ONGOING ACTIVITIES AND INTERNAL CONTROLS 1. Determinie actions to be taken related to prior year's auditors' recommendations. 2 Do Board Members understand the need for internal controls over operations, compliance and financial reporting? 3 Does the District have internal control procedures over the following: a. Purchasing - bidding, conflict of interest, separation of duties b. Cash Receipts - separation of duties, documentation c. Payroll d. Accounts Payable e. Inventory f. Capital Assets g. Deposits - timely reconciliations, compliance with state laws 4 Are periodic tests made of these controls to ensure that the system is working? 5 6 Are there procedures in place for reporting failures of internal controls and for implementing corrections? Does the District record accounting transactions according to GAAP? - For Example are governmental funds accounted for using the modified accrual basis of accounting? Are proprietary funds accounted for using the accrual basis of accounting? 7 8 9 Does the District understand that they should accrue payroll - either during the year or at the end of the year? Does the District monitor expenditures, including payroll in grants, and ask for reimbursement from T.E.A. in a timely fashion? Are there procedures in place to ensure compliance with grant requirements, including timely filing of expenditure reports.
10 Does the District correctly account for: a. Acquisitions of capital assets used by governmental activities. b. Acquisitions of capital assets used by proprietary funds. c. Refunding bond issue d. General Obligation bond issue e. capital lease activity f. Cash pools g. interfund transactions h. post-employment benefits i. Accumulated depreciation in Proprietary Funds and Capital Asset Account Group j. Stock of capital assets in Propretary funds and Capital Asset Account Group k. Accreted interest on capital appreciation bonds in Long Term Debt Account Group l. Tax revenues and allowance for uncollectible taxes YEAR END ADJUSTING ENTRIES 1. Year-end entries which MUST be made. a.. Adjust investments to market. b. Payroll in grants must be appropriately recorded c. Clearing accounts should be cleared. d, Check Due-to-due froms e. Check Transfers-in and Transfers Out beween funds f. Allocate cash pools to the appropriate funds g. Adjust for inventory on hand Did the District appropriately make entries for services they have received but for which they have not yet paid (accrued expenditures)? a. Accrue payroll b. Accrue Interest Payable - short term interest Did the District appropriately make entries for prepaid services such as insurance or rent? a. Insurance paid in advance - record remaining amount to prepaid expenditures b. rent paid in advance - record remaining amount to prepaid expenditures 4. Did the District appropriately make entries for revenues earned but not yet received? a. Has the district booked revenues earned for the next academic year from classes conducted during the current fiscal year? b. Have amounts due from state for reimbursement grants been posted as revenues and as Due from State? 5. Did the District appropriately make entries for revenues received but not yet earned?
a. Have appropriate entries been made to deferred revenues. b. Has the District received rent revenues paid to the district in advance? c. Has the District received tuition or fee payments in advance? 6. Year End Adjustments in Governmental Funds Only a. Budgetary Adjustments b. Encumbrance Adjustments - close 4310 and record to 3440 - Reserved for encumbrances c. Reservation of Fund Balances d. Designation of Fund Balances 7. Year End Adjustments in Proprietary Funds a. Restriction of Net Assets b. Long-term Interest Payable c. Depreciation of capital assets d. Changes in capital assets - acquisitions and disposals 8. Year End Adjustments in Fiduciary Funds a. Review and record changes in commitments 9. Year End Adjustments in Long Term Debt and Capital Asset Account Group a. Enter changes in capital assets if not entered during the year - capital assets disposed of, capital asset projects completed, and capital assets acquired, b. Calculate annual depreciation and add to accumulated depreciation c. Enter changes in long-term debt payable (if not done during the year). d. Post accreted interest to bonds payable in Long Term Debt Account Group e. Post changes in long-term liability for post employment benefits f. Post change in liability for accumulated vacation g. Record Changes in Construction in Progress
PRELIMINARY AUDIT ACTIVITIES 1. Validate the accuracy of your trial balance. a. Do the trial balances balance for each fund b. Are there zero beginning and ending fund balances in all reimbursement type grants c. Do interfund transfers in and tranfers out match d. Do due-to-due-froms match between funds and fund types e. Do any account number items need to be crosswalked? f. Be sure all year-end adjustments as described above have been made and posted in the accounting system 4. 5 6. 7. Determine who at the District will be assigned the task of either preparing the annual report or overseeing the preparation of the report done by someone outside the district. Determine exactly what non-audit services are expected from the independent auditor and be certain these are specified in the engagement letter. Non-audit services include the preparation of the annual report, the provision of the PEIMS file for submission to T.E.A., and the provision of the T.E.A. Audit Data Feed file. Be certain to specify the role and responsibility of the district in the preparation of the annual report. Note that management of the District accepts the responsibility for the content of the annual report. Inquire what the auditor has done to document their independence in conducting the audit. Prepare or update documentation of the District's internal control structure and reports of monitoring the internal controls. Prepare responses to prior year findings with respect to internal controls and describe the corrective actions you have taken.
PREPARATION AND REVIEW OF THE FUND FINANCIAL STATEMENTS 1. 4. 5. 6. 7. Check the prepared reports to be certain all required Statements and Schedules have been included. a. Review Required Schedules presented in T.E.A.'s FASRG b. Review Checklist from GFOA for preparation of a CAFR. In the event the fund financial statements are prepared by someone not in the governmental entity, does the individual assigned to oversee and approve the report have adequate knowledge and experience to understand the content of the reports? Check the financial statement articulation. In other words, check the agreement between and on individual Fund Level Statements. Refer to checklist provided by EdMIS. Check all statements to be certain the data are consistent with the data in the entity's accounting system. Check all statements and exhibits for correct titles and for correct terms - for example the use of Expenditures for governmental fund statements and Expenses for other statements. Check the calculation for the designation of Major Funds as reported for governmental funds and for enterprise funds. If the entity has chosen to designate a fund as major which does not meet the 10 and 5 rule, provide the explanation for such designation. PREPARATION AND REVIEW OF THE GOVERNMENT WIDE FINANCIAL STATEMENTS 1. Does the District maintain adequate records of all long-term debt items which must be included in the Government Wide Financial Statements? a. Long-term bonded debt b. Long-term loans and capital leases c. Other Long-term liabilities such as post-employment benefits d. Accreted Interest on capital appreciation bonds e. Capitalized debt issuance costs f. Capitalized premium or discount on issuance of bonds Does the District maintain adequate records of all long-term capital assets including
accumulated depreciation? Does the District have an adequate explanation as to how the annual depreciation is calculated and allocated by function? 4. Can the District provide a copy of the "work-sheet" entries made in previous years? 5. 6. If the District uses internal service funds, can they provide an explanation as to how they record that activity so that the net profit or loss can be allocated by function? Review the Consolidation and Conversion Entries made in preparing the government wide statements to be sure any of the following which apply have been included: a. Consolidate the long-term debt and capital items as reported at the end of the prior year - i.e. the amounts at the beginning of the year. b. Consolidate the balance sheet items from internal service funds with governmental activities. c. Allocation of the net profit (loss) of internal service funds by function and consolidation of these with expenses in governmental activities. Also consolidate nonoperating revenues and expenses, beginning and ending net assets with governmental activities. d. Document the allocation procedure used to consolidate the net profit (loss) of internal service funds by function. e. Have all current year activities changing capital assets been appropriately reclassified? This includes the following: (1) De-expend current year expenditures for capital acquisitions and add to capital assets. (2) Reclassification of Proceeds of Sale of Capital Assets from other source to decrease in carrying value of capital assets and miscellaneous local revenue. (3) Reclassify completed capital projects from construction in progess to capital assets. (4) Record any transfer of capital assets to proprietary funds as decrease in capital assets and transfer out to proprietary funds. (5) Record any disposal of capital assets.not associated with a sale.
f. Have all current year activities changing long-term debt items been appropriately reclassified? This includes the following: (1) De-expend current year expenditures for payment of debt principal and show it as a reduction in debt payable. (2) Reclassification Proceeds of Sale of bonds and record it as increase in debt payable. Show refunded debt issues separate from regular bond issues. (3) Reclassify premium or discount on the sale of bonds. (4) Determine if debt issuance costs should be capitalized and so reclassified from other resource item. (5) Reclassify payment to escrow agent on refunding bond issue as amount of debt repaid. Calculate accounting loss and add to paid debt. (6) Record accreted interest as interest expense and add to debt payable. (7) Record net change in accrued post-employment benefits. (8) Record amortized premium or discount on bond to current year expense. (9) Record amortized accounting loss or gain on refunded bonds. g. Perform adjustments to adjust tax revenues from modified accrual to accrual basis. (1) Remove effect of 60 day rule is applicable. (2) Separate collected tax revenues into revenues from M&O levy and those from debt service levy. (3) Remove taxes collected from prior year levies and post them to beginning net assets. (4) Move delinquent taxes from current year levy which are assumed to be collectible from deferred revenue to current year revenues. Split into M&O and Debt Service levies. (5) Move delinquent taxes from prior year levies which are assumed to be collectibe from deferred revenue and post to beginning net assets. (6) Enter adjustment to correct for differences in estimates or collections of delinquent taxes made in prior year adjusting entries and the amounts collected and continued estimated to be collected in the current year adjustments. h. Eliminate Interfund transactions between governmental funds and internal service funds. (1) Due-to-due-froms. Be sure these are completely eliminated except for the amounts due to or due from enterprise funds. (2) Transfers in and transfer out. - Be sure these are completely eliminated except for the amounts transferred in or out between the governmental activities and the enterprise funds. I. Reclassify any remaining other sources and uses. j. Allocate annual depreciation by function. Add to expenses by function and add to
accumulated depreciation by type of capital. k. Reclassify all fund balance items to the appropriate net assets categories. 7. Allocate program revenues by function: a. Direct charges for services - document the procedure used for allocation by function. b. Operating Grants and Contributions - Determine revenues and allocate by function. Document the procedure used. 8. If the district has any enterprise funds, review if the following are necessary: a. Were any services provided by internal service funds to the enterprise funds? If so, were appropriate look-back adjustments made? b. Reclassify capital contributions to either transfers in or capital grants. c. Classify all grants as to whether they are capital grants or operating grants. 9. 10. Obtain information on non-fiduciary component units and include in the government wide statements. Review completed Statements A-1 and B-1 for errors between and on the statements. Refer to the check list for this provided by EdMIS. 11. Check data for consistency with your long-term debt and capital asset records. 1 Be sure all details of consolidating and adjusting entries and supporting documentation are filed for future reference.
OTHER ITEMS INCLUDED IN THE FINANCIAL REPORT 1. Review the Notes to the Financial Statements: a. Check for consistency of the data in tables in the notes with data on the exhibits and in the accounting system. b. Check to be sure required notes are included. Use check list provided by EdMIS. 4. 5. 6. Have all schedules required by T.E.A. been included in the annual report. Confirm with T.E.A.'s FASRG. Do the reconciliation statements provide sufficient detail of the reasons the data on the governmental fund statements is different from that on the government wide statements? Does the person in charge of reviewing and approving the financial report understand what must be included in the T.E.A. required exhibits? Are the appropriate reports and schedules for the Single Audit-Act and Yellow Book Audit included in the report? Does the MD&A include everything that must be presented? Refer to the check-list provided by EdMIS. 7. Is the data in the MD&A consistent with that reported in the financial report? 8. 9. Are the Statements and Schedules and introductory material and notes all placed in the correct order in the financial report? Has the person supervising the preparation of reports approved all adjustments and the content of the report?