2. Introduction

3. System Information System Name Formation – City/County/DG
# of Employees
Drivers & Admin. FT/PT
2008 Total Budget
Total Revenues – Indicate Major Sources
Contracts & Local
Indicate Who Pays The Bills? City County or other?

4. Workshop Objective
Objective: to understand which expense and revenues to accrue in order to properly report on the ODOT invoice

5. Workshop Expectations
Your Participation is Expected
Flip Chart for Questions
No Question is Stupid

6. Workshop Outline 1st half of workshop instructional
ODOT rules of accounting/terminology
Accruing revenues & expenses
A look at Quick Books
Lunch
Budget to Budget Variance
General ledger exercise
Questions

7. USOA Uniform System of Accounts
Required book of reference used for all accounting definitions
Final Rule – published 1/15/1993
Requires FTA grantees to use Accrual Basis of Accounting
Allows conversion of Cash to Accrual – only as described in USOA

8. Accrual Accounting Remember this????
What Is It?
Definition: Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term "accrual" refers to any individual entry recording revenue or expense in the absence of a cash transaction.

9. Record Expenses when incurred;
Accrual Accounting
Remember this:
Record Expenses when incurred;
Revenues when earned

10. Asset
An economic resource that is expected to be of benefit in the future. Probable future economic benefits obtained as a result of past transactions or events. Anything of value to which the entity has a legal claim. Any owned tangible or intangible object having economic value useful to the owner.
Debit Account

11. Liability
DEBTS or obligations owed by one entity (DEBTOR) to another entity (CREDITOR) payable in money, goods, or services.
Credit Account

12. Revenue
the total amount of money received by the entity for goods sold or services provided during a certain time period
Credit Account

13. Expenses
Payment, either in cash, by assuming a LIABILITY, or by surrendering ASSET
Debit Account

14. Why Accrual??? Smooth out Timing Differences
For recording of Grant Revenues, Revenue and Expenses reported to ODOT
Reduce over/under payments

15. Rules of Thumb to Accruing
#1 Over $12,000 per year
#2 Under $12,000 per year may accrue if necessary to maintain proper accounting, adjusting entries must be made annually.
#3 Do not accrue consistent, fixed type of revenue or expense. Examples: rent or utilities that are fixed amounts; fuel is consistent plus who knows what fuel is going to cost in future.

16. Expenses to accrue or not?
501/502 Labor & Fringes – Yes
503 Services – Rules #1,2,3
Fuel – Not required
506 Insurance – Yes (prepaid)
507 Taxes - No

17. Wages
Employees are paid on the Friday following the end of week 2 pay period. For the pay period ending 3/28/08, total Operators Salary $5,000. Pay checks are issued on
Cash
Operators Expense $5,000
Cash $5,000
Accrual
Operators Expense $5,000
Wages Payable $5,000
Wages Payable $5,000
Cash $5,000

18. Cash Posting to Ledgers
On post $5,000 to:
(DB) Oper. Expense to 010 Operations
(CR) Cash to Asset

19. Accrual Posting to Ledgers
On post $5,000 to:
(DB) Oper. Expense to 010 Operations
(CR) Wages Payable to Liability
On post $5,000 to:
(DB) Wages Payable to Liability
(CR) Cash to Asset

20. Effect of Cash VS Accrual
Under Cash transaction recording only when payroll paid.
Under Accrual transaction recording payroll when incurred.
Notice timing difference: vs 3-28
Salary expense is recorded in 1st Quarter under Accrual & 2nd Quarter under Cash

21. Fringes
The fringe rate for the system is 25% of Operator’s Salary. Paid fringes at time of payroll.
Cash
Operator’s Fringes $1,250
Cash $1,250
Accrual
Operator’s Fringes $1,250
Accrued Payroll Liabilities $1,250
Accrued Payroll Liabilities $1,250
Cash $1,250

22. Vehicle Insurance
Transit system is billed $12,000 once a year for vehicle insurance on 6/30 annually. Record monthly vehicle insurance expense
Accrual
Premiums for PD Insurance $1,000
Prepaid Insurance $1,000
Entry when paid on 6/30/08:
Prepaid Insurance $12,000
Cash $12,000

23. Expenses to accrue or not?
Purchased Transportation – Based on Contract – No
509 Misc. Expenses – Rule #1
Rent – Typically fixed amount
600 Other Costs – Rule #1 & 2

24. Revenues to accrue or not??
401 Passenger Fares – No, unless seasonal
402 Contracts – Rule#1 & #2
406 Advertising – Rule #1 & #2
Sale of Maint. – Rule 1,2,3
E&D – Rule #1 & #2
413 Other Federal – Rule #1 & #2
430 Contributed Services – No – Fixed
499 Other Revenue – Rule #1 & #2

25. Contract Revenue
Record monthly contract revenue for the $120,000 per year JFS contract. Record contract revenue of $9,500received on
3/28/08 Contracts Receivable $10,000
Contract Revenue $10,000
3/28/08 Cash – JFS Payment $9,500
Contracts Receivable $9,500

26. Elderly & Disabled Program
Annual E&D grant is for $15,000 received approximately 9/30 annually. Record monthly E&D accrual on
E&D Receivable $1,250
State E&D Fare Assistance $1,250
Entry when received on 9/30/08: :
Cash $15,000
E&D Receivable $15,000

27. Budget/Planning
Review Budget Sample
Review Budget Variance Sample

28. Bookkeeping System Review
General Ledger
Asset Ledger
Liability Ledger
Revenue Ledger
Expense Ledger
010 Operations
041 Vehicle Maintenance
042 Non-Vehicle Maintenance
160 General Administration

29. Quick Books Overview User Friendly $80 per hour for Training
Provides Reports & Other Features

30. Work Session
Prepare Budget Variance
Use Your Own Data

31. ODOT Invoice Review Review Sample ODOT Invoice
How the ODOT Invoice Works (handout)
Review Posting to Invoice

32. Why Do We Care? Chapter VI, Financial Management 6.b (2) on page VI-7
1. PURPOSE. This circular is a re-issuance of guidance on the administration of the transit assistance program for nonurbanized areas under 49 U.S.C. 5311, and guidance for the preparation of grant applications. This revision incorporates provisions of the Safe, Accountable, Flexible, Efficient, Transportation Equity Act: A Legacy for Users (SAFETEA–LU), and includes the most up-to-date available guidance for the program.
2. CANCELLATION. This circular cancels Federal Transit Administration (FTA) Circular E, “Nonurbanized Area Formula Program Guidance and Grant Application Instructions,” dated October 1, 1998.
Chapter VI, Financial Management 6.b (2) on page VI-7
“Costs incurred and available balances are reported annually on an accrual basis, on the Financial Status Report in FTA’s Transportation Electronic Award Management (TEAM) System.”

33. Wrap-up / Questions