Nuts and Bolts of Municipal Accounting Presented by: Holly Scofield, CPA March 17, 2011 Topics Overview Personnel Records Software systems Accounting Activities Daily/Weekly Monthly Quarterly Annually Controls Accounting policies and procedures Segregation of duties Oversight Reporting Internal External Overview Fund Accounting Separate, self-balancing set of accounts for each fund Small town General Fund (Governmental fund type) Water & Sewer Fund (Proprietary fund type) Larger municipalities may have multiple governmental funds (special revenue, debt service, capital projects) and internal service funds Financial Consultant Page 1
Fund Accounting (continued) Separate bank accounts for each fun Interfund Transactions Transfers Due to/from Transactions must balance Personnel Organizational chart that places personnel in positions to ensure proper financial accounting is carried out. Council is ultimately responsible for the proper administration of a town s financial position Staff may consist of a mayor, town manager, finance manager and clerical staff Small municipalities may have only mayor and clerk, council may provide oversight Accounting Records Source documents Summary journals General ledgers Trial balances Accounting Policies and Procedures See Exhibit A for list of basic accounting records See Exhibit B for Table of Contents and sample policies See Exhibit C for Sample chart of accounts Financial Consultant Page 2
Software Systems Computerized accounting system for all transactions May have manual transactions (business licenses, building permit fees) that are entered by journal entry Documentation for all journal entries Should have one system that includes all transactions and accounts by fund In house packages Governmental accounting software Fund accounting Utility billing License fee applications Cost may be prohibitive Software Systems In house packages (continued) Enterprise software QuickBooks or Peachtree Set up separate company for each fund Practical solution for small municipalities Can use internet to evaluate software http://findaccountingsoftware.c Accounting System Software Systems (continued) Outsource Cloud computing Contract accountant writes checks, maintains accounts Combination of in-house and outsourced system Outsource certain functions Payroll is a good function to outsource Cost effective Ensures accuracy and timeliness of tax payments and payroll reports Financial Consultant Page 3
Accounting Activities Accounting cycles Revenue cycles Payroll cycle Monthly close out Annual close out Includes audit preparation See Exhibit D for daily, weekly, monthly and quarterly activities Accounting Activities Budget The South Carolina Constitution requires political subdivisions to prepare and maintain an annual budget Budget is usually prepared by finance staff Budget should be realistic, consistent with town s objectives and flexible Budgetary controls to monitor revenue and spending Accounting Activities Budget (continued) Use of a budget calendar can be helpful Enter budget into accounting system Establish policy for reporting budget to actual results and variance analysis Establish policy for amending budget See Exhibit E for budget tools Financial Consultant Page 4
Internal Controls Accounting Policies and Procedures A good policies and procedures manual is an internal control Defines and assigns responsibilities Should address segregation of duties Internal Controls Segregation of Duties Identify duties that should be segregated Can be challenging for small entities See Exhibit F for sample segregation of duties Internal Controls Oversight Council may need to provide oversight Periodically review and test controls for effectiveness May need to use outside source for oversight See Exhibit G for Internal Control Checklist Financial Consultant Page 5
Reporting Internal Reports Reports to council Monthly Report by Fund Include all activity Budget to Actual Variance explanations See Exhibit H Balance Sheet Reporting External Reports Annual Audit Required by law Must submit to Budget and Control Board Must submit within 13 months of end of fiscal year Must include report on court assessments and fines Other External Reports Payroll reports Reports to State agencies Grant Reports Other reports as required Summary Comprehensive accounting system that records all accounts and transactions by fund Documentation of policies and procedures Sound internal controls and oversight Understanding of reporting requirements Financial Consultant Page 6