The parties who informed the Commissioner's Office regarding GASB Statement No. 14 stated that GASB Statement No. 14 would have an immediate, negative impact on the availability or use of the registration exemption in s. 551.22 (1) (a), Stats., by those governmental/municipal securities issuers who had component units that would be subject to GASB Statement No. 14 and who heretofore have had their general purpose financial statements prepared in full compliance with GAAP. In particular, auditors for such municipal/governmental issuers with component units subject to GASB statement No. 14 generally would no longer be able to issue unqualified opinions for general purpose financial of municipal governmental issuers--namely, that such financial are prepared, totally and without qualification, on the basis of generally accepted accounting principles. Two areas of concern in that regard where identified by the auditor groups, and with respect to each of the two areas, although the auditors could include unaudited information regarding such component units in the governmental issuers' general purpose financial statements, the auditor's opinion would have to be qualified, thus precluding use of the s. 551.22 (1) (a) exemption on a self-executing basis for offers and sales of the governmental issuers' securities to the public.
Therefore, in similar fashion to emergency rule-making action taken by the agency in 1982, and for the purpose of alleviating disruption that would occur to the near-term borrowing/bonding plans of governmental issuers of securities claiming registration exemption status under s. 551.22 (1) (a), Stats., and because it would require a period of time for those governmental issuers to be able to have their financial statements prepared according to full-GAAP including the additional requirement under GASB Statement No. 14 (which necessitates having the audit report include all “component units” of a governmental/municipal issuer), the Office of the Wisconsin Commissioner of Securities, in consultation with representatives of municipal issuers, municipal bond dealers, financial advisors, bond attorneys and certified public accountant groups, promulgated emergency rules that: (i) designated (in current subpar. (c)2) as an alternative accounting guideline, GAAP but where the auditor's opinion is qualified with respect to the omission of component units required to be included by GASB Statement No. 14; (ii) designated (in current subpar. (c)3) as an alternative accounting guideline, GAAP but where the auditor's opinion is qualified with respect to the unaudited financial statements of an included component unit; and (iii) designated (in current subpar. (c)4) as an alternative accounting guideline, GAAP but where the auditor's opinion is qualified with respect to the general purpose financial statements for component units whose securities financial statements are not presented in accordance with generally accepted accounting principles, but which are included in the reporting entity in accordance with GASB Statement No. 14.
B. Recent Accounting Developments Warranting Present Emergency rule Treatment.
The Commissioner's Office was recently informed by representatives of various Wisconsin governmental securities issuers (principally with respect to Wisconsin public school district and Wisconsin vocational school district issuers of debt securities), bond attorneys, and certified public accounting firms that interpretations by the Governmental Accounting Standards Board (“GASB”) through its staff with respect to accounting treatment for property tax recognition may cause many Wisconsin public school districts and vocational school districts to have the audit opinions for their financial statements qualified with respect to the deferral of taxes. The existence of a qualified audit opinion would preclude use of the s. 551.22 (1) (a), Stats., registration exemption on a use of the s. 551.22 (1) (a), Stats., registration exemption on a self-executing basis for offers and sales of a school district's debt securities to the public.
The specific accounting issue involves interpretation of the current accounting standard for property tax recognition established by the National Council on Governmental Accounting (“NCGA”) Interpretation 3 “Revenue Recognition--Property Taxes.” The accounting interpretation issue is presented as a result of the interplay of the following two factors: (1) most public school and vocational school districts operate on (and their financial statements are prepared on) a July 1 to June 30 fiscal year; (2) the Wis. Statutes authorize the various Wisconsin local units of government to allow the payment of property taxes (which provide the funding for payment of public school and vocational school district debts and obligations) to be made in installments on January 1 and July 31 of a given year (for example 1996) relating to taxes levied (in the 1996 example given) for a school district's fiscal year extending from July 1, 1995 to June 30, 1996.
Because the July 31 date for payment of the second property tax installment is after the June 30 fiscal year for the school districts, the staff of the GASB in communications with representatives of Wisconsin accounting organizations and school district associations on the issue, set forth the GASB staff's view that the July 31 tax installment revenues may not be recognized for purposes for fiscal years ending the preceding June 30. As a result, auditors for Wisconsin public school districts and vocational school districts would need to show in such school districts' financial statements, deferred revenue for the July 31 installment property taxes. Despite requests for reconsideration, the GASB staff has not changed its position.
Such GASB staff interpretation has resulted in property tax revenue and fund balance amounts as shown in most Wisconsin school districts' audit reports being different from that required to be shown in such districts' Annual Reports and budget documents, thus causing confusion as to what a particular district's financial position actually is. The State of Wisconsin Department of Public Instruction believes that the GASB staff interpretation, in the context of the Wisconsin statutes governing the timing of property tax levies and payments, does not result in appropriate school district revenue and fund balance financial statement presentations.
As a consequence, Wisconsin public school and vocational school districts may be requesting that their external auditors prepare their district's audited financial without showing deferred revenue for uncollected property taxes--which may result in the auditor issuing a qualified opinion. The issuance of such a qualified audit opinion would preclude use of the s. 551.22 (1) (a), Stats., registration exemption on a self-executing basis for offers and sales in Wisconsin of the school district's debt securities to the public.
Therefore, in similar fashion to emergency rule-making action taken by the agency in 1982 and 1994, and for the purpose of alleviating disruption that would occur to the near-term borrowing/bonding plans of governmental school district issuers that regularly claim exemption status under s. 551.22 (1) (a), Stats., for the offer and sale in Wisconsin of their debt securities, the Office of the Wisconsin Commissioner of Securities, in consultation with representatives of school district issuers, bond attorneys and accounting groups, is adopting these emergency rules designating an alternative-to-full-GAAP financial statement provision to deal with this accounting issue to enable school district issuers to continue to use the exemption in s. 551.22 (1) (a), Stats., on a self-executing basis.
The emergency rule created in s. SEC 2.01 (1) (c)5 designates as a permitted alternative accounting guideline for purposes of use of the registration exemption in s. 551.22 (1) (a), Stats., GAAP, but where the auditor's opinions is qualified with respect to the recognition of property tax revenue. The emergency rule created in s. SEC 2.01 (1) (d)5 provides that the auditor's opinion with respect to the financial statements of a school district issuer covered by the emergency rule in s. SEC 2.01 (1) (c)5 must contain language corresponding to the qualification language in s. SEC 2.01 (1) (c)5.
Publication Date:
June 24, 1996
Effective Date:
July 1, 1996
Expiration Date:
November 28, 1996
EMERGENCY RULES NOW IN EFFECT (2)
Department of Transportation
1. Rule was adopted amending s. Trans 6.04 (1) (e), relating to the administration of the federal section 18 program.
Finding of Emergency
The Department of Transportation finds that an emergency exists and that a rule is necessary for the immediate preservation of the public welfare. A statement of the facts constituting the emergency is that without a Governor's certification that the intercity bus service needs of the state are being adequately met, many small urban and rural transit systems will see sharp, unplanned reductions in the amount of financial assistance they receive in 1996. These cuts may result in service reductions, fare increases and the need for local governments to cover a higher share of operating losses than has been budgeted.
Publication Date:
March 13, 1996
Effective Date:
March 13, 1996
Expiration Date:
August 10, 1996
Hearing Date:
April 17, 1996
2. Rules adopted creating Ch. Trans 258, relating to seed potato overweight permits.
Finding of Emergency
The Department of Transportation finds that an emergency exists and that a rule is necessary for the immediate preservation of the public safety and welfare. Although the Department will pursue promulgation of this rule through normal procedure, the Department finds an emergency exists for the following reasons: (1) seed potatoes are transported to market between late February and April. Promulgation of an administrative rule through the normal process would not be timely for this planting season; (2) the Department believes the Legislature intended the provisions of 1995 Wis. Act 163 to be effective during this spring planting season. In order to promulgate rules in time for this spring growing season, this emergency process must be employed. The statute does not specify truck configurations, such as trailer length, axle spacing and weight distribution, but delegates responsibility to the Department. Without specified configurations vehicles that will impose damage to the roadway will be eligible for permits; and (3) the statute confers authority to identify an alternate route through rule but does not specify the alternate route. A suitable alternate route should be in place prior to the issuance of permits to allow diversion of permitted loads if any of the low weight bridges along the primary route manifests overstress. Closure of any of those bridges would substantially impede movement of other legal weight traffic in an area with few alternate routes.
Publication Date:
April 3, 1996
Effective Date:
April 3, 1996
Expiration Date:
August 31, 1996
Hearing Date:
May 13, 1996
Statements of Scope of Proposed Rules
Agriculture, Trade & Consumer Protection
Subject:
Food and dairy license fees. (Chs. ATCP 60, 70, 71, 75 and 80)
DESCRIPTION OF POLICY ISSUES
Preliminary objective:
Provide adequate funding for state food safety programs. This rule could increase license fees for any or all of the following:
○ Food processing plants
○ Food warehouses
○ Retail food establishments
○ Dairy plants
○ Dairy farms
Preliminary policy analysis:
The Department of Agriculture, Trade and Consumer Protection enforces Wisconsin's food safety laws. Among other things, the Department licenses and inspects food processing plants, retail food establishment, food warehouses, dairy plants and dairy farms. These programs are designed to safeguard public health, and ensure a safe and wholesome food supply. They also facilitate the sale of Wisconsin dairy and food products in interstate and international markets.
Wisconsin's food safety programs are funded by general tax dollars (GPR) and industry license fees (PR). In 1991, license fees funded about 40% of program costs. The 1993-95 biennial budget act reduced GPR funding, and required a higher percentage (50%) of license fee funding. However, the Department has not increased license fees since 1991. Program costs have also increased, due to external factors, such as inflation and statewide pay increases, over which the Department has not control. As a result, the Department projects a deficit in its food safety budget by fiscal year (FY) 1997-98.
In order to maintain current food safety inspection services, the Department is considering the need to increase license fees by rule. The Department has not yet determined whether, or to what extent, specific license fees may be increased.
Policy alternatives:
○ Keep food and dairy license fees at their current levels. If the Department continues to inspect food and dairy establishments at the current frequency, this will produce a deficit in the food safety program revenue account beginning in fiscal year (FY) 1997-98.
○ Reduce the current frequency of food inspection. This could have the following consequences:
○ Increased food safety risks. In 1990, a Food Safety Task Force found that the Department was not inspecting food establishments with adequate frequency, and recommended increased inspection for food safety. (This finding was limited to food, not dairy, establishments.)
○ Interstate sales of milk and dairy products would be jeopardized. Wisconsin sells approximately 85% of its dairy output in interstate commerce. Dairy inspection frequency is dictated by the interstate Pasteurized Milk Ordinance (PMO), and cannot be unilaterally altered by the State of Wisconsin. If the Department fails to inspect at the frequency dictated by the PMO, the federal Food and Drug Administration will decertify the state, and other states will refuse to accept shipments of grade A milk and dairy products from Wisconsin. This will cripple Wisconsin's dairy industry.
Statutory authority:
The Department licenses and inspects food processing plants under s. 97.29, Stats., and ch. ATCP 70, Wis. Adm. Code. Under s. 97.29 (3), Stats., the Department may adjust license fees by rule.
The Department licenses and inspects food warehouses under s. 97.27, Stats., and ch. ATCP 71, Wis. Adm. Code. Under s. 97.27 (3), Stats., the Department may adjust license fees by rule.
The Department licenses and inspects retail food establishments under s. 97.30, Stats., and ch. ATCP 75, Wis. Adm. Code. Under s. 97.30 (3), Stats., the Department may adjust license fees by rule.
The Department licenses and inspects dairy plants under s. 97.20, Stats., and ch. ATCP 80, Wis. Adm. Code. Under s. 97.20 (2), Stats., the Department may adjust license fees by rule.
The Department licenses and inspects dairy farms under s. 97.22, Stats., and ch. ATCP 60, Wis. Adm. Code. Under s. 97.22 (2), Stats., the Department may adjust license fees by rule.
Staff time required:
The Department estimates that it will use approximately 0.5 FTE (full-time equivalent) staff time to develop this rule. This includes research, drafting, preparing related documents, holding public hearings, and communicating with affected persons and groups. The Department will assign existing staff to develop this rule.
Agriculture, Trade & Consumer Protection
Subject:
Corn Marketing Order Assessment Rate. (Ch. ATCP 143)
DESCRIPTION OF POLICY ISSUES
Preliminary objective:
Increase the current corn marketing order assessment rate from one-tenth of one cent ($0.001) per bushel to one-half of one cent ($0.005) per bushel.
Preliminary policy analysis:
DATCP is authorized under ch. 96, Stats., to adopt marketing orders for agricultural commodities. Each marketing order and marketing order amendment must be approved in a referendum of affected agricultural producers and must be adopted as an administrative rule.
A marketing order requires producers of an agricultural commodity, such as corn, to pay an assessment specified in the marketing order. A marketing board elected by the producers spends assessment funds for market promotional purposes specified in the marketing order, subject to ch. 96, Stats., and DATCP rules.
DATCP created the corn marketing order (ch. ATCP 143) in 1983, with the approval of the state's corn producers. The Wisconsin Corn Growers Association has now asked the DATCP Secretary to amend the marketing order.
This rule would increase the current corn marketing order assessment rate from one-tenth of one cent ($0.001) per bushel on all corn grown in this state and sold into commercial channels, to one-half of one cent ($0.005) per bushel on all corn sold in this state. The increase would generate an additional $400,000 for market promotion, research, and education. The proposed assessment rate would be consistent with the rate in the adjoining corn-producing states of Iowa and Illinois.
Policy alternatives:
○ No change. DATCP could keep the marketing order assessment rate at the current level of $0.001 per bushel on all corn grown in this state and sold into commercial channels.
However, the Wisconsin Corn Growers Association, which represents a large number of corn growers in the state, has petitioned the Department for a higher assessment.
Statutory authority:
The Department proposes to amend s. ATCP 143.06 (1) under authority of ss. 96.05 and 96.08, Stats.
Staff time required to develop and adopt rule:
The Department would incur one-time costs of $35,000 to cover mailing, public communications, travel, and publication costs, and approximately 0.3 FTE (full-time equivalent) staff time to coordinate the rule amendment process, draft the rule, prepare related documents, hold public hearings, communicate with affected persons and groups, and conduct the referendum. The Wisconsin Corn Growers Association fully reimburses the Department for the cost of adoption.
Financial Institutions, Dept. of
Subject:
(Ch. Bkg 73)
DESCRIPTION OF POLICY ISSUES
Objective of the proposed administrative rule:
Adjustment service companies (ASC) are licensed under s. 218.02, Wis. Stats., to:
¶ Contract with debtors to formulate budgets;
