AUDIT AND ACCOUNTING ISSUES

1. Presented By Jan Page, Audit Manager, West TN Area DIVISION OF LOCAL GOVERNMENT AUDIT jan.page@cot.tn.gov (731) 421-7473 AUDIT ANDACCOUNTING ISSUES

2. YEAR END closing and related records

3. 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 DOCUMENTS PREPARED “FOR AUDITORS” (for auditors to prepare your financials)

4. 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 Other reminders

5. EMPLOYEE COMPENSATION

6. 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) EMPLOYEES SHOULD ONLY BE COMPENSATED THROUGH THE PAYROLL SYSTEM with proper appropriation authoritY

7. 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 Improper payments to employees include

8. PREVALENT AND/OR SIGNIFICANT RECENT AUDIT FINDINGS

9. Violations of 3 day deposit law for collections Related cash and internal control deficiencies over cash collections/receipting/depositing EXTENDED SCHOOL PROGRAMS

10. Some payroll deduction (liability) accounts are not reconciled – these accounts should zero out at some point if classified, coded and paid correctly and timely Payroll deduction accounts

11. 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 Credit/purchasing card policies and payments

12. 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 Debt issuance SHOULD BE properly approved and reported

13. 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 Cash flow issues in school federal projects fund

14. 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 Cell phone policies should be adopted by the board

15. 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 Ensure proper budget is posted

16. 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) Construction contract requirements

17. 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 Conflict of interest for a county commissioner to have a construction contract with school board

18. Financial statements

19. 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 Financial Statement presentation changes

20. ?Questions?

21. Contact Information: Jan Page, Audit Manager, West TN Area DIVISION OF LOCAL GOVERNMENT AUDIT jan.page@cot.tn.gov (731) 421-7473 Have a great day!