Overview of Governmental Accounting, Budgeting, Contracts/Purchasing, Accounts Payable and Treasury

Overview of Governmental Accounting, Budgeting, Contracts/Purchasing, Accounts Payable and Treasury

Finance Academy

Course Instructors Al Friedrich, Office of the Auditor-Controller Paul Lewis, CAO Budget and Analysis Mike Derr, CAO Contracts/Purchasing Ma Mon, Office of the Auditor-Controller Eamonn Mahar, Office of the Treasurer-Tax Collector

Overview Annual Budget Contracts/ Purchasing Accounts Payable General Accounting Payroll Treasury

Governmental Accounting

Accounting Standards Generally Accepted Accounting Principles (GAAP) Financial Accounting Standards Board (FASB) - Business & Not-for-Profit Organizations Government Accounting Standards Board (GASB) - State and Local Governments

Governmental Accounting Funds Governmental resources are allocated and accounted for in separate entities, called Funds The Funds are based on the purposes for which monies are to be spent and controlled

Types of Funds Governmental Funds Tax supported Activities Legally Adopted Budgets Includes: General Fund Special Revenue Funds Capital Project Funds Debt Service Funds

Types of Funds (cont d) Proprietary Funds Self-sustaining, Fee Supported Activities Enterprise Funds Internal Service Funds Fiduciary Funds Trustee Activities on behalf of Outside Parties

Accounting Methods

Cash Accounting Recognize Revenue when Cash is Received Recognize Expense when Cash is Paid

Full Accrual Accounting Proprietary Funds Balance Sheet - Assets Cash Receivables Capital Assets Balance Sheet Liabilities Payables Debt

Full Accrual Accounting Proprietary Funds Balance Sheet Net Assets Revenues Recognized when Earned Revenues Recognized when Earned regardless of Cash timing Expenses Recognized when Incurred regardless of Cash timing

Balance Sheet Liabilities Assets Full Accrual Net Assets

Assets Cash Full Accrual Liability Cash $ 10,000 $ 10,000 Investments 100,000 100,000 Full Receivables Cash Accrual -- 50,000 Total Assets Assets 110,000 160,000 Cash $ 10,000 $ 10,000 Investments 100,000 100,000 A/R -- 50,000 Total Assets 110,000 160,000 Payables -- 5,000 Deferred Rev. -- 20,000 Total Liabilities -- 25,000 Liability Payables -- 5,000 Prepaid -- 20,000 Total Liabilities -- 25,000 Net Assets 110,000 135,000 Total Liab. & Net Assets 110,000 160,000 Net Assets 110,000 135,000 Total 110,000 160,000

Modified Accrual Accounting Governmental Funds Balance Sheet - Assets Cash Receivables Balance Sheet Liabilities Payables

Modified Accrual Accounting Governmental Funds Balance Sheet Fund Balance Revenues recognized in period available and measurable 60 Days after June 30th Expenditures recognized in the time period incurred

Balance Sheet Current Assets Current Liabilities Fund Balance Modified Accrual Noncurrent Assets Noncurrent Liabilities Other Net Assets Not considered in Modified Accrual

Capital Assets Capital Assets + Assets that benefit more than one Fiscal Period and worth more than Capital Asset thresholds. Capital Assets are differentiated from Maintenance Capital Asset Policy Monterey County Website Office of the Auditor-Controller Under Policies & Procedures

Long-Term Liabilities Bonds & Notes Payable Certificates of Participation Other Post Employment Benefits Compensated Absences Landfill Closure Costs

Budgetary Accounting

County Budget Act State Government Code 29009. In the recommended, adopted, and final budgets the funding sources shall equal the financing uses. 29120. Except as otherwise provided by law, the board and every other county or dependent special district official and person shall be limited in the incurring or paying of obligations to the amounts of the appropriations allowed for each budget unit as originally adopted or as thereafter revised by addition, cancellation or transfer.

Budgetary and Operating Equations & Relationship BUDGET Appropriations = Estimated Revenue + Fund Balance ACTUAL June 30th Revenues minus Expenditures ASSETS = LIABILITIES + FUND BALANCE

Encumbrance Accounting An encumbrance is an estimated amount recorded for purchase orders, contracts, or other expected expenditures chargeable to an appropriation The encumbrance is a placeholder until the expenditure is made.

Ledger for Budgetary Control Available Appropriations Expenditures Encumbrances Balance Date Explanation CR (DR) DR (CR) DR (CR) CR (DR) 7-1-14 Budget authority 1,500 1,500 7-2-14 Purchase order 500 1,000 8-15-14 Voucher payable 500 (500) 1,000

Financial Reporting

Audit Opinion from Independent Auditor In our opinion, based on our audit the financial statements present fairly, in all material respects, the respective financial position of the County of Monterey, as of June 30, 2013 in accordance with accounting principles generally accepted in the United States of America.

Financial Statements Proprietary Funds (Full Accrual) Governmental Funds (Modified Accrual) GASB #34 requires reconciliation of Governmental Funds (Modified Accrual) to Government-Wide (Full Accrual)

Reconciliation of Government Funds to Government-Wide Governmental Funds Fund Balance $220,057,489 Capital, Long-term & ISF Assets minus Long-term Liabilities $691,242,120 minus $232,748,828 Government-Wide Net Position $678,550,781

Who Reviews Financial Reports? Bond Holders & Trustees Rating Agencies Prospective Creditors Grantors Federal and State Government

What do They Look For? Financial Stability Status of Reserves Risks for Existing Debt Continuing Disclosure Alerts to New Risks Financial Statements fairly present the County s financial position

Single Audit Federal Programs Report on whether the County complied with the types of compliance requirements for major Federal Programs Report on internal controls concerning compliance Report on the schedule of expenditures of Federal Awards as required by OMB Circular A-133.