MICHIGAN CONSERVATION DISTRICT UNIFORM ACCOUNTING PROCEDURES MANUAL REVISED TABLE OF CONTENTS TABLE OF CONTENTS...1 INTRODUCTION...

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1 TABLE OF CONTENTS TABLE OF CONTENTS...1 INTRODUCTION...3 REQUIRED BASIC ACCOUNTING RECORDS...4 PART ONE...5 UNIFORM CHART OF ACCOUNTS...5 ACCOUNT STRUCTURE...6 ACTIVITIES...6 BALANCE SHEET ACCOUNTS...8 EXPLANATION BALANCE SHEET ACCOUNTS REVENUE ACCOUNTS UNIFORM CHART OF ACCOUNTS FOR REVENUES EXPLANATION OF REVENUE AND OTHER FINANCING SOURCE ACCOUNTS EXPENDITURE ACCOUNTS UNIFORM CHART OF ACCOUNTS FOR EXPENDITURES EXPLANATION OF EXPENDITURE AND OTHER FINANCING USE ACCOUNTS SAMPLE CHART OF ACCOUNTS CHART FOR REVENUE CHART FOR EXPENSES PART TWO INTERNAL CONTROL REQUIREMENTS CASH RECEIPTS CYCLE

2 POSTING OF RECEIPTS USING THE DEPOSIT ADVICE FORM BANK ACCOUNTS, DEPOSITS AND RECONCILIATION OF BANK ACCOUNTS IMPROPER BANK ACCOUNTS CASHING OR ACCEPTING CHECKS BANK RECONCILIATION REQUIRED BANK ACCOUNTS BANK DEPOSITS DISBURSEMENTS DUAL SIGNATURES ON CHECKS PAYMENT VOUCHERS SEGREGATION OF DUTIES INVENTORY ACCOUNTING JOURNAL ENTRY GENERAL LEDGER CAPITAL ASSETS PART THREE MONTHLY FINANCIAL REPORTS PART FOUR BUDGETS SAMPLE CONSERVATION DISTRICTS APPROPRIATIONS ACT FOR PART FIVE ANNUAL AUDITS REPORTING FORMAT PRIOR TO GASB # SAMPLE FINANCIAL STATEMENTS

3 REPORTING FORMAT GASB # GENERAL DESCRIPTION STATEMENT OF NET ASSETS PREPARING FOR THE AUDIT: NUMBERED LETTERS FROM THE MICHIGAN DEPARTMENT OF TREASURY PART SIX POLICIES AND PROCEDURES CREDIT CARD POLICY EXAMPLE FORMAT FOR POLICIES INTRODUCTION The Uniform Chart of Accounts for Counties and Local Units of Government in Michigan has been developed under the authority of Act 2, Public Acts of 1968, as amended (MCL ), and Act 71, Public Acts of 1919, as amended (MCL 21.41). This manual contains a full Chart of Accounts. No District will use all of the activities, and accounts contained in the Chart of Accounts. Smaller districts will use only a few. But when one is used, it will be for the same purpose by each district using it. Conservation Districts meet the definition of a local unit of government pursuant to Act 2 of the Public Acts of 1968, as amended regarding provisions of Sections 14 to 20a. These sections refer to Budgets. Conservation Districts are required to adopt a budget in compliance with the act as spelled out in the Uniform Budgeting Manual and in compliance with the Uniform Chart of Accounts. Audits are required of the Conservation District by the Department of Agriculture as part of the grant process and by Department of Treasury pursuant to a borrowing application under Act 34 of the Public Acts of Audit reports must be conducted by an independent certified public accountant and prepared in compliance with the Bulletin for Audits of Local Units of Government in Michigan. This accounting procedures manual for Conservation Districts contains the basic financial records, documents and procedures that are applicable to all Conservation Districts in Michigan. Included in this manual is a Chart of Accounts that should be sufficient for most Conservation 3

4 Districts. The Department of Treasury has also issued a full Uniform Chart of Accounts that may be obtained from the following address: Michigan Department of Treasury Local Audit and Finance Division P.O. Box Lansing, Michigan (517) Questions, comments and recommendations may be forwarded to the Department of Agriculture at the following address: Michigan Department of Agriculture Environmental Stewardship Division P.O. Box Lansing, Michigan The information presented as part of the accounting manual is based on information contained in the Local Government section of the Michigan Department of Treasury website located at: REQUIRED BASIC ACCOUNTING RECORDS Every Conservation District in Michigan, from the smallest to the largest, must establish and maintain the following basic accounting records. 1. The Uniform Chart of Accounts; 2. Printer pre-numbered official receipts; 3. Pre-numbered official checks; 4. A detail receipt journal; 5. A detail disbursement journal; and 6. A general ledger. The minimum requirements are discussed in detail in the various parts of this manual. The focus of the manual is to describe an accounting system in its simplest form. However, even a complex computerized accounting system must include the minimum records and procedures discussed. As an accounting system becomes more detailed and complex, additional records and procedures will be necessary to provide the information desired. A separate payroll accounting system and records, detail subsidiary ledgers for revenue and expenditure accounts immediately come to mind. However, this manual will not address the more detailed systems that may be necessary to provide the additional information. 4

5 PART ONE UNIFORM CHART OF ACCOUNTS All Conservation Districts must use the Uniform Chart of Accounts. The Uniform Chart of Accounts is based on generally accepted accounting principles as defined by Government Accounting Standards Board (GASB) and Government Finance Officers Association (GFOA). GASB Codification through defines the revenue and expenditure classifications as follows. Revenue The primary classification of governmental fund revenues is by fund and source. Major revenue source classifications are: taxes licenses and permits intergovernmental revenues (Federal aid, State aid, and local contributions) charges for services fines and forfeits miscellaneous Expenditure The major accounting classification of expenditures are by: fund function (or program) organization unit activity character object Conservation District accounting is based on activities. These are the various grants and other projects in which the district is engaged. Definitions of the major accounting classifications of expenditures from GFOA's 1994 Governmental Accounting, Auditing and Financial Reporting (GAAFR) are: Function--a group of related activities aimed at accomplishing a major service or regulatory program. Example: "public safety" is a function. In the case of a Conservation District the activity soil conservation falls under the broad function Other General Government. Soil Conservation could be considered also as a function of the broad category Other General Government. Sub-function--a grouping of related activities within a particular governmental function. Example: "police" is a sub-function of the function "public safety." Or for example forestry is a sub-function of the function soil conservation. 5

6 Organization unit--a responsibility center within a government. Activity--a specific and distinguishable line of work by one or more organizational components of government for the purpose of accomplishing a function. Example (1968 & 1980 GAAFR): "Tree Sales" is an activity performed in discharge of the "Reforestation" function. Conservation District accounting is based on the various activities in which the District is engaged. Sub-activity--a specific line of work performed in carrying out a governmental activity. Example: cleaning luminaries and replacing defective street lamps would be sub-activities under the activity of street light maintenance. Character--a basis for distinguishing expenditures according to the periods they are presumed to benefit. Object--the article purchased or the service obtained. Examples: personal services, contractual services, materials and supplies. Account Structure Governmental Fund Type General Fund Conservation District Activities Conservation Districts will have only a general fund with several activities to account for different programs (grants or projects) such as groundwater stewardship, forestry, etc. In limited circumstances a Conservation District may have an Endowment Fund or a Soil Sedimentation and Control Fund. Activities It is often necessary for a Conservation District to allocate costs to a specific activity or program (service) because of restricted grants from the state or federal government or certain local sources. The term "activity" may include function, sub-function, program (service), sub-program, project, or cost center. See the table below for Conservation District activities The general ledger accounts should be maintained by activity. The budgets, monthly financial status reports, and the annual financial summary are prepared by activity. 6

7 The following accounts reflect recommended major activity categories: Conservation District Activities Chart of Accounts Activity Number Operations Grant-Administration and Support 281 Services Groundwater Stewardship 282 Private Lands Technical Assistance (PLTA) 283 Michigan Agriculture Environmental Assurance 284 Program (MAEAP) Conservation Reserve Enhancement Program 285 (CREP) Gypsy Moth 286 Clean Michigan Initiative (CMI) 287 Americorps 288 Other Programs as Needed See chart of accounts for available activity numbers Figure 1 Within the Uniform Chart of Accounts a full account number consists of 9-digits. Michigan Department of Agriculture is mandating compliance by October 1, 2003 with the uniform chart of accounts and accounting manual established for Conservation Districts. The numbering system to be used is based on the activities in which the Districts are engaged. This will be explained in following sections. To illustrate, an expense line item will be used. That expense is Telephone for general office use. Expense Account numbers appear as follows: Fund Activity Expense Sample 9 Digit Number for Telephone In order to simplify the chart for Conservation Districts, and in an effort to make it more compatible with software such as Quick-books, Quick-books Pro and Cougar Mountain, the Michigan Department of Treasury has suggested some modifications. The use of the Fund designation, 101, will not be used since Districts use just one General Fund. The middle three digits, which correspond to activities, will be used to designate Conservation District Programs and Grants. The third set of digits corresponds to the expense item classifications for those programs and grants. Sample Expanded Number: Operations Grant, Telephone (101) a. General Fund (101) This number appears in brackets to illustrate that it will not be used. 7

8 b. Operations Grant 281 c. Telephone 850 To make this chart work for Quick-books software, the above account would be entered as follows: 281 Operations (Activity) 850 Telephone (An account within the activity, Operations ) The account would appear as follows on the Quickbooks Pro chart of accounts: Telephone Note: Quickbooks allows for seven digit account numbers including the separation period. The extent of the expansion of the account numbers is at the discretion of the Conservation District. MDA is providing a basic skeletal chart, which Conservation Districts can expand to meet their accounting needs. Balance Sheet Accounts These are the asset, liability, and fund equity accounts that make up the balance sheet of the General fund. These accounts are not closed out at the end of an accounting period. Again, the Conservation District will use only the accounts that are necessary for the General Fund. These accounts do not have an activity number associated with them. Therefore, use the prefix 000. Certain accounts are used only in the accounting for account group activity (i.e., General Fixed Assets, General Long-Term Debt) or for government wide financial reporting for GASB Statement #34. Those accounts have been footnoted for reference purposes. Note: Use only the accounts your district needs. CURRENT ASSETS Cash and Investments 001 Cash-Checking. List multiple checking accounts as un-numbered sub-accounts of this line. 002 Cash-Savings. List multiple savings accounts as un-numbered sub-accounts of this line. 003 Certificates of Deposit. List multiple CD s as un-numbered sub-accounts of this line. 8

9 004 Imprest Cash 005 Cash-Construction/Repair 006 Cash-Debt Principal and Interest Payments 007 Cash-Payroll Bank Account 008 Cash-Electronic Banking 017 Investments in Securities Receivables 044 Travel Advances Receivable 056 Interest Receivable 071 Due From Cities 072 Due From Counties 076 Due From Townships 077 Due From Villages 078 Due From State 079 Due From Federal Government 081 Other Units of Government 083 Due From Employees Inventory Open 108 Tree Inventory 109 Open 110 Inventory Equipment Material and Parts NON CURRENT ASSETS Long-Term Investments 121 Unamortized Premium on Investments 122 Unamortized Discount on Investments Capital Assets(Used only for account group and GASB #34 reporting) 130 Land 132 Land Improvements 133 Accumulated Depreciation--Land Improvements 134 Depletable Assets 135 Accumulated Depletion--Depletable Assets 136 Buildings, Additions and Improvements 137 Accumulated Depreciation--Buildings, Additions and Improvements Equipment and Accumulated Depreciation 146 Office Equipment and Furniture 147 Accumulated Depreciation--Office Equipment and Furniture 148 Vehicles 149 Accumulated Depreciation Vehicles 158 Construction in Progress Other Capital Assets as Needed 9

10 Other Debits(used only for account group and GASB #34 reporting) 185 Amount Available in Debt Service Fund 186 Amount to be Provided for Payment of Debt Principal 195 Amount to be Provided for Accumulated Vacation and Sick Leave CURRENT LIABILITIES 202 Accounts Payable 207 Notes Payable 210 Contracts Payable 221 Due to Cities 222 Due to Counties 226 Due to Townships 227 Due to Villages 228 Due to State of Michigan 229 Due to Federal Government 230 Due to Other Units of Government 231 Payroll Deductions Payable 232 Due to Employees 250 Bonds Payable Current 251 Accrued Interest Payable 255 Customer Deposits and Interest Payable 257 Accrued Wages Payable 258 Accrued Taxes Payable 260 Accrued Vacation Leave Payable 261 Accrued Sick Leave Payable 265 Bonds Payable (cash bonds, appearance bonds) 268 Escheatable Money 269 Garnishments Payable 273 Undistributed Receipts 275 Due to Taxpayers (tax overpayments and duplicate payments 283 Performance Deposits Payable 289 Unamortized Premium on Bonds Sold 290 Unearned Lease Income LONG-TERM LIABILITIES 300 Bonds Payable 307 Notes Payable 310 Contracts Payable 339 Deferred Revenue 343 Accrued Vacation and Sick Leave Payable 344 Deferred Compensation Payable FUND EQUITY Contributed Capital 10

11 Reserved Fund Balance/Retained Earnings 368 Reserve for Supplies Inventory 369 Reserve for Advances to Other Funds FUND BALANCE AND RETAINED EARNINGS 390 Fund Balance 393 Designated Fund Balance 395 Retained Earnings 399 Investment in Capital Assets(Used only for account group and GASB #34 reporting) Figure 2 EXPLANATION BALANCE SHEET ACCOUNTS These are example entries to illustrate how this is done in a manual system and for making journal entries. Your computer software does these things for you. Current Assets ( ) 001 Cash This account is used to record the amount of currency, checks, money orders, and bank drafts on hand or on deposit. DEBITED- when cash is received CREDITED-when cash is disbursed. Example Entries Dr Cash Cr Accounts Receivable OR Cr Federal Grant To reflect receipt of cash. Dr Certificates of Deposit Cr Cash To reflect purchase of CD s. Dr Supplies Cr Cash To reflect expenditures for operations grant. 002 Cash - Savings - This account is used to record the amount of monies on deposit in savings accounts under the control of the county treasurer. 11

12 DEBITED - when money is deposited in a savings account. CREDITED - when money is withdrawn from a savings account. 003 Cash - Certificates of Deposit - This account is used to record the amount of certificates of deposit held by the county treasurer. DEBITED - with the cost of certificates of deposit when purchased. CREDITED - with the original cost of certificates of deposit when cashed. Example Entries Dr Certificates of Deposit Cr Cash To reflect purchase of certificates of deposit. Dr Cash Cr Certificates of Deposit Cr Interest Earnings To reflect redemption of certificates of deposit. 004 Cash - Imprest (Petty) - This account is used to record a sum of money either in the form of currency set aside for the purpose of making change or paying incidental expenses. Expenses that for practical reasons, cannot be paid in the regular manner. At certain intervals the petty cash is replenished by a check drawn on the fund from which the petty cash expenses are payable. An itemized voucher for the amount of disbursements made from petty cash must support the replenishment check approved by the Board. The total of petty cash on hand and/or on deposit plus unreplenished disbursements must always equal the imprest cash account balance. DEBITED - with the amount in which the account is established or by which it is increased. CREDITED - only when the established account balance is decreased because of a change in the amount of petty cash needed. Example Entries Dr Imprest Cash Cr Cash To reflect setting up Imprest Cash account. Dr Supplies 12

13 Cr Cash To reflect expenditures for replenishment of Imprest Cash. 005 Cash - Construction/Repair - This account is used to record the amount of cash restricted for the purpose of construction and/or repairs. It is used for the deposit of bond or note proceeds, interest earned, contributions or other money restricted to this use. A separate depository account may be required by a debt ordinance. DEBITED - upon receipt of money restricted for construction or repair purposes. CREDITED - upon expenditure. 006 Cash - Debt Principal and Interest Payments - This account is used to record the amount of cash segregated for the purpose of making debt principal and interest payments. It is used for the deposit of tax collections, contributions or other money to be used for the payment of debt principal/interest and paying agent fees. A separate depository account may be required by a debt ordinance. DEBITED - upon receipt of money restricted for debt purposes. CREDITED - upon expenditure. 007 Cash - Payroll Bank Account - This account is used to record an amount of cash in the form of a separate bank account used only for making payments for personal services and payroll deductions. Usually a fixed sum is deposited to this bank account in an amount sufficient to meet the requirements of: (1) the bank for carrying the account without service charges; and (2) the Conservation District for making payments for personal services between regular pay periods. The principal use of this account is for the deposit of blanket payroll checks against which individual payroll checks and payroll deduction checks will be drawn. Individual payroll checks drawn on this account between regular payroll periods will be included on the next regular payroll voucher. By this method the fixed sum deposited in the payroll bank account will be replenished each pay period. DEBITED - when money is deposited in the payroll bank account. CREDITED - when money is disbursed from the payroll bank account. Example Entries 13

14 Dr Cash - Payroll Cr Cash To reflect transfer of cash. Dr Administrator Salary & Wage Cr Cash - Payroll To reflect payroll expense of the Conservation District Administrator. 008 Cash - Electronic Banking - This account is used to record the amount of cash deposited in a separate bank account used only for making payments by "Electronic Fund Transfers." The amount deposited is the same as the amount to be transferred out. The principal use of this account is for deposits of employer and employee FICA tax and employee federal income tax (941 taxes). 017 Investments in Securities - (Short-Term) - This account is used to record the cost of short-term investments in government bonds, treasury bills, treasury notes and money market certificates. A short-term investment is an investment having a maturity date of 1 year or less. Certificate of deposits should not be recorded in this account. (See Account #003) DEBITED - with the cost of investments purchased. CREDITED - with the original cost of investments when sold. 018 Receivable Control - ( ) - This account is used to record amounts owed to the Conservation District from any source. The account may be used separately or as a control account to record amounts due for any or all of the types of receivables provided for in Account #

15 DEBITED - when amounts owed to the local unit are determined but not immediately received. CREDITED - with amounts received or written off by proper authority. 044 Travel Advances Receivable - This account is used to record cash advances to officials and/or employees of the Conservation District to cover anticipated expenses while traveling in an official capacity for the Conservation District. Upon completion of the travel, this account must be reimbursed for the entire amount of the advance. Detail by individual employee required. DEBITED - with amounts advanced to officials and/or employees. CREDITED - with the return of amounts advanced. 071 Due From Cities - This account is used to record amounts due from cities. Detail by individual city required. DEBITED - with amounts due the Conservation District from cities. CREDITED - with payments received. 072 Due From Counties - This account is used to record amounts due from other counties. A county Conservation District would not use this account to reflect amounts due from other funds within the same county - Account #084 would be used for this purpose. Detail by individual county required. DEBITED - with amounts due the Conservation District from counties. CREDITED - with payments received. 108 Inventory Tree Inventory - This account is used to record the cost of tree inventory materials stockpiled in warehouses. DEBITED - with the cost of producing or purchasing tree materials placed in inventory and with adjustments. CREDITED -with the cost of trees/materials used from inventory and with adjustments. Current Liabilities ( ) 200 OPEN 201 Vouchers Payable - This account may be used to record liabilities for materials and services evidenced by vouchers, which have been pre-audited and signed by the proper authority approving the liability. 15

16 DEBITED - upon payment of vouchers. CREDITED - with amounts approved for payment. 202 Accounts Payable - This account is used to record amounts on open account owing to private persons, firms, corporations, the state, or other organizations for goods and services received by the Conservation District (but not including amounts due to other funds of the county or to other governmental units). DEBITED - upon payment of these accounts. CREDITED - with amounts of accounts payable incurred. 207 Notes Payable - This account is used to record the portion of tax anticipation notes or other notes to be paid by the Conservation District during the current year. A note payable is an unconditional written promise signed by the maker (authorized local unit officials) to pay a certain sum of money on demand or at a fixed or determinable time either to the bearer or to the order of a person designated therein. The long-term portion of notes payable should be recorded in Account #307. DEBITED - with payments made on such notes. CREDITED - with the amount of notes to be paid during the current year. 208 Lease Payable (Current) - This account may be used to record that portion of the present value of total minimum lease payments which are due to the lessor during the current year. Generally it is the present value of the current payment from a lease payment schedule. All delinquent lease principal payments as of the end of a fiscal period must be recorded in this account. DEBITED - when the lease payment is made only to the extent of the present value of the minimum lease payments. CREDITED - with the present-value minimum lease payment to be made. 209 OPEN 210 Contracts Payable - This account is used to record the actual liability on a contract for the amount of work done or services rendered to date for which the contractor has not been compensated. Sub-accounts should be used where several contracts are involved. This account does not include the percentage retained in accordance with contract provisions. Retained percentages are recorded in Account #211. DEBITED - with payments of such amounts to contractors. CREDITED - with amounts due contractors for work completed but not 16

17 including any retained percentages. 257 Accrued Wages Payable - This account is used to record wages earned by employees but not due until a later date. DEBITED - upon payment or by reversing entry. CREDITED - with amounts of salaries and wages earned but not paid as of the end of an accounting period. Example Entries NEXT YEAR: CURRENT YEAR: Dr Salaries & Wages Dr Fringe Benefits Cr Accrued Payroll & Fringe Benefits To reflect payroll for 2001 that is payable to employees in 2002 When the payment is made, the following entry will be made: Dr Accrued Payroll-2001 Dr Salaries & Wages-2002 Dr Fringe Benefits-2002 Cr Cash To reflect payment of payroll in Accrued Taxes Payable (Includes Payroll Taxes) - This account may be used to record the Conservation District's liability for taxes incurred but not due until a later date. An example is the Conservation District's matching portion of social security on an accrued payroll. DEBITED - upon payment or by reversing entry CREDITED - at the end of the year, or monthly, with amounts of accrued taxes. 17

18 260 Accrued Vacation Leave Payable - This account is used to record the current year estimated liability for vacation leave. DEBITED - at year end for the amount of estimated vacation leave liability. CREDITED - at the beginning of the year for the amount of estimated current year vacation leave liability. 261 Accrued Sick Leave Payable - This account is used to record the current year estimated liability for sick leave. DEBITED - at year-end for the amount of estimated sick leave liability. CREDITED - at the beginning of the year for the amount of estimated current year sick leave liability. Long-Term Liabilities ( ) 300 Bonds Payable - This account is used to record the face value of all long-term bonds, which are issued and unpaid. Note: Bonds maturing during the current fiscal year may be recorded in Account #250 - Bonds Payable (Current). Sub-accounts must be maintained showing account activity for each bond issue. DEBITED - with amounts of bonds retired or transferred to Account #250. CREDITED - with the face amount of bonds issued. 304 Lease Payable (Non-Current) - This account is used to record present value of the total minimum lease payments to be made during the term of a capital lease due after a year or more. Present value is the cash purchase price or principal attributable to the leased asset. Note: Present value of lease payments due during the current fiscal year may be recorded in Account #208 - Lease Payable (Current). All delinquent lease principal payments as of the end of a fiscal period must be recorded in Account #208. Subaccounts must be maintained showing account activity for each capital lease agreement. DEBITED - when lease payments are made or with amounts transferred to Account #208. CREDITED - with the total present value amount of long-term lease payments. 307 Notes Payable - This account is used to record all notes of a long-term nature (over 1 year) owed by the Conservation District. Note: The current portion of notes payable may be recorded in Account #207. Detail for each issue of notes is required. 18

19 DEBITED - upon payment of such notes and with amounts transferred to Account #207. CREDITED - with the face amount of long-term notes. 310 Contracts Payable (Long-Term) - This account is used to record that portion of contracts payable falling due in years subsequent to the current fiscal year. Note: The current portion of contracts payable may be recorded in Account #210. Detail for each contract is required. DEBITED - with contractual payments and with amounts transferred to Account #210. CREDITED - with the full amount of debt incurred through a long-term contract. 339 Deferred Revenues - This account may be used to record amounts for which asset recognition criteria have been met, but for which revenue recognition criteria have not been met. Under the modified accrual basis of accounting, such amounts are measurable but not available. It can be pointed off for deferred special assessments, taxes and other revenues. DEBITED - with collections of amounts originally credited to this account or with amounts transferred to revenue accounts. CREDITED - with the offsetting amount recorded in a receivable account by a Conservation District which recognizes its revenue only when received or with amounts received in one accounting period which will not be recognized as revenue until a subsequent period. 343 Accrued Vacation and Sick Leave Payable (Long-Term) - This account is used only in the Long-Term Debt Account Group and is used to record the dollar value of the employees vested accumulated vacation and sick leave as of the last day of the fiscal year, less the amount recorded as current year liability in Account #260 - Accrued Vacation Leave Payable and Account #261 - Accrued Sick Leave Payable. The amount is determined by multiplying the employees hourly rates by the number of leave hours that they have available to use, per employee contracts or agreements, if 100% of leave is vested. If less than 100% is vested, record only the vested portion. Offsetting entries to this account are to be made to Account #195 - Amount to be Provided for Accumulated Vacation and Sick Leave. DEBITED - with the difference if the amount calculated at year-end is less. CREDITED - at the end of the current fiscal year with the difference between the 19

20 amount recorded in the account from the previous year and the amount calculated at the end of the current fiscal year if the ending amount is greater. 368 Fund Balance Reserved for Inventory of Supplies - This account is used to segregate a portion of fund balance to indicate that, using the purchase method, inventories of supplies (or trees on hand) do not represent "available spendable resources" even though they are a component of net current assets. The balance in this account is usually based on the average amount of inventory carried each year. DEBITED - with authorized reductions of the amount reserved. CREDITED - with the amount of fund balance determined to be tied up in inventory. Unreserved Fund Balance ( ) 390 Fund Balance - This account is used to record the fund equity of the general fund of the Conservation District. In most instances, this account reflects the excess of a fund s assets over its liabilities and reserves and such excess is not restricted or segregated for other purposes. DEBITED - at the end of the year with any excess of expenditures over revenues as such accounts are closed to this account. Example Entries CREDITED - at the end of the year with any excess of revenues over expenditures as such accounts are closed out to this account. Dr Fund Balance Cr Detailed Expenditures To close the expenditures accounts. Dr Detailed Revenues Cr Fund Balance To close the revenue accounts. OPTIONAL: This account may be pointed off to reflect the amounts contributed by the various agencies, or by activity, or the activity (program) number can be used with the fund balance account Investment in Capital Assets - This account reflects the net equity in capital assets of the conservation district. 20

21 CREDITED - with capital purchases made during the year and DEBITED - with the amount of disposals and depreciation reported for capital assets. Revenue Accounts Revenue accounts include MANDATORY accounts and OPTIONAL accounts. All Conservation Districts must use accounts listed as mandatory, if the Conservation District receives such revenue. The MANDATORY accounts are the revenue sources required for financial reporting. Optional account numbers are provided within the MANDATORY revenue source categories to provide greater detail of the revenue for use by units desiring to further classify their revenues. The mandatory revenue accounts are listed below: Number Revenue Source 401 Taxes 450 Licenses and Permits 501 Federal Grants 539 State Grants 580 Contribution From Local Units 600 Charges for Services 655 Fines and Forfeits 664 Interest and Rents 671 Other Revenue Italics These are the revenue sources districts are most likely to use. These are considered revenues by source for budgeting purposes. These accounts are the revenue categories that must be reported in the District financial reports. The GASB No. 34 revenue type descriptions provide general guidance related to categorization of revenues on the statement of activities. The following is the Uniform Chart of Accounts for Revenue from the Michigan Department of Treasury. Use this table as a guide to decide how district revenues should be classified in your chart of accounts. Use only the accounts the district needs. 21

22 Uniform Chart of Accounts for Revenues GENERAL REVENUE 401 Taxes 402 Current Real Property Taxes 410 Current Personal Property Taxes 411 Delinquent Real Property Taxes 420 Delinquent Personal Property Taxes 435 Transient Guest Lodging Tax (Act 232 PA 1971 and Act 263 PA 1974) 436 City Utility Users Tax (Act 198 PA 1970) 437 Industrial Facility Tax (Act 198 PA 1974) 438 Income Tax 445 Penalties and Interest on Taxes 447 Property Tax Administration Fee (Act 503 PA 1982) PROGRAM REVENUE 450 Licenses and Permits Business Licenses and Permits Non-Business Licenses and Permits PROGRAM REVENUE--Program specific grants and contributions (operating and capital) GENERAL REVENUE--Multi-purpose grants that do not provide for specific identification of the programs and amounts 501 Federal Grants 539 State Grants 574 State Revenue Sharing PROGRAM REVENUE 580 Contributions From Local Units 600 Charges for Services Court Related Charges Fees Services Rendered Sales Use and Admission Fees PROGRAM REVENUE 22

23 655 Fines and Forfeitures GENERAL REVENUE (usually) 664 Interest and Rentals GENERAL REVENUE (usually) GENERAL REVENUE--Operating special assessments (such as police and fire levies) PROGRAM REVENUE--Operating special assessments (such as street lighting and rubbish collection) SPECIAL ITEMS--Sale of assets and gain on sale of assets 671 Other Revenue 672 Special Assessments 673 Sale of Fixed Assets Contributions and Donations Reimbursements Refunds 693 Gain on Sale of Depreciable Fixed Assets 694 Cash Over and Short SEPARATE REPORTING 695 Other Financing Sources 696 Bond or Insurance Recoveries 698 Bond/Note Face Value 699 Transfers In Figure 3 NOTE: All REVENUE defined by GASB Statement 34 as a program revenue may use an activity number or may use another method of accumulating the information for the governmentwide financial statements. Explanation of revenue and other financing source accounts 400 Revenue Control - This is a mandatory control account, which must appear in the general ledger of each fund of the Conservation District to which revenues are credited. Its balance must at all times equal the combined totals of revenue Accounts # The account appears on balance sheets prepared during a fiscal period. However, it does not 23

24 appear on balance sheets prepared as of the close of a fiscal period since it has then been closed out to fund balance. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with total revenues received or accrued by a fund. 401 Taxes Control - This is a mandatory account for use as a control account for various tax revenues. Its balance must at all times equal the combined totals of revenue Accounts # This account is a revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with total tax revenues applicable to Accounts # Some Conservation Districts will use more than the control account for taxes. It is recommended that detail accounts be maintained. When detail accounts are used the numbers assigned to the column headed "sub-accounts" must be used. These numbers are used for compiling data statewide. 450 Licenses and Permits Control - This is a mandatory account, which is used as a control account for license and permit fees collected. The balance must at all times equal the combined totals of Accounts # when sub-accounts are used to designate specific licenses and permits. This account is revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with all fee revenue from business and non-business licenses and permits When assigning these numbers to licenses and permits, the Conservation Districts should try to assign business licenses and permits to Accounts # and nonbusiness to Accounts # Federal Grants Control - This is a mandatory account, which is used as a control account for Federal Grants received by the Conservation District. The Conservation District may record all of its grants in this one account or may record them separately if they wish. If detailed accounts are used, the balance in this account must at all times equal the combined totals of Accounts # This account is a revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with all federal grant revenue received or accrued. 24

25 When assigning these numbers to various federal grants, the Conservation District should assign the numbers as listed in the column headed "sub-accounts" in the index. 539 State Grants Control - This is a mandatory account, which is used as a control account for State Grants received by the Conservation District. The Conservation District may record all of its grants in this one account or may record them separately if they wish. If detailed accounts are used, the balance in this account must at all times equal the combined totals of Accounts # This account is a revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with all state grant revenue received or accrued When assigning these numbers to various state grants, the Conservation District should assign the numbers as listed in the column headed "sub-accounts" in the index. 580 Contributions From Local Units Control - This is a mandatory account, which is used as a control account for contributions from local units received by the Conservation District. The Conservation District may record all of its contributions in this one account or may record them separately if they wish. If detailed accounts are used, the balance in this account must at all times equal the combined totals of Accounts # This account is a revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with all local unit contribution revenue received or accrued When assigning these numbers to various contributions from local units, the Conservation District should assign the numbers as listed in the column headed "subaccounts" in the index. 600 Charges for Services Control - This is a mandatory account, which is used as a control account for charges for services provided by the Conservation District. The balance must at all times equal the combined totals of Accounts # when these accounts are used to designate specific charges. This account is revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with all charges for services provided by the Conservation District When assigning these account numbers to various charges for services, the Conservation District should assign the numbers as listed in the column headed "subaccounts" in the index. 25

26 655 Fines and Forfeits Control - This is a mandatory control account. If detailed accounts are used, the balance in this account must at all times equal the combined totals of Accounts # This account is revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with the receipt of fines and forfeitures Assign these numbers as needed for parking penalties, forfeitures, etc. 664 Interest and Rents Control - This is a mandatory account used to record interest, dividends, rents, and royalties earned or received on investments, certificates of deposits, or rental of surplus property. It does not include interest on delinquent taxes (See Account #445). All interest and rents may be credited to this single account or each type may be accounted for separately by utilizing Accounts # This account is a revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with interest, dividends, rent, and royalties earned When assigning these numbers to various interest and rents, the Conservation District should assign the numbers as listed in the column headed "sub-accounts" in the index. 671 Other Revenue Control - This is a mandatory account used to record all other conservation revenue that cannot be classified in any other account. All "other revenue" may be credited to this account or each type may be accounted for separately by using Accounts # This account is a revenue by source control used for financial statement reporting purposes. DEBITED - with any adjustments and when closing this account to fund balance. CREDITED - with all other revenue received or accrued When assigning these numbers to detailed accounts, use the numbers as listed in the "sub-accounts" column in the index. 695 Other Financing Sources Control - This is a mandatory account used to record nonrevenue items such as proceeds from loans, leases, sales of bonds or notes, insurance recoveries, "operating transfers in," etc. Accounts # should be used to record the various types separately. Account #699 should be used only for "appropriation transfers in." NOTE: Account # for Infrastructure Asset Depreciation is debited and credited for actual depreciation expenditure to comply with modified accrual method. DEBITED - with any adjustments and when closing this account to fund balance. 26

27 CREDITED - with any amounts received or accrued that are non-revenue items. 699 Transfers In - Control - This activity is found in the Conservation District Fund and Debt Service Fund. Its use is mandatory. Its purpose is to reflect transfers into (appropriation to) a fund. If individual detail is desired, the Conservation District may use the following numbers as desired. Transfers In - Detail - These activity numbers may be assigned by the Conservation District to account separately for appropriation transfers in. Expenditure Accounts Expenditure/Expense accounts include MANDATORY accounts and OPTIONAL accounts. All units must use accounts listed as mandatory. Optional account numbers are provided within the MANDATORY expenditure/expense categories to provide greater detail of costs for use by units desiring to further classify their expenditures/expenses. The mandatory expenditure accounts are listed below: Number Expenditure/Expense 701 Personal Services 726 Supplies 800 Other Services and Charges 970 Capital Outlay 990 Debt Service 999 Transfers (Out) All district chart of accounts should include the above accounts. The accounts that are associated with them should be listed as sub-accounts of them. These are considered line items for budgeting and accounting purposes. Line items may be used for accounting purposes and to assist in the development of the budget, however, the Department of Treasury does NOT recommend adoption of the final budget at the line item level. Optional possibilities are indicated in the Uniform Chart of Accounts and offer the local unit more detail. If the reporting of expenditures/expenses is expanded to optional accounts, the optional account numbers as listed must be used. Use the following table in deciding where to classify expenditures. 27

28 Uniform Chart of Accounts for Expenditures 701 Personal Services Examples include (not all inclusive): Salaries and Wages of elected officials, appointed officials, deputies, supervisory employees, permanent employees, temporary employees, overtime,per Diem, Fringe Benefits, Employer s Social Security, Hospitalization Insurance, Employee Life Insurance, Retirement Contribution, Unemployment Compensation, Sick and Vacation Pay Etc. 726 Supplies Use these numbers for more detail as desired. These account numbers may be assigned in groups such as: Office Supplies, Operating Supplies, Medical Supplies, Maintenance Supplies, Repair Supplies, Etc. 800 Other Services and Charges Use these numbers for more detail as desired. These account numbers may be assigned in groups such as: Professional and Contractual Services 834 Hospitalization 835 Health Services Other Welfare Services Communications (telephone, cell phone, radios, etc.) Transportation Retirement Benefits (to retirees) Community Promotion Printing and Publishing Utilities Repairs 28

29 Rentals Miscellaneous 964 Refunds and Rebates 965 Open 967 Project Costs (not capital outlay) 968 Depreciation and Depletion 969 Open 970 Capital Outlay Use these numbers for more detail as desired. Capital outlay expenditures result in the acquisition of or addition to capital assets. The amounts in these accounts must agree with the capitalization policy of the local unit and will equal the additions to general capital assets records (formerly the General Fixed Assets Account Group) and the infrastructure asset records. 990 Debt Service Principal Interest 999 Transfers (Out) Figure 4 Explanation of Expenditure and other financing use accounts For budgetary control and preparation, activity or department as pointed out previously in the activity section of this manual will summarize these expenditure accounts. 700 Expenditure Control - This is a mandatory control account, which must appear in the general ledger of each fund of the Conservation District. Its balance must at all times equal the combined totals of expenditure Accounts # The account is normally posted monthly from accounts payable and appears on the monthly trial balance. However, it does not appear on balance sheets prepared as of the close of a fiscal period since it has then been closed out to the fund balance. DEBITED - with all expenditures disbursed or accrued by a fund. 29

30 CREDITED - with any adjustments and when closing the account to fund balance. 701 Personal Services - This is a mandatory control account used to record expenditures for salaries and wages, the Conservation District 's portion of social security, the Conservation District 's retirement contribution, and other employee fringe benefits (health insurance, employee life insurance, etc.). If the Conservation District desires, it may use Accounts # to designate specific types of personal services in which case Account #701 becomes a control account. Where used as a control account, its balance must at all times equal the combined totals of Accounts # DEBITED - with all charges for personal services paid or accrued. CREDITED - with any adjustments and when closing this account to fund balance When assigning these numbers to various personal services, the Conservation District should assign the numbers as listed in the column headed "sub-accounts" in the index. 726 Supplies - This is a mandatory control account used to record all expenditures for office supplies, operating supplies, medical supplies, repair and maintenance supplies, etc. If the Conservation District desires, it may use Accounts # to designate specific types of supplies in which case Account #726 becomes a control account. Where used as a control account, its balance must at all times equal the combined totals of Accounts # DEBITED - with all expenditures for supplies. CREDITED - with any adjustments and when closing this account to fund balance. 970 Capital Outlay - This is a mandatory control account found in the Conservation District Fund. It is used to record expenditures by the Conservation District for the acquisition of fixed assets. Such purchases are also recorded, at cost, in the "General Fixed Assets Account Group" either monthly or at the end of the year. A Conservation District may record all capital outlay expenditures within this account or may account separately for various types of capital outlay expenditures by utilizing Accounts # If separate accounting is maintained, Account #970 becomes a control account, and its balance must at all times equal the combined totals of Accounts # DEBITED - with all fund expenditures for capital outlay. CREDITED - with any adjustments and when closing this account to fund balance If these accounts are used for additional breakdown of capital outlay, use the numbers as indicated in the chart of accounts index in the column headed "sub-accounts." 30