What accounting do I need to know as a School Nutrition Supervisor?

 Restrooms: There are restrooms in the front of the building as well as down the side hallway.  Please put all cell phones on silent. Due to the metal building, cell phone reception can be very poor. Feel free to take calls just outside the conference room under the cover.  Attendance: How many non-School Nutrition attendees? Finance or other? How many School Nutrition Supervisors? Less than 3 years?  The LG work environment is a very quiet work environment due to the needs of our programmers. Please be respectful of that.

Today’s Objective: Be able to recognize and correct problems based on the information in your Financial Statements.

ELEM-ABC  TN State COA follows this format: Function Function – 5 digit Fund Fund - 3 digit Object Object Code – 3 digit  Object Codes are only used on Expenditures Cost CenterSub Object Cost Center – 5 digit Sub Object – 3 digit  Cost Centers and Sub Objects are: Optional Completely user defined

 Double entry accounting is a standard accounting method that requires each transaction to be recorded in at least two accounts.  Every debit balance must have an equal and off-setting credit balance for each transaction. WHY DOES THAT MATTER ? ? ?  It provides for quick accuracy. Every transaction must balance.

What is the difference between a Calendar year and a Fiscal Year?  The Calendar year is January 1 through December 31.  The Fiscal year is a period used for calculating annual (yearly) financial statements for businesses and other organizations.  For Tennessee school systems, the Fiscal year is July 1 through June 30.

ASSETS  Bank Accounts  Investment Accounts  Receivables  Inventory/Supplies  Due From Other Funds  Prepaid Expenses ASSET ACCOUNTS  Normally carry a positive (debit) balance  Debits increase the ending balance  Credits decrease the ending balance All Asset Function Numbers begin with 1 (one)

What is an Accounts Receivable? Accounts Receivable is revenue that has been earned for goods or services that you have provided for which you have not received payment. Accounts Receivable is an Asset on your Balance Sheet or Trial Balance. Example: USDA reimbursement requested for meals that have been provided but for which you have not received payment. Generally, receivables are set up at the end of the year (June 30) in order to record revenues in the correct fiscal year. When should I record an Accounts Receivable?

LIABILITIES  Payables  Due To Other Funds  Payroll deductions  Short Term Debt LIABILITY ACCOUNTS  Normally carry a negative (credit) balance  Credits increase the ending balance  Debits decrease the ending balance All Liability Function Numbers begin with 2 (two)

What is an Accounts Payable? Accounts Payable is an expense that has been incurred for which payment has not been made. Accounts Payable is a Liability on your Balance Sheet or Trial Balance. Example: Supplies ordered and received in June that have not been paid for by June 30. Generally, payables are set up at the end of the year (June 30) in order to record expenditures in the correct fiscal year. When should I record Accounts Payable?

EQUITIES  Inventory  Long-Term Notes Receivable  Prepaid Items  Restricted, Committed, Assigned, and Unassigned Equity EQUITY ACCOUNTS  Normally carry a negative (credit) balance  Credits increase the ending balance  Debits decrease the ending balance All Equity Function Numbers begin with 3 (three)

= Assets Liabilities + Equities/Fund Balance

= Assets + Deferred Outflows Liabilities + Deferred Inflows + Equities/Fund Balance (Not included in the discussion today)

vs Balance Sheet Trial Balance

The Balance Sheet displays ending balances only

The Trial Balance shows Balance Sheet accounts with their beginning balances and activity.

Seeing the beginning balance is often helpful. In this particular case, it tells us that the Due from Other Governments (receivable) has not been collected when the amount was received, it was recorded incorrectly.

The Trial Balance also shows accounts with a zero balance.

Cumulative Budget entries for Revenue Controlling account for Outstanding Current Year PO’s Cumulative YTD Expenditures Cumulative Liquidated Prior Year PO’s

Cumulative budget entries (BG) made to expenditure accounts Cumulative YTD revenues

Prior Year Encumbrances (if any) Current Year Encumbrances Cumulative Budget entries (BG) made to Restricted for Operation of Non-Instructional Services

HOW DOES CLOSING THE YEAR END AFFECT THE EQUITY? Total Revenues are reversed through Restricted for Operation of Non- Instructional Services which increases Equity Total Expenditures are reversed through Restricted for Operation of Non- Instructional Services which decreases Equity The difference (net gain or net loss) remains in Restricted for Operation of Non- Instructional Services

EXAMPLE: Prior Year’s Balance Sheet (572,239.49) Revenues 521, Expenses $(125,515,12) After YE Closing (see previous slide) $(74,404.44) Restricted

 Purchases ( Food, Supplies, Contracted Services )  Salaries and Wages  Payroll Taxes ( Employer’s portion of Social Security and Medicare )  Insurance ( Employer’s portion of health and dental ) Normally carry a positive (debit) balance  Equipment Therefore, a debit will increase expenses and a credit will decrease expenses.

Why are Expenditures the only account type that uses object codes? For example,  Expenditures are the only account type segregated by department  The Function defines the department  The Object Code defines the type of expenditure within the department

The Original Budget shows on the top line of the first column Budget Amendments show on the bottom line of that column The Total Budget (Original +/- Amendments) is in the next column Budget Amounts

YTD Expenditures are on the top of each expenditure line YTD Encumbrances (PO’s) are below the expenditure The available amount (total budget less YTD expenses and PO’s) is listed as the Unencumbered Balance The Percent Used is listed below: Total expended (including PO’s) divided by the total budgeted The final column show the current month’s actual expenses and PO’s Actual Amounts

 Lunch, Breakfast, Ala Carte Normally carry a negative (credit) balance  Interest income  Grants  Transfers in from other funds  USDA Payments Therefore, a debit will decrease a revenue but a credit will increase a revenue.

Similar to the Statement of Expenditures, the first columns are the budgeted amounts for Revenues The next columns are the actual revenues received and the percentage that represents of the total budgeted The Unrealized column is revenue budgeted but not collected The last column is the Current month’s revenue

 Bank Accounts  Investment Accounts  Receivables  Inventory/Supplies  Due From Other Funds  Prepaid Expenses Normally carry a positive (debit) balance ASSETS Debit Credit

 Payables  Due To Other Funds  Payroll deductions  Short Term Debt Normally carry a negative (credit) balance LIABILITIES Debit Credit

 Inventory  Long-Term Notes Receivable  Prepaid Items  Restricted, Committed, Assigned, and Unassigned Equity Normally carry a negative (credit) balance EQUITIES Debit Credit

Normally carry a negative (credit) balance  Lunch, Breakfast, Ala Carte  Interest income  Grants  Transfers in from other funds  USDA Payments A debit will decrease a revenue but a credit will increase a revenue. REVENUES

Normally carry a positive (debit) balance  Purchases ( Food, Supplies, Contracted Services )  Salaries and Wages  Payroll Taxes ( Employer’s portion of Social Security and Medicare )  Insurance ( Employer’s portion of health and dental )  Equipment A debit will increase expenses and a credit will decrease expenses. EXPENDITURES

Setting up Accounts Receivable DR Due from Other Governments CR Revenue (This also increases your Revenues)

Receipting of Revenue Sources DR Cash on Hand CR Lunch Revenue Record Bank Deposit DR Cash in Bank CR Cash on Hand (This also increases your Revenues)

Payroll DR Gross salary expense CR Payroll Liabilities CR Cash in Bank Writing Checks DR Expenditure or Liability Accounts CR Cash in Bank (These transactions also increase your Expenditures)

Payroll DR Gross salary expense CR Payroll Liabilities CR Cash Setting Up EOY Payables DR Expenditure Accounts CR Accounts Payable (These transactions also increase your Expenditures)

Paying Vendors for Vol. Ded. withheld & other Payables DR Employee Deduction or Payable Accounts CR Cash in Bank (This also decreases your Assets.)

Asset accounts with negative balances warrant investigation Our software indicates a debit balance as a positive number Assets normally have a debit balance

Liabilities normally have a credit balance Our software indicates a credit balance as a negative number Liability accounts with positive balances warrant investigation

Expenditures on lines where there is no Budget need reclassification or a Budget Amendment

Expenditures on lines where the Unencumbered Balance is positive (the Percent Used is >100%) may require reclassification or a Budget Amendment.

When the Unencumbered Balance is negative, there are still funds available (Percent Used < 100%) When the Unencumbered Balance is positive, more has been spent than was budgeted (Percent Used > 100%)

How do I reconcile my payroll deductions?

TOTALS ON THIS REPORT SHOULD MATCH AMOUNT BILLED BY INSURANCE COMPANY

What are Cost Centers?  Cost Centers are User-defined codes in the Chart of Accounts Why do I need to use Cost Centers?  Cost centers allow you to track Revenues and Expenditures by school For example: ELEM

Cost Centers allow you to track revenues and expenses by school NOTE: If a summary line has actual expenditures or revenues recorded, the Cost Center has not been properly keyed.

Reports can be run with Summarized information

Reports can be run with Cost Center detail

And reports can be run by individual Cost Centers

When the Total Ending Balance is a negative, the Equity and Revenues exceed the Expenditures. Negative is Good

Things I need to know about Budgets

Budgets are entered in reverse from a regular transaction o Budgeted Revenues are entered as aDebit o Budgeted Expenditures are entered as aCredit Budgeted expenditure is negative -- a Credit Actual expenditure is positive -- a Debit

Things I need to know about Budgets Budgets are entered by summarized Revenue or Expenditure line item rather than by Cost Center Budgeted amount Actual amount

Things I need to know about Budgets When do I need to do a Budget Amendment for Revenues?  Review your Summarized statements  Generally, Revenues are only amended if they exceed the anticipated amount AND additional revenues are necessary to cover an increase in Expenditures.  Revenues may also require an amendment if anticipated amounts are significantly lower due to decreased meal counts.

Things I need to know about Budgets When do I need to do a Budget Amendment for Expenditures?  Local policy dictates when amendments are required  Generally, actual expenditures should not exceed the budget in any Function (e.g., 73100) or any Fund (143).

Things I need to know about Budgets When do I need to do a Budget Amendment for Expenditures?  Line item expenditures generally require amendment based on amount or percentage of overage—refer to local policy. Line item not amended. Amount of overage is < $500. Line item amended to prevent overage > 5% and $500.

OTHER USEFUL TOOLS AND REPORTS  Vendor payment verification  The SEARCH function  The Account Analysis report

Where can I look if a Vendor says he/she has not been paid?

You can also look at your Reconciled/Unreconciled checks in your Bank Reconciliation

What is wrong with this expenditure? Note that the account in question is ELEM

To see detail entries posted to an account, you can run an Account Analysis For the account in question, there has been a refund issued which explains the credit to an expense account.

An Account Analysis report can be run for a month, quarter or year. While it may be a lengthy report, it can be a valuable tool for reviewing all transactions made to Fund 143.

How can I find a transaction if I know the amount? To search for other transactions in the same amount, hit F3

Finding the right numbers What is the purpose of the Annual Financial Report? Determination of Excess Balance

Finding the right numbers The Ending Balance from the prior year automatically rolls forward into the current year report as the Starting Balance.

Finding the right numbers The Starting Balance is automatically rolled forward from the prior year report. Any difference in Starting Balance will have to be run through Current Year income or expenses. In this case, Expenses will be increased by $307.67

Finding the right numbers What would cause my starting balance to be different?  Audit adjustments made after the books were closed.  Voided check that was outstanding from the prior year.  Prior year purchase orders (entered in the system) voided or closed out for amounts different than original amount.

Finding the right numbers Total Income is your total current year revenues.

Finding the right numbers Trial Balance

Finding the right numbers Statement of Revenues

Finding the right numbers Total Expenses is your total current year expenditures.

Finding the right numbers Trial Balance Remember, expenditures were increased by $ on the annual report because of the Starting Balance difference.

Finding the right numbers Statement of Expenditures $307.67

Finding the right numbers The Ending Balance should equal the Fund Balance amount after closing the books for year end.

Asset Accounts - Debit balance - Debits to increase - Credits to decrease Liability Accounts - Credit balance - Credits to increase - Debits to decrease Equity Accounts - Credit balance - Credits to increase - Debits to decrease Monthly Tasks (at minimum) - Reconcile Bank Accounts - Reconcile Liability Accounts - Review Trial Balance, Statement of Expenditures and Encumbrances, and Statement of Revenues Annual Financial Report - Check the Starting Balance and make necessary adjustments - Verify the Ending Balance

Why do those balances roll over when Revenue and Expenditures don’t? Where does Fund Balance come from? Why do YTD Debits and Credits only increase, never decrease? What are payables and do I have to journalize them if I do PO’s? Would Full Accrual accounting benefit me? What are Control Accounts and where did they come from? Why do some accounts show up on a Trial Balance but not on the Balance Sheet?

What is each column in the expenditure report telling me? Why is there activity in an account but no amount budgeted? Do I care if one account is over budget but the total by CC is not? Why are there two budget amounts showing up instead of one? Why are numbers stacked on top of each other? How do I know if I am over budget? Is there a more concise or one line report showing budget information? My Revenue/Expense Statement shows a negative ending balance. Is that good or bad?

How do most LEA’s track school revenues and expenditures? How do I set up Cost Centers? How do I reconcile my payroll liability accounts? Are there payroll reports that show people paid out of the wrong program?

Thanks for coming and have a safe trip home