1. Bill Eisele, BWSR & Pam Tomevi, Koochiching SWCD LGU Accounting and Financial Q & A

2. Introduction and welcome Session Agenda Submitting Your Year-End Financial Report A step by step review on how to complete this report LGU Accounting Questions A review of frequently asked accounting questions Questions & Answers Round table open discussion Action Plan Please fill in your information from this session DISMISSED! We hope you go away with some useful nuggets of information 3:30 pm 3:40 pm 4:05 pm 4:30 pm 4:55 pm 5:00 pm

3. LGU Accounting Questions PERA : How do I set up PERA to make sure it calculates the withholding correctly and shows up on the 941 and W-2 forms? PERA is classified as 414h and should be set up in QuickBooks as “other” for tax tracking. Unfortunately QuickBooks does not seem to process the 941 and W2 forms correctly when using this method and requires several adjustments and overrides during the year. During the session, several other options were discussed. The following seems like the best option although I will be discussing it with my auditor before I implement the change for next year. Please call me for further clarification

4. LGU Accounting Questions PERA : Do I have to enroll a temporary employee into PERA if their total income will exceed $425 per month? It depends…if their employment has been predetermined to be 6 months or less (ie: employment duration will be from July 1 – November 30, 2011) then you do not enroll them (Temporary Exclusion – Code 101).

5. LGU Accounting Questions Health Insurance: My District does not offer health insurance. Can they give me cash in lieu of health insurance? Yes. As an example, here is a copy of the Koochiching SWCD personnel policy regarding health insurance allowance.

6. LGU Accounting Questions Health Insurance: Is it taxable? Generally, any plan that provides for payment of health insurance or medical expenses of employees is an excludable benefit, however, if an employer issues a check to an employee to pay for health insurance without requiring proof of payment of premiums, the amount is a taxable fringe benefit. Cash given to employees in lieu of health insurance is taxable and should be reported as income and FICA wages on Form W-2. http://www.irs.gov/govt/fslg/article/0,,id=112716,00.html

7. LGU Accounting Questions Health Insurance: Is it subject to PERA withholding? Cash allowance for health insurance is not considered eligible earnings and is not subject to PERA withholding.

8. Sales & Use Tax: What is Use Tax? Use tax applies to goods purchased that are not subject to Minnesota sales tax but will be stored, used, or consumed in the state. This includes items that are purchased outside of Minnesota, items that were originally purchased for resale but then used directly, and items that are purchased in Minnesota where sales tax is not collected. Items become subject to the use tax when they enter Minnesota, are taken from inventory for use, or are purchased from a Minnesota seller. The use tax rate is the same as the sales tax rate. LGU Accounting Questions

9. Miscellaneous Questions: Where can I find help on Record Retention? What is the threshold for capitalizing assets? Are SWCD employees subject to FUTA taxes? Answers to this and many other frequently asked questions can be found on the MACDE website at ww.macde.us/index.htmww.macde.us/index.htm LGU Accounting Questions

10. BWSR ACADEMY OCTOBER 2011 SUBMITTING YOUR YEAR END FINANCIAL REPORT

11. Why prepare annual financial reports? Internally Allows you to compare actual results to budget Gives a standard format for Board to review year to year Provides revenue and expense information to compare to previous years (trends) Externally For the state, gives information to BWSR which it must have available for legislators. Fulfills specific GASB and state statute requirements

12. Steps Prepare for year end by processing all normal financial entries into the financial accounting system Access year end instructions on BWSR website. Convert the records from Cash Basis to Accrual Basis by processing adjusting entries. Make copies of any entries you make and mark WHY you made the entry. Update fixed asset spreadsheet and compensated absence spreadsheet. Run a trial balance to see that everything is in order

13. Steps - continued Adjusting entries: Interest Receivable Due from other Governments Accounts Receivable Prepaid Expense (usually trees) Payables for amounts owed suppliers and others Due to other Governments Salaries payable Deferred Revenue Tree deposits

14. Steps - continued At this point you are ready to produce statements Start with General Fund numbers and this should use every number in the trial balance, except those related to fixed assets or compensated absences. Two statements are started: Statement of Net Assets (Balance Sheet) and Statement of Activities (Income Statement) Important to see if the new fund balance is correct Use troubleshooting tables if statements don’t balance.

15. Steps - continued At this point complete entries that convert statements to GASB 34 format Add in net fixed assets and compensated absence total to Statement of Net Assets Add in depreciation and change in compensated absence to Statement of Activities As with the General Fund columns, the new columns in this statement must also balance between the two statements.

16. GASB 34 adjustments 1. Add actual NET fixed assets to the Statement of Net Assets 2. Add actual new year end compensated absence liability to Statement of Net Assets 3. Locate this year’s depreciation expense figure from fixed asset spreadsheet. 4. Calculate only the 2 5. CHANGE in compensated absence total from last year 6. NET items 3 and 4 and enter into Statement of Activities

17. GASB 54 Adjustments GASB 54 is new and should be reflected in this upcoming year financial statement package. It is all about the Fund Balance you report on the Statement of Net Assets. A policy will need to be adopted that describes how your fund balance is treated and what is a minimum fund balance. There are new classifications for Fund Balance in the Statement of Net Assets showing if funds are nonspendable, restricted or unrestricted.

18. Other items to prepare Budgetary comparison. Detail statements on deferred revenue and county revenue Notes to Financial Statements Managers Discussion and Analysis (MD&A) Submit package to BWSR. Electronic is now preferred. BWSR sends a copy to the OSA

19. Follow up Close out year in accounting system. Process reversal of adjusting entries to get books back to cash system. File the OSA submission “Special District Financial Reporting Form”

20. Thank you for coming Contact Information: Bill Eisele MN Board of Water & Soil Resources (651) 282-2929 bill.eisele@state.mn.us Pam Tomevi Koochiching SWCD (218)283-1174 pam.tomevi@koochichingswcd.org