Audit and CAFR Presentation
Kathryn Perry, CPA
Partner
Jump, Scutellaro and Company, LLP
Board Secretary Report
• Needs to be reconciled monthly
• Cash-all cash on Treasurers report needs to be
included in the BSR and tie monthly
• Restricted cash accounts need to tie out to the
reconciliation
• If cash transfers occur they need to be made
timely and be reflected on the BSR
• The Accounts Receivable balance needs to
reflect actual
Board Secretary Report
• Fund balance section generally doesn’t reflect
all restricted amounts
• The revenue in Fund 10 generally is recorded
at beginning of the year when setting up AR
• Expenditures are true month to month
• Need to confirm where lease payments are
posted, new equipment items posted and if
Super or BA salaries are charged to other line
items
Treasurers Report
• Needs to be reconciled monthly
• Include all cash accounts
• Bank reconciliations should have minimal
reconciling items
• Outstanding checks need to be examined after
6 months. NJ Escheat rules need to be
followed
ESTIMATING YEAR END FB
Revenues to date
67,000,000
Additional revenue (exclude Extraordinary
aid)
7,500
Total revenues 67,007,500
Expenditures to date
52,000,000
May expenditures
7,000,000
June Expenditures
7,000,000
Total expenditures 66,000,000
Excess of Rev over Exp
1,007,500
2% of expenditures
1,320,000
ESTIMATING YEAR END FB
Prior Year ending total Fund Balance
6,000,0000
Plus excess revenues over expend/less exp over revenues from above
1,007,500
Estimated Year End FB
7,007,500
Less: Reserved FB
2,500,000
Less: PY Excess Surplus
250,000
Less: Maint Res
1,200,000
Less: Cap Reserve
650,000
Less: Tuition Res
325,000
Less: Encumbrances
200,000
Remaining Unreserved
1,882,500
2% from above
1,320,000
difference
562,500
GAAP vs Budgetary
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CAFR is prepared in accordance with GAAP
Why is budgetary different
Fund 20 is on budgetary
Fund 30 is budgetary on Sched F-2a but not on
B-2
Why are there 3 Fund Balances?
• What page has the “real” Fund Balance
• Why is that Fund Balance correct?
• Why is there an A-1 and B-1 Fund Balance
Fund Balance Categories
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Nonspendable fund balance
Restricted fund balance
Committed fund balance
Assigned balance
Unassigned balance
– Governments may not have all categories
applicable to a given year.
How do I figure out my Fund Balance
• Were there entries made against FB during
the year?
• How to roll FB from prior year
• How to break it out into the proper
components
IS FUND BALANCE ROLLING
PRIOR YEAR FUND BALANCE
REVENUES-ACTUAL
EXPENSES WITHOUT ENCUMBRANCES
CURRENT YEAR FUND BALANCE
$
2,500,000
85,000,000
84,500,000
3,000,000
FROM BALANCE SHEET
TOTAL ASSETS
TOTAL LIABILITIES
3,600,000
(650,000)
FUND BALANCE
2,950,000
DIFFERENCE
50,000
SHOULD BE ZERO
WHY? NEED TO RESOLVE
Reserved Fund Balances
• Tuition Reserves – 2 years 10% max of contract per year
• Capital Reserve – cannot exceed amount needed to
implement the LRFP
• Maintenance Reserve – max no more than 4% of the
replacement cost of buildings
• Emergency Reserve – max $250,000
• Waiver Offset Reserve – for approved waiver request
• Legally restricted – in budget for next year
• Debt Service Reserve
Have until June 30th to set up
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
Excess Surplus
• How to calculate
• What Aids are excluded from calculation
EXCESS SURPLUS CALCULATION
PRIOR YEAR FUND BALANCE
REVENUES
EXPENSES
CURRENT YEAR FUND BALANCE
FB FROM ABOVE
LESS:
ENCUMBRANCES
TUITION RESERVE
MAINTENANCE RESERVE
CAP RESERVE
PRIOR YEAR EXCESS SURPLUS
LEGALLY RESTRICTED
OTHER
UNRESERVED FB
EXPENSES FROM ABOVE
TIMES 2%
ADD NON-PUBLIC
ADD EXTRAORDINARY AID
MAX UNRESTRICTED
EXCESS SURPLUS
$
2,500,000
85,000,000
84,500,000
3,000,000
3,000,000
(35,000)
(60,000)
(125,000)
(235,000)
(225,000)
(950,000)
1,370,000
84,500,000
2.00%
1,690,000
38,500
1,728,500
(358,500)
NO EXCESS IF NEGATIVE
Encumbrances
• How are they audited
• See attached memo
Why are there 3 audit opinions
• Opinion on audited financials
• Opinion on internal controls
• Opinion on compliance with grant
requirements
The NJ Audit Program
• The 2012-2013 audit program not available
yet
• May be released in July sometime
• Always read the “Significant Changes” page
• FYI-The audit program can answer many BOE
questions they ask the auditor
Section 1-General Compliance
• Appointment of Auditor
– Risk Assessment
– Internal control testing
– Fraud analysis
• Minutes and resolutions
– The auditor reads all minutes
– Look for bids, required policies, unusual
discussions
Section 1-General Compliance
• Treasurer???
– No longer required
– Board Secretary takes over roles of Treasurer
– A Board Designee prepares the bank reconciliation
– Surety bond on Board Secretary
Section 1-General Compliance
• ASSA, DRTRS and SEMI
– Testing can be done in November
– Depending on size of District this can be very time
consuming
– A specific number of students must be tested
– The auditor will need to see many IEP’s, private
tuition contracts and transportation contracts
Section 1-General Compliance
• Budgets and Transfers
– Provide auditor with the audit year and the next
years budget
– Transfers should be in minutes
– Any County Superintendent approvals should be
provided
– Transfers to Reserves-Very Important!!
– Interfund Balances must cancel out
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
– Required review of open purchase orders at year
end-Encumbrance Testing
– w/o QPA $26,000 w/QPA $36,000
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
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?
Section 2-Specific Compliance
• Fund 10
– Board Secretary and Treasurers Report
• Auditor will tie each month out
– Bank reconciliations
• Not all cash accounts on Cash Report
• They all need to be reconciled monthly
– Petty Cash
• Need to re-establish July 1
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
– Cap Res interest needs to be segregated
• District Taxes
– Auditor will confirm with town
Section 2-Specific Compliance
• Tuition
– Have available your DOE certified rates
– Can only have reserve for 2011-12 and 2012-13
• On-behalf
– Prepare a schedule detailing all reimbursements
and any Accts Rec at year end
Section 2-Specific Compliance
• Compensation Reporting
• All 1099’s were filed
• All required payrolls were certified
• Get completed W-9’s for all vendors
• Pensionable Wages
• Auditor will test pension reports
• Reviewed as part of payroll testing
• 1.5% for health benefits
• Calculated on base wages/paid monthly to NJ
• Provide info on procedures
• Provide cafeteria plan
Section 2-Specific Compliance
• Refunds, e-rate, Cancellations
– Current year cancellations go against expenditure
– Prior year are Misc Income
• Travel Expenditures
– See Memo
• Health Insurance
– Rules on self-insured
• Sale and lease-back contracts
Section 2-Specific Compliance
• Required Maintenance
– Must spend 2% of replacement cost of new facility
– Required schedule in J’s
• Reserves
– Capital reserve schedule
– Rules for use
• Excess Surplus
– 2% of expenditures/minimum $250,000
Section 2-Specific Compliance
• Fund 20
– What goes in Fund 20?
– Grants should have budgets
– Teachers salaries charged should make sense
– A grant cannot have Accts Rec and Def Rev
– TPAF and FICA reimbursement not allowed on Fed
grants ( ED Jobs also included)
– Calculation, form and payment made to NJ by
October 1
Section 2-Specific Compliance
• Fund 30
– Bonds and Grants
– Purpose of Capital Project
– Interest earned on bond proceeds
– Arbitrage calculation
– Unexpended bond proceeds
– Schedule F-2 and F-2a-Budgetary basis
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 12-000400-800
– Bond refunding-needs to be accounted for
properly
Section 2-Specific Compliance
• Fund 60
– What can be a proprietary fund
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Cafeteria
Community School
Child Care
Summer Camp
– Can be run through operating cash acct but must
be shown separate on Treasurers report
– Food Service Management Companies
• SAS #70-amended by SAS #88 report
Section 2-Specific Compliance
• Fund 60
– Child Nutrition-monthly reporting-Audit testing
– End of year Accounts Receivable
– End of year inventory count
– Provide Food Distribution program revenue
– Need to create a Balance Sheet and Profit and
Loss statement like it was a true business
Section 2-Specific Compliance
• Fund 90-Agency Funds
– Payroll
– Payroll Taxes
– Unemployment
– Student Activities
• See checklist
– Other Groups working in the District
Section 2-Specific Compliance
• Capital Assets
– Capitalization level of $2,000
– Depreciation Schedules-lives-methods
– Using an outside agency
– How capital assets flow from B-2 to A-2 in CAFR
– How footnote should be prepared
Section 2-Specific Compliance
• Long-Term Liabilities
– Compensated absences
– Early retirement incentive programs (ERIP)
– Bonds
– Footnote requirements
Single Audit
• Federal Requirements
– OMB A-133
– If grant expenditures exceed $500,000 then a
single audit must be performed
– Low-risk Auditee-why you want to be one
– ARRA-will always be considered High Risk
– What is a major program?
• Grant of $300,000 or 3% of award if in excess of $100
million
Single Audit
• Major program audit requirements
– Must be audited once out of a 3 year period
– See Type A program worksheet
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Schedule of Fed and State awards
Data Collection Form and filing
Findings
Corrective Action Plan
Section 3-Reporting
• Audit Submission
– Due December 5
• Sample reports are in audit program
• Sample footnotes
• Statistical section-The J’s
– Unaudited
Section 3-Reporting
• AMR-Auditors Management Report
– Details out specific tests performed by auditor
– Details all findings even if already stated in the
Single Audit information
– What to watch out for…
• Expenditures increased-did the surety bond
• All payrolls signed off
• Didn’t complete Audit Questionnaire properly
Questions
Feel free to call or email me with any questions
kathryn.perry@jumpcpa.com
732-240-7377