Introduction

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?

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

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

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

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

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.

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

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

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

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

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

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

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.

Expenses to accrue or not? 501/502 Labor & Fringes – Yes 503 Services – Rules #1,2,3 504.01 Fuel – Not required 506 Insurance – Yes (prepaid) 507 Taxes - No

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 4-1-08. Cash 4-1-08 Operators Expense - 501.01 $5,000 Cash - 101.01 $5,000 Accrual 3-28-08 Operators Expense - 501.01 $5,000 Wages Payable - 201.01 $5,000 4-1-08 Wages Payable - 201.01 $5,000 Cash - 101.01 $5,000

Cash Posting to Ledgers On 4-1-08 post $5,000 to: - 501.01 (DB) Oper. Expense to 010 Operations - 101.01 (CR) Cash to Asset

Accrual Posting to Ledgers On 3-28-08 post $5,000 to: - 501.01 (DB) Oper. Expense to 010 Operations - 201.01 (CR) Wages Payable to Liability On 4-1-08 post $5,000 to: - 201.01 (DB) Wages Payable to Liability - 101.01 (CR) Cash to Asset

Effect of Cash VS Accrual Under Cash transaction recording only when payroll paid. Under Accrual transaction recording payroll when incurred. Notice timing difference: 4-01 vs 3-28 Salary expense is recorded in 1st Quarter under Accrual & 2nd Quarter under Cash

Fringes The fringe rate for the system is 25% of Operator’s Salary. Paid fringes at time of payroll. Cash 4-01-08 Operator’s Fringes - 502.15 $1,250 Cash - 101.01 $1,250 Accrual 3-28-08 Operator’s Fringes - 502.15 $1,250 Accrued Payroll Liabilities - 202.02 $1,250 4-01-08 Accrued Payroll Liabilities - 202.02 $1,250 Cash - 101.01 $1,250

Vehicle Insurance Transit system is billed $12,000 once a year for vehicle insurance on 6/30 annually. Record monthly vehicle insurance expense 3-18-08. Accrual 3-18-08 Premiums for PD Insurance - 506.01 $1,000 Prepaid Insurance - 151.01 $1,000 Entry when paid on 6/30/08: 6-30-08 Prepaid Insurance - 151.01 $12,000 Cash - 101.01 $12,000

Expenses to accrue or not? 508.01 Purchased Transportation – Based on Contract – No 509 Misc. Expenses – Rule #1 512.12 Rent – Typically fixed amount 600 Other Costs – Rule #1 & 2

Revenues to accrue or not?? 401 Passenger Fares – No, unless seasonal 402 Contracts – Rule#1 & #2 406 Advertising – Rule #1 & #2 407.01 Sale of Maint. – Rule 1,2,3 412.02 E&D – Rule #1 & #2 413 Other Federal – Rule #1 & #2 430 Contributed Services – No – Fixed 499 Other Revenue – Rule #1 & #2

Contract Revenue Record monthly contract revenue for the $120,000 per year JFS contract. Record contract revenue of $9,500received on 3-28-08. 3/28/08 Contracts Receivable 102.01 $10,000 Contract Revenue 402.01 $10,000 3/28/08 Cash – JFS Payment 101.01 $9,500 Contracts Receivable 102.01 $9,500

Elderly & Disabled Program Annual E&D grant is for $15,000 received approximately 9/30 annually. Record monthly E&D accrual on 3-28-08. 3-28-08 E&D Receivable - 102.07 $1,250 State E&D Fare Assistance - 412.02 $1,250 Entry when received on 9/30/08: : 9-30-08 Cash - 101.01 $15,000 E&D Receivable - 102.07 $15,000

Budget/Planning Review Budget Sample Review Budget Variance Sample

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

Quick Books Overview User Friendly $80 per hour for Training http://quickbooks.intuit.com Provides Reports & Other Features

Work Session Prepare Budget Variance Use Your Own Data

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

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 9040.1E, “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.”

Wrap-up / Questions