CalHFA staff outline GASB 103 implications; auditors, staff to coordinate on classification of MBS activity

CalHFA staff and auditors told the agency’s audit and risk management committee that new GASB guidance (referred to in the meeting as GASB 103) will change presentation and disclosure for items such as management's discussion and analysis (MD&A), unusual and infrequent items, and the classification of subsidies and certain investment activity.

Mandy Merchant, principal at CliftonLarsonAllen, described four main areas of change auditors expect to see in reporting and MD&A content and urged the agency to review definitions with the incoming auditors to determine appropriate placements in the statements.

Agency staff said they contacted GASB technical assistance to clarify mortgage-backed-securities (MBS) and TBA activity. "The GASB said... this [interest from MBS that are not whole loans] will be considered as nonoperating activities because it's not a whole loan," a CalHFA representative told the committee, noting GASB’s technical-assistance guidance distinguishes whole loans (which may be treated as the agency's prime housing activity) from MBS/TBA income.

Board members asked whether CalHFA’s housing finance fund is correctly designated in the state controller’s records. Staff clarified the agency's housing finance fund (0501) is recorded as a proprietary fund because the agency issues bonds and earns fees, while many grants and transfers CalHFA administers are contract-administration funds passed through for specific program purposes.

Staff said they do not anticipate noncapital subsidies becoming a large line in CalHFA’s statements but acknowledged some transfers administered for specific programs will need separate presentation. Staff also noted a recent building acquisition (discussed in the meeting as 520 Capital) will require new records and coordination with the incoming auditors.

Committee members and staff agreed to continue working with Macias Gini & O'Connell on implementation steps and placement decisions under GASB 103.

The committee had no public comment and adjourned.