Transcript of April 11, 2013 Presented by: Amy Tynes, CPA Allen, Green &Williamson, LLP.
- Slide 1
- April 11, 2013 Presented by: Amy Tynes, CPA Allen, Green
&Williamson, LLP
- Slide 2
- Basic Bookkeeping Practices Objective Taking a look at various
account classifications to determine if financial information is
properly reported and determining if the trial balances are ready
to be audited.
- Slide 3
- Topics Assets: Cash Accounts Receivable Inventory Prepaid
Expenses Capital Assets Deferred Outflows
- Slide 4
- Topics Liabilities: Accounts Payable Wages Payable and Payroll
Liabilities Compensated Absences Post Employment Benefits Deferred
Inflows Net Assets Revenues and Expenses Changes in Audit
Process
- Slide 5
- Cash The book balance per your bank reconciliation should agree
to general ledger. Any outstanding or reconciling items should be
reviewed to ensure that they are in fact transactions in transit.
Checks written or deposits made after year-end, even though they
are related to year being closed out, should not affect cash but
should be accrued as a receivable or payable. Need to ensure when
transfers are processed between bank accounts, whether
electronically or by check, that both sides (the deposit and the
withdrawal) are recorded in the same period.
- Slide 6
- Cash At year end, negative cash balances in funds should be
moved to a due to or interfund payable account. With the
corresponding due from or interfund receivable account in the fund
that has the cash balance. This is usually the general fund. Need
to verify what accounts are a part of the master bank account if
there is more than one master bank. Outstanding checks: Need to
review checks that are still outstanding at the end of the year to
determine if any should be sent to Louisiana Unclaimed
Property.
- Slide 7
- Cash Louisiana Unclaimed Property: The holding periods the
timeframe the item is held by the Agency before submitting to La.
Unclaimed Property Division: One year holding period Wages and
payroll Deposits held by utilities, proceeds of a class action
lawsuit or refund ordered by the court Two year holding period
Rents, royalties and mineral proceeds Three year holding period
Gift certifications, dividends and stocks or other intangible
ownership interest
- Slide 8
- Cash Louisiana Unclaimed Property (cont.): Five year holding
period Checks, drafts or similar instruments Money orders, cashier
or certified checks Bonds Demand, savings or matured time deposits
Seven year holding period Express money orders or similar
instruments Fifteen year holding period Travelers checks
- Slide 9
- Cash Louisiana Unclaimed Property (cont.): Steps required after
holding period If the items to the individual/company are in
aggregate under $50- No requirements necessary, money is submitted
to La. Unclaimed Property. If the items to the individual/company
are in aggregate $50 or more- The Agency is required to submit a
letter to the individual/company notifying them of the outstanding
item and they have 60 days to cash or deposit it or to contact the
Agency to reissue the item. These letters are to be maintained by
the Agency. If the letter comes back as undeliverable, then the
Agency does not have to wait 60 days to submit to the state.
- Slide 10
- Cash Louisiana Unclaimed Property (cont.): If the items to the
individual/company are in aggregate $50 or more (cont.)- If the
letter does not come back as undeliverable, then the Agency is
required to wait 60 days. Once the 60 day timeframe is completed
and the item is still remaining outstanding, then the Agency is
required to submit the monies to the state. Items are required to
be submitted based on the States fiscal year end June 30 th.
- Slide 11
- Cash Louisiana Unclaimed Property (cont.): Items are required
to be submitted based on the States fiscal year of June 30 th. For
instance, if a vendor check has a holding period of 5 years, then
the check would have to be outstanding prior to June 30, 2008 if it
is to be submitted for the States FYE 6/30/2013. For all holders,
payment is due to the Louisiana Unclaimed Property Division by
November 1 st with the annual report. Penalties and interest will
be calculated if submitted after November 1 st.
- Slide 12
- Cash Louisiana Unclaimed Property (cont.): The forms required
to be submitted with your payment are UP-1 and UP-2. These forms
along with other information can be obtained at
www.treasury.state.la.us/Home%20Pages/UnclaimedProperty.aspx
www.treasury.state.la.us/Home%20Pages/UnclaimedProperty.aspx
- Slide 13
- Accounts Receivable Processes at year end: Determine that all
accounts receivables from prior year have been cleared out. If
accounts receivables remain from prior year, then need to determine
if the receivable is still valid and collectible. If it is
determined the receivable is not valid, then receivable should be
removed. If it is determined the receivable is not either fully or
partially collectible, then an allowance for doubtful accounts
should be recorded. If it is determined the receivable is
collectible, but not within one year, this information should be
provided to the auditor for note disclosure. Ending balance should
be supported with deposits slips, EFT notices, and/or request for
reimbursements for unreimbursed expenses.
- Slide 14
- Accounts Receivable Are all accounts receivables relating to
outside sources? Receivables from other funds, and not outside
sources, need to be moved out of an accounts receivable account and
into a due from or interfund receivable account. Additionally, the
fund that is paying another fund back should be reporting a due to
or interfund payable rather than an accounts payable. If the
interfund receivables and payables are not going to be cleared out
within the next year, then this information should be provided to
the auditor for note disclosure purposes. A reconciliation of which
funds owe another fund should be prepared. The amount owed to other
funds (due to) should agree to the amount due from other funds.
Funds that will not be paid back need to be recorded as a transfer
in/out.
- Slide 15
- Inventory Most of the School Boards inventory is relating to
purchased food and commodities. Others may have a large amount of
other supplies such office and maintenance supplies. The Agency
should establish policies and procedures on inventory. At a
minimum, year end inventory counts should be completed.
- Slide 16
- Inventory A copy of the year end counts and the values should
be provided to the Accounting Department to ensure balances on the
general ledger agree with the year end counts. Adjustments should
be made to agree with year end balances. The auditors should be
notified when physical inventory is scheduled to be taken, so they
can plan to observe, if necessary.
- Slide 17
- Inventory Commodity inventory balances should agree to the
unearned revenue (no longer considered as deferred revenue)
reported from the U.S. Department of Agriculture. Commodities are
either sent to the Agency or the Processor throughout the fiscal
year. Commodities are usually reported as a revenue and an expense
when received. At year end, any commodity inventory on hand should
be reported as inventory; the offset will be to food expense.
Additionally, the Agency should record unearned revenue to agree to
the commodity ending balance and offset the federal revenue
reported.
- Slide 18
- Prepaid Expenses Prepaid expenses are items that are paid in
advance or cover a length of time that crosses reporting periods.
For instance, a service or maintenance agreement that begins in one
fiscal year and ends in another fiscal year. Full accrual basis of
accounting: Business-type activities or proprietary funds.
Proportionate amount of expense should be recognized in each
benefitting period. Prepaid expenses are still classified as an
asset on the Balance Sheet and the Statement of Net Position
because the prepayment did not result in a consumption of net
position. (cash decreased and prepaid expense increased with not
change in net position as a result of the transaction).
- Slide 19
- Prepaid Expenses Modified accrual basis of accounting:
Recognition is based on the Agencys policy. If using the purchase
method The Agency may recognize the entire amount of prepayment as
an expenditure for the period the payment is made. If using the
consumption method The Agency will recognize a proportionate amount
of expense in each benefitting period. The Agencys policy should be
reflected in the notes to the financial statements.
- Slide 20
- Capital Assets The Agency should have policies and procedures
for capital assets: Different capitalization thresholds are allowed
to be established for various classifications of capital assets.
Software or intangible assets Equipment Buildings/buildings
renovations and improvements Useful lives should be established for
each classification The varying thresholds should be properly
entered into the capital asset program.
- Slide 21
- Capital Assets Policy and procedures (cont.): Tagging process
Who is responsible? When and how are items tagged? Physical
inventory This should be taken at least annually. Support should be
maintained for the physical count. Deletion process Such as
completion of deletion forms Who approves deletions?
- Slide 22
- Capital Assets Policy and procedures (cont.): Additions When
are additions added to the system? Who is responsible for adding
the assets? How is the information gathered and when is it provided
to the person responsible? The policy and procedures should be
provided to the staff.
- Slide 23
- Capital Assets Construction in progress: A listing of all
construction projects should be maintained by the Agency.
- Slide 24
- Capital Assets Construction in progress (cont.): All cost
associated with the projects should be reviewed. The costs that may
be included in the costs of the project: Architect and engineering
fees Contractors and subcontractors application of payments The
costs that are not included in the costs of the project: Legal or
recording fees Interest incurred to acquire a capital asset that
are accounted for as a part of governmental activities
- Slide 25
- Capital Assets Construction in progress (cont.): Improvements
versus Repairs Any outlay that does no more than return a capital
asset to its original condition, regardless of the amount, should
be classified as repairs. If the outlay increases the assets
utility, then it should be capitalized. If the outlay extends the
total estimated useful life of the asset, then it should be
capitalized. If a project covers both repairs and improvements,
then an appropriate portion of the cost should be assigned to
each.
- Slide 26
- Capital Assets Construction in progress (cont.): Year end
accruals Review the first application for payment submitted to the
Agency to process in following fiscal year end to determine if an
accrual is necessary: Each application will show period of work
covered; usually in the top left hand corner of the application for
payment. If work was performed before fiscal year end, then
construction payable along with retainage payable should be
recorded. If prior year had a construction payable or retainage
payable, make sure these have been reversed.
- Slide 27
- Capital Assets Construction in progress (cont.): Completed
projects should be added to capital asset system. Assessment of
assets for impairments: A significant, unexpected decline in the
service utility of a capital asset. Must be Significant Unexpected
Permanent The government has burden of proof that a decline in
service utility is merely temporary.
- Slide 28
- Capital Assets Impairments (cont.)- Some indicators of
impairment: Physical damage where action would be needed to restore
lost service utility. Changes in laws, regulations, or other
environmental factors negatively impacting service utility
Technological developments Change in the manner or duration of use
of a capital asset that negatively impacts service utility Stoppage
of construction Stoppage of development for internally generated
intangible assets
- Slide 29
- Deferred Outflows of Resources GASB 63 For fiscal year ends
after December 15, 2012. Deferred outflow of resources is a
consumption of net position by the government that is applicable to
future reporting period. Most common deferred outflow of resources
for School Boards would result from the refunding of debt. The
difference between the reacquisition price and the net carrying
amount of the old debt should be reported as a deferred outflow of
resources. This is recognized as a component of interest expense in
a systematic and rational manner over the remaining life of the old
debt or the life of the new debt, whichever is shorter.
- Slide 30
- Deferred Outflow of Resources Even though prepaid expenses are
related to a future period, they are still classified as an asset
on the Statement of Net Position because the prepayment did not
result in a consumption of net position. (cash decreased and
prepaid expense increased with no change in net position as a
result of the transaction). GASB 63 is changing the financial
statement format.
- Slide 31
- Deferred Outflows of Resources Before GASB 63 After GASB 63
Statement of Net Assets: Assets (Liabilities) $ Net Assets
Statement of Net Position: Assets +Deferred Outflows (Liabilities)
(Deferred Inflows) $Net Position Note: This format is for
government-wide financial statements and for proprietary
funds.
- Slide 32
- Deferred Outflows of Resources Before GASB 63 After GASB 63
Balance Sheet Assets = Liabilities + Fund Balance Balance Sheet
Assets +Deferred Outflows = Liabilities +Deferred Inflows +Fund
Balance Note: This format is for governmental funds.
- Slide 33
- Accounts Payable Year end review of accounts payable: Determine
if all prior year accounts have been cleared out. If accounts still
remain, determine if the payable is still valid. Determine if
payables go to outside sources such as vendors. If payable is for
indirect costs, these payments need to moved to due to or interfund
accounts.
- Slide 34
- Wages Payable and Payroll Liabilities Wages payable and payroll
liabilities seem to be one of the most difficult to test from
auditors perspective. Wages payable and payroll liabilities do not
always get the attention they require. This process is not just a
year-end activity.
- Slide 35
- Wages Payable and Payroll Liabilities Items to review
throughout the year, before year end: Are payroll liabilities
clearing out when paid? These need to be reviewed monthly Ending
balances need to reflect only the amounts still owed to outside
sources. Any outstanding balances need to be researched and cleaned
up. Are old/inactive funds still reflecting wages payable or
payroll clearing account balances? These need to be researched and
cleaned up.
- Slide 36
- Wages Payable and Payroll Liabilities Year end processes:
Review all summer payrolls for proper recording. This includes the
main summer runs for the 9 month employees as well as any extra
items such as annual leave, stipends, subs, etc. Are all amounts
reported in wages payable? These should not be reducing cash. Most
common on extra payroll runs.
- Slide 37
- Compensated Absences Compensated absences procedures need to
line up with policy. What minimum years of experience is being
accrued? GASB No. 16 requires compensated absences liabilities to
be reported based on the probability of use or payment of certain
balances. Probable means that the future event is likely to take
place. The Agency needs to determine what is the minimum years of
experience for an employee to receive payment of these balances.
Each Agency may differ from another. This should be discussed in
the compensated absences policy.
- Slide 38
- Deferred Inflows of Resources Deferred inflow of resources is
an acquisition of net position by the government that is applicable
to a future reporting period. Revenues and other governmental fund
financial resources should be recognized in the accounting period
in which they become both measurable and available. When an asset
is recorded in governmental fund financial statements but the
revenue is not available, the government should report a deferred
inflow of resources until such time as the revenue becomes
available. Most common example would be advances in which the only
constraint for recognizing the revenue is time. The government has
received an asset (cash) with no obligation (liability) other than
waiting for the period of availability resulting in an acquisition
of fund balance/net position.
- Slide 39
- Deferred Inflows of Resources Grant funds received in advanced
of meeting eligibility requirements would not be a deferred inflow
of resources because the government has a liability that can only
be satisfied by performing under the grant agreement or returning
the grant advance. Assets (cash) and liabilities (unearned revenue)
increase with no increase in fund balance/net position as a result
of the transaction. Recognition of assets and revenues should not
be delayed pending completion of purely routine requirements, such
as the filing of claims for allowable costs under a reimbursement
program or the filing of progress reports with the provider. The
revenue is measurable and available.
- Slide 40
- Post Employment Benefits There are two main types: Pensions
Other post employment benefits such as Health Insurance Pensions:
GASB 67 and GASB 68 GASB 67 At Plan Level Enhances note disclosure
and RSI at plan level Effective for periods beginning after June
15, 2013
- Slide 41
- Post Employment Benefits Pensions (cont.): GASB 68 At Employer
Level Requires governments providing defined benefit plans to
recognize their long-term obligation for pensions benefits as a
liability. Enhances note disclosures and required supplemental
information (RSI) Effective for period beginning after June 15,
2014
- Slide 42
- Post Employment Benefits OPEB: Most plans are due for the
actuarial valuation for fiscal year ended 2013. Data file used by
the actuary is required to be reviewed and tested by the
auditors.
- Slide 43
- Fund Balance Fund Balance is defined as the difference between
governmental fund assets and deferred outflows of resources, and
liabilities and deferred inflows of resources. Policies should be
established: Should address the five different components:
Nonspendable Not in spendable form Restricted Constraints that are
externally enforceable Committed Highest level of decision-making
authority places constraints. Assigned Constraint established by an
approved individual to set aside resources for a particular
purpose. Unassigned Only reported in general fund and does not meet
definition of any above.
- Slide 44
- Fund Balance Policy should be established (cont.): Should
address the order of the use of resources: Restricted versus
unrestricted Committed versus assigned Changes in classifications
Additions and deletions within the classifications, especially
assigned and committed, should be maintained by the agency and
provided to the auditors. These changes are required to be reviewed
by the auditor each year.
- Slide 45
- Revenues Items to double check: Classification of revenues
Federal State Local Federal revenues are properly reported. These
should have a CFDA Number. Review award letters Ad valorem taxes
Recording of pension withheld Recording of 1% sheriff
- Slide 46
- Expenses Ensuring proper reporting in accordance with LAUGH
guide. Refunding of bonds: These should be reported on the books as
bond proceeds and payment to escrow agent. Capital lease payments:
These should be separated as to amounts for principal and amounts
for interest. The bond refunding and capital lease both should be
recorded even if you did not physically receive the cash or expend
the cash.
- Slide 47
- Expenses At the government-wide level of financial statements:
Debt issuance costs except for any portion that is related to
prepaid insurance will now be recognized as an expense in the
period incurred. Agencies that have deferred debt issuance cost,
the implementation of GASB 65 is to be applied retroactively by
restating financial statements, if practical, for all periods
presented. If restatement is not practical, the cumulative effect
of applying this Statement, if any, should be reported as a
restatement of beginning net position or fund balance.
- Slide 48
- Changes in Audit Process 2011 Yellow Book revision: Changes
regarding nonaudit services: Preparation of financial statements
Preparation of note disclosures GASB 34 conversion entries
Depreciation schedule Construction in progress listing Cash to
accrual conversion Risks of auditors independence as a result of
performing nonaudit services for auditee
- Slide 49
- Changes in Audit Process What does this mean to the auditee?
New engagement letter or engagement addendum Required to describe
all nonaudit services. Auditor required to assess more thoroughly
whether management possesses suitable skill, knowledge, or
experience to oversee the nonaudit service and to document that
assessment. The individual is not required to possess the expertise
to perform or re-perform the service. Additional documentation of
management taking ownership of nonaudit services.
- Slide 50
- Changes in Audit Process Examples of additional documentation:
Preparation of financial statements, notes and GASB 34 conversion
Auditee, internally or externally, completing the governmental
disclosure checklist This is not sufficient by itself; therefore,
AICPA recommending another individual within the audit firm
performing a review. Auditee reviewing and approving the audit
adjustments. Depreciation schedule: Auditee providing list of
additions, which should include the useful life of each item, and
list of deletions.
- Slide 51
- Changes in Audit Process Examples of additional documentation:
Construction in progress listing: Auditee required to provide all
items that need to be included on the listing. Cash to accrual
entries: Auditee required to provide listing of accruals, which is
to include all account numbers.
- Slide 52
- Changes in Audit Process Management responsibilities for
nonaudit services: Auditee agrees to assume all management
responsibilities. Auditee agrees to evaluate the adequacy and
results of the nonaudit services performed. Auditee agrees to
accept responsibility for the results of the nonaudit
services.
- Slide 53
- Questions
- Slide 54
- Contact Information Amy Tynes, CPA Allen, Green &
Williamson, LLP 888-741-0205 amy@allengreencpa.com