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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?
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} 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
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} 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
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} 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
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} 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.
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} 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
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} 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!!!
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} 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")(www.grants.gov/web/grants/learn-grants/grant.../omb-uniform-guidance-2014.html)
� OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments (http://www.whitehouse.gov/omb/circulars/a087/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 – www.cfda.gov � Preferences
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} 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 � 24000 and 25000 � 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
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} 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 - http://www.conwaygreene.com/nmsu/ Chapter 22 – Public Schools
� NMAC - http://www.nmcpr.state.nm.us/nmac/_titles.htm Title 6 – Primary and Secondary Education
� Accounting standards ◦ Findings of a component unit must be included
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} 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!!!!
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} 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
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} 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
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} 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!
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} 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
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} 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
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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
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} 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
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} 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)
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} 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
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} 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?
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} 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
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} 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
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} 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?
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} 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
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} 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)
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} 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
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} 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!!
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} 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
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} 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!!!!!!
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◦ Thank you for your time ◦ Are there any final questions? ◦ Be safe going home
Griego Professional Services, LLC
J.J. Griego, CPA
[email protected] Phone (505) 856-2741
Cell (505) 256-2758 Fax (505) 856-7510
