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Crosswalk: financial statements, supplemental schedule, and eZ-Audit

Effective July 1, 2020, not-for-profit institutions must comply with new financial responsibility rules. Audited financial statements (the recommendation is single audit statements) released after July 1, 2020 must include a financial responsibility supplemental schedule (FRSS). Institutions must input FRSS information into the Department of Education’s eZ-Audit system and file by their single audit due date per the Office of Management and Budget’s Uniform Guidance. The accompanying excel spreadsheets provide an illustrative set of financial statements, an FRSS, and a crosswalk to the eZ-Audit reporting templates.

 

Understanding Debt Obtained for Long-term Purposes (DOLP)

The new financial responsibility regulation, effective July 1, 2020, has a new definition of DOLP. DOLP cannot exceed net property, plant, and equipment, and can include liabilities related to construction in progress and capital lease / right-of-use assets. DOLP consists of two components - pre- and post-implementation - and both have specific rules. This tutorial covers pre-and post implementation rules, where to categorize leased / ROU liabilities, how DOLP is used to calculate expendable net assets (the numerator of the primary reserve ratio), and addresses presentation and documentation requirements in the new Financial Responsibility Supplemental Schedule. This tutorial is designed for institutions that do not elect to grandfather their operating leases. 

 

Leases and the Transition Election

The financial responsibility rules effective July 1, 2020 allow a grandfathering transition election for all operating leases entered into before December 15, 2018. The election is related to the conversion of all leases to right-of-use assets when FASB ASU 2016-02, Leases, is implemented -- which for some will negatively impact composite scores. This tutorial explains the transition election, how to assess if it's beneficial, how to report ROU assets on the Financial Responsibility Supplemental Schedule after the election is made, and what to disclose about leases entered into before and after December 15, 2018.

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