Preparing an AELR Meghan Hieger and Megan Smith Office of the Auditor General Accounting Services Division

 Webinar available on our Web site  History and Background Uniform Expenditure Reporting System Purpose of the ELR Structure and Overview of the ELR

Reconciliation Total Expenditures Additions and Subtractions Part II Exclusions Expenditures subject to expenditure limit Part I Expenditures under (in excess of) expenditure limit

Reconciliation Part II Part I Financial Statements Notes to the Financial Statements Schedule of Expenditures of Federal Awards Notes to the ELR

Line A – Total Expenditures Governmental Funds Total Expenditures Other Financing Uses Special or Extraordinary Items Enterprise and Internal Service Funds Total Operating Expenses Non- operating expenses Special or extraordinary items Fiduciary Funds Total Deductions Do not include transfers out

UERS Expenditures Financial Statement Expenditures OPEB Present Value of Lease Payments Separate Legal Entities DepreciationOPEB Acquisition of Capital Assets Principal Payment on Debt

Items not requiring use of working capital Depreciation Loss on disposal of capital assets Bad debt expense Other post employment benefits expense Claims incurred but not reported Landfill closure and postclosure care costs

Two ways to determine subtraction amount for future costs Subtract the increase in the related liability Subtract the ending liability balance Both amounts can be found in the Notes to the Financial Statements

Separate Legal Entity Subtraction Total expenditures of fund General Revenues transferred in SLE Revenues transferred out Expenditures of Separate Legal Entities Municipal Property Corporation Fund

Present value of net minimum capital lease payments Governmental Funds only Only in the year the entity enters into a new lease agreement Should not be used if the entity receives cash that will be expended for the lease Involuntary Court Judgments Must be the result of an involuntary acts Court judgments arising from a contract are voluntary Attorney General Opinion I86-031

Contributions to Fire Districts Tax levied by county for fire districts Portion of tax proceeds received paid to fire district 1980’s court ruling determined not subject to expenditure limit CCD Reimbursement Payments Required by statute for counties that are not part of a CCD Payments are for pupils admitted to CCDs in other counties Amount withheld from county sales tax distribution Long-term Care Contributions Withheld by State Contributions paid to ALTCS Amount withheld from county transaction privilege taxes Counties base limits have been adjusted for required payment Payments Made to Reimburse AZ DHS Contributions required by session laws Session law specifies they are not subject to expenditure limit Cities also required to make contributions but cannot be subtracted

Principal on LT Debt Payment recorded as reduction of a liability Related interest already included on Line A Capital Asset Acquisitions Assets that are not fully expensed when purchased Assets acquired through non-cash transactions are not included

Subtracted the increase Subtracted the ending balance OPEB, Claims, and Landfill Closure Costs Paid in the Current Year but Reported as Expenses in Previous Years Add the decrease Add the beginning balance

What is an exclusion? Arizona Constitution: Article 9, Section 20

Revenue-drivenExpenditure-driven Only excludable once the expenditure is made Determined by revenue source: Dividends, interest income Grants and aid from federal government Amounts received from State HURF revenues Unspent revenues carried forward Determined by expenditure purpose: Debt service payments Excludable no matter what type of revenue is used Can’t exclude both revenue used and expenditure made Cannot be carried forward and excluded in future years

Fund A Revenue Taxes$50,000 Interest Income$100,000 Federal Grants$150,000 State Grants$200,000 Total$500,000 Expenditures General Government$250,000 Debt Service$150,000 Total$400,000 Excluded Federal Grants $150,000 Debt Service $150,000 Interest $100,000 Carried Forward State Grants $100,000 Spent Taxes $50,000 Federal Grants $150,000 State Grants $100,000 State Grants $100,000

Flow Assumption – Maximizing Carryforward Local (nonexcludable) Revenues Nonlocal (excludable) Revenues Total Expenditures Carried Forward Expenditure Limit

Flow Assumption – Maximizing Exclusions Total Expenditures Local (nonexcludable) Revenues Nonlocal (excludable) Revenues

Fund A: Receives $5,000 grant revenue Transfers grant revenue to Fund B Grant revenue spent from Fund B Exclusion taken in Fund B No exclusion in Fund A Transfers: Exclusions follow the money

Revenue reported in F/S $2,000,000 Exclusion claimed on AELR $1,500,000 Difference $500,000 Note to the AELR Required

Debt Service Requirements Principal and Interest payments Governmental Funds: Statement of Revenues, Expenditures & Changes in Fund Balance Enterprise/Internal Service Funds: Statement of Cash Flows & Statement of Revenues, Expenses & Changes in Fund Net Position

Audited Financial Statements Schedule of Expenditure of Federal Awards Exclusions claimed on the AELR

State Grants Judicial Collection Enhancement Fund Sales Tax Motor Vehicle License Tax HURF Excludable Not Excludable

General Fund Local Revenues $500,000 Expenditures $75,000 Transfers Out $5,000 Water and Sewer Fund Revenues $75,000 Transfers In $5,000 Expenditures $75,000 $5,000 Excludable Not Excludable

Road (HURF) Fund HURF Revenue Miscellaneous Revenue Investment Income

Excludable Expenditures City/Town School District Community College State of Arizona County, City, Town Political Subdivision

$50,000 expended $10,000 reimbursement Reduces expenditures FY 2013 $5,000 reimbursement from FY 2013 expenditures FY 2014 Expenditure of $5,000 reimbursement received in 2014 FY 2015

Carry- forward General Fund Road Fund Water & Sewer Fund Utilities Fund

Flow Assumption Determines which revenues were spent and in which order Determines carryforward earned and spent Fund Balance Should be considered in flow assumption Limits the amount of carryforward available

Revenues Local Revenues $7,000 Non-local revenues $11,000 Expenditures $20,000 Beginning Fund Balance $10,000 Ending Fund Balance $8,000 General Fund Beginning Fund Balance Local Revenue $6,000 Non-local Revenue $4,000 Total $10,000 Carryforward Accumulated $4,000 Used $ -0-

Revenues Local Revenues $7,000 Non-local revenues $11,000 Expenditures $20,000 Beginning Fund Balance $10,000 Ending Fund Balance $8,000 General Fund Beginning Fund Balance Non-local Revenue $4,000 Total $4,000 Carryforward Accumulated $ -0- Used $2,000

Declared by the Governor Expenditures authorized by 2/3 of Board Expenditures subtracted from total expenditures subject to the limit Approved by Voters Expenditures authorized by 70% of Board Expenditures subtracted from total expenditures subject to the limit Not Declared by Governor or Approved by Voters Expenditures authorized by 70% of Board Expenditures added to total expenditures subject to the limit in following FY

One-Time Override What it Is Voter approval to exceed the constitutional expenditure limit by a specific amount What it Isn’t Approval to establish an alternative expenditure limit for one year Reporting The specific amount the voters approved the city/town to exceed it’s limit by should be included on Part I, Line 7.

Contact Us Meghan Hieger and Megan Smith Office of the Auditor General Accounting Services Division