District Financial Amalgamation

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District Financial Amalgamation
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Trust Fund Audit Requirements

• All annual funding Trust grants must be followed
  up with an audited financial statement.
• There are two possible ways to comply with this
  during the transition year.

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Option1 Interim Audits

• All amalgamating entities have an interim audited
  financial statement prepared from the date of
  their last audited statement up to the date of
  amalgamation.

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Option2-Enter intervening transactions in
District books.

• All transactions that occurred in each entity,
  from the date of their last audit to the date of
  amalgamation, are entered into the District books
  and included in the first audited statement of
  the District.

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Option Comparison

• Option selection is neutral from a funding
  perspective. The District will receive funding
  for each entity on a prorated annual basis.
• Option1 has a higher financial cost.
• Option2 increases book keeping for the District
  at start up.
• The option that is easiest will depend on the
  timing of amalgamation. If amalgamation occurs
  close to the beginning of each entities fiscal
  year then option 2 is easier. If it occurs later
  in the year option 1 is easier.

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Example-Option1-Apr 1, 2008 amalgamation date
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Example-Option1-Apr 1, 2008 amalgamation date

• Regions and zones should set up unused months of
  annual funding as deferred revenue on the interim
  audited statements.
• Contributed equity of each entity is recorded to
  the District as of March 31, 2008 and District
  transactions begin April 1, 2008.
• The Districts first application for annual
  funding will be for the Apr 1, 2008 year. This
  funding will be reduced by the number of months
  of funding that has devolved from each entity.

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Example-Option2-Apr 1, 2008 amalgamation date
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Example-Option2-Apr 1, 2008 amalgamation date

• Contributed equity of each entity is recorded to
  the District as of the date of their last audited
  financial statements. All transactions from that
  point on are recorded in the District books.
• The Districts first application for annual
  funding will be for the Apr 1, 2008 year. This
  funding will be reduced by the number of months
  of funding that has devolved from each entity.

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Region Zone Steps to Prepare for Amalgamation

• Make sure any outstanding grant follow ups are
  submitted and any grant returns paid.
• Reconcile balance sheet accounts so that you have
  a detailed listing of what makes up the balance.
  This detail should include how the item will
  eventually be cleared. You should also collect
  all documentation that supports and verifies
  these amounts.

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Region Zone Steps to Prepare for Amalgamation

• Write off any untraceable or uncollectible
  amounts. (ie staledated cheques)
• Defer grant revenues that havent been fully
  spent.
• Pay known expenses and collect outstanding
  receivables prior to amalgamation.

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Region Zone Steps to Prepare for Amalgamation
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District Steps to Prepare New Bookkeeping System

• 1.Select accounting software that the new
  District will use. The most commonly used package
  among small organizations we deal with is Simply
  Accounting.

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District Steps to Prepare New Bookkeeping System

• 2. Establish new chart of accounts. Chart should
  mirror the application for District funding so
  that budgeting, reporting and follow up is easy.
  If using Option 2 all transactions from the
  amalgamating entities will need to be mapped to
  this new chart of accounts for entry.

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District Steps to Prepare New Bookkeeping System

• 3. The significant accounting policies need to be
  determined for the new District. This includes
  things like revenue recognition and capital asset
  amortization. The policies of each of the
  entities will be contained in their last audited
  financial statements. Any contradictions or
  discrepancies will need to be resolved by the
  District Board.

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District Steps to Prepare New Bookkeeping System

• 4. Financial amalgamation begins with the
  transfer of net assets (contributed equity) from
  the regions and zone to the District. This can
  not be done until the District has set up an
  operating bank account after the amalgamation has
  occurred. The bank will require the incorporation
  documents in order to establish the account.

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District Steps to Prepare New Bookkeeping System

• 5. Once the District account has been opened the
  book value of the zone and region bank accounts
  can be transferred into the District account. The
  book value is the bank balance less any
  outstanding cheques plus any outstanding
  deposits. No further transactions should be
  initiated through the zone and region bank
  accounts. (no more cheques written or deposits
  done).

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District Steps to Prepare New Bookkeeping System

• If the District and all amalgamating entities
  bank at the same institution the entire bank
  balance can be transferred and any outstanding
  cheques or deposits can be redirected by the bank
  to the new account. If they bank at different
  institutions the region and zone accounts will
  need to remain open until all outstanding items
  have cleared or 6 months from the latest date of
  the outstanding cheques, which ever comes first.

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District Steps to Prepare New Bookkeeping System

• 6. Once the District bookkeeping system is set
  up, the contributed equity from each entity will
  need to be recorded. The contributed equity is
  made up of the assets of each entity (cash, AR
  etc) netted against their obligations (AP,
  deferred revenue etc.)

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District Steps to Prepare New Bookkeeping System

• These assets and obligations become the property
  and responsibility of the District upon
  amalgamation and so must be recorded in the new
  District books.

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Tips Pitfalls

• 1. It is very important that no cheques are
  written on the entity bank accounts past the
  amalgamation date. All transactions should go
  through the District account or the contributed
  equity amounts will not balance with the cash
  transferred to the District.

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Tips Pitfalls

• 2. After amalgamation there will be a time lag
  before contributed equity amounts can be recorded
  in the new system. In the interim the District
  may be paying payables or receiving monies that
  were recorded on the balance sheet of the
  entities. It is very important to code these
  transactions to the balance sheet accounts and
  not to the revenue expense accounts. The
  District should get the list of AP AR including
  the information about how items are expected to
  clear.

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Tips Pitfalls

• Grant funds for which the expenses have not yet
  occurred should be set up as deferred revenue so
  that they can be matched to the expenses when
  they occur. If these amounts flow through to
  contributed equity the obligation to spend the
  funds in the specific way may be overlooked.

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Resources Available

• Administration Center Book keeping Services can
  provide whatever assistance the District requires
  to complete financial amalgamation.
• Book keeping services are charged at 20/hour.
  Transition grants can be used for this expense.
• Consulting is at no charge.

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Resources Available

• Sask Sport 1870 Lorne Street, Regina, SK S4P
  2L7
• Curtis Markewich
• 780-9331
• cmarkewich_at_sasksport.sk.ca
• Salina Barry
• 780-9306
• sbarry_at_sasksport.sk.ca