Reconciling Tax Receivables Course #364

Transcription

1 Reconciling Tax Receivables Course #364 MCTA Annual School August, 2011 Presented by John J. Sullivan & Patrice Squillante, CPA Melanson Heath & Company, P.C. (slides courtesy of Jean Berg, Collector/Treasurer, Town of Holden)

2 What s This Course All About? To emphasize your responsibility to assure tax receivables are in balance, because --- It s a key internal control to ensure City/Town records are accurate. The DOR requires that all your receivable accounts be reconciled as of each June 30 th. It will help ensure your audit goes smoothly. To protect yourself & the integrity of your records against any challenge or criticism. The best way to assure that you meet these goals is to reconcile your books regularly throughout the year.

3 Begin with Two Important Concepts Make sure that you have procedures in place to assure adequate INTERNAL CONTROLS. Make sure you keep a clear and welldocumented AUDIT TRAIL.

4 Find What Works for You! The material that will be presented is a tried and true method of achieving reconciliation, but it s not the only one. Set up your system in the way that works best for you. Employ that system periodically and consistently.

5 Goals for a GREAT Collector! Get those bills out correctly and on time. Collect 100% of the net levy. Balance your receivables internally and with your Accountant/Auditor.

6 Mailing the Bills Check to make sure the totals of mailed bills equals the commitment total. Run a bill register and check the component parts of the bills (tax, betterments, liens, etc.)

7 Collecting the Bills - BY MAIL Batch the mail and immediately reconcile each batch. Make sure you keep a physical record of each transaction. Write the bank name and check number on the bill, or the bill number on the check. Deposit all mail ASAP - the same day as received, if possible.

8 Collecting at the COUNTER Track every payment made in person. Payments by check? Note the number! Batch counter payments where possible. Payments in cash? ALWAYS OBTAIN RECEIPT! Have an organized method to cash out. Make sure you can correlate your receipts with your deposit slips.

9 Special Collection Methods LOCKBOX Particularly good for no decision payment processing. Data transmitted electronically via modem or downloaded from the internet Verify the dollar amount DEPOSITED with the total amount to be POSTED before posting to your tax collection program.

10 Special Collection Methods Tax Service Payments Great for saving time and increasing efficiency Service may send a disk with payment data or transmit data electronically ( ). Payment may come by check or be wired electronically by pre-arrangement. You should verify that CHECK/WIRE total equals the DATA total before you post to your tax collection program.

11 Special Collection Methods On-Line Payments Works like a lockbox Verify total transmitted equals total of deposit Verify totals by type if you are collecting different types of payments on-line If there s a lag between the effective date of the payment, and the deposit of the funds, be sure to carry a deposit in transit at the end of the month, or your cash will not balance.

12 Turnovers to the Treasurer Turn over cash and paperwork at least weekly. Separately identify cash (currency) vs checks. If you have a separate collector bank account, maintain a trail between batches (cash-out), deposit slips and turnover to the Treasurer. If you have a separate collector bank account, make sure to alert the treasurer to any deposits in transit that must be accounted for. Retain a copy of the turnover for a minimum of 3 years.

13 Bookkeeping/Posting Create a Cash Book Posting the payments - computer produces the Cash Book Make sure the posted payments/cash book can be tied out to - the GREEN trail (deposit slips) the WHITE trail (turnover to treasurer)

14 Final Check of Collections Collecting - Have you proved your batches to your cash? Balancing - Have you balanced your turnover to the Treasurer? Posting - After posting, have you confirmed computerized batch totals?

15 Ready for Reconciliation RECONCILIATIONS SHOULD BE PERFORMED MONTHLY!!!!

16 The Manual Control Sheet Why Bother?? It s easier to balance with the Accountant if you can balance internally first. Your outside audit will go more smoothly. It facilitates year end report preparation.

17 Setting up a Control Sheet You can use Excel or any spreadsheet program to set up your control sheet. Set up a template that you can modify for any type of receivable. If necessary, set it up manually, using the same format. Control sheets need to be set up for each type of receivable & levy year collected.

18 Sample Format for a Control Sheet Column 1: Column 2: Column 3: Column 4: Column 5: Column 6: Column 7: Column 8: Column 9: Column 10: Month Ending Date Previous Balance Commitment Payments Abatements Refunds Adjustment Plus Adjustment Minus Reason or Code New Balance

19 Real Estate Tax Control Sheet Levy Year Date Previous Balance Comm/ Starting Balance Payments Abatements Refunds Adjust Plus Adjust Minus Reason Ending Balance 7/31/2008 8/31/2008 9/30/2008

20 Commitment Total This number comes from the Board of Assessors. Be certain that the same total appears in all the following places: The Warrant (from the Assessors) The Commitment Book (from the Assessors or from your computer program) The Bill Register (from your computer program)

21 Payment Totals Payment totals can be derived from: Adding your batch totals - (make sure the batch total contains only taxes, not charges or other types of levies); OR Add the totals from your turnovers to the Treasurer (same caveat as above); OR If it s possible, have your computer total your tax payments for the month. (Generally, the computer can break down payments by type)

22 Abatements Best to get this total directly from the Board of Assessors. If this is not feasible, you can either: Add together the Collector s copy of the abatement slips/report for the month; or Have the computer total the abatements for the month. BE CAREFUL! Make sure that you and the Accountant/Auditor are using the same abatement totals.

23 Refunds Generate your refund/credit balance list monthly. Investigate the cause of all credit balances. Process your refunds timely.

24 Other Adjustments Examples of adjustments that will decrease your control balance (Adjustment Minus): Write-offs to tax title Tax Deferrals Examples of adjustments that will increase your control balance (Adjustment Plus): Charge backs for bad checks Payments that should be credited to another levy

25 Are You in Balance? It s a simple calculation: Commitment (or previous balance) MINUS Payments MINUS Abatements PLUS Refunds MINUS Adjustments Minus PLUS Adjustments Plus EQUALS Balance You can plug in the formula in your computer spreadsheet, or just use a calculator.

26 Getting the Detail Balance Your control balance must be reconciled with the detail balance otherwise known as the trial balance. Run a delinquent list or an outstanding list or an unpaid list from your computer program. The total on the detail listing should equal your control balance. Run a trial balance for each part of your levy.

27 Maintain Month-End Control Make sure to choose the month-end date as the effective date for your unpaid bill list. If you can only use the current date for this purpose, you MUST make sure that: You don t post payments into the computer for the subsequent month until you have reconciled. The Assessors don t post any abatements into the computer for the subsequent month until you have reconciled.

28 Things to Check If You are Unbalanced Are you using the correct commitment total? Does the total amount of posted abatements for the month equal the number you are using in your control? Do your posted payments equal the amount on the turnovers? Have you mistakenly included interest and charges as payments to the levy? If you don t refund monthly, have you accounted for each and every credit balance? Is every credit balance showing up on your refund list? Did you adjust your control for charged back NSF checks? Can you determine if your unpaid bill listing is correct?

29 Balancing with the Accountant Have a routine that both you and the Accountant can agree on. Have confidence in your balances - because you have already balanced your detail to your control! Discipline yourself - perform this routine every month.

30 Your Goals Balance with the Accountant on June 30. Have a good audit. Close out your levy with confidence. Send a reconciled report to the Department of Revenue.

31 City/Town of Schedule of Outstanding Receivables June 30 Real Estate Taxes Levy of 2001 Levy of 2000 Levy of 1999 Levy of 1998 Prior Years Total Detail per Balance per Treasurer/ General Collector Ledger Variance Personal Property Taxes Levy of 2001 Levy of 2000 Levy of 1999 Levy of 1998 Prior Years Total Deferred Property Taxes Taxes in Litigation Motor Vehicle Excise Levy of 2001 Levy of 2000 Levy of 1999 Levy of 1998 Prior Years Total Tax Liens/Tax Title Tax Foreclosures/Tax Possessions Please attach a brief description of the variances. Accountant/Auditor Collector/Treasurer Treasurer Date Date Date

32 Final Thoughts Even if you re : Using the most sophisticated billing software and Collecting record-high percentages of your tax commitment IF YOU AREN T RECONCILING YOUR RECEIVABLES, YOU AREN T DOING THE WHOLE JOB AS COLLECTOR!