UCOA Accounting Manual Supplement for Phase I: Functional Level Information. Connecticut Office of Policy & Management

Transcription

1 Connecticut Office of Policy & Management Uniform Chart of Accounts (UCOA) Project Connecticut Office of Policy & Management UCOA Accounting Manual Supplement for Phase I: Functional Level Information DRAFT V1

2 Table of Contents 1 Introduction...3 Background...3 Governmental Accounting...3 How to Use this Manual...4 Updates to this Manual Overview of the Uniform Chart of Accounts Project...5 Mandate...5 Opportunity...5 Uniform Chart of Accounts Defined...6 Objectives of the UCOA...6 Data Warehouse...7 UCOA Development Process...7 Research and Procedures...7 Governmental Finance Officers Association Governmental Accounting, Auditing, and Financial Reporting ( GAAFR or the Blue Book )...7 Survey...8 Interviews...8 Other States Research Chart of Accounts...10 Overview Implementation Phased Approach, Mapping, General Fund & Function...11 Phased Approach...11 Mapping...12 Reporting General Fund and Functions UCOA Download and Upload Requirements...14 Overview Independent Audit Requirements Frequently Asked Questions (FAQs)...16 Draft 2

3 1 Introduction Secretary Statement to be updated by OPM Insert opening statement Background Public Acts and require the Office of Policy and Management (OPM) to (1) design, develop and implement a uniform system of accounting for municipal revenues and expenditures and (2) to develop a benchmarking system that includes financial and nonfinancial data from various sources. These public acts provide an important opportunity to create a tool available to and of benefit to local and state policy makers, taxpayers and those researching these matters. A similar initiative, in accordance with Public Act and Section 15 of Public Act , is underway with respect to education expenditures made by school districts. OPM and SDE have been coordinating our efforts in this regard. As part of this initiative, Section 257 of Public Act directs the Secretary of OPM to develop, not later than July 1, 2014, a Uniform Chart of Accounts (UCOA) for municipal expenditures and revenues. The public act also requires municipalities, by June 30, 2015, to implement the UCOA by completing and filing annual reports with OPM as may be required by the Secretary of OPM in order to increase transparency and meet the State s benchmarking goals. It is important to emphasize that, although the UCOA will provide a structure for reporting expenditures and revenues, neither Public Act regarding municipalities nor Public Act regarding school districts requires municipalities or school districts to replace their current chart of accounts with the UCOA developed by the State. Those municipalities in the process of or planning to create a new chart of accounts are, however, encouraged to consider use of the UCOA and associated accounting manual developed by OPM and/or SDE. Regarding the reporting requirements for municipalities under Public Act for the June 30, 2015 date, OPM will phase-in these requirements in order to help ensure a smooth and simpler implementation. The first year will involve reporting at broad categories of revenues and expenditures, with additional levels of information to be added in subsequent years. This edition of the UCOA Accounting Manual Supplement provides guidance in implementing the uniform chart of accounts for reporting purposes for the first phase, which include: Overview of the UCOA Project Overview of the Uniform Chart of Accounts Design and Structure of the Uniform Chart of Accounts Definitions and information on using the Segments of the UCOA Governmental Accounting Accounting personnel should be familiar with the principles and statements issued by the Governmental Accounting Standards Board ( GASB ), which is recognized nationally as the primary standard-setting body for Governmental Accounting. The principles and statements of GASB are available in its publication titled Codification of Governmental Accounting and Financial Reporting Standards, available from: Governmental Accounting Standards Board P.O. Box Draft 3

4 Hartford, CT (800) In addition, the Government Finance Officers Association publishes Governmental Accounting, Auditing, and Financial Reporting, which provides detailed guidance in applying the principles and statements of GASB. It is available from: Government Finance Officers Association 203 N. LaSalle St., Suite 2700 Chicago, IL (312) The UCOA Accounting Manual Supplement does not provide guidance for detailed transactions or on accounting information below the Functional level. The detailed UCOA Accounting Manual will be available for those municipalities undergoing an accounting system implementation or who desire to use the UCOA in their underlying accounting systems. Suggestions and comments about the information in this manual should be directed to. [OPEN to determine the appropriate contact person] How to Use this Manual The UCOA Accounting Manual Supplement is a manual that describes the segments of the Uniform Chart of Accounts. It does not include the detail of each account in the UCOA. It is intended for use for reporting during the first year phase-in of the UCOA and includes the methods by which municipal financial information may be mapped to it or data may be entered via a web-based form for reporting purposes. Please note that the detailed UCOA Accounting Manual contains the detail by account, including account definitions, rules and other information, which may be used for those municipalities who are undergoing an accounting system conversion or who wish to use the UCOA in their underlying accounting system. The key accounting personnel in each applicable municipality should read the manual in its entirety to become familiar the UCOA segments, as it will be used prospectively as the basis for municipal reporting of financial information. The UCOA Accounting Manual Supplement is a constant work in progress and is periodically updated to maintain its accuracy and usefulness through each implementation phase and as accounts are added, deleted, or modified, and as new technical issues arise. Updates to this Manual This Manual may be updated periodically for new accounts, changes in accounts, rules, etc. When updates are made, a notification will be provided to users of the update. Each update will be documented in the Appendix section of this manual. * * * * * * * * * * Draft 4

5 2 Overview of the Uniform Chart of Accounts Project This section provides a background summary for the development of the Uniform Chart of Accounts ( UCOA or UCOA Project ). Mandate Public Act , Section 257 states that: Sec (NEW) (Effective from passage) (a) Not later than July 1, 2014, the Secretary of the Office of Policy and Management shall, in consultation with the Department of Education, the Connecticut Conference of Municipalities and the Council of Small Towns develop and implement a uniform system of accounting for municipal revenues and expenditures, including, but not limited to, board of education and grant agency expenditures and revenue. Such uniform system of accounting shall include a uniform chart of accounts to be used at the municipal level. Such chart of accounts shall include, but not be limited to, all amounts and sources of revenue and donations of cash and real or personal property in the aggregate totaling five hundred dollars or more received by a municipality. The secretary shall make such chart of accounts available on the Internet web site of the Office of Policy and Management. (b) Not later than June 30, 2015, each municipality shall implement the uniform system of accounting for municipal revenues and expenditures developed pursuant to subsection (a) of this section by using such uniform system to complete and file annual reports with the Office of Policy and Management as may be required by the secretary in order to increase transparency regarding municipal expenditures and to meet the state's benchmarking goals. In addition to Public Act , Public Act provides for bonded funding for the Office of Policy and Management to design and implement state and local benchmarking systems, including technology development. Opportunity The Public Acts noted above empower municipalities and the State to have a unique opportunity to create a tool that can be used to enable a more effective and efficient use of state and local resources for local government. There is an increasing desire among varying stakeholders to compare revenue and expenditures between municipalities and determine how those varying resources and expenditures relate to outcomes. The Office of Policy and Management (OPM) has historically collected financial information for each municipality to meet State reporting requirements. OPM has established a tradition of requesting various types of information from municipalities and other stakeholders, primarily by obtaining annual financial statements from each municipality. However, the information OPM receives today is aggregated at the municipal level, is collected from annual financial statements and is compiled manually at OPM. Given the manual nature of the current process, information is not current once published and is not at a level to allow for detailed analysis and benchmarking. With the creation of a Uniform Chart of Accounts ( UCOA ), the State and municipalities can begin to measure financial results and establish standards or targets using financial measures. Draft 5

6 Uniform Chart of Accounts Defined A chart of accounts is a uniform system of account numbers used to categorize municipal revenues, expenditures, assets, liabilities, and fund equity. A chart of accounts provides the framework to capture original transactions, organize that data logically, and provide a robust basis for reporting on the results. A well-designed chart of accounts satisfies these requirements by providing the ability to isolate the data into segments or buckets and, by using tools to combine data from selected segments, to allow for meaningful analysis and reporting. The UCOA standardized account-code structure allows every municipality to use the same account codes and methods for tracking revenue and expenses in their daily accounting. This not only allows for an apples-to-apples comparison between municipalities, but also helps municipalities in their financial decision-making processes to ensure that their investments are driven toward improving services and gaining efficiencies. The UCOA provides transparency, uniformity, accountability, and comparability of financial information for municipalities. UCOA data provides invaluable financial information that stakeholders at every level can use to make informed investment decisions. A Uniform Chart of Accounts will standardize the way municipalities account for resources budgeted and expended and provide greater accountability to assist decision-makers at all levels. A UCOA provides: Transparency Clear, detectable view of how dollars are invested in logical detail; Uniformity Conforming to the same principles, standards or rules used from community to community to ensure consistency; Accountability Precise rules for capturing and reporting data aligned to specific goals and objectives; and Comparability Uniformity of method and content to allow comparison between different, but like entities. The benefits include: Uniformity of format and application; Isolation of data in segments creating granularity of data; Power of combining segments to address specific questions; Comparability of data; Numbering methodology enhances ad-hoc reporting and data warehouse searches; and Allows for more effective analysis when combined with non-accounting data. Although a UCOA allows for the capture of revenue and expenditure information at a detailed level, some expenditure information between the municipality and the local board of education are accounted for differently from municipality to municipality (i.e., some expenditures by the municipality and not transferred to the board of education). Including municipal financial information with board of education data is an important aspect of obtaining comparative information between municipalities and providing a total cost of municipal services. As stated above, Public Act authorizes funding for the State to design and implement a state and local benchmarking system. This system would collect comprehensive financial and nonfinancial information from municipal governments. Objectives of the UCOA The Uniform Chart of Accounts is used by multiple entities. The primary objective of the UCOA is to meet both the internal and external reporting needs of municipalities and the State by providing consistent Draft 6

7 detail in the general ledger to address the questions and the need for information of stakeholders at all levels. Another objective of the UCOA is to integrate the financial data into the State s Data Warehouse for municipal data from all municipalities. Still another benefit is to improve the consistency in tracking costs to enhance the consistency of financial analysis. Those requirements include the flexibility to perform appropriate analysis, including an analysis of Return on Investment. The data, for effective analysis, must be prepared in a consistent and comparable method and must be provided using uniform categories and groupings. Data Warehouse The Data Warehouse is a software application designed for archiving and analyzing an organization's historical data, such as revenues, expenditures, demographic and other non-financial information. Municipalities will provide information from their operational systems to the Data Warehouse annually. Once data is housed in the Data Warehouse, software tools are used to analyze, sort, aggregate, disaggregate, and compare the data. The financial Data Warehouse stores the financial and other data from every municipality in Connecticut along with other state-level data. Also, complex queries and analyses may be performed on the information that links financial information with non-financial information. Access to the Data Warehouse is granted by OPM at its discretion. UCOA Development Process The key is to establish a basic framework a set of standards for what will be measured and the precursor to this is data collection. However, for measurements to have meaning, it is critical to ensure the base of collected information has consistency and uniformity, is comparable, of expected quality, is relevant, is accessible to stakeholders and provides transparency. The preponderance of financial information for municipalities in Connecticut is captured in each organization s respective underlying accounting systems. In order to be used to meet the State s objectives, the information needs to be centrally: Accessible and Consistent and comparable. Organizations have prescribed guidance to account for financial information. However, there are disparities between organizations on implementation of the guidance. In addition, the State lacks an ability to access the fundamental financial information efficiently and at a level of detail to be comparatively meaningful at the individual school level. Research and Procedures Governmental Finance Officers Association Governmental Accounting, Auditing, and Financial Reporting ( GAAFR or the Blue Book ) The Governmental Finance Officers Association ( GFOA ) provides accounting guidance for state and local governments through publication of the GAAFR. As part of this guidance, the GAAFR provides guidelines and recommendations for a chart of accounts. The State utilized elements of the GAAFR prescribed structure, charts of accounts used in other states, and results from stakeholder surveys and interviews in the development of the UCOA for Connecticut. Draft 7

8 Although there is prescribed guidance, there are a number of issues relevant to the data: a) Disparities exist on how the chart of accounts and accounting is employed between municipalities. b) Accounting disparities exist relative to which expenditures are allocated to Boards of Education and which are retained at the municipality. c) Detailed information is not captured centrally; information is obtained by OPM at a very high level. d) There is an identified need at the state level to capture information at a more granular level. A uniform chart of accounts employed by each municipality enables the state to capture detailed financial information from each location, allows for uniformity and comparability and enables automation of data capture. Survey The State surveyed over 700 stakeholders including town managers, finance directors, superintendents, business managers, and representatives from various agencies such as the Connecticut Council of Municipalities and Connecticut Council for Education Reform. The blended response rate across all stakeholder categories was approximately 40 percent. The surveys sent to municipal and board of education stakeholders included questions in the following categories: Presentation of a draft UCOA and questions requesting feedback and interpretation of each segment of the account structure; Inquiries about the information technology infrastructure employed and accounting system; Current reporting requirements and preferences for obtaining reporting back from the State s system; Costs and other activities shared with the municipality; and Financial and nonfinancial information desired, currently requested and / or available. The results from the surveys indicated that the proposed draft UCOA was adequate to capture revenue and expenditure information at a detailed level and that most municipalities had the technological infrastructure to accommodate the UCOA. Interviews The State elected to interview approximately 35 municipalities and their respective boards of education and a combined total of approximately 25 regional school districts, charter schools, regional educational service centers, and organizations/agencies. The population of interviewees was determined by using a three-tiered approach based on the towns square mileage, total expenditures, and county to ensure interviews were conducted for representative sample across the state. The results of the municipal interviews are incorporated into the proposed UCOA outlined herein. Other States Research The State, through contracted services, conducted research via telephone interviews, correspondence, and reviewing Web sites with several states that embarked on a UCOA project including Georgia, Rhode Island, Utah, Texas, Massachusetts, Michigan, Minnesota, and Florida. States which have implemented a UCOA report an increased level of transparency and use of the information for policy decision making purposes. Of the states contacted, only Rhode Island s UCOA is mandatory for schools and is implemented in each entity s underlying accounting system. Other states had varying degrees of implementation. Draft 8

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10 3 Chart of Accounts Overview The structure for the UCOA is as follows: Segment BOE Expenditures Revenues Balance Sheet Reportable Length 1 Fund* XXXX XXXX XXXX Town General Fund 1005-Town General Fund 1005-Town General Fund Optional Length 2 Function* FF FF Public Safety 41-General Government Not Used 3 Department FFXX FFXX Police Department 4147-Town Clerk Not Used 4 Sub-Department FFXXSS Police Patrols Not Used Not Used 5 Object MMXXX MMXXX MMXXX 5 1-Asset, 2- Liability, 3-Fund Balance, 4- Revenues, 5- Expenditures General Supplies Marriage Licenses Cash Checking 6 Project PPPPP PPPPP Not Used 5 Optional Optional *Reporting for the first year phase-in approach will only include the General Fund from segment 1 and the Function level (segment 2). A brief description of these segments follows: The Fund (type of source) from which funds are being expended The Function (activity) for which the funds are being used The Department (broad objective) for which funds are used The Sub-Department (detailed objective) for which funds are used The Object (budget classification) for which the funds are used The Project (optional classification) timing or tracking of expenditures Municipal Defined (Optional) Code that can be used at the discretion of Municipalities for items they wish to track separately. This discretion is allowed so long as the required segments Draft 10

11 are used as designed in the detailed UCOA Accounting Manual and use of the field does not impact the UCOA reporting requirements. [OPEN: Determination of whether a Defined segment is warranted] 4 Implementation Phased Approach, Mapping,, General Fund & Function Phased Approach The state is implementing municipal reporting using a phased approach. Creating a reporting system that includes benchmarking and comparative analytics is a journey, which takes time to establish benchmarks and ensure the system is capturing comparative, quality data. The Phased approach will allow the State to capture information at a high-level, analyze the information for quality and provide it back to stakeholders for their own purposes and will allow the comparison of more detailed information over time as the system matures. In the first year of implementation, OPM will only require municipal financial expenditure information at the Function level for the General Fund only (i.e., General Government, Public Safety, Public Works). Municipal revenue information will be requited at the major object type for the General Fund (i.e., taxes, intergovernmental revenue). OPM will also require non-financial information to be used for comparative and analytical purposes, the majority of which are derived from other sources at the State level. In subsequent Phases, or years, OPM will require more detail. For example, in Year-2, the State will require information at the Department level (i.e., Town Clerk, Police) for all other governmental funds. Draft 11

12 Mapping Mapping, simply stated, is a crosswalk of an underlying chart of accounts in a local accounting system to the UCOA, which resides in a data warehouse. In Year 1 implementation, each municipality will provide an electronic file of its general ledger to OPM. OPM will map or crosswalk that file to the UCOA in the Mapping Tool. The Municipal COA/UCOA map will then forever reside in the Mapping Tool. Since the reporting information is at the Functional level for the General Fund only, it is anticipated that OPM may map the vast majority of municipal charts of accounts with no additional municipal personnel involvement. Once the mapping is completed, each year a municipality will send its general ledger file to a secure site and the Mapping Tool will crosswalk its accounts to the UCOA. The map will only need to be updated for any account additions or deletions. Phase I will also include a web-based form for manual data entry, should a municipality prefer a manual approach to sending financial information to the state. Under this approach, each municipality may continue to use its own, historical chart of accounts in its current accounting system with no changes to its local or internal accounting and reporting. However, and as stated above, a municipality currently undergoing an accounting system implementation or changing its underlying chart of accounts is encouraged to use the UCOA for its new chart of accounts. Reporting General Fund, Functions and Revenue Major Object As stated above, the first Phase of reporting will involve only the General Fund expenditure information at the Functional level and General Fund revenue information at the Revenue Major Object. A Function is a group of related activities aimed at accomplishing a major service for which the Draft 12

13 Municipality is responsible. The Function describes the activity for which a service or material object is acquired. The Functions of a municipality are classified into 17 broad areas. The following table lists the codes and functions in the UCOA. Function Number Description 41 General Government 42 Public Safety 43 Public Works 44 Health & Welfare 45 Culture & Recreation 46 Economic Development 47 Education 48 Debt Service 49 Capital Outlay 50 Other 51 Benefits 80 Water 82 Wastewater 84 Solid Waste 86 Electric 98 Contingency 99 Transfers Only those functions that exist at a municipality within the General Fund will be mapped to the UCOA for reporting purposes to OPM. If a municipality does not have a particular function in the General Fund (i.e., Electric is used within a separate fund), then only those functions it does have will be mapped. A Revenue Major Object is a group of related revenue sources for the municipality. The Revenue Major Object describes the source from which the revenue and/or financing source is acquired. The Revenue Major Object codes of a municipality are classified into 9 broad areas. The following table lists the Revenue Major Object codes in the UCOA. Major Object Number 41 Taxes Revenue Major Object Description 42 License and Permits 43 Intergovernmental Revenues 44 Charges for Services 45 Fines & Special Assessments 46 Investment Earnings 47 Rents & Royalties 48 Other Revenues 49 Other financing sources Draft 13

14 The financial information will be combined with other financial and non-financial data, captured in the data warehouse from sources at OPM and other State agencies. It is not anticipated that municipalities will need to input this other financial and non-financial information into the data warehouse in Phase I. The other financial and non-financial information to be used for reporting purposes is as follows: Population Square Miles Number of miles of road Number of students K-12 Equalized Grand List Fund Balance Unassigned 5 UCOA Download and Upload Requirements Overview The following describes the requirements for UCOA Download and Upload for use in the Data Warehouse. Also, presented is the structure of the UCOA Account Strings and the modifications that are necessary to provide data to the UCOA Validation Tool and for the UCOA Allocation Tool for final placement in the Data Warehouse. To be inserted upon completion of the Data Warehouse design and development. ********** Draft 14

15 6 Independent Audit Requirements Considerations and Procedures to be completed by OPM. ********** Draft 15

16 7 Frequently Asked Questions (FAQs) To be included and revised upon each version of the Accounting Manual. ********** Draft 16

17 Uniform Chart of Accounts (UCOA) Project Connecticut Office of Policy & Management UCOA Accounting Manual Supplement for Phase I: Functional Level Information DRAFT V1