Financial Reporting Cash Basis

1. Financial ReportingCash Basis 2008 Small Ports Conference Leavenworth WA

4. CLASS OBJECTIVES We will answer the following questions to understand the principals and reporting requirements for “cash” basis annual financial reporting at Ports. Who is SAO? What is an Annual Financial Report? Why do we have an Annual Financial Report? Where does the report go and who uses the data? What are the financial reporting requirements? How do I complete and reconcile the schedules, statements and notes? How do I file the Annual Report?

5. Who is SAO? Washington State Auditor – Elected by Citizens Performs Audits: 2200 local governments 168 State Agencies Accountability Audits (includes Audit Assessments) Legal Compliance Audits Financial Audits Single Audits – Federal Funding Performance Audits Local Government Support – prescribes BARS Whistle Blower Act – SAO Hot Line (expanded 2008) 350 employees – 14 regional offices

6. SAO Local GovernmentSupport Team Christy Raske, CPA, Accounting Services Manager (360) 725-5593 raskec@sao.wa.gov Local Government Finance Project & Accounting Questions Alexandra Johnson, CPA, Assistant Manager (360) 725-5596 johnsoal@sao.wa.gov BARS Training, Technical Assistance Phillip Parks, CPA, Assistant Manager (360) 725-5595 parksp@sao.wa.gov BARS & Grants Training, Technical Assistance Toni Nelson, Small City Specialist (509) 710-4949 nelsont@sao.wa.gov Technical Assistance and Training for Small Cities Duane Walz, Local Government Specialist (360) 725-5594 walzd@sao.wa.gov Local Government Database and Technical Assistance and Training for Small Cities Lisa Tagman, Administrative Assistant (360) 725-5599 tagmanl@sao.wa.gov BARS Manual Orders, Address Updates, Subscription Services, General Information Helpdesk and reference guides: http://www.sao.wa.gov

7. RCW 43.09.200 The State Auditor shall formulate, prescribe, and install a system of accounting and reporting for all local governments, which shall be uniform for every public institution, and every public office and every public account of the same class. The system shall exhibit true accounts and detailed statements of funds collected, received, and expended for account of the public for any purpose whatever, and by all public officers, employees, and or other persons. The accounts shall show the receipt, use and disposition of all public property, and the income, if any, derived there from; all sources of public income …..

8. What does SAO require I do at my Port? LGS Reporting - At a minimum all ports will need to file an annual report with SAO within 150 days of year end. Participate in Audits - The type and extent of auditing will be based on your port revenues, audit history, risk and users of the financial statements. Over $2,000,000 in revenues will have an accountability, legal compliance, and financial audits (also single audit if spend over $500,000 in Federal funding). Between $2,000,000 and $200,000 will usually be limited to an accountability and legal compliance audit. Less than $200,000 will usually have an audit assessment – However, must complete and return the questionnaire!!!

9. SAO Homepage

10. SAO Helpdesk

11. Sample Questions Do you have something that rates accounting software packages? We are currently using ACCPAC and would like something better. Can the Port prepare cash basis financial statements if they have historically prepared financial statements that follow GAAP? We are considering becoming our own Treasurer. We are a small Port with 5 employees. I double as the Finance Manager and Auditor. Could I also be the Treasurer? Do you have guidelines, duties of the Treasurer?

12. Subscription Services

13. Local Government Categories

16. What is the Annual Report? Yearly financial activity information assembled in the format required by SAO. The format is described in the Cash Basis Ports BARS manual. It is comprised of: The C-1 Financial statement Financial notes that provide information about the financial condition and organizational performance. Schedules that provide information concerning financial, legal and contractual requirements.

17. Why an Annual Report? RCW 43.09.230 – requires an annual report to be filed within 150 days after year end. Designed to provide essential financial information for management of local government and legislative officials. To inform the public of the financial affairs and condition of their local government.

18. Reports to Duane by end of May!

19. 2007 Port Filing Statistics 54 of 76 on Time 4 Late 18 Non Filers Filing Format 15 Electronic 14 E-mail & 1 CD 2 PDF 6 Word 7 Excel 43 Paper

20. Where does the Annual Report data go?

21. LGCS Publication SAO statutorily required to produce Comparative Data City County Port Transit Library Conservation Fire State Library Contact SAO (360) 725-5599 or tagmanl@sao.wa.gov

22. LGCS Sample - Revenues

23. LGCS Sample - Expenses

24. Internet - LGFRS Created as a result the “1997 Local Government Finance Study” Legislature desired greater access to local Government fiscal data Ten years of data is available on the SAO website Users Legislature State and Federal Agencies Media and Academia Citizens

28. SAO Audit Staff Internal Site for SAO Auditor’s Series of Analytical Reports Source Data – Schedules 04/05/09 and 16

29. LGCS Reports

31. What are our financial reporting requirements? They are prescribed by SAO and are located at sao.wa.gov/LocalGovernment/BARS/Index.htm Ports Districts Cash Basis Budgeting, Accounting and Reporting System Manual

32. Overview - BARS Manual Part Zero - Introduction Part One - Uniform Chart of Accounts Part Two - Budgeting Part Three - Accounting Issues Part Four - Reporting Part Five - Appendix

33. BARS Manual Review Part Zero – Introduction Reporting requirements Updates Part One – Uniform Chart of Accounts Design and prescription General ledger and Capital Asset accounts Grant Reporting Revenue Accounts Expense Accounts

34. BARS Account Code Structure ? ? ? ? ? ? ? ______ ______ ______ ______ ______ ______ L L L L L L L L L P P P P P P P ______ ______ ______ ______ ______ ______ Fund Local Option Local Option Prime and Element and Object and field field field BASUB Subelement Subobject field field field \________________________/ \_________________________/ Organizational Number Account Number P = Specific coding is prescribed in the BARS manual. L = The fields are established in the BARS manual, but specific numbers are assigned by each local government.

35. Revenue Coding Example Port furnished electricity to users at Marine Terminal Prime Digit 600 Revenue Basic Account 630 Marine Terminal Subaccount 631 User Charge Element 631.8 Utilities Subelement 631.82 Electricity Object 631.82.X Subobject 631.82.XX Notes: Also expense example in the BARS manual

36. General Ledger and Capital Asset Account Codes Part 1 Chapters 2 & 3: These account codes are not applicable to Cash Basis Reporting. Entities should use inventory records/ lists to control capital assets they are responsible for.

37. Chapter 4Grant Revenue Coding Need to know the source of the revenue and whether it is for supporting operational activities or purchasing capital assets (693.XX vs 651.XX). Why did you get the money (capital or operating)? Where did the money come from (State, Federal)? What coding information do you need to record it? Grant Revenue could be from either: Federal (direct or indirect) State Local * Must have a Federal Single Audit if expend $500,000

38. Federal Grant Other than Department of Health and Human Services EXAMPLE: Port receives a grant from FAA. CFDA 20.106 for airport improvement – operational grant. The CDFA - 20.106. The BARS coding is 693.20.1X.  BARS CODE 6 9 3. 20.6 X 1. Revenue 2. 3. operational 4. 5. 6. First three digits of CFDA number 7. For Local Use 1. For revenue for capital grants use 651.XX.XX 2. Grants from Department of Health and Human Services special coding 693.9X.XX, use 9 and X.XX are last three digits of CFDA number 

39. State Grant – Non federal funds EXAMPLE: Port receives a grant from the State Department of Transportation (agency number 03.6X). The BARS coding is 693.03.6X. BARS CODE 6 9 3. 03.6 X 1. Revenue 2. 3. Operational 4. 5. 6. State Agency Number 7. For Local Use For local grants use numbers 07.0X – 09.99 For revenue for capital grants use 651.XX.XX 

40. Revenue Account Codes In general revenue accounts are coded by function and detailed by activity within the function. Basic Accounts Function 610 Airport 620 Marina 630 Marine Terminal 640 Local Option Capital Contributions 660 Property Lease Rental 670 Non revenues 680 General and Administrative 690 Non operating

41. Expense Account Codes In general revenue accounts are coded by function and detailed by activity within the function. Basic Accounts Function 710 Airport 720 Marina 730 Marine Terminal 740 Local Option 750 Local Option 760 Property Lease Rental 770 Non expenses 780 General and Administrative 790 Non operating

42. Non Expenses - Debt 77x.xx – Used by single-entry, cash-basis 771.XX – Debt Redemption Principal Interest = 799.91 BARS Code is determined by Type of Debt General Obligation – Debt backed by tax dollars Revenue – Debt backed by user fees Principal Amounts should equal Schedule 09 Principal + Interest (771.XX + 799.91) total should match Debt section of Notes to Financials

43. Non Operating 799.90 799.91 – Interest Expense 799.92 – Election Expense 799.98 – Environmental Expense

44. Quiz

45. Part Three General Accounting & Issues Describes accounting issues specific to cash basis ports Internal Controls Employee Bonding Electronic Funds Transfer Membership in Organizations Payroll Accounting Cell phones and phone cards Petty Cash Cancelled Checks/ Warrants Voucher Certification Salary Increase for Elected Investments Officials Duplicate Instruments Cash Receipting Promotional Hosting Employee Travel Loss of Public Funds

46. Part Four - Reporting RCW 43.09.230 Financial Reports are to be certified * and sent to SAO within 150 days of yearend. Statements C-1 Statement of Activities Arising from Cash Transactions F-1 Notes to the Financial Statements Schedules 04 Details of Revenues and Other Sources 05 Details of Expenses and Other Uses 09 Long Term Debt 16 Expenditures of Federal Awards/ State & Local Assist. 19 Labor Relations Consultants

47. C-1 ReportingStatement of Activities Arising From Cash Transactions Operating Section Operating Revenues (610’s-60’s and 80’s) Operating Expenditures (710’s-60’s and 80’s) Operating Income or Loss Non operating section Revenues/ receipts (651, 671, 693, 699’s) Expenses/ disbursements (771, 773, 799.xx, .91, .92, .98) (Do not include 672, 772, sale of investments) Total Non operating activity Net Increase (Decrease) in Cash and Investments Beginning Cash and Investments Ending Cash and Investments

48. F-1 Reporting - Notes Example notes are located in the BARS manual. Modify language to describe your entity. Incorporate those areas unique to you and remove those that are not applicable. Must tie back to Statements and Schedules Update EVERY YEAR (refer to BARS manual) Do not need to have exact number as examples

49. Note 1 - SSAP Summary of Significant Accounting Policies (SSAP). This note provides basic information about the Port and the methods used in financial reporting. Need to review and complete applicable sections. Reporting Entity Basis of Accounting Cash, Deposits Capital Assets Investments Compensated Absences Long term debt Risk management

50. Note 2 - Investments Need to list all investments held by the Port If the investments are uninsured or unregistered and held by a third party in the name of the Port the details need to be disclosed. If the Port has derivatives (i.e. complex investment or debt contracts used to increase earnings or hedge costs) the nature of the transactions need to be disclosed.

51. Notes 3 & 4: Property Taxes & Long Term Debt and Capital leases Note 3 Property Taxes: If you receive property taxes you should complete this note. If you have a special tax levy it should be discussed. Note 4 Long Term Debt and Capital Leases: Need to disclose debt by type and give the amortization schedule. If have capital leases use a separate column. Additional information for debt issues should be provided. May want to disclose debt requirements.

52. Notes 5 & 6: Construction in Progress & Pension Plans Note 5 Construction in Progress: If the Port has engaged in construction the status of the individual projects should be disclosed in a schedule. Individual information should be listed so users of the financials will know the status of each project. Note 6 Pension Plans If the port offers pension benefits these need to be disclosed in the notes. If the plan is the State PERS plan the template note may be used. If the Port administers another pension plan the details of the that plan need to be disclosed.

53. Notes 7 & 8: Contingencies and Litigation and Other Items Note 7 Contingencies and Litigation: Disclose any legal or contractual violations and steps taken to resolve them. If there are major lawsuits against the Port the details need to be disclosed. If there is an outstanding amount for a judgment it should be reported on the schedule 9. Note 8 Other Items: Corrections of prior errors Related party transactions Extraordinary events Subsequent events Participation in Joint Ventures Material Commitments

54. Annual Report - Schedules Schedules 04 – Detail of Revenues and Other Sources 05 – Detail of Expenses and Other Uses 09 – Long Term Debt 16 – Expenditures of Federal Awards and State/Local Financial Assistance 19 – Labor Relations Consultant(s) Audit Assessment Survey Districts below $200,000 in total revenue

55. Schedule 04 Purpose: To report the revenues for each port so that the State Auditor’s Office can collect information about the total amounts received. Specific account numbers are required. The level of detail should equal that shown in the BARS Manual chart of accounts. To the third digit To the fourth digit for non-operating revenues (699 series) Source data for LGCS and LGFRS

56. Schedule 04

57. Schedule 05 Purpose: To report the expenses for each port so that the State Auditor’s Office can collect information about the total amounts received. Specific account numbers are required. The level of detail should equal that shown in the BARS Manual chart of accounts. To the third digit To the fifth digit for non-operating expenses (799 series) Source data for LGCS and LGFRS

58. Schedule 05

59. Common Errors Invalid Account Codes Check Chart of Accounts Yellow Tabs – Ch. 5 Revenues, Ch. 6 Expenses Grants Yellow Tabs – Ch. 4 Grant Source Codes Amounts on Schedules do not Equal C-1

60. Sample Schedule 04 lists: 610 Airport - User Charges $23,450 610 Airport – Aircraft Parking Fees $7,650 699 Ad Valorem Taxes $157,323 699 Interest $1,311 Suggested Account Codes: ____611.00______ Airport – User Charges ____611.30______ Aircraft Parking Fees ____699.20______ Ad Valorem Taxes ____699.10______ Interest

61. Grants Schedule 04 lists: 693 Grants $2,450,000 Upon further review, multiple grants were received by: Federal CFDA# 20.106 $2,000,000 State DOT $450,000 Suggested BARS Codes ___693.20.10___ Federal Aviation Administration ___693.03.60___ Department of Transportation

62. C-1 Reporting - Revenues Schedule 04 611 Airport User Charges $422,322 616 Airport Rentals 101,323 61X Total Airport $523,645 621 Marina User Charges $195,736 626 Marina Rentals 31,923 62X Total Marina $227,659 6991 Interest Income $3,127 6992 Property Taxes $75,009

63. C-1 Reporting – Revenues OPERATING REVENUES:? 61X Airport operations $523,645 62X Marina operations $227,659 63X Marine terminal operations __________ 66X Property lease/rental operations __________ 68X General and administrative __________ 64X Other:____________________ __________ Total Operating Revenues $751,304 Non-Operating 6991 Interest Income $3,127 6992 Taxes Levied $75,009

64. C-1 Reporting - Expenses Schedule 05 Subtotals 711 Airport - Operations $324,572 713 Airport - Maintenance 50,227 Total Airport $374,799 721 Marina - Operations $173,127 723 Marina - Maintenance 75,009 Total Marina $248,136 771.20 Debt Principal $50,000 799.91 Debt Interest $5,232

65. C-1 Reporting – Expenses OPERATING EXPENSES:? 7X1 General Operations $_497,699__ 7X3 Maintenance __125,236__ (781+783)General and Administrative __________ 74X Other:____________________ __________ 75X Other:____________________ __________ Total Operating Expenses ___622,935_ Non-Operating 771.X Principal paid on long-term debt __50,000___ 799.91 Interest paid on long-term debt ___5,232___

66. Schedule 09 Purpose: Provides information about the long-term debt of the district. Two Categories General – Debt backed by the district’s full taxing authority Revenue – Debt backed by specific revenue sources

67. Schedule 09

68. Common Errors ID numbers are missing Math Errors (Beginning + New Issues – Redeemed = Ending) Last Year’s Ending Balance does not equal Current Year’s Beginning Amounts Redeemed on Schedule 09 should equal Principal Payments on Schedule 05 (771.X0) and Statement C-1 Amount Issued on Schedule 09 should equal Debt Proceeds (671.X0)on Schedule 04 and Statement C-1

69. Sample Edit Report - Principal

70. Sample Edit Report - Proceeds

71. Statement C-1 NONOPERATING REVENUES/RECEIPTS (EXPENSES/DISBURSEMENTS): (699.10) Interest income __________ (699.20) Taxes levied for: __________ (699.80) Disposal of capital assets __________ (773.30) Purchase of capital assets __________ (671.X0) Long-term debt proceeds __$250,000_ (771.X0) Principal paid on long-term debt __$70,380__ (799.91) Interest paid on long-term debt __________ (699.61) Gain (loss) on investment __________ (65X) Capital contributions __________ (699.50) Extraordinary/Special items __________ (679, 699.90) Other Non-operating revenues __________ (779, 799) Other Non-operating (expenses) __________ (799.92) Election expenses __________

72. Schedule 16 An essential document for planning and conducting the audit of your organization. If $500,000 or more in federal awards are expended in a year, you must contact the State Auditor’s Office Consists of two Schedules Federal and State

73. Schedule 19 Statutorily required since the 1993 Legislature required the State Auditor’s Office to collect The public has a right to be kept informed about the role of outside consultants in public sector labor relations A labor relations consultant is someone who agrees to perform such services for compensation. Required to be filed regardless if a labor consultant is hired

74. Audit Assessment Survey Districts with revenues consistently less than $200,000 Once completed and returned, the assessment is reviewed. If an assessment is not completed and returned, district will have a regular audit Will be a component of the Annual Report

75. Annual Report Filing Before filing, must complete a review process Mailto: Annual Report Local Government Support PO Box 40031 Olympia, Wa. 985004-0031 E-Mail: walzd@sao.wa.gov Review CD Materials

76. Audit Preparation The following document describes auditor procedures when conducting an audit of a cash basis Port. This details specific steps in a financial audit; note, some of the steps may not be applicable. Verify the correct financial statements, notes and schedules are present and tie to each other. Preliminary procedures – analytical and high risk analysis. Internal controls evaluation – knowledge and oversight. Audit procedures to determine if financial statements represent the transactions that took place at the port.

77. Questions???