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 date67,000,000 Additional revenue (exclude Extraordinary aid) 7,500 Total revenues67,007,500 Expenditures to date52,000,000 May expenditures7,000,000 June Expenditures7,000,000 Total expenditures66,000,000 Excess of Rev over Exp1,007,500 2% of expenditures1,320,000

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 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 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

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 30 th 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

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 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 and 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 – Bond refunding-needs to be accounted for properly

Section 2-Specific Compliance Fund 60 – What can be a proprietary fund 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 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 me with any questions