Colorado Association of School Business Officials Intermediate School

Colorado Association of School Business Officials Intermediate School District Accounting Presented by Tony Whiteley, CPA Curriculum Prepared by Karin Slater, SFO

Intermediate School District Accounting � Introductions ◦ Name ◦ School District/Employer ◦ Position ◦ How long have you been involved with school finance

� The Intermediate School District Accounting Classes are developed for School Accounting Personnel of public and charter schools by Colorado. ASBO in cooperation with the Colorado Department of Education, the Colorado League of Charter Schools, and offers updates on issues affecting the accounting/financial operations and reporting requirements of public schools in Colorado. These classes will help you develop a “Tool Kit” to be used in your present or future school district employment.

Intermediate School District Accounting Class Overview: This class provides attendees with a detail look at fund accounting in school districts. Through a combination of lecture and classroom participation, participants will learn the concepts of the measurement focus, basis of accounting, and revenue recognition as it pertains to school districts. This course is appropriate for anyone interested in advancing their knowledge of school district accounting.

Agenda � Fund Accounting � CDE Chart of Accounts � Fund Types � Flow-thru coding concept � Measurement Focus and Basis of Accounting � Capital Assets/Depreciation � Financial Statements � TABOR Calculations � Other Considerations

FPP Handbook � Http: //www. cde. state. co. us/cdefinance Financial Policies and Procedures � FPP Handbook � Meetings and Minutes � Chart of Accounts

Fund Accounting Section 1

Fund Accounting � Each fund is tracked as a separate, selfbalancing set of accounts � Each fund will have a complete, balanced TB � Pooled Cash or Due to/Due From is often used � Like running multiple, separate entities � Considerations for interfund transfers ◦ Object 52 xx debit balance �(source indicating destination) ◦ Object 52 xx credit balance �(destination indicating source)

CDE Chart of Accounts Section 2

Required Elements to Chart of Accounts Source/Object/ Balance Sheet (SOBS)

Fund within CDE Chart of Accounts xx-xx-xxxx-xxxx � 1. Fund - an independent fiscal and accounting entity with a self-balancing set of accounts for recording cash and other financial resources. It contains all related assets, liabilities and residual equities or balances, or changes therein. Funds are established to carry on specific activities or attain certain objectives of the school district according to special legislation, regulations, or other restrictions.

CDE Chart of Accounts 2. xx-xx-xxxx-xxxx Location - a dimension used as a way to identify schools, attendance centers, operational units, buildings, or sites as budgetary units or cost center designators, as a means of segregating costs.

CDE Chart of Accounts 3. xx-xx-xxxx-xxxx Special Reporting Element (SRE) - describes the activity for which a service or material object is acquired, much like a function. This element is optional, but may be used with the program element to differentiate program costs. Exception: If District has been approved for Title I Consolidated School-wide Reporting, SRE 95 is required.

CDE Chart of Accounts xx-xx-xxxx-xxxx 4. Program - a dimension which describes the activity for which a service or material object is acquired. The programs of a school district are classified into six broad areas: Instruction (0010 -2099), Support Services (2 xxx), Operation of Non. Instructional Services (3 xxx), Facilities Acquisition and Construction Services (4 xxx), Other Uses (5 xxx), and Reserves (9 xxx).

Function/Program CDE: PROGRAM �A program is a plan of activities and procedures designed to accomplish a predetermined objective or set of objectives.

CDE: Programs � 0010 through 2099 : INSTRUCTIONAL PROGRAM ◦ activities dealing directly with the interactions between staff and students ◦ Location: �school classroom �in another location such as a home or hospital, �or in other locations such as those involving cocurricular activities.

CDE: Programs � SUPPORT ◦ ◦ ◦ 2100 2200 2300 2400 2500 2600 ◦ 2700 ◦ 2800 ◦ 2900 SERVICE PROGRAM Support Services - Students Support Services - Instructional Staff Support Services - General Administration Support Services - School Administration Support Services – Business Operation and Maintenance of Plant Services Student Transportation Services Support Services – Central Other Support Services

CDE: Programs o 3100 3200 3300 3400 4000 o 5000 o o Food Services Operations Enterprise Operations Community Services Education for Adults Facilities Acquisition and Construction Services Other Uses Note: Continue to use Program Code 3100 for Food Services Operations reported under Fund 21, effective July 1, 2014.

CDE Chart of Accounts xx-xx-xxxx-xxxx 5. Source/Object/Balance Sheet - a combination dimension which is used to identify the type of account: Balance Sheet, Revenue (Sources), or Expenditure (Object). Object is the service or commodity obtained. xx-xx-xxxx-xxxx 6. Job Classification - a dimension which enables school districts to break down expenditures for salaries and employee benefits by the employee’s job classification. If salary or benefit object code is used, job classification code must be used.

CDE Chart of Accounts 7. xx-xx-xxxx-xxxx Designated Grant/Project - an award of financial assistance in the form of cash or a contribution or gift of other assets from another government to an eligible grantee to be used for a specified or designated purpose, activity or facility. � To track grants, grant codes are used in the asset, liability, expenditure/expense, and revenue accounts

Grant Codes � Grant codes generally follow the same sequence as Source Codes 1000’s: local grants 2000’s: Intermediate sources 3000’s: State grants 4000’s-9000’s Federal grants ◦ See CDE listing of State and Federal Grant numbers http: //www. cde. state. co. us/cdefinance/sf. COA

Fund Types Section 3

FUND TYPES � Types of Funds ◦ Governmental �General �Special revenue �Debt Service �Capital Projects �Permanent ◦ Proprietary �Enterprise �Internal Service

FUND TYPES � Types of Funds (Cont’d) ◦ Fiduciary �Pension �Investment �Private purpose �Agency � How many funds is a government required to have?

10 GENERAL FUND to account for and report all financial resources not accounted for and reported in another fund. � For instance: � Used ◦ ◦ ◦ Bond Redemption Fund Capital Reserve Fund Special Building Fund Insurance Reserve Fund any other fund authorized by the State Board of Education

11 Charter School Fund � Used to track revenues and expenditures of charter schools � Not required to include transactions in financial database for normal day to day operations � However, must be included for Data pipeline reporting purposes.

11 Charter School Fund � May use Other funds to track charter school, if applicable, such as Pupil Activity Fund and Governmental Designated-Purpose Grants Fund. � Location codes 900 through 969, which are reserved exclusively for charter schools, must be used to identify specific charter schools within the district. � See Appendix K, “Charter Schools, ” in the COA

18 Risk-Management Sub-Fund of the General Fund (optional) � Allows you to separate your risk management accounting, and maintain a self-balancing set of records specific to risk management insurance � Funds 10 and 18 are the only funds available for risk-management purposes

19 Colorado Preschool Program Sub- Fund of the General Fund (optional). � Allows a district to separate the Colorado Preschool Program � Other moneys used to pay the costs of providing preschool services may be deposited into this fund. � Expenditures shall only be made to pay the costs of providing preschool services directly to children enrolled in the district’s preschool program

19 Colorado Preschool Program Sub- Fund of the General Fund (optional). � Such costs shall include teacher and paraprofessional salaries and benefits, supplies and materials, home visits, the entire cost of any preschool program contracted services, ◦ the costs of their parents, any associated professional development activities, ◦ costs that a district would not otherwise have incurred but for the services provided in conjunction with the five percent of such overhead costs. ◦ For more info visit http: //www. cde. state. co. us/cpp ◦ ◦

19 Colorado Preschool Program Sub-Fund of the General Fund (optional). � Any moneys remaining in the fund at the end of the year shall remain in the fund. � Allocations may be made to fund 11 for charter schools. ◦ Must use the grant code of 3141 (CPP preschool) ◦ Unused amounts at year end, must use a “reservation of fund balance” within the equity section of Fund 11, including balance sheet code of 6724.

SPECIAL REVENUE FUNDS Used to account for and report the proceeds of special revenue sources that are restricted or committed for specified purposes other than debt service or capital projects. A separate fund may be used for each restricted source.

SPECIAL REVENUE FUNDS 21 22 23 24 25 Food Services Special Revenue Fund Recently moved from Fund 51 (Enterprise Fund) 21 Effective July 1, 2014 Governmental Designated-Purpose Grants Fund Pupil Activity Special Revenue Fund Full-Day Kindergarten Mill Levy Override Fund Transportation Fund

DEBT SERVICE FUND � Resources that are restricted, committed, or assigned to expenditure for principal and interest. � Debt service funds should be used to report resources if legally mandated. � The use of Bond Redemption Funds for non voter-approved debt is not permitted by Colorado Revised Statutes.

DEBT SERVICE FUND � 31 Bond Redemption Fund. Used to account for the accumulation of resources for and the payment of principal, interest, and related expenses on longterm general obligation debt or long-term voterapproved lease-purchase debt. � 39 Non-Voter Approved Debt Service Fund. Must be used to account for the accumulation of resources and payment of principal, interest and related expenses on any non-voter approved debt. DO NOT use this code for voter approved debt. � Funds 32 -38 roll to Fund 31, and should not be used for non-voter approved debt.

CAPITAL PROJECT FUNDS � Resources are restricted, committed, or assigned to expenditure for capital outlays acquisition or construction of major capital facilities and other capital assets (other than those financed by proprietary funds and trust funds).

CAPITAL PROJECT FUNDS � � � 41 Building Fund. Used to account for all resources available for acquiring capital sites, buildings, and equipment. Examples of such resources include bond sale proceeds, grants, donations, and interfund transfers. 42 Special Building and Technology Fund. Used to account for all resources generated by taxes levied pursuant to Section 2245 -103(1)(d), C. R. S. , for the construction of schools (e. g. , the acquisition of land construction of structures) or for the acquisition of instructional computer technology. If a district levies the tax, this fund is required. 43 Capital Reserve Capital Projects Fund. Used to account for the purposes and limitations specified by Section 22 -45103(1)(c), C. R. S. , including the acquisition of sites, buildings, equipment, and vehicles. Fund 43 CAN be used for a capital reserve fund which is classified as a capital projects fund.

ENTERPRISE FUNDS � Similar to private business enterprises � Intent is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through use charges. � Activities are required to be reported as enterprise funds if any one of the following criteria is met. Governments should apply each of these criteria in the context of the activity’s principal revenue sources: ◦

ENTERPRISE FUNDS ◦ The activity is financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity. ◦ Debt that is secured by a pledge of net revenues from fees and charges and the full faith and credit of a related primary government or component unit is not payable solely from fees and charges of the activity. ◦ Laws and regulations require that the activity’s costs or providing services, including capital costs, be recovered with fees and charges, rather than with taxes or similar revenues. ◦ The pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service).

ENTERPRISE FUNDS � 51 Food Service Fund. Used to record financial transactions related to food service operations. If the district receives USDA school breakfast/lunch money, this fund is required. ◦ Recent changes have moved this fund number to 21 effective July 1, 2014 � Note: Enterprise fund codes 52 through 59 are available for district use. � If funding is being provided by the General Fund, the source code used in the Enterprise Fund should be an appropriate source codes (1973 – 1978) for data pipeline purposes.

INTERNAL SERVICE FUNDS � Services provided by one department or agency to other departments or agencies of the government and its component units, or to other governmental units, on a costreimbursement basis. � Internal service funds should only be used if the reporting government is the predominant participant in the activity.

INTERNAL SERVICE FUNDS � The recording of user fee revenue generated by charging other funds causes a double counting of revenues and expenditures � To prevent the overstatement of revenue and expenditure amounts on CDE reports, districts must code revenues to the appropriate source codes (1973 -1978).

INTERNAL SERVICE FUNDS � 63 Risk-Related Activity Fund (Used if a second fund in addition to fund 64 below is needed) � 64 Risk-Related Activity Fund. � Note: Internal service fund codes 61 through 62 and 65 through 69 are available for district use.

FIDUCIARY FUNDS (Trust and Agency Funds) Trust: � Used to account for assets held in a trustee capacity or as an agent for individuals, private organizations, and/or other governmental units. � Normally subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held. Agency funds do not involve a formal trust agreement and the government's role is purely custodial.

� 72 FIDUCIARY FUNDS (Trust and Agency Funds) Private-Purpose Trust Fund ◦ This fund may be used for expendable or nonexpendable scholarship programs � 73 Agency Fund ◦ Agency funds are custodial in nature and do not involve measurement of operations. Agency funds generally serve as clearing accounts. 74 Pupil Activity Agency Fund ◦ These activities are self-supporting and do not receive any direct or indirect district support

PERMANENT FUND � 79 Permanent Funds should be used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs � 85 � 90 Foundations – Accounting for Foundations District Debt Fund. Used with Balance Sheet Codes 7511, 7512, 7513, 7514, 7515, and 7519 (contra account) to report District Debt. Not a true fund, used for data pipeline collection purposes.

Flow-thru Coding Concept Section 4

Flow-thru Coding Concept � CDE does not allow the entity that CDE provides with the Federal funding (District or BOCES) to subgrant the Federal funding to another entity. � In the cases where the District involves another entity (charter school or District), the FPP committee established the flow-thru coding concept; please see Object Codes 0591 -0594 and Source Codes 4951 -4954, 3951 -3954, and 1951 -1954.

Flow-thru Coding Concept (cont. ) � This flow-thru coding (not to be confused with the Federal grant pass through funding concept or sub-granting) was established to allow the other entity to report the activities they performed on behalf of the District or BOCES. It is therefore up to the District or BOCES to meet, with the charter school or other district assistance, the compliance requirements related to Federal funding provided to the District or BOCES.

Flow-thru Coding Concept (cont. ) � The use of the flow-thru object and source coding may also include the appropriate grant code involved. � The sum of the flow-thru Object Codes (0591 -0594), should agree with the sum of the flow-thru Source Codes (1951 -1954, 39513954, and 4951 -4954) at the state level. These sums may agree at the district level for use with charter schools.

Measurement Focus and Basis of Accounting Section 5

Basis of Accounting � Basis of accounting determines when the government will recognize transactions in the accounting records and when they will be reported in the financial statements. ◦ Governmental funds use the modified accrual basis of accounting. ◦ Proprietary funds use the accrual basis of accounting.

Basis of Accounting � Accrual basis of accounting recognizes transactions when they occur, despite the timing of the related cash flows. ◦ Using this basis of accounting, revenues are recognized in the accounting period which they become objectively measurable and the government earns them. ◦ Expenses are recognized in the period incurred assuming that they are measurable.

Basis of Accounting � Modified accrual basis of accounting modifies the accrual basis of accounting to reflect the spending of financial resources. ◦ Revenues are recognized when they are measurable and available. �Measurable means you have some objective way to quantify the revenue. �Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period.

Measurement Focus � Measurement focus determines what a government measures and reports in its financial statements. ◦ Governments use the flow of current financial resources measurement focus. ◦ Proprietary funds use the economic resources measurement focus.

Measurement Focus � Current financial resources measurement focus shows the extent to which financial resources obtained during a period are sufficient to cover claims incurred during that period against financial resources. � With this measurement focus, only current assets and current liabilities generally are included on the balance sheet.

Measurement Focus � Economic � With resources measurement focus this measurement focus, all assets and all liabilities associated with the operation of these funds are included on their statements of net position.

Governmental vs. Proprietary Funds

Revenue Recognition for Grants � The “available” criterion applies to reimbursement grants. For expenditure driven grants in governmental funds, revenues are recognized at the time of the expenditure only if the reimbursement will be received within the government’s period of availability. � Ensure that you request your June 30 th Grants Accounts Receivable prior to the end of your revenue recognition period (may be 60 days or more) to meet the “available” criterion

GASB 34 � GASB 34 requires a separate presentation of financial statements for each type of measurement focus: ◦ Fund Statements remain modified accrual basis of accounting, current financial resources measurement focus ◦ Government-Wide Statements combine and present all non-fiduciary funds on a full accrual, economic resources measurement focus

Capital Assets Section 6

Capital Infrastructure Assets * * Land Improvements that have a useful life are depreciable

Depreciation � Things to consider in implementing depreciation. ◦ ◦ Depreciable lives Depreciation methods Capitalization threshold In what department of the government does the asset belong?

Depreciation � Generally, will use straight line depreciation � Value of the asset should include all costs to make the asset ready for use � Divide Value by life of asset to determine yearly depreciation � Determine is you are going to use a half-year convention or by number of months asset is in place

Definition of Infrastructure � Infrastructure, defined as: ◦ Long-lived capital assets that can be preserved for a significantly greater period than most capital assets ◦ Normally stationary items ◦ Examples: �Roads and bridges, dams �Water and sewer systems � Do any of you have infrastructure?

Infrastructure Assets � Reporting alternatives ◦ Historical cost based depreciation ◦ Modified approach

“Modified” Approach � No depreciation is required if the government demonstrates that it is maintaining qualifying infrastructure assets approximately at or above the condition level established. � Condition assessments must be performed at least every three years.

Financial Statements Section 7

Government-Wide Statements � The ◦ ◦ ◦ ◦ � government-wide statements include: Statement of Net Position. Statement of Activities (cost of services approach). Economic resources measurement focus. Accrual basis of accounting. Governmental activities. Business-type activities. Discretely presented component units. Do not include Fiduciary Funds at the government-wide level.

Statement of Net Position (Previously Statement of Net Assets) � All assets (including capital assets) � Deferred Inflows � All liabilities (including long-term liabilities) � Deferred Outflows � Net position (rather than fund balances, retained earnings; GASB 34 was called total net assets). ◦ Invested in capital assets, net of related debt ◦ Restricted ◦ Unrestricted � Choice between classified format or order of liquidity.

Statement of Net Position Deferred Outflows (1 of 3) � Deferred outflow of resources: a consumption of net position by the government that is applicable to a future reporting period • Has a positive effect on net position, similar to assets � Outflow of resources: a consumption of net position by the government that is applicable to the reporting period

Statement of Net Position Deferred Outflows ( 2 of 3) Some transactions in which the resulting item should be reported as a deferred outflow of resources (currently classified as assets) –Grant paid in advance of meeting timing requirement –Deferred amounts from the refunding of debt (debits) –Costs to acquire rights to future revenues (intra-entity) –Deferred loss from sale-leaseback

Statement of Net Position Deferred Outflows (3 of 3) Some transactions in which the resulting item should be reported as a deferred outflow of resources (currently classified as assets) -Debt issuance costs (other than insurance) � Initial direct costs incurred by the lessor for operating leases � Acquisition costs for risk pools � Loan origination costs

Statement of Net Position Deferred Inflows (1 of 4) � Deferred inflow of resources: an acquisition of net position by the government that is applicable to a future reporting period • Has a negative effect on net position, similar to liabilities � Inflow of resources: an acquisition of net position by the government that is applicable to the reporting period

Statement of Net Position Deferred Inflows (2 of 4) Some transactions in which the resulting item should be reported as a deferred inflow of resources (currently classified as liabilities) –Grants received in advance of meeting timing requirement –Taxes received in advance –Deferred amounts from refunding of debt (credits) –Proceeds from sales of future revenues –Deferred gain from sale-leaseback

Statement of Net Position Deferred Inflows ( 3 of 4) Some transactions in which the resulting item should be reported as a deferred inflow of resources (currently classified as liabilities) – “Regulatory” credits (gains or other reductions) –“Unavailable” revenue in governmental funds –Loan origination fees (excluding points) – lessor accounting –Commitment fees (after exercise of expiration)

Statement of Net Position Deferred Inflows ( 4 of 4) � Use Balance Sheet Code 7801 for Grant revenues that were received after the district’s revenue recognition period. � Avoid � Use this situation by requesting your funds! Balance Sheet Code 7482, if received grant revenue prior to its being earned.

Difference from Fund Statements to Gov’t Wide (1 of 2) � Long-term assets � Long-term Liabilities ◦ Receivables ◦ Capital Assets ◦ ◦ ◦ Debt Compensated Absences Claims and Judgments Pension Benefit Obligation Other Post Employment Benefits (OPEB)

Difference from Fund Statements to Gov’t Wide (2 of 2) � Inventory (expense when used rather than when purchased). � Previously had the option of using the consumption method or the purchase method, but now we can only use the consumption method. � Interest payable on long-term debt.

Statement of Activities � Net cost format (expenses minus program revenue – net cost) � Expenses by functions/programs � Revenues by: ◦ Program (charges for services and program specific operating and capital grants) or ◦ General (i. e. taxes and other non program revenue) � Special, extraordinary items and transfers

Expenses/Expenditures � Expenses/expenditures function are reported by ◦ Direct expenses – required ◦ Indirect expenses allocation permitted �Separate column for indirect expenses if allocated ◦ Depreciation ◦ Interest

Program and General Revenues � Program revenues reduce the net cost of a program. ◦ Charges for services ◦ Program specific grants and contributions � Net cost is financed by general revenues. All revenues are general revenues unless they are required to be reported as program revenues.

Differences from Fund Statements � Recognition of revenues on accrual basis. ◦ Property taxes – no availability criterion, recorded on full accrual basis of accounting. ◦ Recognition of expenses for long-term liabilities. �Compensated absences �Claims and judgments �Pension benefit obligation �OPEB

GASB 34 Requirements Fund Level Statements � Fund Presentations ◦ Major funds ◦ Non-major funds presented in a single column by category ◦ Major fund concept does not apply to fiduciary funds or internal service funds � However, to meet Colorado Revised Statutes, supplemental schedules are required for reporting budgetary comparisons for all funds and schedules of changes for fiduciary (agency) funds.

Major Fund Criteria � General Fund is always a major fund � Individual fund is: ◦ At least 10 percent of assets including deferred outflows, liabilities including deferred inflows, revenue, expenditures/expenses, ( excluding extraordinary items) of the relevant category or fund type � At least 5 percent of total governmental and enterprise funds combined � Other funds that are deemed to be important for separate disclosure

Governmental Fund Statements � Required Statements: ◦ Balance Sheet ◦ Statement of Revenue, Expenditures, and Changes in Fund Balances ◦ Characteristics of governmental fund statements: �Current financial resources measurements focus �Modified accrual �Reconciliation required to government-wide statements for both statements

Treatment of Internal Service Funds � Remove the ‘doubling up” effect of internal service fund activity at government-wide level � Generally, assets and liabilities are reported with governmental activities – unless internal service funds primarily support business-type activities. � The doubling up effect is addressed in the data pipeline file by the use of additional negative offset entries (source 1979 and object code 0529). Triggered by the use of source codes 1973 -1978.

Internal Service Funds � Used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the government and its component units, or to other governmental units, on a costreimbursement basis. � To prevent the overstatement of revenue and expenditure amounts on CDE reports, districts must code revenues to the appropriate source codes (1973 -1978).

Proprietary Funds � Economic resources measurement focus � Accrual basis of accounting � Enterprise defined ◦ Debt secured solely by pledge of net revenues from fees or charges ◦ Laws or regulations require recovery of cost ◦ Pricing policy designed to recover cost

Proprietary Fund Statements � Classified Statement of Net Position � Statement of Revenue, Expenses, and Changes in Net Position � Statement of Cash Flows � Reconciliation required for financial position and operating statements (if necessary)

Proprietary Fund Statements � Statement Assets) of Net Position (previously Net ◦ Classified – current vs. long term ◦ Restricted assets must be reported as such ◦ Net position �Invested in capital assets, net of related debt �Restricted �Unrestricted

Proprietary Fund Statements � Operating Statement ◦ Distinguish between operating and non-operating ◦ Capital contributions and transfers reported separately

Proprietary Fund Statements � Cash Flow ◦ Four categories of cash flows �Operating �Non-capital financing �Capital and related financing �Investing Direct method is required for cash flows

Proprietary Fund Reminder: �Food Service, as of July 1, 2014 is moving from Fund 51 Proprietary Fund to Fund 21 Special Revenue Fund

�Sample Proprietary Fund disclosure as of July 1, 2014: Restatement of Net Position and Fund Balance The District previously reported the activity of the Food Service Fund in a proprietary fund. Beginning in fiscal year 2014 -2015, such activity has been more appropriately reported in a special revenue fund. Accordingly, the newly established special revenue fund reports a restated beginning balance of $xxx, which is equal to the net current assets and current liabilities previously reported in the proprietary fund. All remaining assets and liabilities, including net position of $xxx, previously reported in the proprietary fund are not recognized at the fund level under modified accrual, and have been reclassified as assets and liabilities of the governmental activities as of July 1, 2014.

Component Unit Presentations � Discrete presentation in government-wide statements � Major component unit reporting choices: ◦ Separate columns in the government-wide statements ◦ Separate statements after fund presentations ◦ Condensed information in the notes � Note: Charter schools are still required to provide a separate governmental audit to its authorizer and to CDE.

Required Supplementary Information � Budgetary comparisons for general fund and major special revenue funds ◦ ◦ Original and final budget Actual on budgetary basis or GAAP basis Reconciliation to GAAP basis statements When applicable – infrastructure-modified approach �Three most recent condition assessments �Estimated amount to maintain and preserve versus actual amount for the last five years Note: Budgetary comparisons are required as supplemental information for all funds per State Statutes.

MD & A Management Discussion and Analysis � The MD & A is a section of a government's annual report in which management discusses � numerous aspects of the company, both past and present. � Among other things, the MD&A provides an overview of the previous year of operations and how the government fared in that time period.

MD & A Management Discussion and Analysis � Management will usually also touch on the upcoming year, outlining future goals and approaches to new projects. � Note: to be considered as a complete audit, the MD&A must be included.

MD & A � The MD&A is a very important section of an annual report, especially for those analyzing the fundamentals, which include management goals and management style. Although this section contains useful information, investors should keep in mind that the section is unaudited.

MD & A � MD&A’s should: • enable readers to view the government through the eyes of management; • complement as well as supplement financial statements; • be reliable, that is, complete, fair and balanced, and providing material information — namely, information that could influence a reasonable investor in making a decision to invest or continue to invest in the government;

MD & A � Have a forward-looking orientation; � focus on management’s strategy for generating value for investors over time; � be written in plain language, with candor and without exaggeration, and � embody the qualities of understandability, relevance, comparability and consistency over reporting periods.

Financial Statement Data Analysis � MD & A is the only required component of the financial statements that has comparative information. These comparative summaries or schedules include: ◦ ◦ Net Positions Changes in Net Positions Capital Assets Long-term debt

TABOR Reserve Calculations Section 8

TABOR � The TABOR amendment was approved by Colorado voters in 1992. TABOR places limits on revenue, spending, and debt which may be weakened only by the approval of the voters.

TABOR � TABOR requires the establishment of “emergency reserves… to use for declared emergencies only”, amounting to “ 3% or more of its fiscal year spending excluding bonded debt service”. [TABOR (5)]

TABOR � “Fiscal year spending means all district expenditures and reserve increases except, as to both, refunds made in the current or next fiscal year or those from gifts, federal funds, collections for another government, pension contributions by employees and pension fund earnings, reserve transfers or expenditures, damage awards, or property sales”. [TABOR (2) (e)]

TABOR � The term “reserve” in the definition of fiscal year spending refers to fund balances, and “reserve transfers or expenditures” means moneys which are passed from one fund of cash or assets held as a reserve to another such fund or moneys which are disbursed from such fund. � Therefore, districts use “revenues” for TABOR determinations.

Other Considerations Section 9

Segregation of Duties Key element in Internal Control Should not be able to perpetrate and to conceal errors or fraud in their normal course of their duties. Fraud Triangle: 3 factors that contribute to fraudulent activity by employees: opportunity, financial pressure, and rationalization.

Segregation of Duties Incompatible duties to be segregated � Custody of assets. � Authorization or approval of related transactions affecting those assets. � Recording or reporting of related transactions. � If can’t segregate duties, consider what compensating controls to use

Auditor Expectations � All accruals and deferrals should be recorded i. e. booked (revenue recognition and matching principal). � All balance sheets accounts should be reconciled. � Have available all supporting worksheets and reconciliations to “prove” the balances, including bank reconciliations.

Auditor Expectations � Trial Balance should be “Balanced”. � Adopted any revisions to Budgets available. � Review prior year(s) journal entries made by the auditors.

Helpful Websites Colorado Statutes and Constitution http: //www. leg. state. co. us Colorado Department of Education http: //www. cde. state. co. us/cdefinance

For more information about Colorado. ASBO � Contact: Bert Huszcza, Executive Director at Colorado. ASBO@msn. com Or go to www. Colorado. ASBO. org

Intermediate School District Accounting Q&A