District Financial Matters

1. District Financial Matters Budgets, Audits and Safeguarding the Public’s Funds

2. Budgeting • A new budget for the next fiscal year is developed during the first quarter of each year. • This budget should • Give an accurate picture of what your district is planning on receiving and spending in the next year. • Be prepared by the full board or by a committee who has reviewed financial information for the year to ensure its accuracy. • Be submitted to fiscal court and Division of Conservation by April 1. • Be defendable by the district board of supervisors.

3. Why should you amend your budget? • It is statutorily required! • KRS 65.065 states (in part): “No moneys shall be expended from any funds or any sources, except in accordance with the budget which has been filed with the fiscal court…” • This means that if the district has not budgeted to spend a certain revenue stream or to spend on a certain expenditure, it can not legally spend those funds.

4. Amending Budgets • Budget should be revisited at least quarterly so that the entire board can review the district’s financial progress. • Budgets should be amended throughout the year as programs and priorities change. • Amendments should also be made for funds not previously budgeted (direct aid, state cost share, etc.). • Amended budgets should be submitted to the Soil and Water Conservation Commission (via the Division of Conservation). The amended budgets do not have to be submitted to fiscal court due to an agreement between the Soil and Water Conservation Commission and the Department for Local Governments.

5. Audit Requirements • Audits are required for all conservation and watershed districts every 4 years. • Districts with over $750,000 in financial activity must be audited annually. • Through an agreement with the Auditor of Public Accounts’ office, the Soil and Water Conservation Commission contracts with an outside company for these audits.

6. Audit Preparation • Prior to the audit, the auditor contacts the district with an extensive list of documents to be sent so that the auditor can review them before the day of the audit. • These include, but are not limited to: • Annual Financial Reports • Budgets • Ledgers of all the district’s accounts • Payroll Reports • Confirmation letters from banks, fiscal court, etc. • Your Field Representative can help prepare these items, but it is the district’s responsibility to produce them.

7. During the Audit • The auditor spends at least a day in the district office reviewing books and procedures and asking questions. • An exit interview is provided at the end of the day so that the district will know the findings of the audit. • A written analysis is then provided to the district and the Division of Conservation. • The Field Representative can help prepare for the audit, but since it is the district’s books that are being audited, the only people who should be present during the audit are district supervisors and employees.

8. Common Audit Deficiencies • Deficiencies are arranged in two categories: • Noncompliance Issues – these are statutorily required • Reportable Conditions – these are good business and accounting practices

9. Common Noncompliance Issues (from most recent audit cycle) • Submission of monthly treasurer’s reports • Treasurer’s reports must be submitted monthly by the 10th or within 3 days of meeting • Submission of employee time sheets • Employee time sheets must be submitted monthly by the 10th or within 3 days of meeting • Inadequate bonding • Every supervisor and employee that has access to financial matters has to be covered by a bond that is at least the maximum amount of public funds the supervisor or employee handles at any given time during a fiscal year cycle. • Budgetary control • Budgets must be submitted by April 1. Budgets should be amended to include revenue and expenditures not previously included in the budget.

10. Common Reportable Conditions (from most recent audit cycle) • Segregation of duties • Receiving/disbursing funds, recording transactions, and reconciling bank accounts should not be performed by the same person. • Authorized check signers • Elected supervisors should be signing checks. • Safeguarding of investments • Certificates of deposits should be kept in a safe deposit box. Two authorized persons (which should not include a district employee) should be required for access to this box. • Stale Outstanding Checks • Checks outstanding for more than one year should be investigated, adjusted for, and payment stopped, as necessary. • Recording of Available Resources • All the financial resources (including certificates of deposit) should be included in a district’s books and financial reporting.

11. Safeguarding Funds • As elected officials it is your duty to keep the public’s funds safe and to make sure that they are used for the purpose for which they were intended. • The district’s funds are provided to the district to conserve and improve the natural resources in your district.

12. How to safeguard funds • Only the treasurer or another elected board member should sign checks. • All investments and check books should be kept under lock and key. • NEVER sign blank checks. • Reconciliations and ledgers should be reviewed and compared each month. • Make sure that the programs/projects the district is spending money on fit into the district’s mission.