Student Activity Accounting T… · 4 6 Foundations for the Use of MAFA • Convenience funds are...

1

www.eidebai l ly.comwww.eidebai l ly.com

Student Activity Accounting

Presenters:Matt Moline, CPA, Senior Associate, Eide Bailly

LLPJoel Stencel, CPA, Audit Manager, Eide Bailly LLP

www.eidebai l ly.comwww.eidebai l ly.com 1

Resources Used

• The majority of the information contained in this presentation is from “Chapter 14 – Student Activity Accounting” of the 2015 UFARS Manual, prepared and published by the staff of the Minnesota Department of Education

• Available on the department’s website• http://education.state.mn.us

2


Agenda

• Foundations for the Use of MAFA

• Guiding Principles

• Operations of an Activity Fund

• Issues

These seminar materials are intended to provide the seminar participants with guidance in accounting and financial reporting matters. The materials do not constitute, and should not be treated as professional advice regarding the use of any particular accounting or financial reporting technique. Every effort has been made to assure the accuracy of these materials. Eide Bailly LLP and the author do not assume responsibility for any individual's reliance upon the written or oral information provided during the seminar. Seminar participants should independently verify all statements made before applying them to a particular fact situation, and should independently determine consequences of any particular technique before recommending the technique to a client or implementing it on the client's behalf.


Foundations for the Use of MAFA

3



• Necessary for establishing, maintaining, and auditing activity accounts

• All activities that could be placed into one or more of the following categories should be placed under board control and accounted for using UFARS (not MAFA)• An activity for which a board takes control because of its

preemptive power• An activity that goes to a graduation requirement (credit,

partial or full standard)• An activity (or some transactions) related to a contract• Some activities (or transactions) that have an authorized fee

attached• Some activities (or transactions) that have taxable sales related

to them



• Student Activity Funds vs. Other Activity Funds• Student activity funds are used to account for dollars

raised by the students for the students

• Owned, operated, and managed by organizations, clubs, or associations (groups) within the student body under the guidance and direction of faculty or staff members for educational, recreational, or cultural purposes

• yearbook, class account, choral and band, class projects, student clubs, student council, student-sponsored bookstores

4



• Convenience funds are not permitted in a student activity fund• Maintained at the request of and for the convenience

of staff members• flower fund, sunshine, faculty fund, employee coffee fund

• No statutory authority

• May constitute an “in kind” benefit

• Exposes district to liability for loss of those funds



5


Guiding Principles


Guiding Principles

Principle One: Activity fund development and fund management are grounded in board policy and written procedures.

Principle Two: Student activity funds are used for student activity purposes and for those students currently in school.

Principle Three: There is an adult of record who is primarily responsible for the management of the fund.

6


Guiding Principles

Principle Four: All transactions are open to inspection.

Principle Five: Activity funds are managed in accordance with sound business practice.

Principle Six: The size of an account is limited to a reasonable amount.

Principle Seven: Activity accounts within an activity fund are audited annually internally.


Operations of an Activity Fund

7



• Transportation

• Textbooks

• Telephone charges

• Police liaison officers

• Classroom supplies

• Library books

• Assemblies

• Educational field trips

• Office supplies

• Postage

• Reimbursements

• Employee compensation

Curricular or cocurricular under board control –appropriate:



• Employee or student holiday parties

• Entertainment expenditures

• Items of clothing that will be retained by the user

• Flowers for a funeral, retirement or any other personal event

• Donations

Curricular or cocurricular under board control –inappropriate:

8



• Supplies and materials

• Food

• Entertainment

• Transportation

• Lodging

• T-shirts

• Travel expenditures

• Admission fees

• Donations

Extracurricular not under board control – appropriate:



• Office supplies

• Library books

• Office or school furniture

• Facility meetings or faculty events

• Textbooks

• Assemblies for the entire school

• Employee comp, gifts, or awards

Extracurricular not under board control –inappropriate:

9


Issues


Issues

1. Fundraising• Must adhere to district policy

2. Receipts and deposit procedures• Proper controls

3. Gifts• Same manner as regular receipt

4. Internal control over receipts• Admissions/ticket sales• Membership dues/student fees• Fundraising• Donations

10


Issues

5. Bidding and purchasing• Board responsibility

6. Cash disbursements and checks• Original vendor invoices• Requests signed by activity advisor and student rep• Checks only – two signatures

7. Bank reconciliations• Monthly

8. Advances and reimbursements• Complete form with supporting documents, signed by advisor and

student• Deposit unused cash immediately


Issues

9. Disposition of cash balance in discontinued account• Written request from advisor

10. Student activity petty cash fund• Need administrative authority

11. Disposition of property• Follow district policy

11


Issues

12. Change funds• Can be used

13. Personal checks• Cannot be cashed from an activity fund

• May be accepted (i.e. purchase of ticket to play)

14. Labor payments• At no time and under no circumstances are labor payments

made by cash or check from a student activity account• Including casual employees such as gatekeepers, referees, DJs,

and ticket-takers


Issues

Specific guidance in Chapter 14

• Staff lounge vending machine• Because it is a contract the board has control and proceeds

must go to a legitimate activity, not to an adult fund and not accounted for in the student activity fund

• Proceeds from vending machines going to activities• Must first be deposited in the general fund

• Profits from the general fund can be transferred to a student activity account ONLY IF it is under board control, since that is the only way a transfer could occur

12


Issues

Past audit findings• Unallowable student activity fund – Class of 2013 • Improper approval – did not have student rep and/or

advisor signatures on request• Improper use – closed Class of 2013 account by

writing check to class president who was to keep the funds for future reunions for the class

• Inadequate documentation – did not have proper receipt

• Deficit balances – multiple accounts with deficit balances at year-end


Issues

Past audit findings (continued)

• Inadequate documentation – did not have invoice to support disbursement

• Inadequate approval – did not have required two signatures on checks

• Timely deposits – receipts were not being deposited daily, or in a timely manner

• Inadequate documentation – disbursement to cash with no supporting documentation

13


Issues

Past audit findings (continued)

• Improper use – paid a portion of athletic director’s salary

• Unallowable student activity accounts – Parent-Teacher organization, Sunshine fund, Faculty fund, Senior Citizen Dance fund

• Improper use – paid library costs, cocurricular activities, textbook purchases, baby shower expenses, student eye exams, clothing for student, beverages for staff lounge, teacher wages, employee wellness activities, gifts


Keys to an Effective and Efficient Audit Process

14


• Who is responsible for the fair presentation of the financial statements?

• Why do we need to be audited?


Learning Objectives

• This session will help governmental personnel effectively and efficiently prepare for the annual audit, both during fieldwork and throughout the year. The course will provide best practices and other tools that can be used to enhance communication between the school and the auditors to avoid surprises and delays in report issuance.

27

15


Planning Phase

• Schedule the Audit – avoid peak periods or scheduled vacations

• Consider scheduling entrance conference or preliminary meeting• Establish timeframes and deadlines

• Discuss audit approaches

• Significant events or transactions that occurred during the year

28


Planning Phase

• Engagement Letter

• Establishes management’s responsibility• Financial statements

• Making all management decisions and performing all management functions

• Establishing and maintaining effective internal controls

• Making available financial and related information available to the auditors

29

16


Planning Phase


• Establishes auditor’s responsibility• Expression of opinions as to whether the financial statements

are presented fairly in accordance with generally accepted accounting principles (“GAAP”)

• Audit is conducted in accordance with generally accepted auditing standards (GAAS) and, if applicable,

• These professional require that we plan and perform the audit to obtain reasonable assurance (not absolute assurance) about whether the financial statements are free from material misstatement and are fairly presented in conformity with GAAP

30


Materiality?

• The following are based on the budget of any respective fund.• Budget Materiality

• $20,000,000 - $205,000

• $10,000,000 - 115,000

• $ 5,000,000 - 65,000

• $ 3,000,000 - 42,000

• $ 1,000,000 - 18,000

• $ 500,000 - 10,500

• $ 250,000 - 6,000

17


Planning Phase


• Additional items that are often included within the engagement letter

• Timing of the engagement

• Fees and billing schedule

32


Planning Phase

• Provided by Client (PBC) Listing

• Detail listing of items, schedules, agreements, etc. that are needed for audit completion

• Separate items between interim (if applicable) and final fieldwork

• Include due dates to determine priority of requests • Assign personnel to each item to establish responsibility

for ease of follow-up and so the auditor knows who to address questions

• Establish means to provide items requested to the auditor (e-mail, hard copy, etc.)

• Update frequently

33

18


Planning Phase

• Required Communication with those charged with governance

• Professional standards require the auditor to communicate matters related to the financial statement audit that are, in the auditor’s professional judgment, significant and relevant to the responsibilities in overseeing the financial reporting process.

34


Fieldwork (Interim and Final)

• Auditors are required to gain an understanding of the entity and its environment, including its internal control structure

• Inquiries of management and others within the entity

• Observation and inspection of key control activities

35

19



• Auditors are required to identify and assess risks of material misstatements on two levels

• Financial statement level

• Relevant assertion for classes of transactions, account balances, and disclosures

36



• Consideration of fraud in a financial statement audit (fraudulent financial reporting and misappropriation of assets)

• Auditor’s objectives:• Identify and assess risks of material misstatement due to

fraud;

• Obtain sufficient appropriate audit evidence concerning the assessed risks of material misstatement due to fraud by designing and implementing appropriate responses; and

• Respond appropriately to fraud or suspected fraud that is identified in the audit.

37

20



Consideration of fraud in financial statement audit

• Auditors are required to inquire of management, those charged with governance, internal auditors (if applicable) and others within the entity

• their knowledge of known or suspected fraud

• views regarding the risk of fraud, the risk of management override of internal control,

• knowledge of any communication received regarding possible fraud, either from customers, employees, or others associated with the entity

38



• Audits provide reasonable and not absolute assurance on the entity’s financial statements

• Sampling

• Analytical procedures

39

21



• Periodic status updates

• Determine frequency and who should attend

• Ensure the following are included:• Open Items

• Control deficiencies identified to date

• Obstacles to issuance

40



• Disclosure Checklist

• Auditee can ask whether auditor can provide a checklist template that can be completed as the entity is preparing the financial statements

41

22


Issuance

• Subsequent Events – What are we really asking about? Subsequent Events are those items occurring between the date of the financial statements (June 30th) and the date of the auditor’s report

• Auditor’s are required to perform audit procedures to identify subsequent events that will require adjustment to or disclosure in the financial statements. Procedures include:

• Inquiries of management and those charged with governance about the occurrence of subsequent events

• Reading of minutes through report issuance• Reading of entity’s latest interim financial statements, if any

42


Issuance

• The auditor should design and perform appropriate audit procedures to identify litigation, claims, and assessments involving the entity that may give rise to a risk of material misstatement.

• Attorney Letters - response should be as close to the date of the auditor’s report as is practicable in the circumstances

43

23


Issuance

• Management Representation Letter

• Obtain management’s representations that they have fulfilled their responsibility for the preparation and fair presentation of the financial statements and for the completeness of the information they provided to the auditor;

• Corroborate other audit evidence relevant to the financial statements or specific assertions in the financial statements;

• Dated the same date of the auditor’s report

• Must receive signed letter prior to report issuance

44


Issuance

• The following deliverables are the auditor’s responsibility:

• Independent Auditor’s Report on Financial Statements

• Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Audit Standards (if applicable)

• Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance With OMB Circular A-133 (if applicable)

• Others identified in the engagement letter

45

24


Issuance

• Required Communication with Those Charged With Governance

• Auditing standards require the auditor to communicate to those charged with governance and to an appropriate level of management deficiencies in internal control identified during the audit.

• Must be communicated no later than 60 days following the report release date

• Must communicate material weaknesses (a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the District's annual or interim financial statements will not be prevented or detected on a timely basis)

• Must communicate significant deficiencies (a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the District's financial reporting)

46


In Summary – Communicate Often

Open communication between the auditor and the entity will benefit everyone involved:

• Timely resolution of issues

• Research unusual or infrequent accounting treatment

• Avoid surprises

• Don’t wait until the audit to ask questions, contact your auditor as questions come up

47

25


In Summary – Be Prepared

• Audit Preparedness – largest cause of inefficiencies and potential increased audit fees is the audit beginning before the organization has completed the year-end close process AND before ALL items on the PBC list are completed

48


Audit Areas to prepare for

• Cash• Whether reconciling yourself or with Region

assistance, have cash reconciled in a timely manner.

• If using the Region ensure the adjustments required for reconciliation are being posted in SmartFinance in a timely manner. This includes throughout the year, not just audit time.

26


Receivables

• State Aid and Property Taxes Receivable• If you are calculating your own receivables, ensure to

provide your auditor with the documentation used to calculated the receivable.

• If you are relying on the auditor to propose the entries, ensure you are reviewing and approving the entries prior to posting.


Receivables – Continued

• Federal Receivables• If possible, spend and claim reimbursement for all

federal dollars in the year for which they are budgeted.

• When extenuating circumstances exists (for example, summer payoffs), make draws to federal funds as soon as possible.

• Keep in mind for fiscal year 2016 the single audit threshold is moving from $500,000 of federal expenses to $750,000 of federal expenses.

27


Receivables - Continued

• Miscellaneous Accounts Receivable• Use SmartFinance for this process if possible. Again

if making a manual journal entry ensure you have the supporting documentation to provide to your auditor. Information should include

• what the receivable is for,

• who it is from

• amount due,

• date payment received (if applicable)

• If not using currently, work with the Region to establish the period balance report and the invoices process for miscellaneous receivables.


Capital Assets

• June 30, 2014 was the 10th anniversary of GASB 34 for tier 3 Districts as described by the GASB.

• Capital Asset vs. Capital Outlay

• Capital Asset Definition

• Best practice – flag capital assets as you are going through the year and then “create” the fixed asset(s) at year end. After flagging, make copy of the invoice and place in a separate file for audit time.

• Review capital outlay/repairs and maintenance accounts at year end and capitalize as necessary (before the auditor arrives).

28


Capital Assets/GASB 34 Continued

• Be sure to contact your auditor if you have a capital project in process at year end to ensure proper handling of construction in progress.

• Capital assets acquired via capital lease.• Other than capital assets, GASB 34 also

required other schedules and disclosures. One of those is the budget comparison schedule for the general fund and all major special revenue funds. Because of this, ensure the budget approved by the board, matches the budget in smart finance.


Accounts Payable/Payroll Liabilities

• Verify balances in your 206 accounts agree to the “period balance report by fund”.

• If it does not agree, investigate any differences.

• 215 accounts• Reconcile on a monthly basis.

• Outside of health insurance all accounts should have a “reasonable/reconcilable” balance.

29


Fund Balance

• After posting and closing take a look at ending fund balances and ensure the balances are what you expected. Post reclassification adjustments as necessary.

• Make your auditor is aware if your teacher’s union has voted to approve less than 2% of the required set aside for staff development.

• Other potential adjustments could be the operating capital transfer.


GASB – What they have done to us and where they are going next

Statement No. 45

Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions

Statement No. 54

Fund Balance Reporting and Governmental Fund Type Definitions

Statement No. 63

Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position

57

30


GASB Continued

Now – Statement No. 68Accounting and Financial Reporting for Pensions –

An amendment of GASB Statement No. 27.

GASB currently has several topics they are taking comments on, mostly related to pensions and handling of pensions.

58


Auditors and the use of the “f” word

• FRAUD

• Pending or threatened litigation

31


Potpourri

• Independence• What it means for the audit?

• MD&A

• Capital Assets

• Why is it important?

• Fact and appearance

• Related party transactions• Need affidavit on file prior to paying any invoice


Potpourri

• Booster Clubs / Fundraising• Any organization outside the District’s “Umbrella”

must remain independent of the District in both fact and appearance.

• Any reference to the School District or Mascot in the name of the booster club could be an issue

• Need to ensure donors are aware of who they are giving their money to.

• Beware of funneling gambling funds• Every time you see a LG-555, you should determine

if the flow thru of funds through the district is necessary. If not, deny the donation.

32


Potpourri

• $5 gift rule

• Public Purpose• Public funds cannot benefit a private individual• No matter how it was raised, once a dollar enters the

district’s books it is public funds • If it feels “good”, you probably can’t do it.

• Reimbursement Requests• Before payment you should have:

• Detailed receipts for all items requiring it• Superintendent’s request signed off on by board chair/treasurer• All other employee’s requests signed off on by Superintendent


Potpourri

• Major vs. Non-major Funds• What does this mean?

• General Fund always Major.

• Calculation:• If any fund contains more than 10% of the district-wide

Assets, Liabilities, Revenues, or Expenses.

• Audit impact

• Financial statement impact

33


Potpourri

• Full vs. Modified Accrual • Government-wide vs. fund level

• Why the difference?

• Is one better than the other?

• What do 3rd parties care about?


Potpourri

• Budget• All changes that effect total revenues and expenses

of the budget must be approved by the board.

• Make sure what the board approves is reflected in Smartfinance.

• When adjusting to match SERVS make sure any changes you make doesn’t affect the overall total of the budget.

• If increasing a finance code i.e. 401 then decrease the 000 finance code of the same object code.

34


Potpourri

• Collateral• Any bank accounts the District owns must be

collateralized 110%.

• FDIC insures up to $250,000 of both interest bearing and non-interest bearing accounts at each financial institution.

• It is the district’s responsibility to ensure proper coverage is available at all times of the year.

• Does not apply to investments held at a brokerage (for example – MSDLAF, Morgan Stanley, Northland Trust)


Potpourri

• Food Service• Need to tie into revenue amount with non-financial

data.• Meals served

• Detail of Ala carte items sold. Most districts lack in this area.

• Why should you care?• Food service providers guarantee a break-even.

• Food service makes money already

• Could cost the district more money to upgrade system

35


Potpourri

• Food Service• Common issues

• Where to code lunch money deposits?• Who’s responsibility is it to track food service revenue

(outside provider)• Not sophisticated enough software or not using software

features that will allow tracking

• Best Practice• Code all food service revenue to one account and true-up

with a journal entry each month

• Audit impact – modified opinion


Potpourri

• Community Service/Fitness Center Revenue• Need to tie into revenue amount with non-financial

data.• Cost of class x class participants should equal smart finance

• Kids in Daycare

• Fitness center members

• Sports/Play tickets should use pre-numbered tickets.

• Most districts lack in this area.

• Why should you care?• Are we getting all the money we should?

• Audit impact – modified opinion

36


Potpourri

• 215 accounts• The balance of these accounts should include any $s

you have withheld from an employees paycheck, but have not yet remitted to the 3rd party provider.

• These accounts should zero out once you pay the 3rd

party provider.

• Due to summer payoffs, these accounts are always most significant come year end/audit time.


Potpourri

• 215 accounts• What your auditor is going to look at:

• Is the amount withheld on your summer payoffs relating to pay dates from July 1st to August 31st comparable to the balance in the 215 accounts as of 6/30/201X

• Your auditor will look at the balance of the 215s through the 201X02 month of the subsequent year and expect the 215 accounts are close to zero once the summer payoffs are over.

• Flex accounts are always a different story, but the balance should stay reasonable.

37


Potpourri

• 215 accounts


Potpourri

• 215 accounts

38


Potpourri

• 215 accounts• Common issues

• Flex accounts

• 215 payments showing up in the period balance report. These items should be reclassed out of XX-206-000 to XX-215-XXX. • Hopefully, you can work with Region to get this issued fixed

• Not making 12 payments in the year to a 3rd party vendor.

• Employees switching plans/coverage or leaving unexpectedly


Potpourri

• Salaries vs. Wages• Far and away the most significant expense of a

District

• What auditors are going to look at:• How salaries in the CY compare to the PY

• Factoring in increases and steps/lanes

• Does FICA/Medicare and PERA/TRA withheld make sense

• Does Salary payable at the fund level compare to the PY.

39


Potpourri

• Salaries vs. Wages• How can you get prepared for audit?

• Track FTEs

• Obtain % change in salaries only from negotiations

• Have of list of retired/departing employees as well as new employees

• Other unusual circumstances


Potpourri

• Prepaid Items• If you incur the expense in 20X1, but receive the

benefit in 20X2 or beyond. You have a prepaid.

• Can be booked with a journal entry as they incur, best practice is to make a reversing entry

• Common items• Insurance coverage that doesn’t follow fiscal year. You

should work with your insurance company to get the coverage to match. Important not to pay early.

• Assets purchased after the school year ends in May/June. Benefit established when items is put in service.

40


Potpourri

• Accounts Payable• Items on the period balance report that are due from

another district can be reclassed from XX-206-000 to XX-210-000.

• The region and service co-ops are considered districts

• Items on the period balance report that are due from another government can be reclassed from XX-206-000 to XX-212-000.

• Most commonly the city(ies) the district reside(s) in


Potpourri

• Determining if individuals are W-2 employees or 1099 independent contractors.

• Ticket takers

• Line judges

• Officials

• Section events

• Fringe benefits• Accountable vs. non accountable plans

• IRS stance on expense reimbursements with or without and overnight stay.

41


Questions


Contact Information

Matt Moline, CPA

1911 Excel Drive

Mankato, Minnesota 56001

507.304.6903

Joel Stencel, CPA

1911 Excel Drive

Mankato, Minnesota 56001

507.386.6243

42


Thank you!

Date post:	17-Aug-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Student Activity Accounting T… · 4 6 Foundations for the Use of MAFA • Convenience funds are...

Documents