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School Board Audit Committee Training Module 5

School Board Audit Committee Training Module 5 Understanding the Basic Elements of School Board Financial Statements. Session objectives. After completing this session you will:. Understand the Audit Committee’s duties related to the financial reporting process.

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School Board Audit Committee Training Module 5

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  1. School Board Audit Committee Training Module 5 Understanding the Basic Elements of School Board Financial Statements

  2. Session objectives After completing this session you will: Understand the Audit Committee’s duties related to the financial reporting process Understand key features of PSA Handbook Have an overview of School Board financial statements Understand key indicators in School Board financial statements 2

  3. Role and Accountabilities of a School BoardDuties related to the Financial Reporting Process [ON Regulation 361/10 9(1)] • To review the School Board’s financial statements • To review the results of the external audit • To recommend, to the Board of Trustees, the approval of the annual audited financial statements • To review matters that the external auditor is required to communicate to the Audit Committee under generally accepted auditing standards • To review with the external auditor material written communications

  4. Financial Reporting Overview • Financial statements are a fundamental component of school board’s financial reporting • For financial statements to be credible, readers need to have confidence that the statements follow accepted and identifiable standards established by an arm’s length standard setting body • If school boards follow independently set standards, readers can have confidence that the financial statements are consistent and comparable over time

  5. Accounting Standards for School Boards • School Boards are required to follow Public Sector Accounting Standards (PSA) established by the Public Sector Accounting Board (PSAB) for School Boards • “PSAB” is the acronym for the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants (CICA). PSAB has the authority to set accounting standards for the public sector. That authority means that PSAB sets generally accepted accounting principles (GAAP) for the public sector (e.g. school boards) • The Government may also direct school boards to follow certain policies

  6. PSA Standards • Introductory Section • Concepts and Principles (PS 1000 – PS 1300) • Contains sections dealing with: PS 1000 Financial statement concepts PS 1100 Financial statement objectives PS 1150 Generally accepted accounting principles (primary sources of GAAP) PS 1200 Financial statement presentation PS 1300 Government Reporting Entity • Specific Items – Financial Reporting (PS 2100 – PS 2700) • Sections dealing with financial statement items such as: PS 2100 Disclosure of accounting policies PS 2120 Accounting changes PS 2130 Measurement uncertainty PS 2400 Subsequent events

  7. PSA Standards • Specific Items – Financial Statement Items (PS 3030 – PS 3510) • Contains sections dealing with financial statement items such as: PS 3030 Temporary investments PS 3040 Portfolio investments PS 3150 Tangible capital assets PS 3410 Government transfers • Specific Items – Government Not-for-profit-organizations (PS 4200 – PS 4270) • Contains sections dealing with NPO’s such as: PS 4210 Contributions

  8. Changes in Accounting Frameworks relating to Government Organizations

  9. Financial Reporting Overview – Why PSA?Unique characteristics of a School Board

  10. Financial Reporting Overview • At the end of the fiscal year (August 31) school boards prepare two significant reports • Financial Statement Forms as required by the Education Financial Information System (EFIS) • General Purpose summary financial statements • Accounting principles in both should be consistent (i.e. PSA)

  11. Financial Reporting Overview EFIS • EFIS contains significantly more detail than summary financial statements, including grant calculations and supplementary information important for funding decisions • The general purpose summary financial statements are required to be prepared in accordance with PSA standards and are required to be audited • Required statements are as follows: • Statement of Financial Position • Statement of Operations • Statement of Change in Net Debt • Statement of Cash Flows • Notes to financial statements are also required. General Purpose Financial Statements

  12. Anytown District School Board Statement of Financial Position as at August 31, 2010 Prior year comparatives are required on Statement of Financial Position • Assets that can be used to discharge existing liabilities or finance future operations • No distinction between current and long-term financial assets • All liabilities are reported • No distinction between current and long-term liabilities Key indicator Difference between financial assets and financial liabilities represents future revenue required to pay for past transactions Assets available for provision of services typically not used for discharging existing liabilities or financing future operations • Key indicator • Represents school boards net economic resources • Amount by which all assets exceed all liabilities

  13. Anytown District School Board Statement of Operations Year ended August 31, 2010 Prior year comparatives are presented as well as original approved budget (in PSA format) Revenues recorded by significant type • Expenses reported by function or major program • Note disclosure required to report expenses by object (salaries, supplies) • Key indicator • Shows whether revenues of period were sufficient to cover expenses of the period • Reports accumulated surplus at the beginning and end of the period

  14. Anytown District School Board Statement of Change in Net Debt Year ended August 31, 2010 Prior year comparatives are presented as well as original approved budget (in PSA format) Shows the TCA impact on the difference between surplus for the period and change in net debt Shows other non-financial assets impact on the difference between surplus for year and change in net debt Shows whether revenues of the period were sufficient to cover spending of the period. This represents the change in future revenue requirements This represents the change in future revenue requirements.

  15. Financial Reporting Overview Statement of Cash Flows • Reports how the organization financed its activities during the period and met its cash requirements by reporting changes in cash and cash equivalents

  16. Case Study

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