posted January 6, 2016

Understanding Covered-Employee Payroll   

by Sara Kirk, Audit Manager 

If you are a school district that does not offer post-employment benefits other than pension benefits, then fiscal year 2015 is most likely the first year you have had to disclose covered-employee payroll amounts within your audited financial statements. GASB Statement No. 68,Accounting and Financial Reporting for Pensions,requires two additional schedules be presented within the financial statements as required supplementary information (RSI), both requiring the disclosure of a covered-employee payroll figure.  These schedules include information related to the District’s participation in the Arizona State Retirement System (ASRS) cost-sharing multiple-employer pension plan.

What exactly is covered-employee payroll?  Covered-employee payroll represents the payroll of employees that are provided with pensions through the pension plan.

The first RSI schedule included in the financial statements beginning the year ended June 30, 2015 is theSchedule of the District’s Proportionate Share of the Net Pension Liability.  Because the measurement date of the net pension liability is June 30, 2014 for reporting in the June 30, 2015 financial statements, this schedule requires the presentation of a covered-employee payroll figure for the year ended June 30, 2014.  The second RSI schedule included in the financial statements beginning the year ended June 30, 2015 is theSchedule of Contributions, which requires the presentation of a covered-employee payroll figure for the current fiscal year end.

Tips for how the District can obtain the required covered-employee payroll amounts: The District should first ascertain if the information can be queried and extracted from within the general ledger through an existing report or is readily available in another format.  A payroll journal totals report containing the cumulative wage basis for which contributions were made for the entire fiscal year may be generated or perhaps the District will have to work with a system programmer to create a custom query to extract the information.  As an alternative, the figures could be compiled from the information that is generated at the time the contribution remittances to ASRS are prepared each time a payroll is run.


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