Transcript ANNUAL FINANCIAL REPORTING (CASH)

2010 Updates to Annual
Financial Reporting
Washington Finance Officers Association 2010
Conference Vancouver
September 16, 2010
Duane Walz Assistant State Auditor Local Government Support
Agenda
 2010 changes in reporting requirements
 GASB 54

Effects on the financial reporting process
 Assuring accuracy of the financial report

SAS 115 update
 Q & A for reporting issues
Annual financial reports
 Preparation

Reporting requirements and changes

Reconciliation

Drafting statements, schedules and notes
 Review and oversight

SAS 115

Internal controls
Reporting prescribed in BARS
 “Cash-basis” manuals for:
 Cities, counties, special purpose
districts
 Fire districts
 Conservation districts
 Library districts
 Ports
BARS updates
2010 changes to financial reporting
 Annual updates to reporting requirements

Use update applicable to fiscal year being reported

May use forthcoming year’s update (optional)
EFF DATE SUPERSEDES CASH BASIS BARS MANUAL: VOL PT CH PAGE
1-1-10
1-1-07
1 0 1
1
Updates for reporting
Locate chapter and highlight
Reporting requirements
2010 reporting changes
 Annual Report Disclosure Form

Required if you are NOT submitting through the State
Auditor’s online financial report application

Provides clarity on which forms you are filing

Eliminates the need for negative reporting
C-4/C-5 statement presentation
 Present fund activities/programs into single fund at report
time
Financial statement changes
2009 REQUIREMENT that is being phased in over two
years
 There should be only one general fund
 If the local government accounts for the debt and
capital projects related to proprietary activities in
funds other than proprietary, these activities should
be incorporated in the appropriate proprietary fund
 Fund presentation for C-4

Rollup of multiple general funds and/or proprietary funds

Examples: USDA loans – Operating fund, debt service, &
reserve fund must be rolled together at report time
Financial Statement Changes
General
Fund
#001
Criminal
Justice
Fund
#005
Park Fund
#002
General
Fund
Reserve
#305
General
Fund
#001
 There should be only one general fund.
 If the local government accounts for the debt and
capital projects related to proprietary activities in
funds other than proprietary, these activities should
be incorporated in the appropriate proprietary fund.
Water
Operating
Fund
#401
Water
Redemption
#402
Water Debt
Reserve
#403
Water
Utility
Fund
#401
Roll-up of managerial funds
Proprietary fund example:
Accounting system
 401 Water Sewer
 402 Airport
 404 W/S Debt Service fund
 405 Water Improvement
 406 Sewer Improvement
 410 Airport Reserve fund
Reporting to the
Auditor
 401Water Sewer
 402 Airport
Note:
Need to eliminate
transfers between
managerial funds
397s & 597s
Fund analysis will be required
 Accuracy of fund use

Will require evaluation of present fund numbers for accuracy

Do you have the correct fund numbers?

Do you have the correct activity in the correct fund?
 Separation of governmental activities and proprietary
activities is essential to accurate reporting
 Special revenue funds will be scrutinized under GASB 54

Are you using special revenue funds for the correct purpose?

Are they special revenue or just reserves?
GASB Statement 54
 “Special Revenue funds are used to account for the
proceeds of resources that are restricted or committed for
purposes other than debt service or capital projects ….
The restricted or committed resources need to comprise a
substantial portion of the inflows reported in the special
revenue fund.”

“Restricted” or “committed” are focal points
 Entities may use this calculation to determine whether an
activity would qualify for reporting as a special revenue
fund.
Substantial portion of inflows =
(restricted revenues + committed
revenues)
Total Inflows reported
Statement C-4 - Revised
 “All” funds are
reported on C-4
except “Fiduciary”
fund types
 Elimination of budget
presentation on the
financial statement
 Addition of fund total
column incorporated
into C-4 statement
2010 reporting changes
 Beginning/ending cash reporting

Incorporation of “prior period” adjustments in the beginning
cash and investments section of C4

Addition of BARS code subaccounts on Financial
Statements and Schedules 04 and 05 (use is optional)

308.10 / 508.10 reserved (may require note disclosure)

308.80 / 508.80 unreserved
Statement C-5 revisions
 Should be prepared for all trust and agency funds
including:

Payroll and claims clearing funds
 Elimination of budget presentation
 Incorporation of total column for all C-5 funds
Schedule 04 / 05 Format Change
Changes reflect the electronic layout that is the preferred
reporting format.
Schedule 16 – Emphasis on ARRA
 No changes to the schedule, but reporting
requirement is to emphasize “ARRA” funds on federal
schedule 16

Must abbreviate and must use “bold” type
Notes to Federal Schedule 16
 Additional note required if you have ARRA award
Schedule 22 – revised format

If you have “average” annual revenue of less than $200,000, a
Schedule 22 “Annual Questionnaire for Audit Assessment” is
required.

Now a part of the annual report instead of a separate filing

Must use the 2010 format
Notes to financials
 Note 1 (c) – Budgets

Budget disclosure is now reported in the notes to financials
 Note 1 (m) – Reserved Fund balance – no prescribed
language

Use of 508.10 “reserved” requires description of the nature
and amounts of these reservations
Changes to the notes
 Note 3 – Investments – instructions to note were
modified to clarify that real property is NOT to be
included.

Reference made in BARS that Note 3 should tie to
Schedule 12

Investments may be presented at cost, fair market value,
etc., but must be able to reconcile the note to Schedule 12
 Note 6 – Long-term debt – clarifies that you must
include “fiscal year being report” plus the remainder
of outstanding debt.
 Notes are updated EVERY YEAR

Be sure to check BARS manual updates for latest version
Reviewing the annual financial
report
 SAS 112/115 – requirement

SAS 115 – modifies language somewhat, but does NOT
eliminate the requirements of SAS 112
 Establish a control for review

Finance committee

Management

Outside source
Audit standard for review
 The standard considers deficiencies in controls over
the preparation of the financial statements.
 Indicators of a deficiency are:

Ineffective oversight of financial reporting and internal controls
by those charged with governance.

Failure by management or council/board to address a
deficiency previously reported.

Identification by the auditor of a material misstatement in the
financials that are under audit (ever if the entity subsequently
corrects).
Criteria for adequate review
 The key criteria is to minimize the “potential” for a
material misstatement in the financials.
 Audit standard emphasizes “likelihood” of whether the
control would prevent a material misstatement on the
financials.
 Control should demonstrate that misstatements on
the financials have been reduced to less-than-likely.
Preparing the financial report
 Use a checklist and matrix to assist in preparing your
report
 Locate budget and all amendments for the fiscal
period being reported
 Gather required financial information from outside
agencies such as:

Risk management pools, lending agencies and
banking/investment institutions
 Review the BARS manual for changes
Essential steps for accurate
reporting
 Know your software

Software systems provide some schedules but not all
 The report is in the details!! Accurate BARS codes
are the foundation of a successful annual report.

Data entry is the key
 Many automated systems have eliminated need to
separately prepare statements and some schedules


ASP prepares: Schedule 04/05, 07, 11 and 12
BIAS and VISION systems prepare: C-4/C-5 plus schedules
04/05, 07, 11,12, and 16
 Entities must prepare:


Notes to Financials
Schedules 09,10,17,19, 20, 21 & 22
Include year-end compliance
 Year-end financial period closing issues



Open period expenditures

Cities: Open until Jan. 20

Counties: 30+ days (auditor sets the period)
Recording period-end revenue

Interest earnings

Federal reimbursement grants/loans
Year-end journal entries

Record 508.00.00 ending fund balance

Adjustments/corrections (if any)
 Fund balance reconciliation

Cash rule: Schedule 04 - Schedule 05 = Schedule 11 + 12 by
fund

After recording 508.00 ending fund: Schedule 04 = 05 = 11 +
12
Reconciliation
 Bank reconciliation

For cash-basis entities, this is a key component in
preparing an accurate financial report
 Reconciliation to assure that statements and
schedules balance to bank statements

Financial statements = Bank reconciliation
Final Annual Report Document
 All reports and balances provided to audit team are
considered FINAL – unless you specifically identify
areas that are “draft.”
 Modifications made to “final” reports cannot be
corrected after audit starts.
Filing the Annual Financial Report
 Cash Annual Financial report templates for
cities/counties is available on the State Auditor’s
website, www.sao.wa.gov
 DEADLINE - Must be received 150 days after yearend, typically May 29 -30
 Don’t forget the Certification Cover Page
Annual Report Training Available
 “Cash-basis” financial report preparation classes are
provided annually through the WFOA nonconference
education program.
 Classes located geographically around the state,
starting in February
 Registration: www.wfoa.org
Annual Report Assistance
Duane Walz
Assistant Audit Manager
Local Government Support
(360) 795-5595
[email protected]
www.sao.wa.gov