# In Black & White

## Freeing Finance & Budget Departments from Drudgery One Article at a Time

### How to improve CaseWare performance by 20%

• Darryl Parker
• Tips and Tricks
• minute(s)During our introductory CaseWare training sessions, we focus on the fundamentals. To move users beyond these basics and ensure an even faster year end, we regularly provide CaseWare tips & tricks in this blog series. Our advice in this article is simple: eliminate unnecessary groupings from your file. It nearly always means better performance and less confusion!  Why Purge? Why should you care about cleaning up (purging) your mapping and grouping codes? You want as comprehensive a grouping structure as possible - initially.That way you know you have an appropriate location for every G/L account. Once you have grouped all your accounts though, a typical file will have a large number of groupings that are not necessary. Those unnecessary groups slow down the file. They also slow you down, as you have to scan through long columns full of zeros and determine whether they are noteworthy.  $0.00 of "Fishing Revenue" might be expected for your statements, but what about$0.00 of Account Receivable? That's why purging the map numbers or group numbers in any file can be a significant improvement. It moves the file from a generic setup to one tailored exactly for this year-end. In large, complex files we see dramatic results: Opening large financial statements: up to 10% faster. Opening group assignment window: up to 10% faster Opening grouped lead sheets and trial balances: up to 60% faster. In one of our large IFRS client files, cleaning up the groupings resulted in a more than 20% improvement in speed across a simple set of tasks (opening the file, reviewing the consolidation and mapping, and looking at automatic documents and the financial statements). Note - in a very simple file, the speed improvements may not be noticeable but the benefits of a file that is easier to navigate remain. We’ve posted recently about the standard Mapping Purge feature in CaseWare Working Papers. Read that article for an understanding of the built-in features, and then get ready for a more advanced map purge that addresses the limitations of the standard one.  The Advanced Purge tool Perhaps you tried the regular map purge in your own Working Papers files. Or maybe you read about the problems that the built-in mapping purge has (can only work on mapping, cannot check account assignment, required knowledge of dBase filters) and thought it was not a good fit for your organization. We want you to be able to quickly and easily clean up the unneeded grouping numbers in your file so you have an even faster year-end. So, we built a tool to allow you to do just that. And we are providing it to CaseWare users for free. The Advanced Purge Tool will: Allow you to choose any of the mapping or 10 grouping structures to clean up. Never delete a map/group number with any adjustments related to it. Never remove a map/group number with any account allocated to it or any of its child map/group numbers. Check three years of historical balance data to determine if prior year adjustments should preclude deletion of a map/group number. Allow you to choose whether calculated map numbers should always be saved, or should apply the balance-checking logic to them. Define a “root” or “base” map number length that will not be deleted under any circumstance. BEFORE YOU START - A Word of Warning!!!  The Advanced Purge tool will delete group numbers out of your Working Papers file, and there is no undo button.  You must take a backup before running a purge. Even better, take a disposable copy of your file and thoroughly test a purge and verify its effects before running it in your live file.  And even then, you should take a backup of that live file in advance of running your thoroughly tested purge! To use the tool: Download the tool. It is a compressed (Zip) file so you will need to extract it after downloading. The tool is a single CaseView document. After extracting, drag and drop this document onto the Document Manager of the file to be improved. Launch the CaseView document. Confirm you understand the risks of purging groups. Choose the grouping mechanism from which you wish to eliminate zero balance. Choose what balance type to examine for balances and if Other Basis entries should be considered. Specify if you want to keep calculated group numbers. Specify if you would like to keep base group numbers. If selected, you must also note how many digits are represented in your definition of a base group number. Once completed, select Perform Purge. When finished (it may take awhile), you will get a confirmation of how many unused groups have been eliminated. You can get a copy of the tool to see how it will simplify and streamline your own data files. All you have to do is click the image below! Consider our more advanced CaseWare training if you want your CaseWare Black Belt!

### CaseWare Feature Spotlight: Diagnostics

• Darryl Parker
• CaseWare Feature Spotlight
CaseWare's diagnostics significantly reduces time spent to generate CAFRs, annual financial statements, budget books and other complex reports.

### Is Self-Implementation right for you?

• Jamie Black
• Efficient, Effective and Reliable
To implement technology as inexpensively as possible many governments consider self-implementation. How do you know if this is right for your organization?

### Lipstick on a Pig: 6 Spreadsheet-based Financial Reporting Tool Flaws

• Jamie Black
• Automating Financial Reporting
Comprehensive Annual Financial Reporting and Budget Book tools based on spreadsheets are all the rage. Don't overlook their considerable weaknesses.

### 5 Best Practices for Updating Critical Software

• Waldo Nell
• Tech for Execs
You rely on your key applications but updates and upgrades can be risky. Here are 5 steps to mitigate risk and guarantee better outcomes.

### What You Need to Know about 64-bit Working Papers

• Darryl Parker
• What's New
CaseWare has released a 64-bit version of Working Papers. This is excellent but some consideration is required for a smooth upgrade.

### Navigating PSAB: Asset Retirement Obligation Standards

• Bill Cox, BDO
• PSAB
• minute(s)Could Be Some Big Changes - And Some Unexpected Ones How Did We Get Here? The relatively new[1] Public Sector Accounting Board (“PSAB”) standard “PS 3260 Liability for Contaminated Sites” turned out to not have much of a financial statement impact for most governments and government organizations. Certainly the Federal, Provincial and Territorial Governments ran into some of the most significant challenges. But most others were not faced with hugely significant liabilities to report. Likely the most significant reason for this is that PS 3260 applies, for the most part, to assets that are not in productive use. It was a logical progression for PSAB to consider whether standards were required for Asset Retirement Obligations (“AROs”). That is, standards that apply to assets that are in productive use. In addition to being a logical progression, many government organizations that moved to Public Sector Accounting Standards (“PSAS”) recently [2] had been applying ARO standards pursuant to the previous accounting framework they had been following. It was time for PSAB to look to see what, if any, standards were required in this area.  An ARO project was set in motion, a task force put to work, and a Statement of Principles issued in August 2014. The main features of the Statement of Principles were: Legal, constructive and equitable obligations could create an ARO. The carrying value of the tangible capital asset is increased by the ARO and expensed through amortization of the asset. Subsequent remeasurement of liability would require adjustment to carrying value of the asset if it is still in use. Post-retirement operation, maintenance and monitoring form part of the ARO. A present value technique is often the best method with which to estimate the liability. In the period since the issue of the Statement of Principles the task force has been reviewing responses and developing a proposed standard. Expect an exposure draft in December 2016. Does It Make Sense To Have Different Standards For Similar Types of Liabilities? When the ARO standards arrive there will be three PSAS standards that deal with items that, at least on the surface, appear to have some similarities. These will be: - the pending ARO standard - the recent PS 3260 Liability for Contaminated Sites standard - and long-existing PS 3270 Solid Waste Landfill Closure & Post-closure Liability standard Each of these standards deals with situations related to clean up of land. On closer review though, it might be reasonable to consider Contaminated Sites as the odd one out. This standard deals with existing contamination as opposed to the other standards which deal with anticipated future costs. But, the requirements for closure and post-closure activities and monitoring of a landfill are identical concepts to those of AROs. Should they not then have the same accounting requirements? Accounting for Landfill Obligations The current Landfill Liability section has some similarities and some differences to the ARO proposals. Likely the most significant difference is that estimated liability amounts are not capitalized to an asset. Why is that? Quite simply the standard came into play in 1998 - a full 11 years before the adoption of PS 3150 Tangible Capital Assets. Capitalization really was not an option at that point. It is only logical that the ARO Task Force will consider whether there should be harmonization of the ARO and Landfill Liability standards. What Would a Harmonized ARO/Landfill Liability Standard Look Like? At first glance, one might expect that the liability amount would not change by the applying ARO concepts to landfill liabilities. After all, both standards suggest that you may want to look at present value techniques to account for future obligations. Yet, there could be a distinct difference in one area. Change could occur in accounting for costs that will be incurred regardless of the level of activity of the landfill. A portion of capping, closure and monitoring costs will be incurred whether the landfill contains 1,000 tonnes of waste or 100,000 tonnes. These “fixed” costs would likely be immediately capitalized at the time of opening the landfill under an ARO standard. Under the current Landfill Liability standard these costs, like those related to volumes, are accounted for as the capacity of the landfill is used. The impact of this different treatment would be an increase in a government’s Net Debt. Net Debt is an important indicator, and one that is watched by many, including bond rating agencies. This possible outcome is one that should be considered so that it does not come as surprise to watchers of the government. Explanations should be made in budget documents, annual report Financial Statement Discussion and Analysis, and other relevant reports and communications. Landfill closure and post-closure costs that are variable to volumes would likely be accounted for similarly under an ARO standard as they are under the current Landfill Liability standard. The liability related to these costs increases proportionate to volumes. But, of course, as the volume housed in the landfill increases the future life of the landfill decreases - it is becoming more full. Thus it does not make sense to capitalize these costs to the asset. Instead such amounts would be expensed as the capacity is used - exactly analogous to the current Landfill Liability standard. A Rudimentary Example It is always difficult to discuss accounting results using just words, so it may be best to look at a rudimentary example. Consider the following fact pattern: Assumptions Item Cost/Factor Cost of closure $10,000,000 Portion of closure costs not impacted by volume$4,000,000 Annual post-closure monitoring $50,000 Monitoring period 15 years Life of landfill 10 years Discount rate 5% Engineering cost inflation 3% Capacity usage Evenly over life The resulting differences in approach between possible ARO treatment and current Landfill Liability standard can be significant in impact to liabilities and net debt. Impact at Different Points Item Current Standard ARO Treatment Difference Year 1 Liability$920,572 $4,039,254$3,118,682 Year 5 Liability $5,594,807$7,700,794 $2,105,987 Year 9 Liability$12,240,941 $12,752,909$511,968 Year 10 Liability post closure $841,933$841,933 $0 Year 15 Liability$681,423 $681,423$0         Year 1 Expense $920,572$920,572 $0 Year 5 Expense$1,332,097 $1,377,762$45,665 Year 10 Expense $2,040,157 1,874,709 ($165,448) Year 15 Expense $36,050$36,050 $0 Year 1 TCA$0 $3,118,682$3,118,682 Year 5 TCA $0$1,732,601 $1,732,601 Year 10 TCA$0 $0$0 The Exposure Draft is Coming! The take away from all this is that those governments with landfills should be paying particularly close attention to the development of the ARO standards. As before noted, the first Exposure Draft is expected in December 2016 and this will create an excellent opportunity for interested parties to closely review the proposals. Most importantly, interested parties should respond with their critiques and suggestions. Even a response that supports the Exposure Draft without reservation is appreciated by PSAB because there is often a relatively low response rate to Exposure Drafts from those that will actually have to implement the proposals. Effective for fiscal years beginning on or after April 1, 2014 ↩ Government not-for-profit organizations, for example, generally adopted PSAS for their 2012 fiscal year. ↩   Provided as a Guest Post, by Bill Cox Bill Cox is a Partner in Audit and Assurance and has been with BDO Canada LLP for over 20 years.  Bill’s practice is focused on work with government, not-for-profit organizations and financial institutions.  He also maintains a significant small/mid-sized business client base.
When the Asset Retirement Obligation standards arrive there will be three PSAS standards. Bill discusses what you can expect from these standards.

### In Control: Why Monitor When We Know it is Broken?

• Holly Ueland
• In Control
• minute(s)In part 1 of this series, we discussed how continuous controls monitoring is incredibly valuable for management. In this installment of the series, we address a recurring question we hear.  When chatting with clients we hear "Listen, I know our processes is broken. Why waste time monitoring it when we could spend that time fixing it? Aren't we checking the pulse of a dead patient?" This statement does seem to have some logic to it. But it over-simplifies the situation. The reality is that monitoring your control activities is an integral part of the effort to fix them. When we say "broken" we typically mean that the process is failing to achieve its objective. Translating this into Internal Control terminology we mean the control activities are failing to mitigate risk.  Business processes are often very complex with many steps, risks, controls, stakeholders and participants. When we say "the process" is broken we mean one or more risks are not being controlled. But which controls? Why? That information is going to be critical in determining how we fix "it". Monitoring controls that we suspect are not functioning can tell us which controls are failing and why. This information is critical to making good decisions about how to resolve the issue: Further, once we resolve the issue (Repair, Implement, or Remove) we will want to monitor to ensure new problems don't crop up or old ones reocur. If you go in for heart surgery, Doctors want to keep a close eye on you for some time thereafter! How does your organization determine what expected controls are for various processes and determine which ones to monitor? Through best practices, which we discuss in part III of this series.
The importance of Monitoring is often overlooked in internal control systems. Even when processes are"broken", it turns out monitoring is essential.

### 6 Key Fraud Findings for Government Finance Officers

• Holly Ueland
• In Control
• minute(s)The Association of Certified Fraud Examiners (ACFE) 2016 Report to the Nations on Occupational Fraud and Abuse had several findings that will be very interesting to finance managers in local government. The 2016 report is based on the results of the 2015 survey. As part of the survey, respondents were asked to provide a detailed narrative of the single largest fraud case they had investigated since January 2014. Respondents were then presented with 81 questions to answer regarding the particular details of the case, including information about the perpetrator, the victim organization, and the methods employed, as well as fraud trends in general. While the report is very interesting from many respects, there are 6 points we want to highlight. 6 Findings relevant for Government Finance Officers The most prominent organizational weakness that contributed to the frauds in the study was a lack of internal controls, which was cited in 29.3% of cases, followed by an override of existing internal controls, which contributed to just over 20% of cases. Government and public administration experienced the third highest incidence of losses due to error and fraud, with a median loss of $109,000/ incident. Small organizations had a significantly lower implementation rate of anti-fraud controls compared to large organizations. Small government organizations are more susceptible to fraud. Out of all the government bodies included in the report, from federal to local, small organizations (those with fewer than 100 employees) accounted for the greatest number of fraud occurrences overall. In addition, of the fraud occurrences in small organizations, those involving cash occurred over twice as frequently. The presence of anti-fraud controls was correlated with lower fraud losses. ACFE compared organizations that had specific anti-fraud controls in place against organizations lacking those controls and found that where controls were present, fraud losses were 14.3%–54% lower Anti-fraud controls also correlated with much faster detection. Frauds were detected 33.3%–50% more quickly if the organization used such controls. The report also notes that total losses represented in the study were actually significantly higher. However, to conservatively report loss amounts, the top and bottom 1% of results were excluded from the total loss figure. Even viewing the losses reported through a conservative lens, a typical loss of$108,000 per fraud can be devastating to many organizations, especially when combined with the indirect fallout that often accompanies a fraud scheme.   Join us for a free webinar and see how CaseWare's Continuous Controls Monitoring will improve your organization's internal control. We’ll examine the ever-evolving risk profile that governments experience and also demonstrate the significant benefits available (timeliness, accuracy, and cost-effectiveness) of automating monitoring and enforcement of internal control (Continuous Monitoring) using CaseWare solutions.
2016 ACFE Report outlines several key points for government finance officers interested in internal control and eliminating fraud.

### Financial Statement Automation Saves Time & Money for Lethbridge

• Jamie Black
• Success Stories