Presented by: J.J. Griego, CPA Griego Professional Services, LLC

Transcription

1 Presented by: J.J. Griego, CPA Griego Professional Services, LLC } Griego Professional Services, LLC J.J. and our staff Introduction and backgrounds } Attending School Districts Introduction and backgrounds What you are hoping to get out of this training? 1

2 } Why are we here today? History of School Districts and Accounting Principles More and more responsibility with less resources We are presenting in two separate sessions to help the training be consistent and for each participant to walk away with some reference material Education - A long term solution Continuously new accounting and auditing pronouncements } What are our Goals? Educate District Finance Directors and staff What are the expectations in preparing and assisting in the preparation of the financial statements With regards to operations as it pertains to the financial statements and year-end close internal controls Provide the District (you) with tools for the audit oversight and preparation assistance Provide the District (you) with options and choices Capability to take responsibility for the financial statements 2

3 } How will we accomplish our Goals? Learn what is included in the Financial Statements Start with the finished product Understand each piece of the financials Where does the information come from? Learn what each District needs to know There are no stupid questions How do we learn best? Learning from each other Learn from training Learn from reference material } Identifying Potential Component Units } Reading and Understanding your Financial Statements Compliance Federal Single Audit Report Schedule of Federal Award Expenditures Report on Internal Controls and other Matters Supporting Schedules Budget vs. Actual Statements Combining Individual Fund Statements 3

4 } Reading and Understanding your Financial Statements Governmental Financial Statements Government-Wide Financial Statements Management s Discussion and Analysis Independent Auditor s Report How the numbers agree } New Trends The charter schools must be included in the financial statements of their sponsoring school districts or PED by discrete presentation All charter schools should be reported as significant and therefore major component units of the school district or PED Trend to move back to school districts upon renewal Changes to come in federal funding and guidance 4

5 } Introductory Section Table of contents Official Roster } Financial Section Independent Auditor s Report Management s Discussion Analysis Basic Financial Statements Government-Wide Fund Financial Statements Footnotes } Footnotes Summary of Significant Accounting Policies Stewardship, Compliance and Accountability Cash and Temporary Investments Accounts Receivable Interfund Receivables, Payables and Transfers Capital Assets Long Term Debt Other Risk Management, ERA, RHC, JPA, etc. 5

6 } Supplementary Information Combining and Individual Fund Statements and Schedules Nonmajor Funds Special Revenue, Capital Project, Debt Service Supporting Schedules Vendors over $60,000 no opinion!!! Fiduciary Funds Pledged Collateral Cash and Temporary Investments Cash Reconciliation } Required Supplementary Information Pension schedule } Compliance Section Report on Internal Control and on Compliance } Federal Financial Assistance Report on Compliance Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs 6

7 } Federal Single Audit Report When is it required? Federal Expenditures over $750,000 in total High vs. low-risk auditee Report provides an opinion on compliance Focus on Major Programs What is a major program? Program types A vs B High vs. Low-Risk programs Rotation of major programs } Federal Single Audit Report What affects the District s Single Audit? Previous two audits Findings Major programs tested Federal and State program reviews Provide to auditor Deficiencies in Federal Award audits National focus and problem What to expect Costs } Remember you can pay audit fees out of federal programs!!! 7

8 } Federal Single Audit Report Compliance of Major Programs Grant Provisions Read them The Office of Management and Budget's (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly called "Uniform Guidance") ( omb-uniform-guidance-2014.html) OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments ( a87_2004.html#a) } Schedule of Expenditures of Federal Awards (SEFA) Who is responsible? District many times auditor will prepare as part of financial statements (District should start preparing) What goes on the schedule? Federal award expenditures including direct and state pass-through Award number Federal grantor or pass-through grantor and program title Federal CFDA number Preferences 8

9 } Schedule of Expenditures of Federal Awards (SEFA) Reading the Schedule Example of a SEFA What to look for SEFA and the new chart of accounts and Other funds with federal awards (21000, sometimes 11000, etc.) Medicaid (vendor relationship) Impact Aid } What to look for and what to ask! What are my major programs? What programs are auditors testing? Do our Program Directors understand allowable costs? What training should we be going to? What compliance requirements are the Districts struggling with? Reporting How funds can be spent 9

10 } Report on Internal Controls and on Compliance and Other Matters What does the report tell the reader No Opinion Instances of non-compliance and deficiencies in internal control Indication of whether findings are a material weakness Findings Example } Report on Internal Controls and on Compliance and Other Matters Internal controls Segregation of duties Bank reconciliations Capital assets - infrastructure Compliance State statutes - Chapter 22 Public Schools NMAC - Title 6 Primary and Secondary Education Accounting standards Findings of a component unit must be included 10

11 } Supporting Schedules required for School Districts Pledged collateral 50% vs. 102% rule Disclosure example Schedule example Tie to footnote from schedule Cash and investments What is allowed cash and investments Time Deposits vs. Demand Deposits Schedule example Bank balance Outstanding items Activity funds and Petty Cash Tie to footnote from schedule } Supporting Schedules required for School Districts Cash reconciliation PED report Operating cash reconciliation Operating vs. Federal vs. Other Cash must tie from financial statements to footnotes to schedules Tie from schedule to financial statements } Cash, cash, cash!!!! 11

12 } Supporting Schedules required for School Districts Change in Activity Funds State Audit Rule Requirement Presented by School Who is in charge of the cash? No negative balances Risk Risk Risk!!!!! Example } Having a grasp on your cash will allow you to make efficient and informed management decisions! } Budgetary vs. Actual Statements Original Budget vs. Final Budget vs. Actual BAR s What is Actual? Statement that is important to PED 12

13 } Budgetary vs. Actual Statements Presentation Budget should result in zero fund balance Designated Cash from prior year Reconciliation to combining financial statements Fund equity = Cash Examples Tie out ending fund balance to cash } Debt Service Funds Revenue & Expenditures Revenue sources including property taxes General Obligation Bond vs. Bond Anticipation Note Chart of Accounts Principal and Interest Balance Sheet Cash Accrued Interest? Fund balance Reserved for Debt Service 13

14 } Capital Project Funds Revenue & Expenditures State Funds Bond Funds Property Taxes Balance Sheet Cash Accounts Receivable Accounts Payable Fund Balance Reserved for Capital Projects } Special Revenue Funds Revenues & Expenditures State, Federal and Other Funding How to tell the difference How to agree to SEFA Balance Sheet Cash Accounts Payable Deferred Revenue vs. Accounts Receivable? Fund Balance Unreserved Cash deficit borrow from the general fund; not other federal funds! 14

15 } What to look for and what to ask! What is the difference between accounts receivable and deferred revenue and fund balance? What programs generate federal funds vs. state funds? What about Medicaid? Is there such a thing as negative cash? What do we do with old funds that we do not use anymore? } Required footnote disclosures Accounting standards State Requirements Detailed information contained in the financial statements More changes and requirements ahead GASB pronouncements } District s Accounting Policies } Budget to Actual Reconciliation General Fund, Major Funds and Other Governmental Funds 15

16 } Cash Cash vs. Investments 50% and 102% requirements disclosed FDIC Insurance GASB 40, Deposit and Investment Risk Disclosures Remember all cash ties from Statements to Notes to Schedules Tie out to financial statements } Accounts Receivable Major funds and total Nonmajor by AR type Tie out to financial statements } Capital assets Capitalization Policies ($5,000) Roll forward including additions and deletions PSFA Depreciable vs. non-depreciable Capital Asset Listing and Maintenance VERY IMPORTANT! Library books Software Tie out to financial statements 16

17 Long-term debt } Roll forward including additions and deletions } Indicate amount due within one year and future annual requirements Bonds Types G.O. Bonds, Bond Anticipation Notes Proceeds, issuance costs, discounts, premiums Covenants Payments principal and interest Compensated absences Capital Leases and Notes Payable Operating Leases } Tie out to financial statements } Joint Powers Agreements State Audit Rule JPA vs. MOU } Others! ERB RHCA Fund Deficit Excess of expenditures over appropriations Subsequent Pronouncements Commitments Related Party Transactions Inter-fund Balances and Transfers 17

18 } Governmental Funds (Modified accrual basis) Focus on Funds Major vs. Non-Major Criteria District s choices General Fund combined or not (no longer a choice per State Audit Rule) Transportation, Instructional Materials, Teacherage } Governmental Funds (Modified accrual basis) Major Criteria 10% of total assets, liabilities, revenues, etc. per fund type 5% of total assets, liabilities, revenues, etc. of all fund type District s choices Non-Major Governmental Funds Combined Special Revenue Funds Capital Project Funds Debt Service Funds 18

19 } Governmental Funds Balance Sheet Cash and Temporary Investments Accounts Receivable Accounts Payable and Accrued Liabilities Interfund Balances (Due to/from other funds) Property Taxes Deferred property taxes } Where are the District s Capital Assets? Capital Outlay Capital outlay vs. additions (should agree) Statements vs. footnote } Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance Revenues Taxes Intergovernmental (State and Federal Grants) Charges for Services, Interest and Other Expenditures By Function Capital Outlay Debt Service (Principal and interest) Other Debt Service expenditures (issuance costs) 19

20 } Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance Other Financing Sources (Uses) Proceeds from long-term debt, including premiums and discounts Operating Transfers to / from other funds } Tie fund balance from Balance Sheet to Statement of Revenues, Expenditures } Tie out Nonmajor funds from the back to the total column in the front Balance Sheet Statement of Revenues, Expenditures and Changes in Fund Balance } Reconciliations to the Government-wide financial statements Balance Sheet Capital Assets Property Taxes Bond issuance costs, premiums and discounts Accrued Interest Long-term debt Compensated Absences GO Bonds and Notes Payable } Tie out from fund financials to government-wide 20

21 } Reconciliations to the Government-wide financial statements Statement of Revenues, Expenditures and Fund Balance Depreciation Expense Capital Expenditures Disposal of Capital Assets Gain / Loss Changes Interest payable Compensated absences Issuance costs, premiums & discounts (and amortization of each) Principal payments and proceeds Deferred property taxes } Tie out from fund financials to government-wide } What does preparation of financial statements include? Conversion from cash to accrual? Dictate in your RFP! } How does a number tie to a footnote? } Ask about numbers within the reconciliations? Do financial statements agree with cash reconciliation to the PED? } What do the due to/due from accounts represent? 21

22 } Government-wide (Full accrual basis) Accrual basis preparation of financial statements from exchange and non-exchange transactions should be recognized when an exchange takes place Focus on the Primary Government Government and Business-type activities Component Units } Statement of Net Position (Full accrual basis) Capital Assets Accumulated Depreciation Long-term Debt Compensated Absences, Bonds, Accrued Interest, Etc Property Taxes Investment in Capital Assets, net of related debt Component Unit information (financial statements) combined if more than one PENSION LIABILITIES Outflows and Inflows 22

23 } Statement of Activities (Full accrual basis) Expenses, not Expenditures Reported by Function Other items Depreciation unallocated Interest on long-term debt Revenues Program Charges for Service, Operating / Capital Grants and Contributions General Property taxes, SEG, Interest, Etc. Tie net position from Stmt of Net Position to Stmt of Activities Pension expense } Statement of Activities (Full accrual basis) Transfers Should zero out unless transfers between business-type activities or comp. unit Change in Net Position Net Position Beginning of the year Restatements End of the year Governmental Business-type Component Unit 23

24 } Required by GASB 34 REMEMBER? Brings everything together Bond holders and underwriters Accrual Basis of Accounting } Statement of Net Position } Statement of Activities } What is our debt situation? } What does the equity number represent? } How are property taxes presented? } What are in the component unit numbers? } Does your SEG revenue tie out? } Is there any gain or loss on sale of assets? 24

25 } Provide auditor with A/P & A/R listing } Prepare an Accrued Payroll Schedule Don t forget FICA, Medicare and ERA Held checks } Capital Asset Listing Include depreciation Infrastructure Construction in Progress Needs to be in accordance with new PED COA } What is the Management s Discussion and Analysis (MD&A)? Provides financial managers the opportunity to present both a short- and long-term analysis of the government s activities Considered Required Supplementary Information (RSI) } Why have the MD&A? To allow readers to have a summary understanding of the financial activities of the District Bondholders, Public, etc. Representation of Management 25

26 } Who is responsible for the MD&A? Financial Manager (Business Manager) and/or Superintendent Auditor Absolutely Not!! Problems with the auditor preparing The auditor does not give an opinion on the MD&A Assistance (providing an example) } What needs to be included in the MD&A? Comparison of current results to prior year Distinguish results between primary government and component units, if applicable Focus on District operations Brief narrative of the basic financial statements (differences between each type of financial) 26

27 } What needs to be included in the MD&A? Condensed financial information Total assets (capital and other assets) Total liabilities (long-term and other liabilities) Net Position (invested in capital assets, restricted and unrestricted) Program and General Revenues by major source Program Expenses by function Total Revenues and Expenses } What needs to be included in the MD&A? Condensed financial information Contributions Extraordinary and special items Transfers Changes in Net Position Analysis of overall financial position and results of operations Analysis of balances and transaction within individual funds 27

28 } What needs to be included in the MD&A? Variation of original budget, final budget and actual budget results for the General Fund Analysis of significant capital asset and long-term debt activity A discussion on infrastructure assets, if applicable A description of current facts and conditions (student counts, legislative actions) Statements regarding future years and referral to component unit financials } What can be used? Narratives Tables Charts and graphs } Do Not Include more than what is Required!! 28

29 } What is this? And why is it important? } What is reported and why? Financial Statements Includes District and Charter School if applicable Generally Accepted Accounting Principles Yellow Book Single Audit Uniform Guidance Schedule of Expenditures of Federal Awards Other Schedules } Financial Statements Covered Government-wide (Full accrual basis) Governmental (Modified Accrual basis) Budget to Actual (Cash basis) Schedule of Expenditures of Federal Awards Other Schedules 29

30 } What is the difference? Why do we care? State of NM vs. Other States and Federal Requirements Materiality Public Education Department District s Responsibility Auditor s Responsibility Audit Costs Continue to increase. Why? New pronouncements New and more oversight and compliance How to help to control? Some things out of a District s control (new requirements) Assisting the auditor and providing information Preparing financial statements Preparing schedules Cash, AR, AP, Fixed Assets, LTD Disclosing issues and being proactive Implement, Implement, Implement!!!!!! 30

31 Thank you for your time Are there any final questions? Be safe going home Griego Professional Services, LLC J.J. Griego, CPA Phone (505) Cell (505) Fax (505)