Agenda 10/22/2013 Item #16F5 10/22/2013 16.F.5.
EXECUTIVE SUMMARY
Recommendation to adopt a resolution urging members of the Florida Legislature to oppose
legislation that would mandate the use of a Uniform Chart of Accounts for all governmental
entities to report financial information
OBJECTIVE: That the Board of County Commissioners adopts the attached resolution urging
members of the Florida Legislature to oppose legislation that would mandate the use of a Uniform Chart
of Accounts.
CONSIDERATIONS: As government finance professionals and elected officials responsible for
managing government funds, the Florida Government Finance Officers Association (FGFOA) believes
transparency and accountability of the use of public funds to citizens and other stakeholders is
paramount to good government.
In 2011, legislation was passed requiring the chief financial officer to develop a uniform chart of
accounts to be used by all governmental entities for the purpose of reporting assets, liabilities, equities,
revenues and expenditures.
The FGFOA has several serious concerns regarding the proposed Uniform Charts of Accounts (UCOA)
and reporting requirements. This white paper delineates FGFOA concerns in an effort to assist Florida
Chief Financial Officer Jeff Atwater and the members of the Florida Legislature as they move forward
with their continued work on providing accountability and transparency of public funds.
In summary,the proposed UCOA and reporting requirements is problematic, as follows:
• Clarification of reporting responsibility— it is unclear whether the county constitutional officers
or the chief financial officer of the county should report financial information to the State of Florida.
In addition to the extra"layer" in the reporting hierarchy at the county,the proposed UCOA monthly
reporting requirement will also place an undue burden on chief financial officers.
• Double reporting of expenditures for counties — if constitutional officers report and the county
reports, the expenditures would be reported twice. These reports will not be reconciled on a monthly
basis due to cost and time constraints.
• Conflicts with current required monthly reporting requirements — schools districts, county
clerks, and other local governments may prepare monthly reports. For such entities, the proposed
UCOA monthly reporting will result in duplicate reporting and additional costs.
• Quality of data provided to the public will be jeopardized without time for verification —the
basis of accounting used to prepare monthly ad-hoc reporting may differ from the year end audited
financial statements. The information may not be validated, resulting in compromised data that does
not provide meaningful comparisons between organizations.
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• High costs of implementation—the level of detail required to comply with the proposed UCOA is
far greater than that required in the current financial reports.
Implementation of the proposed UCOA and reporting requirements would be costly to governments, and
ultimately the taxpayers, and will result in the delivery of inaccurate and confusing information.
FISCAL IMPACT: Significant resources will be necessary to comply with modifying the current
accounting systems, creating a crosswalk from the current systems to the proposed UCOA, and ongoing
reporting. This is an unfunded mandate on local governments.
GROWTH MANAGEMENT IMPACT: There is no Growth Management Impact associated with
this Executive Summary.
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, is approved as
to form and legality, and requires majority vote for adoption. -JAK
RECOMMENDATION: That the Board of County Commissioners adopt the attached resolution and
together with the FGFOA recommend an alternative strategy that could accomplish the Legislature's
goal to ensure transparency and accountability while limiting the burden to governmental entities and
preserving the autonomy of those entities. Legislation should be enacted that prescribes maximum
meaningful transparency reporting by local governments, leaves it to local governments to include such
information on their websites, and does not impose significant financial burdens on local governments.
Prepared by: Mark Isackson, Director Corporate Financial Planning &Management Services
County Manager's Office
Crystal Kinzel, Clerk of the Circuit Court Finance Director
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COLLIER COUNTY
Board of County Commissioners
Item Number: 16.16.F.16.F.5.
Item Summary: Recommendation to adopt a resolution urging members of the Florida
Legislature to oppose legislation that would mandate the use of a Uniform Chart of Accounts
for all governmental entities to report financial information
Meeting Date: 10/22/2013
Prepared By
Name: LehnhardPat
Title: Operations Coordinator,Transportation Administrati
10/14/2013 2:54:07 PM
Submitted by
Title: Operations Coordinator,Transportation Administrati
Name: LehnhardPat
10/14/2013 2:54:08 PM
Approved By
Name: IsacksonMark
Title: Director-Corp Financial and Mgmt Svs,CMO
Date: 10/16/2013 12:17:22 PM
Name: OchsLeo
Title: County Manager
Date: 10/16/2013 1:53:54 PM
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10/22/2013 16.F.5.
RESOLUTION NO. 13-
A RESOLUTION URGING MEMBERS OF THE FLORIDA LEGISLATURE TO OPPOSE
LEGISLATION THAT WOULD MANDATE THE USE OF A UNIFORM CHART OF
ACCOUNTS FOR ALL GOVERNMENT ENTITIES TO REPORT FINANCIAL
INFORMATION
WHEREAS, in 2011 the Florida Legislature passed and the Governor signed Senate Bill 1292
requiring the chief financial officer to recommend uniform chart of accounts for reporting financial
information for all state agencies, local governments, educational entities, and entities of higher
education; and
WHEREAS, each entity of the state and local government is different, serves a different purpose
and uses a different basis of accounting; and
WHEREAS. the purpose of the Chart of Accounts Project is to develop a uniform chart of
accounts to be used by all governmental entities for reporting assets, liabilities, equities, revenues and
expenditures; and
WHEREAS, the draft uniform chart of accounts will impact over 2350 governmental entities;
and
WHEREAS, each of the impacted entities are currently accountable to the electorate, citizens Asook
and users of their services; and
WHEREAS, Florida governments are required to meet many reporting requirements, both at the
state and federal level, including reporting to the Florida Department of Financial Services, Florida
Equal Employment Opportunity, Florida Unemployment Compensation, Florida Retirement System,
Federal Affordable Care Act, and payroll taxes and W-2 information to the Internal Revenue Service.
WHEREAS, the monthly reporting may be prepared on a basis of accounting that may differ
from the basis of accounting used to prepare the year-end audited financial statements and that the
monthly information will not be validated; and
WHEREAS, the new level of detail required at the object level for monthly reporting is far
greater than the level of detail reported either in the audited financial statements or in the Annual
Financial Report required pursuant to the provisions of Section 218.32(1)(a), Florida Statutes; and
WHEREAS, there will be no attempt to validate any of the data before it is posted for public
viewing and this results in a high risk that the data will be inaccurate,invalid or incomplete; and
WHEREAS, the establishment of a uniform chart of accounts without requiring uniformity in
other areas such as in the basis of accounting and in the accounting treatment of various transactions in
itself will not provide users with any meaningful comparisons between organizations; and
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WHEREAS, regardless of the approach taken to implement the provisions of Section 215.89,
Florida Statutes, significant resources will be required to achieve the goals of the chief financial officer;
and
WHEREAS, the cost of implementing the Uniform Chart of Accounts far exceeds any benefit
that taxpayers may accrue; and
WHEREAS, we believe that transparency and accountability of the use of public funds to
citizens and other stakeholders is paramount but that it must be done while simultaneously limiting the
burden to the entities and preserving the autonomy of each entity of government.
WHEREAS, we believe that legislation be enacted that prescribes maximum meaningful
transparency reporting by local governments, leaving it to the local governments to include such
information on their web sites, and that such legislation should not impose significant financial burdens
on local governments.
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY
COMMISSIONERS OF COLLIER COUNTY, FLORIDA.that
Section 1. That the Collier County Board of County Commissioners urges members of the
Florida Legislature to oppose legislation that would mandate the use of a uniform chart of accounts for
all governmental entities to report financial information.
Section 2. That a copy of this resolution be sent to the Collier County Legislative Delegation,
Speaker of the House, President of the Senate, and Governor Scott.
BE IT FURTHER RESOLVED that the Clerk is hereby ordered and directed to spread this
Resolution in full among the minutes of this meeting for permanent record in his office.
This Resolution adopted this 22nd day of October, 2013. after motion. second and majority vote.
ATTEST: BOARD OF COUNTY COMMISSIONERS
DWIGHT E. BROCK, Clerk COLLIER COUNTY, FLORIDA
By:_ _ By:
Deputy Clerk Georgia A. Hiller, Esq.
I Chairwoman
'
Approve. "o orm and legality:
Jeffrey A. 1 'i ''''kolh, County Attorney
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Florida Government Finance Officers Association (FGFOA)
Uniform Chart of Accounts
White Paper
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October 14, 2013
Post Office Box 10270 Tallahassee, Florida 32302-2270
Phone(850)222-9684 Fax (850) 222-3806
www.fafoa.orq
Contact:)Qarner:aficities.com
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EXECUTIVE SUMMARY
As government finance professionals and elected officials responsible for managing government funds, the Florida
Government Finance Officers Association (FGFOA) believes transparency and accountability of the use of public funds to
citizens and other stakeholders is paramount to good government.
In 2011, legislation was passed requiring the chief financial officer to develop a uniform chart of accounts to be used by
all governmental entities for the purpose of reporting assets, liabilities,equities, revenues and expenditures.
The FGFOA has several serious concerns regarding the proposed Uniform Charts of Accounts (UCOA) and reporting
requirements. This white paper delineates FGFOA concerns in an effort to assist Florida Chief Financial Officer Jeff
Atwater and the members of the Florida Legislature as they move forward with their continued work on providing
.. F_ accountability and transparency of public funds.
In summary,the proposed UCOA and reporting requirements is problematic, as follows:
• Clarification of reporting responsibility—it is unclear whether the county constitutional officers or the chief
financial officer of the county should report financial information to the State of Florida. In addition to the extra
"layer"in the reporting hierarchy at the county,the proposed UCOA monthly reporting requirement will also
place an undue burden on chief financial officers.
• Double reporting of expenditures for counties—if constitutional officers report and the county reports,the
expenditures would be reported twice. These reports will not be reconciled on a monthly basis due to cost and
time constraints.
• Conflicts with current required monthly reporting requirements—schools districts, county clerks,and other
local governments may prepare monthly reports. For such entities,the proposed UCOA monthly reporting will
result in duplicate reporting and additional costs.
• Quality of data provided to the public will be jeopardized without time for verification—the basis of accounting
used to prepare monthly ad-hoc reporting may differ from the year end audited financial statements. The
information may not be validated, resulting in compromised data that does not provide meaningful comparisons
between organizations.
• High costs of implementation—the level of detail required to comply with the proposed UCOA is far greater than
that required in the current financial reports. Significant resources will be necessary to comply with modifying
the current accounting systems,creating a crosswalk from the current systems to the proposed UCOA,and
ongoing reporting. This is an unfunded mandate on local governments.
Implementation of the proposed UCOA and reporting requirements would be costly to governments, and ultimately the
taxpayers, and will result in the delivery of inaccurate and confusing information.
The FGFOA recommends an alternative strategy that could accomplish the Legislature's goal to ensure transparency and
accountability while limiting the burden to governmental entities and preserving the autonomy of those entities.
Legislation should be enacted that prescribes minimum desired transparency reporting by local governments, leaves it
to local governments to include such information on their websites,and does not impose significant financial burdens on
local governments.
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INTRODUCTION
During the 2011 Florida legislative session,Section 215.89, Florida Statutes, was created.The legislative intent,as stated
in the provisions of Section 2011-44, Laws of Florida,is as follows:
1)That a mechanism be provided for obtaining detailed, uniform reporting of government financial information
to enable citizens to view compatible information on the use of public funds by governmental entities;
2)That uniform reporting requirements be developed specifically to promote accountability and transparency in
the use of public funds;and
3) In order to accommodate the different financial management systems currently in use, separate charts of
account may be used as long as the financial information is captured and reported consistently and is
compatible with any reporting entity.
The Legislature delegated the responsibility and authority for implementing the provisions of Section 215.89, Florida
Statutes, to the state's Chief Financial Officer (CFO). The state CFO has proposed a Uniform Chart of Accounts (UCOA)
and reporting requirements. This white paper summarizes the issues related to the proposed UCOA reporting
requirements and concerns of local government finance professionals in an effort to assist state CFO Jeff Atwater in his
efforts to implement the requirements of Section 215.89, Florida Statutes.
As government finance professionals and/or elected officials accorded the responsibility of managing government funds,
we acknowledge that accountability and transparency of the use of public funds by our entities is first and foremost with
respect to our training and our actions. In these challenging financial times,perhaps now more than ever,transparency
and accountability are essential to good government.
Various sections of the Florida statutes provide for the creation, operation and enumerated powers for counties,
municipalities, school boards and special districts.The statutes also empower many of these entities to levy and collect
taxes and,to the extent not inconsistent with general or special law,grant several powers for each entity to self-govern.
Clearly, the intent of the Legislature has been, to the extent possible, to allow these entities the ability to govern
themselves. It is also clear that the Legislature has established parameters to ensure these entities provide financial and
-,, legal accountability to its citizens. In addition, Section 11.45, Florida Statutes, requires these entities to periodically
provide for a financial audit. These financial audits must be conducted in accordance with auditing standards generally
accepted in the United States and government auditing standards and,when applicable, in accordance with the Florida
9. °° Single Audit Act and the Federal Single Audit Act Amendments of 1996.
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AUTONOMY OF LOCAL GOVERNMENT AND EDUCATIONAL ENTITIES
COUNTIES
In many counties in Florida,voters elect independent constitutional officers who are a "check and balance"on the board
of county commissioners. These constitutional officers are independently elected and are accountable to the citizens
within their county. They include the clerk of the circuit court and comptroller (clerk), property appraiser, sheriff,
supervisor of elections and tax collector. The framers of the Florida Constitution intentionally made these countywide
officers separate and independent from the rest of county government to ensure that the entity that decides how to
spend your tax dollars (board of county commissioners) is not the same entity that pays the county bills, invests its
funds, audits its own procedures and transactions (clerk); assesses your property's taxable values (property appraiser);
collects your taxes (tax collector); protects its citizens (sheriff);or oversees the election process(supervisor of elections).
These offices, audited annually by Public Accounting Firms as a part of the overall county audit, follow strict
constitutional and statutory guidelines. They cannot set public policy or levy taxes as only the board of county
commissioners have that authority.
The Clerk and Comptroller's Office, established in 1838 by the Florida Constitution as an independently elected officer,is
charged with safeguarding public records, public assets and public funds.
MUNICIPALITIES
In accordance with Section 2, Article VIII, of the Florida Constitution, municipalities are established or abolished and
their charters amended pursuant to general or special law. When any municipality is abolished, provision shall be made
for the protection of its creditors. Municipalities also have governmental, corporate and proprietary home rule powers
to enable them to conduct municipal government, perform municipal functions and render municipal services, and may
exercise any power for municipal purposes except as otherwise provided by law. Each municipal legislative body shall be
elective. They also have authority to set public policy for and levy taxes on their citizenry. All municipalities with gross
revenues in excess of$100,000 per year are audited by Public Accounting Firms annually.
e SCHOOL DISTRICTS
School districts and their governing boards were created pursuant to Section 4, Article IX of the Florida Constitution.
These districts are an independent taxing and reporting entity managed, controlled, operated, administered and
supervised by district school officials in accordance with Chapter 1001, Part II, Florida Statutes. The boards consist of
elected officials responsible for the adoption of policies, which govern the operation of the district's public schools.The
superintendent is responsible for the administration and management of the schools within applicable parameters of
state laws,state Board of Education rules and school board policies. School districts must maintain financial records and
accounts as prescribed by State Board of Education rules. Financial audits of school districts are performed annually by
either Public Accounting Firms or the State Auditor General depending upon County size.
STATE UNIVERSITIES
There are 12 state universities that comprise the state university system,which was created pursuant to Section 7(b),
Article IX of the Florida Constitution. Pursuant to Section 7(c),Article IX of the Florida Constitution,each state university
is administered by a board of trustees. Each state university board of trustees has all the powers of a body corporate.
The university president serves as the executive officer and the corporate secretary of the board of trustees and is
responsible for the operation and administration of the university within applicable parameters of state laws, Florida
Board of Governors regulations, and board policies.State universities must maintain financial records and accounts as
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prescribed by Florida Board of Governors regulations. Financial audits of state universities are performed annually by
the State Auditor General.
STATE COLLEGES
There are 28 state colleges that comprise the Florida College System, which was created pursuant to Section 1001.60,
Florida Statutes. Each state college board of trustees has all the powers of a body corporate. The college president
serves as the executive officer and the corporate secretary of the board of trustees and is responsible for the operation
and administration of the college within applicable parameters of state laws,State Board of Education rules, and board
policies. State colleges must maintain financial records and accounts as prescribed by State Board of Education rules.
Financial audits of state colleges are performed annually by the State Auditor General.
SPECIAL DISTRICTS
C Also especially popular in Florida, special districts are local units of special-purpose governments whereby the governing
board has policy-making powers. They also operate within limited boundaries and are created by general law, special
act, local ordinance or by rule of the governor and Cabinet. Special districts ensure accountability of public resources
since special districts are held to the same high standards as municipalities and counties.The first special districts were
created almost 190 years ago.Although special districts are very similar to counties and municipalities, special districts
are local units of special-purpose government as opposed to local units of general-purpose government. Florida's laws
generally treat them alike regarding accountability of public resources.
Special districts exist to serve a public purpose and must be held to certain minimum standards of accountability to keep
the public, appropriate local general-purpose governments, and state agencies informed of their status and activities.
Special Districts are generally audited annually by Public Accounting Firms.
SUMMARY
It is important to note that each of the above types of government is accountable to the electorate, citizens and users
with whom they interact. As indicated above, pursuant to Section 11.45, Florida Statutes, these entities are subject to
periodic financial audits by independent certified public accountants.Along with complying with state, local and federal
laws, accountability to those directly affected by actions of these local governments should be and is the highest level of
accountability one can expect.
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UNCLEAR,CONFLICTING,OR DUPLICATIVE REPORTING REQUIREMENTS
1.Constitutional Officer Self-Reporting
As set forth in the provisions of Section 215.89(2)(c), Florida Statutes, "local government" means a municipality,
county,water management district,special district or any other entity created by a local government. Inasmuch
as this definition seems to exclude county constitutional officers from its operation (since they were created by
Article VIIII,Section 1(d)of the Florida Constitution), much debate has occurred in the local government finance
community.
County constitutional officers typically operate independently of the county (primary) government from a
financial management perspective. While county constitutional officers are reported as a part of the primary
government (as that term is defined under generally accepted accounting principles) in the primary
government's financial statements, historically, county constitutional officers have provided financial
information to the county as a part of the "year-end closeout process" at the level of detail necessary for
preparation of financial statements.
Clarification is needed on whether the county constitutional officers will be responsible for independently
reporting their financial information to the State of Florida,or does the state intend to place a conduit reporting
responsibility on the chief financial officer of the county (be it the clerk or other duly created charter officer). In
addition to adding an extra "layer" in the reporting hierarchy, the proposed UCOA monthly reporting
requirement for revenues and expenditures will also place an undue burden on the county chief financial
officers.
2.Double Reporting of Expenditures
As noted above, historically, county constitutional officers have provided financial information to the county as
part of the "year-end closeout process" at the level of detail necessary for preparation of the financial
statements.That information is then utilized by the chief financial officer of the county to prepare "eliminating
entries" on the county's financial statements so that financial transactions between county constitutional
officers are not "double counted." If monthly reporting of revenues and expenditures is implemented by the
state CFO,there will presumably be no opportunity to prepare "eliminating entries" on a monthly basis due to
both cost and time constraints. There is a risk that both revenues and expenditures will be "double counted."
This will occur if, for instance, the board of county commissioners reports a transfer out to a constitutional
officer (as an expenditure), and that particular constitutional officer also reports his/her expenditures by
individual line items.
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3.Conflicts with,or Duplicates,Current Required Monthly Reporting Requirements
Pursuant to State Board of Education (SBE) Rule 6A-1.008, school district finance departments are currently Alok
required to provide monthly financial statements to the school board in a form prescribed by the school board.
The proposed UCOA monthly reporting requirement for revenues and expenditures adds an additional monthly
reporting requirement for school districts. Depending on the school board determined format of the monthly
financial statements, it is possible that the process for preparing the proposed UCOA monthly revenue and
expenditure reports may differ and have its own unique set of processes. Therefore,this creates a duplication s'
of reporting efforts resulting in additional unnecessary work by school district finance department staff. In
practice, this same conflict would be applicable to counties, municipalities, and special districts that have
requirements to prepare monthly reports that differ from the proposed UCOA monthly reporting requirement.
Another example is the monthly reporting requirements for the clerks. They are required to report the court-
related revenues and expenditures in summary form monthly to the Clerks of Court Operations Corporation
(CCOC). In addition,they are required to report in detail such things as case counts by court type;accomplished
results toward performance requirements in the areas including but not limited to collection of court fees,fines
and service charges, new case openings and docketing of case specific filings or motions; jury statistics;
foreclosure case statistics and soon an enhanced assessments and collections report. The proposed UCOA
monthly revenue and expenditure reports would be a duplication of reporting, resulting in additional
unnecessary work by clerk staff.
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MONTHLY REPORTING UNREONCILABLE TO ANNUAL REPORTING
One of the key fundamental issues in this initiative is that the monthly ad-hoc reporting may be prepared on a basis of
accounting that may differ from the basis of accounting used to prepare the year-end audited financial statements and
that the monthly ad-hoc information will not be "validated." In our view, there are at least two potential issues with
monthly ad-hoc reporting of revenues and expenditures as proposed:
1. Auditors will be unable to "reconcile" the monthly revenues and expenditures to the audited financial
statements since they will conceivably be presented on different"basis of accounting";and
2.The value of the information to the state and to potential users accessing the state's reporting system will be
compromised because the data is "unfiltered." Basically, what the state would be saying by posting these
unaudited numbers is, "here are some numbers for you to review but we will not give you any assurance that
they are correct."
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QUALITY AND COMPARABILITY OF DATA
When providing data to the public, every effort should be made to ensure that the data is accurate and reliable.
However, UCOA project reporting provisions ensure that just the opposite will occur; there will be no attempt to
validate any of the data before it is posted for public viewing.This results in a high risk that the data will be inaccurate,
invalid or incomplete. Reasons for this can include anything from innocent mistakes, such as misclassification of
expenditures or improper cutoff, to the intentional misstatement of amounts being reported. Another issue that will
have to be overcome is that government financial system users have a tendency to expense funds where the budget is
located. Because it is impractical to budget at the same low level of detail as proposed for reporting by the UCOA
project, it will be a challenge to make sure that expenditures are posted to the correct cost objects. This will result in
either the establishment of more costly internal controls to ensure that expenditures are properly coded or, more likely
in a time of scarce resources, it will result in no additional controls being established, thus increasing the risk that the
data will be unreliable.
Additionally, because there will be no validation of the data submitted to the state,the information presented must be
disclaimed as unaudited and tell the user of the information that the state is taking no responsibility for the data that
they are disseminating. Responsibility and accountability go hand in hand, and this lack of taking responsibility for the
integrity of the data by the state is counterproductive to the goal of promoting transparency and accountability. In fact,
it perpetuates one of the most negative stereotypes that governments have to overcome, which is the lack of taking
responsibility and for holding people accountable. Further,transparency,while a worthy goal, is only valuable when the
public perceives that it can get a true picture of what is going on. We question how this proposed data dump of
information on the public will promote any positive perception of government.
Another goal of the project is to promote comparability across government organizations. While creating a uniform
chart of accounts is a necessary component of comparability, unless all organizations use the same basis of accounting, a
chart of accounts in and of itself will not result in the goal of achieving comparability across all government agencies.
There are vast differences between the various bases of accounting. Take, for example, the purchase of a fixed asset.
Both the cash basis and the modified accrual bases of accounting recognize the purchase of fixed assets as expenditures.
However, even though the transaction represents an expenditure under both bases, comparability may still be
compromised as a result of the timing of the recognition of that expenditure. The cash basis of accounting recognizes
the expenditure when the cash is disbursed versus the modified accrual basis of accounting recognizing the expenditure
when it is incurred.Adding to the confusion,the purchase of a fixed asset using full accrual accounting isn't an expense
at all; instead, it is recorded on the balance sheet with the purchase price being depreciated over the useful life of the
asset. As this example illustrates, the differences in the bases of accounting between organizations severely impacts
comparability between reporting organizations.
Further, organizations using the same basis of accounting are allowed to establish policies that could impair
comparability between organizations. For example, GAAP allows an organization using the full accrual basis of
accounting to choose its own threshold for capitalization of certain classes of assets. Let's assume that the threshold of
capitalizing capital assets for one government is$100,000 and the threshold for another government is$1 million (as per
the State of Florida). For a capital asset costing $90,000, both organizations would reflect the transactions as an
expense. For a capital asset costing$500,000, the first organization would capitalize the cost and amortize it over time,
while the second organization would expense the entire amount in the year of acquisition. Therefore, there are
obstacles to comparability even between entities using the same basis of accounting.
In addition, the Florida Department of Financial Services has indicated that it will be left up to each county to decide if
they will report collectively with their constitutional officers or whether the constitutional officers will report separately.
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Comparability will be compromised with this position. If some counties report their information separate from their
constitutional officers and some counties report collectively,then there will be no way to compare the board of county
commissioners' information across the spectrum; tax collectors across the spectrum; and the same for the rest of the
Constitutionals.
Therefore, the establishment of a uniform chart of accounts without requiring uniformity in other areas such as in the
basis of accounting and in the accounting treatment of various transactions in itself will not provide users with any
meaningful comparisons between organizations.
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COST OF IMPLEMENTATION
It is unclear as of this date whether the proposed UCOA is intended to replace the 2011 Uniform Accounting System
Manuals for Cities, Counties, and Other Reporting Entities (all of which are dated as of August 9, 2010) or whether the
proposed UCOA is intended to operate as an "overlay" to those manuals. The answer to that question will have a
significant impact to units of state and local government, both operationally as well as from a cost perspective.
As noted elsewhere in this document, there is also the issue of monthly reporting versus year-end reporting and the
challenges presented both by the frequency of reporting as well as the reconciliation (or lack thereof) of the monthly
information to the year-end data.
It is our expectation that since the year-end reporting will presumably be prepared in conformity with generally
accepted accounting principles and therefore be "reconcilable" with the local government's audited financial
statements,the issues with the year-end reporting will generally be limited to the following three major categories:
1. The level of detail required for certain objects of expenditures (i.e.contractual services and
travel expenses) is far greater than the level of detail previously reported either in the audited financial
statements or in the Annual Financial Report (AFR) required pursuant to the provisions of Section 218.32(1)(a),
Florida Statutes;
2. Similar to item 1, it is our understanding that units of state and local government will now be required to report
information at a much higher level of detail for each individual fund. In the past, information reported in the AFR
was reported by fund type and information in the "basic financial statements" produced by units of government
for the purpose of annual audit were only segregated by fund for the "major fund" (as that term is defined in
GASB Statement Number 34 Basic Financial Statements-and Management's Discussion and Analysis for State
and Local Governments)with all"non-major"funds combined into one column for financial reporting purposes.
While many units of government participate in the Government Finance Officers Association's "Certificate of
Achievement for Excellence in Financial Reporting" Program, which requires the presentation of combining and
individual fund level financial statements and schedules, participation in the program is voluntary. In any event,
the opinions expressed by external auditors on the fairness of presentation of the financial statements generally
only extend to the basic financial statements and not to the individual fund level financial statements (with the
exception of the "major" funds). The cost for local governments to obtain an opinion on the fairness of
presentation of financial information at the fund level would be significant;and
3. If the implementation of Chapter 2011-44, Laws of Florida, is intended to create an "overlay" as discussed
above, units of local government will need to determine the capabilities of their current financial management
software applications to create such an"overlay." In any event,this exercise is also expected to be costly.
Similar to year-end reporting requirements, it appears there are also three ways to implement the monthly reporting
requirement:
1. Modify the entity's current accounting system;
2. Develop a "crosswalk"from the entity's current system to the proposed UCOA,or
3. A combination of(1)and (2).
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The survey of the Cost of Implementation that the Florida Department of Financial Services has undertaken is not
complete as of the writing of this white paper, nor are the results available. However,there are key points to consider
regarding the Cost of Implementation.
IMPLEMENTATION:
In our view, regardless of the approach taken to implement the provisions of Section 215.89, Florida Statutes,significant
resources will be required to comply with the proposed UCOA reporting requirements.
MODIFYING CURRENT ACCOUNTING SYSTEMS:
The first point to be made is that modifying the current accounting system to mirror the proposed UCOA will be labor
intensive on the part of the entity's staff. Current accounting systems are set up to meet the needs of the individual
entity's management and constituency.The UCOA concept with a goal of transparency does not focus on the individual
particular needs of their constituencies.Modifications to mirror the UCOA will put financial burdens on entities and their
staffs who are already burdened by budget cuts and staff reductions.
A second point, as indicated in the section "UNCLEAR, CONFLICTING, OR DUPLICATIVE REPORTING REQUIREMENTS," is
that some entities will perform double work to create the report required by other statutes, which will necessitate
reporting on two different formats and entering data twice on a monthly basis,hence doubling the staff time and costs.
CREATING A CROSSWALK FROM CURRENT SYSTEMS TO UCOA:
Creating a crosswalk from current accounting systems to the UCOA will be costly for several reasons. First and foremost
will be software costs. Programming current systems will require the particular vendor to provide programming services
to accounting systems that are proprietary in nature and can only be reprogrammed by the vendors themselves. In
today's world, programming rates an an hourly basis usually are in the range of$200 to$400 per hour.In addition, most
systems would require additional software licensing fees and ongoing monthly maintenance support fees. Once the
crosswalk is completed, there will still be the costs of staff time for preparation and reporting as previously expressed
elsewhere in this white paper.
ONGOING REPORTING:
Currently,most entities report annually to Florida Department of Financial Services their AFR through a system known as
LOGER. As noted above,the level of reporting for the AFR is at the fund-type level. More specifically, local governments
currently report expenditures by fund type (i.e. general, special revenue, debt service, capital outlay, etc.), by function
(i.e. 513.00-Financial and Administrative,521.00-Law Enforcement,541.00-Road and Street Facilities,etc.)and by major
category(i.e. personal services,operating expenditures/expenses,capital outlay,debt service,grants and aids,and other
uses). The average time to enter the information annually for a representative county is 1 1/2 to 2 days of staff time.
This does not include the time it takes to assimilate the information from the accounting system into the format
required for the AFR. It is our understanding that the state CFO will require units of local government to report to the
individual fund level, by department and by object code. Reporting by object code versus category is a big issue. It is our
estimation that the sheer volume of data to be reported at this expanded level (not to mention the cost of staff to
create and verify the information) will grow by more than 100 times, and that is just for the year-end reporting.
Interpolating this out on a monthly basis for revenue and expenditure reporting at the comprehensive level of detail
requested by the Florida Department of Financial Services realistically could add substantially to this process. Making it a
monthly routine will require another staff person. In addition, currently the AFR reporting requires only reporting of
revenues and expenditures. The proposed UCOA requires reporting on balance sheet accounts as well, creating even
more burden on staff.
Another consideration is the impact that monthly financial reporting will have on governmental computer systems and
networks. Many governments have a substantial number of funds, some that exceed 100, which will be required to
provide reporting. The monthly reporting will require substantial computer resources, which may result in many
governments having to upgrade current systems at a substantial cost. The Summary of Reporting Requirements on this
website http://www.myfioridacfo.com/aadir/CO/ACOApro)ectdocuments/SummaryofReportmaReauirments.odf
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indicates that reporting entities shall report revenues and expenditures at the lowest operational level of funds that is
maintained by the reporting entities. If, for example,an entity maintains three separate special revenue funds for daily
operational purposes, financial information would be reported for each of the three separate special revenue funds
rather than a single summarized submission at the GAAFR level.
Some governments use multiple sub-funds to capture information that is rolled up into one fund for financial statement
purposes. Monthly closing calculations could be costly and accuracy compromised.
In addition, Florida governments currently are required to meet many reporting requirements,including reporting to the
Florida Equal Employment Opportunity, Florida Unemployment Compensation, Florida Retirement System, Federal
Affordable Care Act, and payroll taxes and W-2 information to the Internal Revenue Service. Each of these reporting
requirements imposes penalties for not meeting the prescribed deadlines. There is concern that additional monthly
reporting requirements may result in governments not being able to meet all of these current reporting requirements in
the time required, resulting in potential penalties and other ramifications.
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SUMMARY
Without reservation, we believe that transparency and accountability of the use of public funds to citizens and other
stakeholders is paramount.We applaud the Legislature in its efforts to ensure that the citizens of Florida and of its local
governments are beneficiaries of financial accountability and wise use of resources. The current proposed UCOA
reporting requirements, while well intentioned, is not the solution for the reasons discussed in this white paper,
including: the autonomy of state and local government entities; risk of lack of quality and incomparable data; conflicts
with current established reporting requirements both annually and more frequently; different bases of accounting and
different purposes for which each entity exists; and most crucial, the duplication of effort and the implementation cost
to the taxpayer that places extraordinary burdens on local government entities with no resources to accommodate
these burdens. In our opinion, the cost to implement the UCOA far exceeds any benefit that might accrue to the
taxpayer as a result.
We recommend an alternative strategy that could accomplish the Legislature's goal to ensure transparency and
accountability while limiting the burden to governmental entities and preserving the autonomy of those entities.
Legislation should be enacted that prescribes minimum desired transparency reporting by local governments, leaves it
to local governments to include such information on their websites,and does not impose significant financial burdens on
local governments.
By taking the more local approach, information provided by each local government on its web site would be easily
accessible to the local constituency and would be in the same place that the local government currently publishes its
budget documents and year end audited financial statements. This would provide better context and an enhanced
historical perspective for the user to interpret the interim information. Additionally, the interim financial information
would likely come straight from the local government's current financial management system and not require costly
conversions or overlays necessary to convert it to a one size fits all approach as currently proposed.
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Florida Government Finance Officers Association
Uniform Chart of Accounts Task Force
Chair
Honorable Jeffrey R.Smith,CPA,CGFO,CGMA
Indian River County Clerk of Court&Comptroller
Past President of FGFOA
Members:
DeeDee Beaver,CPA,CGFO Paul A.Guzenski,CPA
Director of Finance&Accounting Senior Accountant
•
Polk County Clerk of Court&Comptroller Palm Beach County Clerk of Court&Comptroller
Honorable Ken Burke,CPA Ron Herring,CPFO,CGFO
Pinellas County Clerk of Court&Comptroller Assistant Finance Director
City of Tarpon Springs
Desmond Chin,CPA
Director of Finance Amber Hughes
Village of Palmetto Bay Legislative Liaison,Florida League of Cities
Linda C.Davidson,CPA,CGFO,CPFO William Kleinsorge,CPA
Financial Services Director,City of Boca Raton Finance Director
Past President of GFOA and FGFOA County Finance Division
Sumter County Clerk of Court&Comptroller
Fred Dean,CPA
Director of Finance, Thomas P.Klinker,CPA,CGMA,CGFO,CPFO
Pinellas County Clerk of Court&Comptroller Senior Finance Director
Lake County Sheriff's Office
Diane Bernardo,CPA Past President of FGFOA
Director of Finance
Indian River County Clerk of Court&Comptroller Darlene Malaney,CIMA
Director of Financial Services
Tony F.DeBlasio,CPA Palm Beach County Clerk of Court&Comptroller
Manager,Financial Reporting,
Palm Beach County Clerk of Court&Comptroller Elissa Nagy,CPA
Assistant Finance Director
Christian Flierl,CPA Indian River County Clerk of Court&Comptroller
Director,Accounting&Financial Services
South Florida Water Management District Shannon Ramsey-Chessman,CPA,CGFO
Chief Operating Officer of Finance
Jill Freitas Palm Beach County Clerk of Court&Comptroller
•
Senior Accountant Current FGFOA Board Member
Palm Beach County Clerk of Court&Comptroller
William V.Spinelli,CPA
Rob Garner,CPA,CGFO Director of Finance
President,Government Consulting Services Corporation City of Leesburg
Past President of FGFOA
Patricia A.White,CPA
Joseph Garofalo,Jr.,CPA Accounting Manager
Fiscal Director City of Boca Raton
Sarasota County Tax Collector
Merrill Wimberley,CPA
Chief Financial Officer
Leon District Schools
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