Get Ready for the 2018-2019 Audit

1. Get Ready for the 2018-2019 Audit Kathryn Perry, CPA Jump, Perry and Company, LLP

2. Due Dates and Uploads • Due December 5th every year • Data Collection Form due within 30 days of audit submission • Board resolution must be from a Board meeting within 30 days of audit submission • Uploads: • CAFR -AMR -Cover Letter • Peer Review -DCF -CAP • Resolution -COI

3. CAFR • Comprehensive Annual Financial Report • CAFR sections: • Introductory Section • Financial Section • Statistical Section • Single Audit Section

4. Why a CAFR? • The minimum GAAP requirements are MD&A, Basic Financial Statements and Required Supplementary Information • Broader presentation of GAAP financial statements • Gives a spirit of transparency and full disclosure • Provides additional information for credit rating agencies

5. Introductory Section • List of Principal Officials • Letter of Transmittal • Organizational Chart • IASBO COE

6. Transmittal Letter • Official communication of your government and serves to convey the financial report • Cannot be dated any earlier then the audited financial statements • Introduce the reader to the BOE • Addressed to “The Board and Citizens” • Must include • Management’s responsibility for the financial information

7. Transmittal Letter • Internal control structure • Independent audit • Refer to MD&A, but do not duplicate information or that in the Notes • Profile of the school district • Information useful to assessing the economic condition of the school district

8. Financial Section • Independent Auditor’s Report • Management Discussion and Analysis • Basic Financial Statements • Required Supplementary Information • Combining and individual fund presentations and supplementary information

9. Financial Section • Independent Auditor’s Report • Management Discussion and Analysis • Describe the basic government-wide financial statements • Provide condensed financial data-current year and preceding year • Provide an analysis of the school districts overall financial position • Discussion of capital assets and long-term debt • Has to agree with the financial statements

10. Financial Section • Basic financial statements • District-wide financial statements-A’s • Fund financial statements-B’s • Governmental Funds • Proprietary Funds • Fiduciary Funds • Notes to the Financial Statements • Required Supplementary Information • C through I

11. Statistical Section • Financial Trends-feeds from auditor financial data • Revenue, Debt, Demographics and Economy and Operating Information • Unaudited • To be provided to the auditor

12. Single Audit Section • Opinions on Internal Control and Grant Compliance • Schedule of Federal Awards(SEFA) and Schedule of State Awards (SESA) • Notes, Findings and Prior Findings

13. SEFA & SESA • All Federal and State Grants need to be included on schedules • All grants need Grant numbers • Need to provide grant documents • Major programs are determined from the SEFA and SESA • Totals by Fund need to tie to SEFA and SESA including Accounts Receivable and Deferred Revenue

14. Single Audit • Federal Requirements • Single Audit/Uniform Guidance • If cumulative federal expenditures exceed $750,000 then a single audit must be performed • Low-risk Auditee-why you want to be one • What is a major program? • Grant of $750,000 or 3% of award if in excess of $25 - $100 million

15. Single Audit • Major program audit requirements • Must be audited once out of a 3 year period • Single Audit Summary • Schedule of Fed and State awards • Data Collection Form and filing • Findings • Corrective Action Plan

16. Grants • Major Program • Specific Grant Testing • Testing is based on Grant Compliance Supplement • Testing of internal control over grant compliance

17. Other DOE Audits • Findings from DOE audits • Inform auditor of any findings • Auditor has to review Corrective Action Plan • Report on findings in current year CAFR

18. Auditor’s Management Report • Specific DOE testing not normally part of a GAAS audit • Surety bonds • Secretary Reports/Treasurer Reports • Bids/over bid threshold • Food service • Student activities • ASSA • Transportation

19. Auditor’s Management Report • Tuition charges • Payroll sign-offs • Employee position control roster • Encumbrances • Travel • TPAF reimbursement • Testing for lead of all drinking water

20. ASSA & DRTRS • ASSA Testing can be done in November • Depending on size of District this can be very time consuming • Need to keep all of the records/backup used to calculate the student count • A specific number of students must be tested • The auditor will need to see many IEP’s, private tuition contracts, transportation contracts, free & reduced lunch applications, and ESL/LEP info

21. Audsum • Auditor inputs based on final CAFR balances • The detail by school entered by BA (new for 2017-18) • BA needs to review auditor input • Audsum creates the base information for the next years budget • Needs to be certified by due date

22. Reports to have ready • Secretary’s Report • Balance Sheet by fund • Annual activity for balance sheet accounts • Revenue report by fund • Expenditure report by fund – grouped by object • FICA reports from DOE • Current year and next year budget • State Aid Summary

23. Reports to have ready • Ex-Aid and Non public aid • Grant reports from DOE • Compensated Absences schedule • New Leases • List of Bids • Vendors above bid threshold

24. Year End • Review Board Secretary’s report • Cash • All bank reconciliations need to be prepared and free of unrecorded adjustments • Old/stale checks should be researched and cleared up • Total cash in all funds should reconcile to Treasurer’s report which should tie to bank reconciliations

25. Year End • Accounts Receivable • Account balance should tie to State Aid Payments Schedule • Any deductions need to be recorded • Fund 20 • Most grants need to have the costs incurred before the grant can be drawn down • Fund 30 • Any SDA grants need to be recorded when reimbursement requested • Both funds generally “borrow” from Fund 10

26. Year End • Accounts Payable/Encumbrances • Encumbrances need to make sense • Next fiscal year expenditures should not be included • Auditors do not want to get into a discussion about whether it belongs in encumbrance or not • Fund balance section generally do not reflect all restricted amounts • No over expended line items

27. Fund Balances • Must tie to the prior year ending in total • Were there entries made against FB during the year?

28. IS FUND BALANCE ROLLING

29. Reserved Fund Balances • Must have resolution in June Board Meeting to put money into reserves • Types of reserves available • Tuition Reserves • Maintenance Reserve • Capital Reserve • Emergency Reserve • Waiver Offset Reserve • Legally restricted – in budget for next year • Excess Surplus • Debt Service Reserve Have until June 30th to set up

30. Reserves • Tuition reserve • Must have a tuition contract with another LEA • Must provide the contract to the auditor • 2 years 10% max of contract per year • If used in budget-it is taken out of reserve and must recalculate the 2 years based on Resolution • Maintenance Reserve • Need Maintenance plan • max no more than 4% of the replacement cost of buildings

31. Reserves • Emergency reserve • $250,000 or 1% of budget up to $1 million • Need Commissioner approval for withdrawal • Need to prove it is an emergency • Can be budgeted for use for excessive health care costs or security improvements

32. Reserves • 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

33. Excess Surplus • How to calculate • What Aid is excluded from calculation • If you do not have a resolution to add money to the other reserves and excess surplus calculates-there is nothing the auditor can do

34. EXCESS SURPLUS CALCULATION

35. The NJ Audit Program • Always read the “Significant Changes” page • FYI-The audit program can answer many BOE questions they ask the auditor

36. Section 1-General Compliance • Appointment of Auditor/required audit steps • Risk Assessment • Internal control testing • Fraud analysis • Minutes and resolutions • The auditor reads all minutes • Look for bids, required policies, unusual discussions

37. Section 1-General Compliance • Treasurer • Not required • Board Secretary takes over roles of Treasurer • A Board Designee prepares the bank reconciliation • Fund Checklists

38. Section 1-General Compliance • Budgets and Transfers • Transfers should be in minutes • Any County Superintendent approvals should be provided • Transfers to Reserves-Very Important!! • Interfund Balances must cancel out • CAFR footnote needs to disclose why the interfund

39. 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/Consortiums • Required review of open purchase orders at year end-Encumbrance Testing • w/o QPA $29,000 w/QPA $40,000

40. 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

41. 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 from PY?

42. Section 2-Specific Compliance • Fund 10 • Board Secretary and Treasurers Report • Auditor will tie each month out/AMR finding • Bank reconciliations • Not all cash accounts on Cash Report • They all need to be reconciled monthly • Petty Cash • Need to re-establish July 1

43. 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 • Reserve interest needs to be segregated • District Taxes • Auditor will confirm with town

44. Section 2-Specific Compliance • Tuition • Have available your DOE certified rates • Can only have reserve for 2017-18 and 2018-19 • On-behalf FICA • Obtain schedule from DOE with all reimbursements. Will assist in determining Accts Rec at year end

45. Section 2-Specific Compliance • Compensation Reporting • All 1099’s were filed • All required payrolls were certified/signed off • Get completed W-9’s for all vendors • W-2’s and W-3’s • Pensionable Wages • Auditor will test pension reports • Reviewed as part of payroll testing • Employee Contribution for Health Benefits • Calculated on base wages/paid monthly to insurance company • Provide info on procedures • Have a written cafeteria plan

46. Section 2-Specific Compliance • Refunds, e-rate, Cancellations • Current year cancellations go against expenditure • Prior year are Misc Income • Travel Expenditures • Tested/Must have Policy • Health Insurance • Sale and lease-back contracts

47. Section 2-Specific Compliance • Required Maintenance • Must spend 2% of replacement cost of new facility • Required schedule in J’s • Reserves • Capital reserve, Maint Res, Tuition Res, Emergency Res schedule in CAFR notes • Rules for use • Excess Surplus • 2% of expenditures/minimum $250,000

48. Section 2-Specific Compliance • Fund 20 • What goes in Fund 20? • Grants should have budgets • Teachers salaries charged should relate to grant • A grant cannot have Accts Rec and Def Rev • TPAF and FICA reimbursement not allowed on Fed grants • Calculation, form and payment made to NJ by October 1

49. Section 2-Specific Compliance • Fund 30 • Bonds and Grants • Purpose of Capital Project • Interest earned on bond proceeds • Arbitrage calculation • Unexpended bond proceeds • Capitalization of Assets

50. 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 12-000-400-800 • Bond refunding-needs to be accounted for properly