISCAL OFFICIALS INFORMED VOLUME 35, NUMBER 4 | APRIL 2015 NASACT-NAST LGIP WORKGROUP SENDS LETTER TO GASB: ASKS GASB TO NOT DEFINE STANDARDS ON LIQUIDITY GATES & FEES Th e NASACT-NAST LGIP Workgroup recently sent these parameters can include liquidity requirements. a letter to the Governmental Accounting Standards Accordingly, it is possible that gates and fees may run Board providing input on state laws or statutes that against these contractual provisions. prevent a local government investment pool (LGIP) In the letter, the workgroup pointed out that GASB from imposing a liquidity fee or redemption gate on defi nes cash and cash equivalents as short-term, highly pool participants. liquid investments that are both (a) readily convertible At GASB’s request, NASACT surveyed a number to known amounts of cash (emphasis added) and (b) of states to determine the existence of statutes that so near their maturity that they present insignifi cant risk prevent fees or gates. Th e survey found that while of changes in value because of changes in interest rates. most states do not have specifi c statutory prohibitions, In addition, as cited in the GASB standards: several states do have statutes that require the principal “...consistent with common usage, cash includes and accrued income of each account that is maintained not only currency on hand, but also demand for a participant in the investment pool be subject to deposits with banks or other fi nancial institutions. payment from the pool at any time upon request. Cash includes deposits in other kinds of accounts Conceptually, the imposition of a gate would be in or cash management pools that have the general confl ict with this statutory provision. characteristics of demand deposit accounts in A number of states also mentioned that general that the governmental enterprise may deposit investment statutes and LGIP policies state that two additional cash at any time and also eff ectively may primary objectives are preservation of principal and withdraw cash at any time without prior notice maintenance of liquidity. Again, imposing a gate or penalty” (emphasis added). would run contrary to this policy. Again, the imposition of a gate or fee would create an Several states reported that the state treasurer, with issue with the current GASB defi nition of cash. approval of a funding board (or other similar entity), Th e workgroup has requested that GASB not defi ne has the statutory authority to enact measures to protect conditions or standards regarding gates or fees but the fund from a run or other catastrophic event. rather allow each LGIP to follow the direction of its One state pointed out that many local governments governing board or authority because there are already invest bond proceeds into LGIPs. It is common appropriate safeguards in place in the states to prevent for the indentures governing bond issuances to set a run on the fund. Th e letter may be viewed at www. parameters for investing the bond proceeds, and nasact.org. BACKGROUND — NASACT and the National Association of State Treasurers created the LGIP Workgroup last fall to examine amendments to Rule 2a-7 approved last summer by the U.S. Securities and Exchange Commission. The amendments impact money market mutual funds (MMFs), specifically requiring, among other things, that MMFs adopt a floating net asset value (NAV) instead of the traditional stable NAV. The workgroup has focused primarily on the impacts the amendments will have on local government investment pools (LGIPs), which are in many instances operated by state governments. In October the workgroup submitted a letter to the GASB requesting that the issue be added to the GASB’s technical agenda and that the GASB consider options that will allow LGIPs to continue using amortized costs (i.e., a stable NAV). The GASB added this issue to its technical agenda in December 2014. NASACT News | April 2015 1 NASACT 2015 MIDDLE MANAGEMENT CONFERENCE RECAP Th e sessions presented during the 2015 NASACT Middle Management Conference are listed below. To download conference materials, visit www.nasact.org/2015_nasc_materials. GROOMING MANAGERS INTO LEADERS BIG DATA ANALYTICS • Bud Wrenn, Consulting Partner, Table Group, • Eric Hunley, Senior Manager, State and Local Pinnacle Consulting & Coaching Government Practice, SAS Institute, Inc. GASB UPDATE SINGLE AUDIT ISSUES • David Bean, Director of Research and Technical • Beth Wood, State Auditor (NC) Services, GASB FINANCE ROUNDTABLE PERFORMANCE AUDIT ROUNDTABLE • Moderator: Jay Cleveland, Division Administrator, • Moderator: Bill Styres, Audit Manager, Financial State Accounting Enterprise (IA) Related and Performance Audit Divisions, Offi ce of the State Auditor (NC) TRAINING ISSUES ROUNDTABLE • Moderator: Lizzie Scott, Professional Development THE SUPER CIRCULAR – WILL IT BE A GAME Manager, Offi ce of the Legislative Auditor (LA) CHANGER? • Beth Wood, State Auditor (NC) THE ART OF TELLING • Gary Tomlinson, Strategy & Execution Expert, MANAGING A MULTI-GENERATIONAL WORKFORCE Tomlinson & Associates • Willow Jacobson, Association Professor, UNC School of Government EMOTIONAL INTELLIGENCE • Lizzie Scott, Professional Development Manager, BUSINESS COMMUNICATIONS Offi ce of the Legislative Auditor (LA) • Carole Buncher, Owner, Carole Buncher and Associates THE CHANGE CYCLETM • Dave Minionis, Organizational Eff ectiveness STATE OF THE STATES Consultant, Humanetrics • Scott Pattison, Executive Director, National Association of State Budget Offi cers GREEN BOOK • Grant Simmons, Senior, Financial Management and FINANCIAL CRIMES Assurance Team, U.S. Government Accountability Offi ce • Michael East, Special Agent in Charge-Financial • Jo Kane, Internal Control Specialist, Internal Control & Crimes, NC State Bureau of Investigation Accountability, Offi ce of Management and Budget (MN) Left: NASACT Executive Director Kinney Poynter and North Carolina State Controller Linda Combs welcomed attendees on the opening morning of the conference. Right: North Carolina State Auditor Beth Wood also welcomed attendees and spoke during several conference sessions. NASACT News | April 2015 2 2015 NASACT MIDDLE MANAGEMENT CONFERENCE RECAP Left: David Bean provided attendees with an update on recent activities of the Governmental Accounting Standards Board. Right: Lizzie Scott (LA) spoke to attendees about the importance of emotional intelligence. Bill Styres (NC, center) led the Performance Audit Roundtable. Left: Jo Kane (MN) and Grant Simmons from GAO spoke to the group about the Green Book. Right: Michael East, from the North Carolina State Bureau of Investigation, provided real-life examples of financial crimes committed in North Carolina. NASACT News | April 2015 3 2015 NASACT MIDDLE MANAGEMENT CONFERENCE RECAP Jay Cleveland (IA, center) moderated the Finance Roundtable session. Left: Dave Minions spoke about becoming change resistant. Right: There were 114 in attendance at this year’s conference. Left: Willow Jacobson gave a timely presentation about multiple generations in the work force. Right: Carol Buncher spoke to the group about business communications. NASACT News | April 2015 4 NEWS FROM WASHINGTON GAO RELEASES 2015 REPORT ON FRAGMENTATION, OVERLAP AND DUPLICATION U.S. Comptroller General Gene Dodaro testifi ed Military Health System and TRICARE Prime, before the Senate Homeland Security and which provides the same health benefi ts to military Government Aff airs Committee this month benefi ciaries. regarding the release of the Government In addition to looking at programs with Accountability Offi ce’s report on “Opportunities to fragmentation, overlap or duplication, GAO also Reduce Fragmentation, Overlap, and Duplication provides information cost savings and revenue and Achieve Other Financial Benefi ts.” Th e report enhancement opportunities. Of note are GOA’s provides an annual update on GAO’s recommended recommendations on cost savings under Medicare actions to reduce duplication and overlap. Th is and Medicaid services. GAO recommends that report identifi es 66 new actions that the executive the agencies ensure that states report accurate and branch and Congress could take to cut down on complete state Medicaid data so that better oversight duplication, fragmentation and ineffi ciencies in 24 of states’ fi nancing arrangement can be achieved. areas across the federal government. GAO also recommends that states use data to better GAO is required by statute to annually review focus investigative eff orts on high-risk households federal programs, agencies, offi ces and initiatives to more eff ectively fi ght fraud among benefi ciaries of that are fragmented, overlapping or duplicative. the Supplemental Nutrition Assistance Program. GAO notes that many of the problems over the In concluding, GAO provided that there are several years have resulted from the lack of reliable existing and new tools that can assist in identifying, budget or performance information. GAO’s 2015 evaluating and addressing fragmentation, overlap report identifi ed 12 new areas with evidence of or duplication. GAO believes that the GPRA fragmentation, overlap or duplication in agriculture, Modernization Act of 2010 (GPRAMA) and the defense, general government, health, homeland Digital Accountability and Transparency (DATA) security and law enforcement, information Act of 2014 could provide better budget and technology, international aff airs, and science and performance information if fully and eff ectively the environment. GAO defi nes fragmentation