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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IS FUND BALANCE ROLLING

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

Reserves Tuition reserve Maintenance 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

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

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

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

EXCESS SURPLUS CALCULATION

The NJ Audit Program 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/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

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

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

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

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 from PY?

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

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

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

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

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

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

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

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

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

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 SSAE16 Net Cash Resource Schedule Schedule of Meal Count Activity

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 Other Groups working in the District Are they registered/501c3’s

Section 2-Specific Compliance Capital Assets Capitalization level of $2,000 Depreciation Schedules-lives-methods Using an outside agency for depreciation 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 Leases Footnote requirements

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 email me with any questions kathryn.perry@jumpcpa.com 732-240-7377