Best Practices for Year-End Close

1. Best Practices for Year-End Close Purchasing Academy November 7-8, 2011 @ Irving November 17-18, 2011 @ San Marcos TASBO

2. Things to Do…During the Fiscal Year • Annual tasks: • Update and distribute all policies, procedures, forms, and internal controls • Annual training of administrative staff and campus secretaries is recommended • Track beginning and ending numbers for: • Checks written from all bank accounts • JVs, cash receipts, budget changes, etc posted to the general ledger – Are your numbers automatically or manually assigned? • Ensure that all Investment Officers have acquired their required investment training hours • Track all receivables and pre-paid expenses. • Maintain documentation for all changes in fund balance, such as Fund Balance commitments approved by the School Board and Budgetary Fund Balance appropriations.

3. Things to Do…During the Fiscal Year • Monthly: • Reconcile all bank accounts to the general ledger every month, including posting all reconciling items • Automate if possible through your finance system or depository bank • Monitor your bank account balances for highest balance each month and match to collateral pledged • Prepare monthly financial reports for School Board review and/or approval • Track all assets bought and sold every month – reconcile the capital assets detail listing and general ledger • Monitor the general ledger to clear due-to and due-from accounts every month

4. Things to Do…During the Fiscal Year • Daily: • Monitor cash balances, including outstanding checks if possible to ensure adequate cash is on hand for all disbursements • Ensure that all payroll disbursements, purchase orders, petty cash vouchers, activity account expenditures, contracts for services, etc. are approved in accordance with federal and state law. In addition, all of these purchases should be in compliance with the district’s policies, procedures and internal controls. • Every expenditure should be “perfect” because every expenditure is subject to audit review.

5. Financial Audit Preparation

6. Getting Started • Enter into an Agreement with a CPA firm • Review the terms of the agreement carefully, it typically includes: • Auditor responsibilities • District responsibilities • Extra charges, if any, such as GASB 34 or other statements • Independence of auditor • Gone as the days that the external CPA firm can prepare journal entries….. • They can’t prepare the financials…and audit them, too

7. The Client Prepared List • The CPA Firm’s List • Planning Phase • Confirmations • Workpapers • Your District’s List • Responsibility • Deadline • General Ledger & Supporting Documents • Tasks to Do….End of fiscal year

8. Planning Phase • List of beginning and ending check numbers for fiscal year • All bank accounts • Preliminary working trial balance • For planning purposes – do not have to include all final JVs • List of Board Members & related parties • Ask Superintendent’s Office • Remember to include all board members during the fiscal year (9/01 through 8/31) • Need current address for distribution of confirmation letter

9. Confirmations • Bank confirmations • All bank accounts, including sweep account, if any • All CD accounts • Confirmation of depository securities • Confirmation from board members • Legal confirmation to each attorney used during year • Run a 6211 inquiry to verify attorneys used • Depository Contract Confirmation • Equal Employment Opportunity Commission

10. Workpapers • ASCII file – Finance system extract as of 8/31 • With all final EOY general journal entries • Remember that any additional changes will have to be entered by you in the finance system and by the auditor in their system

11. Workpapers • Cash Management • Bank Reconciliations • All accounts – must be in balance and tied to total cash (object 1111) • Post all reconciling items • Highest Cash Balances per bank statements • Spreadsheet by month – add securities pledged on highest cash days • Bank transfers of $5,000 or more between 8/23 and 9/08 (dates vary each fiscal year) • Accounts receivables at 8/31 • Tie to object codes 124X and 129X

12. Workpapers (Continued) • Schedule of mandated programs • Schedule of federal financial assistance • Total should match object code 59XX • Schedule of prepaid insurance at year end & insurance expense for year (tie to GL) • Totals should match object codes 141X and 6429 • Schedule of pre-paid asset accounts (1410) • Spreadsheet with all prepayments by fund number

13. Workpapers (Continued) • Schedule of fixed assets • Beginning balance tied to prior year audit report • Reflect all additions, deletions, and ending balance of 8/31 by classification and function • Total additions (over $5K) should equal object code 66XX • Total deletions (over $5) should be supported by surplus sale or other disposal method • Calculate depreciation of all assets by function • Post adjustments to assets in Fund 901 • Remember to add all “incomplete” construction projects as 08-31 to the Construction in Progress object code 1580

14. Workpapers (Continued) • Schedule of detailed accounts payables at 8/31 • Total of object code 211X • Listing of all checks written in fiscal year • Listing of all checks written after year end (through day of audit) • Schedule of accrued liabilities at year end (object code 221X) • Schedule of unused sick pay at year end (include number of working hours and pay rate) • Schedule of Impact Aid revenues (If applicable) • Schedule of deferred revenues (object code 231X) • Detailed schedule of revenue accounts greater than $5,000

15. Workpapers (Continued) • Detail of following expenses • Legal fees – suggestion: prepare the schedule and tie to GL (object code 6211) • Transfers out – Balance asset and liability accounts – object codes 79XX and 89XX • Schedule of investments • Verify that GL and investment account statement match as of 8/31 – object codes 112X for investment balances • Verify that GL interest earned matches the investment statements • Schedule of amounts due to Student Activity Accounts • Include detailed receipts and disbursements (year-to-date GL) • Copy of original and amended budget

16. Workpapers (Continued) • List of vendors used during fiscal year • Print a vendor listing • Schedule of expenditures for computation of indirect cost • Schedule of and support of all leases • Schedule of interfund payables • Amounts of payroll and covered payroll for Pension footnote (TRS) • Detail for any reservations or designations of fund balance – Provide copy of resolution(s)

17. Workpapers (Continued) • Copy of TEA Near-Final Summary of Finance • Access to listing of all Special Education students • Copy of Impact Aid Application, if applicable • TRS On-Behalf Calculation • Post to GL and balance to revenue account – 5831 • PEIMS Edit Reports – Statement of Revenues, Expenditures, and Changes in Fund Balance – Mid-year collection for prior fiscal year • District and Campus Plans – Might be on the district’s website • And, any other document that may be requested later….

18. Things to Do…At Year-End • Reconciliations • TRS 2155 accounts • Workers Compensation – 1411 accounts • Flow-out funds, if any • Commodities for Child Nutrition Program • Tie all state revenue (per TEA Summary of Finance and Payment Ledgers) to the general ledger (58XX) • Tie all federal revenue to the general ledger and the Schedule of Federal Awards • Tie all investment balances and interest earnings to the general ledger, annual investment report, and investment statements at 8/31

19. Things to Do…At Year-End • Reference material – Subject to Review • Internal Control Procedures • Update auditor-provided Internal Control Questionnaires (your responses should match your Internal Control Procedures) • Employee Handbooks • Fiscal Manual, if any • Organizational Chart

20. Sample of Documentation • Accounts Payable listings & GL • Accounts Receivable listing & GL • Insurance Schedule & GL • Prepaid items • Interfund accounts • Revenues • Local • State • Federal

21. Auditor Field Work Requests • In addition to all of the client prepared workpapers, your auditors may request some or all of the following: • Bid documents, such as advertisements, bid tabulations, award letters, contracts, etc. • And/or list of all Purchasing Co-Op Agreements • Responses to Variances such as Budget-to-Actual, Actual current year to Actual prior year by function, etc. • Vendors with annual expenditures exceeding $50,000 to test compliance with bid laws and School Board approval of contracts

22. Auditor Field Work Requests • Random selections of: • Payroll checks (including respective HR files) • Accounts payable checks • Journal entries posted to general ledger • Cash receipts • Bank account reconciliations (other than August) • Credit Card transactions, if any • Fixed assets – may request to physically see selected assets • Documentation such as Grant Awards for all state and federal grants • Documentation for all receivables and pre-paid expenses

23. Report Preparation • Auditor Responsibilities • Identify Variances & obtain clarifications from client • Draft financial report and provide to client • Prepare final financial report and present to the School Board • District Responsibilities • Prepare Optimum Fund Balance Schedule (unaudited) • Prepare Management Discussion & Analysis (MD&A) • Review draft financial report • Obtain School Board approval of financial report • File with TEA by deadline (150 days after end of FY) • Mail to all required entities (Dun & Bradstreet, etc.)

24. PEIMS Verification(Mid-Year Actual Financial Data)

25. PEIMS Mid-Year Reporting Deadlines • Midyear (Collection 2) (prior year data) • EDIT+ ready to process data – 10/17/11* • EDIT+ ready for ESCs to accept district and ESC files – 1/5/12 • First submission due date for Districts and ESCs – 2/2/12 • Resubmission due date for Districts and ESCs – 2/16/12 • Data available to customers - March 8, 2012 • *Why is this date so important????

26. Reporting Audited Data in PEIMS • All audit adjusting entries must be posted to the Prior Year general ledger • Best practice is to post all adjustments, if any, as they occur during the audit (Before approving your financial audit report draft verify that your general ledger matches the auditors report) • All account codes must meet the PEIMS edit checks, if not corrections should be made • Use caution to avoid changing expenses from one function or fund to another. • Finally, tie the PEIMS reports to the Audit Schedules. • Variances greater than 3% will result in a penalty on the Schools FIRST report.

27. Data Submission Requirements • Mid-Year Finance Actual Data is for the prior year audited data • For 2011-2012 PEIMS Mid-Year – Report audited 2010-11 • Detailed financial data – unlike PEIMS Budget Data it is not summarized by major object codes • Does not include sub-objects and local use codes • Locally used code structures may need to be extracted by establishing “crosswalks” during the PEIMS extract process • For federal project funds, the fiscal year code should indicate the state project year during which the project funds were originally allocated.

28. Data Submission Requirements • Fund balance accounts should reflect the “post-closing” fund balances on August 31st, with all audit adjustments posted to the general ledger • Shared Service Arrangements fiscal agents shall report the actual financial data for the prior school year for the shared service arrangement. SSA fund codes shall be used to report financial data.

29. PEIMS Edits • Edits may be one of the following: • Fatal • Warning • Special Warning • All of these need to be verified to ensure accuracy • Types of edits: • 03201 If Object code is 61XX-64XX, function must not be “00” – Fatal error • 03212 If object code is 65XX, function must be “71” or “81” – Special Warning • 03265 Actual amount for fund 199, object code 61XX- 64XX must be greater than $0 – Fatal error

30. Questions

31. Presenter Contact Information Rebecca Estrada Executive Director of Finance Lackland ISD 2460 Kenly Ave., Bldg. #8265 Lackland Air Force Base San Antonio, Texas 78236 (210) 357 5005 estrada.r@lacklandisd.net