Proposed Changes to the Accounting Manual for Public Schools in the State of Washington (AMENDED) FY

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1 Summary of Changes to the Accounting Manual for School Districts FY ! Add legal citations. Chapter 1 Principles of Accounting! Revise discussion of financial statements. Three types are possible. o GAAP o OCBOA based on requirements of regulatory agency (cash) o OCBOA based on requirements of regulatory agency (modified accrual)! Add guidance for GAAP in boxes.! Minor modifications to fund guidance.! Add permanent fund guidance.! Eliminate much of the guidance on proprietary funds since they are not permitted.! Rewrite fiduciary fund guidance, revising for new types per GASB 34. o Private-purpose trust. o Investment trust. o Pension and other employee benefit trust. o Agency fund.! Revise guidance on capital assets. o Remove account group. o Reported on districtwide statements (GAAP) and in note disclosure (all).! Revise guidance on long-term debt. o Remove account group. o Reported on districtwide statements (GAAP), in note disclosure and schedule of long-term debt (all).! Expand discussion of depreciation.! Expand discussion of modified accrual and accrual basis accounting.! Expand discussion of budgetary comparisons including GAAP requirements.! Rewrite guidance on interfund transactions to reflect changes due to GASB 34. o Reciprocal interfund activity. o Nonreciprocal interfund activity.! Remove quasi-external transactions and reimbursements no longer used.! Discuss GAAP financial reporting requirements. SDAAC Summary of Changes (AMENDED) 1 4/11/2002

2 ! Added legal citations Chapter 2 Budgeting! Removed references to residual equity transfers Chapter 3 Accounting Guidelines! Rewrite section on internal control structure to incorporate COSO standards and Statement of Auditing Standards No. 78.! Add some question and answers related to internal control.! Add information on substitute systems under time and effort records.! Add GAAP guidance in boxes.! Add discussion of nonexchange transactions.! Add reference to IRS information (website link) under employee travel.! Add discussion of inventory system including use of purchase or consumption basis.! Add discussion of inventory cost valuation methods.! Revise capital asset section (formerly fixed assets) for GASB 34 guidance.! Eliminate account groups per GASB 34.! Revise discussion of interfund transfers.! Eliminate residual equity transfers no longer permitted (GASB 34).! Expand discussion of investment earnings. SDAAC Summary of Changes (AMENDED) 2 4/11/2002

3 Chapter 4 General Ledger Accounts! Removed GL 425 USDA Commodities (no longer will be separated from Lunchroom Inventory)! Removed GL 899 Unreserved, Undesignated Residual Equity Transfers (no longer appropriate)! Removed all references to General Fixed Asset and Long-Term Debt Account Groups (GASB 34).! Instituted holding accounts, Capital Assets and Long-Term Debt. Use of holding accounts is optional.! Designated Inventory accounts (GL 410 and 420) as accrual accounts.! Clarified that although capital assets and long-term debt will not be presented on the F- 196, it is important to record entries associated with them. Disclosure in the notes for both capital assets and long-term debt continue to be required. In addition a schedule of long-term debt is a required part of the F-196. In addition, districts reporting on GAAP basis will present the capital assets and long-term debt on their districtwide statements.! Removed expendable and nonexpendable trust fund references. These terms are no longer used (GASB 34).! Added Private-Purpose and Pension (and Other Employee Benefit) Trust funds. Private- Purpose trust funds include those all revenues previously in expendable trust funds previously held in nonexpendable trust funds. Trust funds use accrual basis accounting (GASB 34).! Added the permanent fund as a new governmental fund (GASB 34).! Updated description of GL 450 Investments for consistency with GASB 31. Chapter 5 Revenue Accounts! Added revenue accounts o 5329 Impact Aid Special Education Funding o 6164 Limited English Proficiency (funds will now flow through OSPI) o 6152 School Improvement (ESEA). Includes federal grants for improving teacher quality, safe and drug-free schools state grants, community service state grants, 21 st century community learning centers, educational technology state grants, innovative education program strategies, comprehensive school reform, state assessments, and rural and low income schools program. o 6154 Reading First (Title I ESEA) o 6310 Medicaid Administrative Match SDAAC Summary of Changes (AMENDED) 3 4/11/2002

4 Remove revenue accounts o 4162 Better Schools Staff o 4163 Better Schools Professional Development! List programs included in revenue codes containing multiple programs passed through from OSPI to districts such as 6100, 6151 and 6152.! Retitle revenue code 4175 Flexible Education (formerly Education Program Enhancement)! Clarify 4121 Special Education includes state funded special education safety net awards and revenues from home hospital (WAC )! Open the capital project fund (CPF) in 5200 General Purpose Direct Federal Grants Unassigned! Clarify 6151 (retitled Disadvantaged) includes Title I, grants to local educational agencies, Even Start, education for homeless children and youth, and Part A, neglected and delinquent youth living in non state (local) operated group homes! Add guidance on deductible revenues in section 3 and add narrative after deductible revenue accounts (1400, 1600, 3600, 5400, and 5500).! Indicate revenues used in the levy calculation. Chapter 6 Expenditure Accounts! Add expenditure (program) accounts o 52 School Improvement Federal o 54 Reading First Federal! Remove expenditure (program) accounts o 62 Better Schools Staff State o 63 Better Schools Professional Development State o 49 Skill Center Other Categorical! Rename expenditure (program) accounts o 51 Disadvantaged (formerly Remediation) o 64 Limited English Proficiency (formerly Bilingual)! Now includes bilingual and emergency immigrant o 75 Flexible Education (formerly Local Education Program Enhancement)! Remove activities o Entirely remove activity 43 Commodities, as it will no longer be separated from lunchroom inventory. o Close activity 29 Payments to other districts in program 97 Districtwide Support only. SDAAC Summary of Changes (AMENDED) 4 4/11/2002

5 Open additional activities in program 86 o 28 Extracurricular o 63 Operation of Buildings o 65 Utilities o 68 Insurance o 91 Public Activities! List individual programs included in program (expenditure) codes containing multiple programs passed through from OSPI to districts, such as 6100, 6151 and 6152.! Clarify 21 Special Education Supplemental State includes preschool and statefunded special education safety net awards and expenses for providing home hospital services (WAC ) and Medicaid special education (RCW ).! Clarify 51 Disadvantaged Federal includes expenditures from federal entitlement grants under ESEA Title I including grants to local educational agencies, Even Start, education for homeless children and youth, and local institutions to assist school districts in providing services to children under 18 years of age who have been placed in local detention centers or group homes (ESEA Title I, Part D, Subpart 2).! Clarify 57 State Institution Neglected and Delinquent Federal includes children in state institutions under ESEA Title I, Part D, Subpart 2.! Clarify the 20 series activities include professional development.! Clarify activity 27 Teaching includes Running Start. Chapter 7 Journal Entries! Remove GL 425 Inventories USDA Commodities and adjust journal entries.! Remove references to account groups and institute optional use of holding accounts.! Change fixed assets to capital assets in accordance with GASB 34 language. Chapter 8 Financial Reporting! Change general-purpose financial statements to basic financial statements.! Three possible audit opinions o GAAP o OCBOA based on requirements of regulatory agency (modified accrual) o OCBOA based on requirements of regulatory agency (cash)! All districts will continue to report on the F-196 that generally equates to the fund financial statements required by GAAP. SDAAC Summary of Changes (AMENDED) 5 4/11/2002

6 ! Districts choosing to report on GAAP basis will complete the following in addition: o Districtwide statements! Statement of net assets! Statement of activities! Reconciliations with fund financial statements o o Separate fiduciary financial statements! Statement of fiduciary net assets! Statement of changes in fiduciary net assets Required supplementary information! Original budget for general and ASB funds! Management discussion and analysis proceeding the financial statements! All districts are required to complete notes to the financial statements and should consult Appendix B for significant changes due to GASB 38. Even though capital assets and long-term liabilities are not included in the fund financial statements (i.e. F-196) the notes related to them are still required. In addition, schedules of long-term and shortterm debt will be a required part of the F-196.! Significant guidance on GAAP reporting requirements. Chapter 9 Information Unique to Each Fund! Remove references to expendable and nonexpendable trust funds. These terms are no longer used. Resources formerly in expendable and most in nonexpendable trusts is now in private-purpose trust funds. (GASB 34)! Change the term fixed assets to capital assets (GASB 34).! Remove references to the general fixed asset account group (GFAAG) and general long-term debt account group (GLTDAG). These are no longer used (GASB 34).! Add the governmental fund, permanent fund, for endowment type activities. Update explanations of the funds.! Add legal references throughout.! Update the ASB section for the changes in RCW 28A and chapter WAC. Significant changes with respect to private fundraising.! Change treatment of district administered deferred compensation plans. These should be placed in a pension (or other employee benefit) trust fund. Prior to GASB 34 these were placed in expendable trust funds.! Add guidance on implementing technology systems pursuant to SSB 6515 (RCW 28A (2)(iii)(f). SDAAC Summary of Changes (AMENDED) 6 4/11/2002

7 Chapter 10 Grant Management! Revised order of purchasing and procurement sections, moving definitions to beginning of chapter.! Added time and effort guidance.! Updated guidance to reflect OMB Circular A-133 changes.! Updated references and table of contents. Appendix A Glossary! Add, remove and modify definitions.! Add references. Appendices Appendix B Notes to Financial Statements NOTE: Some research ongoing, final revision to follow.! Change year references from 19XX to 20XX.! Modify basis of presentation and basis of accounting to comply with GASB 34. o Add Permanent Fund as governmental fund. o Remove references to expendable and nonexpendable trust funds and insert references to private-purpose and pension (and other employee benefit) trust funds (GASB 34). o Remove references to account groups, no longer used (GASB 34).! Remove encumbrance note (GASB 38).! Expand descriptions of activities in major funds (GASB 38).! Expand discussion of debt service requirements to maturity, separately identifying principal, and interest for each of the subsequent five years and in five-year increments thereafter (GASB 38).! Expand lease note to include obligations under leases for each of the five subsequent years and in five-year increments thereafter (GASB 38).! Add schedule of changes in short-term debt and the purpose for which such debt was issued (GASB 38).! Add interest requirements and terms for variable-rate debt (GASB 38).! Add details about major components of receivable and payable balances (GASB 38).! Add note on interfund transfers (GASB 38).! Revise pension note. Appendix C GASB Selected Pronouncements! Added summaries of GASB Statements: o No. 33 Accounting and Financial Reporting for Nonexchange Transactions. o No. 34 Basic Financial Statements and Management s Discussion and analysis for State and Local Governments. o No. 36 Recipient Reporting for Certain Shared Nonexchange Revenues An amendment of GASB Statement 33. SDAAC Summary of Changes (AMENDED) 7 4/11/2002

8 o o No. 37 Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments Omnibus Amendment of GASB Statements 21 and 34. No. 38 Certain Financial Statement Note Disclosures. Appendix D Reference Materials! Updated. SDAAC Summary of Changes (AMENDED) 8 4/11/2002