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Get Ready for the 2018-2019 Audit

Get ready for the upcoming audit by knowing the due dates, required uploads, and comprehensive annual financial report (CAFR) sections. Understand the importance of CAFR and learn about the introductory, financial, statistical, and single audit sections. Discover the significance of the auditor's management report, grants, and other DOE audits.

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Get Ready for the 2018-2019 Audit

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  1. Get Ready for the 2018-2019 Audit Kathryn Perry, CPA Jump, Perry and Company, LLP

  2. Due Dates and Uploads • Due December 5th every year • Data Collection Form due within 30 days of audit submission • Board resolution must be from a Board meeting within 30 days of audit submission • Uploads: • CAFR -AMR -Cover Letter • Peer Review -DCF -CAP • Resolution -COI

  3. CAFR • Comprehensive Annual Financial Report • CAFR sections: • Introductory Section • Financial Section • Statistical Section • Single Audit Section

  4. Why a CAFR? • The minimum GAAP requirements are MD&A, Basic Financial Statements and Required Supplementary Information • Broader presentation of GAAP financial statements • Gives a spirit of transparency and full disclosure • Provides additional information for credit rating agencies

  5. Introductory Section • List of Principal Officials • Letter of Transmittal • Organizational Chart • IASBO COE

  6. Transmittal Letter • Official communication of your government and serves to convey the financial report • Cannot be dated any earlier then the audited financial statements • Introduce the reader to the BOE • Addressed to “The Board and Citizens” • Must include • Management’s responsibility for the financial information

  7. Transmittal Letter • Internal control structure • Independent audit • Refer to MD&A, but do not duplicate information or that in the Notes • Profile of the school district • Information useful to assessing the economic condition of the school district

  8. Financial Section • Independent Auditor’s Report • Management Discussion and Analysis • Basic Financial Statements • Required Supplementary Information • Combining and individual fund presentations and supplementary information

  9. Financial Section • Independent Auditor’s Report • Management Discussion and Analysis • Describe the basic government-wide financial statements • Provide condensed financial data-current year and preceding year • Provide an analysis of the school districts overall financial position • Discussion of capital assets and long-term debt • Has to agree with the financial statements

  10. Financial Section • Basic financial statements • District-wide financial statements-A’s • Fund financial statements-B’s • Governmental Funds • Proprietary Funds • Fiduciary Funds • Notes to the Financial Statements • Required Supplementary Information • C through I

  11. Statistical Section • Financial Trends-feeds from auditor financial data • Revenue, Debt, Demographics and Economy and Operating Information • Unaudited • To be provided to the auditor

  12. Single Audit Section • Opinions on Internal Control and Grant Compliance • Schedule of Federal Awards(SEFA) and Schedule of State Awards (SESA) • Notes, Findings and Prior Findings

  13. SEFA & SESA • All Federal and State Grants need to be included on schedules • All grants need Grant numbers • Need to provide grant documents • Major programs are determined from the SEFA and SESA • Totals by Fund need to tie to SEFA and SESA including Accounts Receivable and Deferred Revenue

  14. Single Audit • Federal Requirements • Single Audit/Uniform Guidance • If cumulative federal expenditures exceed $750,000 then a single audit must be performed • Low-risk Auditee-why you want to be one • What is a major program? • Grant of $750,000 or 3% of award if in excess of $25 - $100 million

  15. Single Audit • Major program audit requirements • Must be audited once out of a 3 year period • Single Audit Summary • Schedule of Fed and State awards • Data Collection Form and filing • Findings • Corrective Action Plan

  16. Grants • Major Program • Specific Grant Testing • Testing is based on Grant Compliance Supplement • Testing of internal control over grant compliance

  17. Other DOE Audits • Findings from DOE audits • Inform auditor of any findings • Auditor has to review Corrective Action Plan • Report on findings in current year CAFR

  18. Auditor’s Management Report • Specific DOE testing not normally part of a GAAS audit • Surety bonds • Secretary Reports/Treasurer Reports • Bids/over bid threshold • Food service • Student activities • ASSA • Transportation

  19. Auditor’s Management Report • Tuition charges • Payroll sign-offs • Employee position control roster • Encumbrances • Travel • TPAF reimbursement • Testing for lead of all drinking water

  20. ASSA & DRTRS • ASSA Testing can be done in November • Depending on size of District this can be very time consuming • Need to keep all of the records/backup used to calculate the student count • A specific number of students must be tested • The auditor will need to see many IEP’s, private tuition contracts, transportation contracts, free & reduced lunch applications, and ESL/LEP info

  21. Audsum • Auditor inputs based on final CAFR balances • The detail by school entered by BA (new for 2017-18) • BA needs to review auditor input • Audsum creates the base information for the next years budget • Needs to be certified by due date

  22. Reports to have ready • Secretary’s Report • Balance Sheet by fund • Annual activity for balance sheet accounts • Revenue report by fund • Expenditure report by fund – grouped by object • FICA reports from DOE • Current year and next year budget • State Aid Summary

  23. Reports to have ready • Ex-Aid and Non public aid • Grant reports from DOE • Compensated Absences schedule • New Leases • List of Bids • Vendors above bid threshold

  24. Year End • Review Board Secretary’s report • Cash • All bank reconciliations need to be prepared and free of unrecorded adjustments • Old/stale checks should be researched and cleared up • Total cash in all funds should reconcile to Treasurer’s report which should tie to bank reconciliations

  25. Year End • Accounts Receivable • Account balance should tie to State Aid Payments Schedule • Any deductions need to be recorded • Fund 20 • Most grants need to have the costs incurred before the grant can be drawn down • Fund 30 • Any SDA grants need to be recorded when reimbursement requested • Both funds generally “borrow” from Fund 10

  26. Year End • Accounts Payable/Encumbrances • Encumbrances need to make sense • Next fiscal year expenditures should not be included • Auditors do not want to get into a discussion about whether it belongs in encumbrance or not • Fund balance section generally do not reflect all restricted amounts • No over expended line items

  27. Fund Balances • Must tie to the prior year ending in total • Were there entries made against FB during the year?

  28. IS FUND BALANCE ROLLING

  29. Reserved Fund Balances • Must have resolution in June Board Meeting to put money into reserves • Types of reserves available • Tuition Reserves • Maintenance Reserve • Capital Reserve • Emergency Reserve • Waiver Offset Reserve • Legally restricted – in budget for next year • Excess Surplus • Debt Service Reserve Have until June 30th to set up

  30. Reserves • Tuition reserve • Must have a tuition contract with another LEA • Must provide the contract to the auditor • 2 years 10% max of contract per year • If used in budget-it is taken out of reserve and must recalculate the 2 years based on Resolution • Maintenance Reserve • Need Maintenance plan • max no more than 4% of the replacement cost of buildings

  31. Reserves • Emergency reserve • $250,000 or 1% of budget up to $1 million • Need Commissioner approval for withdrawal • Need to prove it is an emergency • Can be budgeted for use for excessive health care costs or security improvements

  32. Reserves • Capital Reserve • Separate cash account – not required but easier • Interest earned is added to account • Be careful to actually withdraw the money if it is used • Separate accounting in the footnotes • Need resolution/information of withdrawal/add

  33. Excess Surplus • How to calculate • What Aid is excluded from calculation • If you do not have a resolution to add money to the other reserves and excess surplus calculates-there is nothing the auditor can do

  34. EXCESS SURPLUS CALCULATION

  35. The NJ Audit Program • Always read the “Significant Changes” page • FYI-The audit program can answer many BOE questions they ask the auditor

  36. Section 1-General Compliance • Appointment of Auditor/required audit steps • Risk Assessment • Internal control testing • Fraud analysis • Minutes and resolutions • The auditor reads all minutes • Look for bids, required policies, unusual discussions

  37. Section 1-General Compliance • Treasurer • Not required • Board Secretary takes over roles of Treasurer • A Board Designee prepares the bank reconciliation • Fund Checklists

  38. Section 1-General Compliance • Budgets and Transfers • Transfers should be in minutes • Any County Superintendent approvals should be provided • Transfers to Reserves-Very Important!! • Interfund Balances must cancel out • CAFR footnote needs to disclose why the interfund

  39. Section 1-General Compliance • Bids and Contracts/Purchasing • Auditor does test bids • Print out a report detailing all vendors being paid in excess of bid threshold • State contracts should be used/Consortiums • Required review of open purchase orders at year end-Encumbrance Testing • w/o QPA $29,000 w/QPA $40,000

  40. Section 1-General Compliance • Chart of Accounts/Expenditure Classification • Expenditures must be reported in proper account • Auditors test voucher packages using the Chart of Accounts • Auditor reviews the classification of Administrative Expenditures • BA provides salary detail • Over expenditures

  41. Section 1-General Compliance • Year end Procedures • Review open PO’s • Review balance sheet accounts • Does the state aid equal the state aid report? • Has the state aid been reduced properly? • Special Revenue Fund-is the AR and Deferred Revenues for each grant calculated • Audit entries from PY?

  42. Section 2-Specific Compliance • Fund 10 • Board Secretary and Treasurers Report • Auditor will tie each month out/AMR finding • Bank reconciliations • Not all cash accounts on Cash Report • They all need to be reconciled monthly • Petty Cash • Need to re-establish July 1

  43. Section 2-Specific Compliance • Investments- use only approved Banks • Check Banking & Insurance website for list of approved GUDPA banks • Revenue • Need State Aid report • Schedule in J’s of all other revenue • Reserve interest needs to be segregated • District Taxes • Auditor will confirm with town

  44. Section 2-Specific Compliance • Tuition • Have available your DOE certified rates • Can only have reserve for 2017-18 and 2018-19 • On-behalf FICA • Obtain schedule from DOE with all reimbursements. Will assist in determining Accts Rec at year end

  45. Section 2-Specific Compliance • Compensation Reporting • All 1099’s were filed • All required payrolls were certified/signed off • Get completed W-9’s for all vendors • W-2’s and W-3’s • Pensionable Wages • Auditor will test pension reports • Reviewed as part of payroll testing • Employee Contribution for Health Benefits • Calculated on base wages/paid monthly to insurance company • Provide info on procedures • Have a written cafeteria plan

  46. Section 2-Specific Compliance • Refunds, e-rate, Cancellations • Current year cancellations go against expenditure • Prior year are Misc Income • Travel Expenditures • Tested/Must have Policy • Health Insurance • Sale and lease-back contracts

  47. Section 2-Specific Compliance • Required Maintenance • Must spend 2% of replacement cost of new facility • Required schedule in J’s • Reserves • Capital reserve, Maint Res, Tuition Res, Emergency Res schedule in CAFR notes • Rules for use • Excess Surplus • 2% of expenditures/minimum $250,000

  48. Section 2-Specific Compliance • Fund 20 • What goes in Fund 20? • Grants should have budgets • Teachers salaries charged should relate to grant • A grant cannot have Accts Rec and Def Rev • TPAF and FICA reimbursement not allowed on Fed grants • Calculation, form and payment made to NJ by October 1

  49. Section 2-Specific Compliance • Fund 30 • Bonds and Grants • Purpose of Capital Project • Interest earned on bond proceeds • Arbitrage calculation • Unexpended bond proceeds • Capitalization of Assets

  50. Section 2-Specific Compliance • Fund 40 • Should detail the debt service revenue and principal and interest payments • Should not have a fund balance • If it does have a FB budget it into the next year • Debt service aid assessment charged to 12-000-400-800 • Bond refunding-needs to be accounted for properly

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