Transcript Understanding the Financial Report

A.R.S. 48-807
Changes in the Financial Disclosure Laws
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New legislation has been adopted to address
concerns about financial management of Fire
District funds
New procedures are now mandated for Fire
Districts to follow
Allows a great opportunity to talk about the
way SFD operates its finances
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Functions include (ARS 48-803, 804, 805)
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Monthly board meetings
Annual budget
Determine compensation for District personnel
Publish a financial report (ARS 48-251)
Hire a Fire Chief to handle day to day operations
 Handout from AFDA RedBook
There is a fiduciary responsibility by the
board to assure proper procedures and
practices are being followed as it relates to
providing community safety and best fiscal
practices.
A FIRE DISTRICT SHALL RECONCILE ALL FUND
ACCOUNTS FOR EACH CALENDAR MONTH OF
THE FISCAL YEAR WITHIN THIRTY DAYS AFTER
THE END OF THAT CALENDAR MONTH. ALL
FUND ACCOUNTS SHALL BE RECONCILED IN
ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES. THE FIRE DISTRICT
BOARD SHALL REVIEW THE RECONCILED FUND
ACCOUNTS MONTHLY.
A FIRE DISTRICT SHALL PRODUCE MONTHLY FINANCIAL
REPORTS IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES TO INCLUDE CASH FLOW
PROJECTIONS FOR EACH FISCAL YEAR. CASH FLOW
PROJECTIONS SHALL BE UPDATED MONTHLY WITH THE
ACTUAL REVENUES AND EXPENDITURES FROM THE PRECEDING
MONTH. THE FIRE DISTRICT BOARD SHALL REVIEW THE
UPDATED CASH FLOW PROJECTIONS EACH MONTH. ANY
FINANCIAL REPORT OR CASH FLOW PROJECTION THAT
WOULD INDICATE THAT THE DISTRICT IS LIKELY TO VIOLATE
SECTION 48-805, SUBSECTION D OR THAT WOULD INDICATE
AN ADVERSE IMPACT ON THE ONGOING OPERATIONS OR
LIQUIDITY OF THE DISTRICT SHALL BE REPORTED TO THE
COUNTY TREASURER AND THE COUNTY BOARD OF
SUPERVISORS WITHIN TEN DAYS AFTER THE DISCOVERY.
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Concerns arising from other Fire Districts in
the State of Arizona that have had
questionable financial practices,
mismanagement of funds, and in some cases,
legal ramifications for financial improprieties.
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Transparency and trust in your local
government
Have a solid platform that all communities
must utilize to assure uniformity in data
collection and reporting
Some best practice guidelines to assure
sound financial operations are being
employed
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SFD has a long history of providing sound
accounting practices.
The process and format we employ have been
considered best practice and we have provided
outside audits before we were mandated to have
outside reviews.
Multiple GFOA recognitions for Budget
◦ Government Finance Officers Association
We want to maintain compliance and assure our
public that we are held to the highest standards.
We want to maintain transparency and financial
forecasting for our future longevity and
sustainability.
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We have a few new requirements that SFD will
need to provide to be compliant:
◦ Many of the items we have already started doing
◦ Most of the requirements outlined are what SFD has
always provided and operated within
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Follow the required timeline and procedural
issues as they relate to posting/publishing of
financial information.
Board must provide a “Certification” of the
Annual Budget
Estimate Revenues and Expenses for the next
2 years at budget- the proposed year and the
following year
If there is an estimated expense exceeding
revenues for any year- a consolidation or
joint operations study must be completed
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If there is a time where funds are expected to
be deficient, the Board Chair may draw
warrants (Access line of credit with bank
through the County- up to 90%)
◦ The current SFD policy is to have a 15% operating
reserve fund that reduces that risk/need.
◦ We are proposing to cap that at $2 million in the FY
2015 budget. Could alter that with cash flow
projection based on implementing 2 year format
◦ SFD has not needed to access the line of credit very
often (once in the last 25+ years). If funding was
needed, there would be interest charges incurred.
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The Governing Board must review accounts
monthly.
◦ SFD includes the accounts- expenses, revenues,
fund balances, etc. in its monthly financial report.
◦ The format will change to accommodate better
information and more streamlined reporting.
 Reconciliation of the bank statements will be quite
obvious in the volume of paperwork you will have to
look through and have for review
 Staff will be doing all the work but you will be
expected to be able to comfortably read and identify
any irregularities or areas of concerns
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The District must provide monthly financial
reports:
◦ Statement of financial activities
◦ Statement of net assets
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While the current format provides this
information, we are proposing to streamline
the report so it is generated directly from our
accounting software and includes more
categories for everyone to review and track.
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SFD will now be required to present annual
cash flow projections.
While this is going to be a best guess
scenario, it will help us to see where we are at
a given point based on what we project funds
to be arriving at SFD annually.
◦ A project that is expected to be completed in 1
month and is delayed and or when we receive the
invoice could dramatically skew the projection while
really having no impact in the operation or the
budget
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The prior format SFD used included a bar
graph that clearly illustrated the expenses
and revenues each month compared to year
to date projections.
We have created a new data spreadsheet that
clearly identifies cash flow as we expect it to
occur.
◦ This will not simply be budget divided by 12
◦ Practical and actual monthly
calculations/estimations- expenses and revenues
will be used to project this report
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If there is a concern with a financial report or
if cash flow projections indicate an adverse
impact, the SFD Board is required to report
the issue within 10 days.
◦ This provides a check and balance for the County
Supervisors in AZ to know better what is happening
at the local level (when there is concerns or issues)
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SFD has provided a financial report at every
monthly board meeting in the SFD format for
decades.
The new format will now meet the mandated
requirements in reporting to better illustrate
the data required.
◦ Additional reports and data will be provided.
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At each meeting, we will require a formal
board action to approve the monthly financial
report.
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Where there are important components of the
budget, the Board will review those items
each month.
◦ This could include a monthly report/status of the
SRCC.
◦ This could be the expenses for the Station 6 project
during construction.
◦ Anything else that would be of financial interest to
meet the fiduciary responsibilities of being a board
member.
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The budget- published and then actual must
be maintained on the District website for 60
months.
We are now required to publish on the
District website- this eliminates the need to
post the budget in the newspaper.
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We want to present to you what we expect to
produce on a monthly basis
We want to explain what the documents look
like and what they mean so the public and
you know what is included in the paperwork
and how to interpret the monthly finance
reports
We will maintain a high level of transparency
for all to understand the finances and
operations of SFD
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Assets- items with dollar value owned by SFD
◦ Examples- property, equipment and cash
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Equity- Difference between assets and liabilities.
Fund- a fiscal and accounting entity/location for
tracking balances in each account
Liabilities- debt owed by SFD
Other Financing Sources- Revenue received from
different SFD owned funds (transfers in/out)
Revenue- Income earned from carrying out SFD
activities/business
Transfers In/ Transfer Out- accounting practice
of allocating funds between accounts
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This report shows all of the revenue and
expense categories by group.
◦ Examples:
 Salaries for all employees under the heading 51100
 Training and Tuition for all employee groups are listed
under 62750
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Shows the % spent or received Year to Date.
◦ Encumbrances are not included in the expense
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Each month equals 8.33% of the budget.
Date of reporting
period
Fund account
name
Line item numbers
Total Revenue- less
any funds carried
over from capital
account or
contingency funds
Revenue for
month to date
Revenue for
year to date
You want to
see this
number get to
zero or be a
positive
number
Unfavorable means
over allocated
If funds get
reallocated it
tracks where you
are in comparison
Actual amount
assigned in original
budget
Total budgeted
Bottom line will
never change
Month to
Date
expenses
Month to date
less monthly
revenue
Amount
available to
spend in
budget
Nebulous
difference
of funds
allocated
from Fund
10.
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Developed by historical data to get a place to
start.
Each month is projected to represent what we
think will be an expense or revenue.
While we will try to be accurate, there is a
margin of error as we learn this style of
projection.
◦ Could expect a large expenditure to be delivered in
a month and it arrives late- would throw off report
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We have heard this question before
◦ While it is always tricky to answer that because of
the way the operation works Irregularity of revenues- taxes, ambulance billing,
wildland reimbursement etc. make it difficult to answer
at any one specific point
 Definitely different than how a for profit business
works with revenue and expense flow
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This sheet shows the up and down financial
flow the District manages on a monthly basis
3 payrolls and
2 OT cycles
Does not show
encumbrances-last chart
showed $804,015.81
Capital Reserve are funds
designed for capital
purchase needs
All of the 51000
salary line item #’s
Board
Contingency 15%
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Shows previous year (if $ still owed) and
current year.
◦ Expenses- what we spent:
 Fuel, lodging, per diem, wages, and backfill
◦ Total Paid- What has been reimbursed by Feds
◦ Outstanding- waiting for reimbursement
◦ ND Vehicle Revenue- Actual $ collected for the
contracting of SFD apparatus and equipment
 SFD Collected $79,042 in FY13 for deployments
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Projects- revenue generated from services
provided to other agencies- Telecom mostly
Since there is
FY13 balance the
line remains on
the report
We have
expenses but
nothing has
been paid FY14
Since we were just
paid for an
outstanding bill
this last month,
we include to
show a $0 balance
This is a
net profit
$ amount
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Same principals as previously explained when
looking at expenses and revenues.
SRCC runs as a project
◦ We have SFD costs for dispatch in SFD budget
◦ SFD pays for services like all other agencies
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We have the Expense in SFD budget and show
as a revenue in the SRCC project budget
Operating
Budget for
SRCC Project
Fund 50- SRCC
is title of this
account
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The balance sheet shows 5 accounts broken down by
assets, liability, and equity
SFD Operating Expense Fund is called Fund 10. Fund
10 is the number assigned by the accounting
software
◦ Assets
 First 5 accounts are actual funds for which you will see
reconciliations.
 The remaining 9 are accounting funds that the staff and auditor
use for projections, clearing accounts, place holders.
◦ Liability
 Accounts and lines used to identify money that SFD is expected
to pay.
 These are holding accounts for accounting and auditing
purposes.
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Equity
◦ Fund balance
 The difference between the assets and the liabilities
◦ Contra Account
 Will be adjusted with a journal entry effective 6/30/13 as
part of the audit process
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Total Revenue
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Total Expense
◦ Matches the cash flow sheet (taken from Tyler)
◦ Matches the cash flow sheet
 In this month it shows ***Fund 10 out of balance by
$-2,696.17 (the difference between the 2 sheets)
 Staff researches the difference and makes the appropriate
journal entry in Tyler.
These top 5 are the
accounts that are
reconciled
Fund 10 Account
This number
will be the
amount we
are
reconciling
later
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Fund 20- Capital Reserve Fund
◦ Nothing has been taken out of the account so there
are no debits.
◦ You see the interest earned.
◦ As the Cash Flow sheet shows- we expect to deduct
$425,026 in August (which was done this week).
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This fund is really designed to be utilized for
future capital purchases.
◦ Each year, when we budget, we will allocate capital
project funding from this account as needed.
◦ When this account balance hits zero, we will need to
levy for capital purchases accordingly.
Fund 20 account
No debits or activity in
this account so you do
not see any transactions
except for interest
earned $226.38
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Fund 98- Payroll Fund
◦ This is the fund that SFD uses to process payroll.
 Funds are transferred in from Fund 10 to Fund 98 each
pay period to cover payroll expenses.
 With the mandated reconciliation process, the transfer
checks will now be listed for your review.
Fund 98 account
These accounts are
bookmarks/placeholders
for different accounts
within the budget
framework.
Accounts get zero’d out
as transfers occur
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Fund 99- Accounts Payable (POOL)
◦ Referred to as the POOL account because this is
where the money is pooled to pay the accounts
payable.
◦ Different accounts listed for the places we hold
funds to pay the accounts payable each month.
 There are a few different local banks that SFD uses for
different funds. They are outlined on the cover sheet
provided and help SFD participate in the services of
many local banking institutions.
 Chase, Bank of America, NYCB Family of Banks
Fund 99
account
Bank One is not
accurate namechanged in system
already
Accounts Payable checking balance
SFD assets match
liabilities so there is $0
equity
Value in the account is
$34,869.38 because that
is what is in the accounts
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Bank Statement Register by account name:
◦ Tyler Bank Reconciliation
 Deposits, checks and interest
◦ Ledger Sheet from Yavapai County
 Deposits, Warrants, FDAT, Property Taxes, Coconino transfers, and
interest earned
◦ Bank Statement (if applicable)
 Copies of checks, deposits, electronic fund transfers(ETFs), interest
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Important for SFD Governing Board to confirm that the
balances match as part of the fiduciary responsibility of
the Financial Report approval.
Notice the Finance Department initials on the documentsthat is the internal control process to assure the
documents and reconciliations have been reviewed and not
altered.
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The first 5 funds you saw on the Balance Sheets are reconciled monthly
◦ Fund 10
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County General
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The funds that funnel through the County (Yavapai)
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Expenses that need to be paid or reimbursed via check
Petty Cash
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SFD Agency
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This is the account where purchase and sell t-shirts and SFD SWAG to the general public.
This is a self perpetuating fund for these items.
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Excess funds can be used for benevolent related issues- funeral flowers, birth of a child
(employees), etc.
Office Cash
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Could be between check runs and immediate payment required. Balance typically less than
$3,000.
Small purchase at a location we do not have an account at and have no access to a credit
card,
AFLAC Medical and Dependent Care
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Funds that are collected through employee contributions via payroll deductions and used to
fund qualified health benefits and dependent care,
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This is not the employee cost share for health insurance-that money is directly put into the
healthcare liability account listed on Fund 10 Balance Sheet page,
This is deposits made
into SFD’s account for
various reasons- taxes,
FDAT, interest
These are the
monies that
were
transferred into
SFD accounts
$ amount
matches the
Balance Sheet
Specific
Fund Name
Income to the account
comes from- interest paid,
FDAT, property taxes
received
Warrants
Redeemed are
deductions
from account
paid to SFD
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This is the largest reconciliation as it is from
where all of the bills and invoices are paid.
Copies of the checks are provided for each
board member to personally review.
We welcome any questions about a particular
check or expense at any time.
Blocked information is personal
data that may be protected
information
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Station 6:
◦ We will be adding Station 6 as a project account for
August (September board meeting).
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SRCC Cash Flow Sheet/Projection
We will be looking for a best practice format
if we or another agency develops one to
streamline the mandated information into a
ready friendly format
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The intent of this legislation is not to
micromanage every penny that is spent but to
do the following:
◦ Be informed on where the District sits financially
month to month and year to date
◦ Understand the accounting and finance principles
of the District
◦ Be responsible and accountable by approving the
financial report monthly
◦ Be better prepared to financially forecast needs
◦ Be good stewards of the tax payers funds in order
to provide emergency services to the Fire District
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Fire Districts must comply with the new
requirements of ARS 48-807 by September
14, 2013. We will be finalizing any of the
missing details with which legal may have
concerns.
We encourage you to ask staff if you have any
questions, or need additional assistance with
the new forms or processes.
◦ If appropriate, feel free to contact the Chief and ask
questions upon receipt of your board packet so
staff can have the answer at the meeting.
Transparency