AUDIT AND

ACCOUNTING ISSUESPresented By

Jan Page, Audit Manager, West TN AreaDIVISION OF LOCAL GOVERNMENT AUDIT

jan.page@cot.tn.gov(731) 421-7473

YEAR END CLOSING AND RELATED RECORDS

DOCUMENTS PREPARED “FOR AUDITORS” (FOR AUDITORS TO PREPARE YOUR FINANCIALS)

Capital Asset Records – should be prepared at year end (6-30). Should also be complete with additions, deletions (and current depreciation calculations)

Accrued Leave Balances (if any) – list by employee with current leave balance, amounts and extensions

Fund Balance Worksheets – worksheet documenting calculations for restricted, committed and assigned fund balances

OTHER REMINDERS Close Records ASAP– check with your area audit manager for

when you are scheduled to be audited and coordinate with them to arrange a date. Contact local education field rep if their assistance is needed in year end calculations and arrange a schedule

Inform Auditors of any Unique Issues Early – any issues that are unusual or unique should be discussed with auditors early in the audit process to allow for audit planning

Update Contact List of Officials/Board Members – Please have an updated contact list (correct names, mailing addresses, and email addresses if available) for the Director of Schools and all board members who have served from July 1st of the previous audit year through current – including new board members. If the board members have served only a portion of the time, please include their dates of service

EMPLOYEE COMPENSATION

EMPLOYEES SHOULD ONLY BE COMPENSATED THROUGH THE PAYROLL SYSTEM WITH PROPER APPROPRIATION AUTHORITY

The only exception to this is a direct reimbursement for expenses incurred personally for the benefit of the school department

And then only subject to restrictions of department and board policies (i.e., reimbursement for school department approved travel/training expenses)

IMPROPER PAYMENTS TO EMPLOYEES INCLUDE

Gift Cards (seems popular lately in some systems) Payments made through vendor system and

reported on 1099s Contract with retired employees (currently receiving

payment from TCRS) through the vendor system. (These employees should have contracts reported to TCRS and should be paid by payroll system subject to work restrictions approved by TCRS)

Any other inventive way of compensating employees outside of the payroll system and/or appropriation authority

PREVALENT AND/OR SIGNIFICANT RECENT AUDIT FINDINGS

EXTENDED SCHOOL PROGRAMS Violations of 3 day deposit law for

collections Related cash and internal control

deficiencies over cash collections/receipting/depositing

PAYROLL DEDUCTION ACCOUNTS Some payroll deduction (liability)

accounts are not reconciled – these accounts should zero out at some point if classified, coded and paid correctly and timely

CREDIT/PURCHASING CARD POLICIES AND PAYMENTS

The board should adopt specific policies governing credit/purchasing cards

Credit/purchasing cards should not be paid from statements without some method of obtaining and reviewing original invoices/receipts and comparing them back to the statements

DEBT ISSUANCE SHOULD BE PROPERLY APPROVED AND REPORTED

All debt instruments issued on behalf of the school department should be approved by the board of education and the board of county commissioners PRIOR TO ISSUANCE

In addition, a report on the debt obligation should be filed with the Division of State and Local Finance in the Comptroller’s office within 45 days of issuance

CASH FLOW ISSUES IN SCHOOL FEDERAL PROJECTS FUND File for reimbursement timely If necessary, approve provisions

allowing interfund loan (aka, “permanent transfers”)

Interfund loans as above should be approved by the Division of State and Local Finance as previously mentioned for other debt instruments

CELL PHONE POLICIES SHOULD BE ADOPTED BY THE BOARD

General policies addressing who is to receive phones paid for by the school system and the usage thereof should be adopted by the board of education

ENSURE PROPER BUDGET IS POSTED The budget approved by the County

Commission should be the one posted to your accounting records/financial statements

Ensure that the original budget and all properly approved amendments are posted to the accounting records

Budget reports should include the available beginning balances approved in the budget process

CONSTRUCTION CONTRACT REQUIREMENTS

An escrow account for contract retainage is required for all contracts of $500,000 or greater (Section 66-34-104, T.C.A.)

A licensed contractor is required on all construction contracts of $25,000 or more (Section 62-6-102, T.C.A)

Construction contracts of $25,000 or more involving architecture, engineering or landscape architecture require plans made by a registered architect (Section 62-2-107, T.C.A)

CONFLICT OF INTEREST FOR A COUNTY COMMISSIONER TO HAVE A CONSTRUCTION CONTRACT WITH SCHOOL BOARD

It is a conflict of interest for a county commissioner to enter into a construction contract with the board of education (Section 12-4-101(a)(1), T.C.A)

This statute has been upheld more than once by the state attorney general. (Opinion 91-31) and others referring to 91-31 as authoritative

We consider this opinion binding until such time that it is specifically contradicted by subsequent litigation

FINANCIAL STATEMENTS

FINANCIAL STATEMENT PRESENTATION CHANGES

GASB statements 63 & 65 change some long-term assets and liabilities in the financial statements to “deferred inflows” and “deferred outflows”. Will not affect many accounts and auditors will work with you to record these items in the financial statements

Any long-term debt currently shown on your financial statements as liabilities of the school department (notes, bonds, certain capital leases) will be moved for financial statement presentation to the primary government financial statements. Again, auditors will work with you to help record these items

?QUESTIONS?

HAVE A GREAT DAY!Contact Information:

Jan Page, Audit Manager, West TN Area

DIVISION OF LOCAL GOVERNMENT AUDIT

jan.page@cot.tn.gov(731) 421-7473