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NACUBO/WashingtonUpdate

James E. Morley, Jr.

President

National Association of College and University Business Officers (NACUBO)

October 2002

Current national issues

Current national issues

• War against terrorism & homeland security

• Tax issues and accounting standards

• Federal regulations

• Technology

National issues

War against terrorism and

homeland security

Homeland security:Impact on colleges and universities

• Foreign students and visitors

• Sharing of information with law enforcement and privacy concerns

• IT security

• Laboratory security and treatment of biohazards

Homeland security: New federal laws

• USA Patriot Act (enacted October 26, 2001)

• Enhanced Border Security and Visa Entry Reform Act (enacted May 14, 2002)

• Public Health Security and Bioterrorism Preparedness Act (enacted June 12, 2002)

Homeland security: USA Patriot Act

Information sharing:This legislation provides simplification for federal officials to receive court orders for student records and amends FERPA to permit “emergency disclosure.”

• Calls for full implementation of INS foreign student tracking system (SEVIS)

• With court order, Feds investigating terrorism may obtain business and student records

Homeland security: USA Patriot Act (cont’d)

Information sharing:Updates surveillance laws to cover today’s communications—e-mail, voice mail, etc.

Homeland security: Public Health Security & Bio-terrorism Preparedness Act of 2002

– Select agent list to be reviewed at least biennially

– Regulations will cover possession and use, not just transfers, of select agents

– Tighter controls, including federal background checks on persons allowed access to select agents

– Broad inspection authority for HHS

Department of Homeland Security: Proposed The administration’s five organizational categories proposed for the new department

include 24 government entities Border and Transportation Emergency Preparedness and Response Chemical, Biological, Radiological and Nuclear Countermeasures Information Analysis and Infrastructure Protection Secret Service

Sixty-one Congressional committees and subcommittees now have authority over the 24 organizations likely to be merged into the new department

And, at present, the House Government Reform and Senate Governmental Affairs committees have general oversight authority

• Source: Congressional Quarterly

National issues

Tax issues and accounting standards

Tax issues: Recent IRS actions

• Memo on FICA withholding for medical residents

• Final rules published for:

– Intermediate sanctions

– Corporate Sponsorships

• Re-proposed rules on 1098-T reporting

Tax issues: Final rules on corporate sponsorships

• Safe harbor for qualified sponsorship payments• Exclusive sponsorships allowed• Exclusive provider arrangements not in safe

harbor—but not automatically subject to UBIT• EO’s web site can link to sponsor’s site, but not

endorse it• Rules published 4/25/02 Federal Register, and are

applicable for payments solicited or received after December 31, 1997

Tax issues: IRS Re-proposes 1098-T reporting requirements• Eases reporting burden

• Repeals requirement to collect name / SSN of individuals claiming student as dependent

• Allows reporting of aggregate amount of qualified tuition / expenses or amounts billed

• Effective date of new regulations will be for tax year 2003 (1098-Ts that will be filed in early 2004)

• Final rules expected by end of 2002

Accounting standards: GASB

• GASB Statement No. 34• Basic Financial Statements-And Management’s

Discussion & Analysis-for State and Local Governments

• GASB Statement No. 35• Amends GASB34 to include Public Colleges and

Universities• GASB Statement No. 37 - Omnibus Statement

– Addresses problems created by GASB34 and GASB35

GASB Standards (cont’d)

• GASB Statement No. 38 - Note Disclosures• Significantly modifies required disclosures

• GASB Statement No. 39 – Affiliated Organizations• Applies to foundations and other entities

supporting public institutions

Accounting standards: FASB

• FASB Statement No. 141 - Business Combinations

– Excludes not-for-profits

• FASB Statement No. 142 - Goodwill and Intangible Assets

• Not-for-profit business combinations

• Measuring financial instruments at fair value

Accounting standards: AICPA Project

• Exposure draft revises rules for Property, Plant & Equipment accounting

• Specifies expenditures which qualify for capitalization

Accounting legislation:

Sarbanes-Oxley Act of 2002 • Creates new, independent regulatory body, the Public Company

Accounting Oversight Board (PCOAB)

• Changes to ensure FASB independence in setting national accounting standards

• Auditor independence requirements mandated for audits of publicly traded companies

• New corporate responsibilities and restrictions for CEOs and CFOs

• Focus on greater disclosure and transparency in financial reporting, internal controls, ethics, audit committee expertise

• Stricter provisions and for corporate fraud and white-collar crime

Planned future accounting group actions

• Increased disclosure: GASB Statement 39 (issued 2002)

• GASB performance measures “experiment”—coming (end—2002)

• FASB mandated study of principles-based accounting financial reporting system (due July 2003)

National issues

Federal regulations

Federal regulations: ED – Title IV Program eligibility rules

• Replace the 12-hour rule with a one-day rule• Clarify provisions for incentive compensation and identifies “safe

harbor” activities for student recruiters• Clarify need to take attendance in order to comply with return of Title

IV funds requirements• Amend overpayment rules to permit students owning small amounts to

retain their program eligibility• Expand from 90 to 120 days for making late disbursements and

require institutions to offer them to students who complete the period of enrollment

• Eliminate the rule for institutions to confirm the receipt of notices sent to borrowers (or parents for PLUS loans) that loan funds have been credited to students’ accounts

Federal regulations:OMB Federal Financial AssistanceManagement Improvement Act of 1999

• Proposed revisions to Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations

• Proposal for a standard format for federal agency use in announcing discretionary grant and cooperative agreement funding opportunities

• Proposed standard data elements for federal agency use in creating grant funding opportunity announcement summaries under the E-Grants initiative

• Proposed revisions to three OMB cost principles circulars (A-21, A-87, A-122) to clarify ambiguous language in the interpretation of similar costs

• Proposed revision to Circular A-110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, et al

Issues in 2002: Status of Congress

• September initiatives included bill establishing new Homeland Security Agency and passage of Corporate Accountability Bill in late July– Corporate Accountability Bill affects only corporations

directly, including creation of an independent oversight board loosely attached to the SEC

– Debate of Homeland Security Agency parameters still in committee

Issues in 2002: Status of Congress (cont’d)

• Prospects for passage of FY2003 appropriations bills dim before new congressional session in January 2003

• Likely scenario is passage of a long-term continuing resolution (CR)

– Keeps funding levels at FY02 levels in short term, but can switch to funding levels of proposed appropriations

National issues

Technology

Technology: 2002 Issues

• Broadband access

• Distance education and federal student aid

• Information technology authorization

• Intellectual property

• Network security

• Privacy

• Workforce development

• FY’03 funding priorities

Technology: Higher Education Information Technology Alliance (HEIT)

• Five years old; convened by NASULGC and EDUCAUSE

• Represents higher education’s collective interests in federal information technology policy

• Hosts annual forum to share information and formulate legislative issues agenda

• USA Patriot Act, cyber security legislation, and homeland security activities have far-reaching implications for higher education

Technology: HEIT Alliance members

AACC Association of Research Libraries

NAICU

AASCU EDUCAUSE NASULGC

ACE Internet2 University Continuing Education Association

AAU NACUBO

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