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1 ' CITY OF ROSEVILLE EMERGING ISSUES ' December 31,2014 Executive Summary The following is an executive summary of financial and business related updates to assist you in staying current on emerging issues in accounting and finance. This summary will give you a preview of the new standards that have been recently issued and what is on the horizon for the near future. The most recent and significant updates include: • Internal Control Integrated Framework —COSO has issued an updated integrated framework for ' internal control. The update is expected to make the integrated internal control framework easier to use and apply. In addition, the update takes into account globalization of businesses today and its interdependence on technology. The updated framework superseded the original framework beginning January 1, 2015. • Accounting Standard Update—Accounting for Pensions—Governmental Accounting Standards Board(GASB)has issued new statements:relating to accounting and disclosures for pension. The new statements require governments providing defined benefit pensions to recognize their long-term ' obligation for pension benefits as a liability. In addition, the statement includes new requirements for required supplementary information and more extensive footnote disclosures. • Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards—The Office of Management and Budget (OMB) issued grant reform rules on December 23, 2013. This reform streamlines the language from eight existing OMB Circulars (listed below) into one consolidated set of guidance, in the code of Federal regulations, known as the "Super Circular". The following are extensive summaries of each of the current updates. As your continued business partner, we are committed to keeping you informed of new and emerging issues. We are happy to discuss these issues with you further and their applicability to your City. COSO PROJECT—INTERNAL CONTROL INTEGRATED FRAMEWORK The updated framework has changed to address the changes in business and operating environments, such as globalization of markets and operations, greater complexities in businesses, reliance on evolving ' technologies and expectations relating to preventing and detecting fraud. In addition, principles of effective internal controls have been added to each of the components of internal control as follows: ' Control Environment: 1. Demonstrates a commitment to integrity and ethical values. 2. The board of directors is independent from management and exercises oversight responsibility of the performance of internal controls. 3. Management establishes structure, reporting lines, authority and responsibility. 4. Demonstrates a commitment to attract, develop and retain competent individuals. 5. Enforces accountability for individual's internal control responsibilities. Risk Assessment: 6. Specifies suitable objectives with sufficient clarity. 7. Identifies and analyzes risk as a basis for how risks should be managed. 8. Assesses the potential for fraud risk. 9. Identifies and analyzes significant changes that could impact the system of internal controls. 111 i 17