Date: November 22, 1995

To: Philip Calder

From: Judy Yuran

Subject: Issues Resolution Committee Comments on Stewardship ED

The following are comments from IRC members related to the FASAB 

Supplementary Stewardship Reporting Exposure Draft (ED).

GENERAL COMMENT

! Resources versus Relevance

Some IRC Members expressed reservations as to agency

resources required to comply with the proposed Stewardship

Standard. Agencies are being asked to provide additional

information from their systems at a time when

government-wide resources are being reduced. In many cases

agencies' systems are antiquated and lack standardization

for adequately processing and transmitting reliable data. 

While IRC members see value in reporting on resources

entrusted to the Federal Government beyond the traditional

financial statements, the nature and extent of the effort is

in question. Agency representatives believe that

considerable time, effort and cost will be required to first

implement the standard and then to collect and report the

data. They also feel that information required by the

standard needs to be relevant to users' needs, material in

nature, and cost effective to implement and maintain. FASAB

may want to confer with agencies' systems representatives to

determine overall impact and specific timeframes and costs

necessary for implementation.

COMMENTS TO APPENDIX A - QUESTIONS FOR RESPONDENTS AND TO RELATED

ISSUES

The following are responses to specific questions in the

Stewardship ED with which IRC members take issue or feel need

further clarification. 

1. "Sufficient guidance to identify and categorize assets..." 

! Expansion 
2

1b. Definition for Stewardship PP&E - Federal Mission PP&E -

is not broad enough. Page 23, Para 54, 1st bullet should

read: "Items that are intended to operate for space and

aeronautical exploration purposes..." 

! Exclusion

Some members feel that the definition for Federal Mission

PP&E related to Weapons Systems should exclude "otherwise

general PP&E" acquired specifically to repair, maintain, or

overhaul Federal Mission PP&E. Reimbursable maintenance

operations often use this PP&E and are reimbursed on basis

of cost. Since Federal Mission PP&E is not depreciated, the

exclusion of the "otherwise general PP&E " equipment will

allow depreciation cost to be included in the total

reimbursable operations cost and will result in a "full

cost" reimbursement.

! Reclassification

Mission PP&E is to be expensed. If a Mission PP&E asset is

brought into general use and reclassified, should the

original expense be reversed and the asset capitalized? If

so, at what value should the asset be recorded, original

cost, fair market or original cost retroactively

depreciated?

2. "Sufficient guidance to identify and categorize expenses..."

2b. The Human Capital Standard is not sufficient for

determining which expenses should be reported as stewardship

investments. The Standard defines Human Capital investment

as expenses incurred for "programs" for (1) education and

training of the public, excluding federal military and

civilian personnel, that (2) are intended to maintain or

increase national productive capacity. The definition needs

to be clarified. Foremost, a good case can be made that all

education and training can be expected to maintain or

increase the national productive capacity. Additionally,

the definition states that it applies to "programs" for

education and training and not to the education and training

itself. The definition leads one to believe that the entire

budget for programs within the Department of Education may

be classified as Human Capital investment even though some

of the Departments activities may not directly provide

education or training.

 
3

In addition, some IRC members felt that the reporting

requirements for "human capital" cannot be justified on a

cost/benefit basis. Output and outcome information, such as

the example given in the first bullet of Paragraph 91, high

school and college graduates as a percentage of population

over 25," requires population statistics which cannot be

extracted from agencies' management information systems. 

Such information would be costly to obtain, and would not

enhance the relevance or usefulness of the financial

statements. In addition,since many of these programs are

unique to the Federal government, there is nothing with

which they might be compared.

 

3. "Reporting data is meaningful and relevant information..."

3C. Valuation of stewardship land is too subjective,

costly, and difficult to obtain while providing little if

any financial value.

4. "Presenting either historical or latest acquisition cost..."

 

4b. Latest acquisition cost (LAC) and historical cost

should both be permitted. While historical cost has been

the preferred method, latest acquisition cost is more

representative of current replacement cost or economic

value. This is especially the case for assets purchased in

prior periods that are still currently being acquired. In

some situations, LAC is more readily available due to

systems limitations. 

5. "Physical property transferred to state or local government.."

Determination of difference between the fair market value of

the property and any payment or other consideration received

in the exchange is not cost beneficial. It is unclear as to

who is to assign the value. The transfer transaction is too

subjective. How will it work in the financial systems and

where will the expense be recognized?

6. "Reporting of significant state or local total contributions

to shared or joint programs..."

State and local governments should not be required to report

on their contributions to joint or shared programs. This
4

requirement would represent an "unfunded mandate" for both

state and local governments creating a significant reporting

burden. State universities more than private universities

would be unduly burdened by these requests. Additionally,

less than full compliance would result in the collection of

insufficient data for accurate costing and reporting.

 
5

7. "Projected data for all programs for 6 future years..."

These projections preclude and infringe on the authority of

the President and Congress to determine their own specific

comparative data requirements. We question the amount of

effort needed to achieve these results. Out years

comparisons may strain existing limited agency resources by

creating duplication of work effort with questionable

results.

8. "Projections for 75 years..."

Social Insurance Programs projections for 75 years seems

excessive. Unless specifically required by law, a lesser

period would seem more appropriate. Such lengthy

projections may be meaningful for some social programs but

not for all. It is recommended that the Board carefully

consider the responses from the affected agencies. Then,

based on the responses either adopt a minimum supplementary

social insurance data requirement that is applicable to all

social insurance programs or, adopt specific standards for

specific programs, as was done in the "Revenue" exposure

draft.

9. "Current services assessment 6-year time horizon..."

The Office of Management and Budget should determine this

reporting requirement.

10. "Sufficient guidance to transition from reporting program

outlays to reporting program expenses..."

Although the guidance is sufficient, implementation of the

guidance for some agencies may be difficult and costly. 

 

11. "Reporting expense and/or outlay data..."

11c. The Reporting of expenses and outlay data is supported

by the cost accounting standard. However, as stated in the

response to question ten, implementation for some agencies

will be both difficult and costly. 
6

12. "Problems with September 30, 1996..."

This date does not provide adequate time from the issuance

of the final FASAB standard to implementation in and

publication of the revised United States Standard General

Ledger. 

13. "Ranking the forms of presentation..."

A. A line without a dollar amount on the Balance 

Sheet, referencing a note to the Financial Statements 3

B. A line without a dollar amount on the Balance Sheet,

referencing supplemental information 4

C. A note without a separate Balance Sheet line 1

D. Supplemental Information without a separate Balance 

 Sheet line 2

E. No Preference 5

 

Comment: We do not feel that a line item without a dollar

amount on the Balance Sheet is appropriate. Instead, a

footnote disclosing social insurance program financial

status and projected cash flow should be included in the

Balance Sheet footnote section as (1) a footnote referenced

to the liability for amounts due and payable at the of the

accounting period or (2) as a "other footnote" not

specifically referenced.

We are currently considering the impact of the Stewardship and

related Property Plant and Equipment proposed standards on the

United States Standard General Ledger (SGL). We will share the

proposed plan for implementation of these standards in the SGL as

well as any further issues following discussions within the SGL

Issue Resolutions Committee.

If you have any questions, you may contact me or Karl Boettcher

of my staff on (202)874-9980.