Financial Reporting Cash Basis

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Financial ReportingCash Basis

• 2008 Small Ports Conference
• Leavenworth WA

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Washington State Auditors Office Presentation
Cash Basis Ports Annual Financial Reporting
Class Presented By Phillip Parks and Duane
Walz Local Government Support Team
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AGENDA

• 1000 1010 Introductions
• 1010 1030 Overview of SAO
• 1030 1100 Overview of SAO Homepage
  Annual Report Publications
• 1100 1200 Review of Ports Cash Basis BARS
  manual
• 1200 100 Lunch
• 100 200 BARS Manual continued
• 200 300 Example Cash Basis Financial
  Reports

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CLASS OBJECTIVES

• We will answer the following questions to
  understand the principals and reporting
  requirements for cash basis annual financial
  reporting at Ports.
• Who is SAO?
• What is an Annual Financial Report?
• Why do we have an Annual Financial Report?
• Where does the report go and who uses the data?
• What are the financial reporting requirements?
• How do I complete and reconcile the schedules,
  statements and notes?
• How do I file the Annual Report?

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Who is SAO?

• Washington State Auditor Elected by Citizens
• Performs Audits
• 2200 local governments
• 168 State Agencies
• Accountability Audits (includes Audit
  Assessments)
• Legal Compliance Audits
• Financial Audits
• Single Audits Federal Funding
• Performance Audits
• Local Government Support prescribes BARS
• Whistle Blower Act SAO Hot Line (expanded 2008)
• 350 employees 14 regional offices

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SAO Local GovernmentSupport Team

• Christy Raske, CPA, Accounting Services Manager
• [phone] raskec_at_sao.wa.gov Local
  Government Finance Project
  Accounting Questions
• Alexandra Johnson, CPA, Assistant Manager
• [phone] johnsoal_at_sao.wa.gov BARS
  Training, Technical Assistance
• Phillip Parks, CPA, Assistant Manager
• [phone] parksp_at_sao.wa.gov BARS Grants
  Training, Technical Assistance
• Toni Nelson, Small City Specialist
• [phone] nelsont_at_sao.wa.gov Technical
  Assistance and Training for Small Cities
• Duane Walz, Local Government Specialist
• [phone] walzd_at_sao.wa.gov Local Government
  Database and Technical Assistance and
  Training for Small Cities
• Lisa Tagman, Administrative Assistant
• [phone] tagmanl_at_sao.wa.gov BARS Manual
  Orders, Address Updates,
  Subscription Services, General Information
• Helpdesk and reference guides
  http//www.sao.wa.gov

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RCW 43.09.200

• The State Auditor shall formulate, prescribe,
  and install a system of accounting and reporting
  for all local governments, which shall be uniform
  for every public institution, and every public
  office and every public account of the same
  class.
• The system shall exhibit true accounts and
  detailed statements of funds collected, received,
  and expended for account of the public for any
  purpose whatever, and by all public officers,
  employees, and or other persons.
• The accounts shall show the receipt, use and
  disposition of all public property, and the
  income, if any, derived there from all sources
  of public income ..

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What does SAO require I do at my Port?

• LGS Reporting - At a minimum all ports will need
  to file an annual report with SAO within 150 days
  of year end.
• Participate in Audits - The type and extent of
  auditing will be based on your port revenues,
  audit history, risk and users of the financial
  statements.
• Over 2,000,000 in revenues will have an
  accountability, legal compliance, and financial
  audits (also single audit if spend over 500,000
  in Federal funding).
• Between 2,000,000 and 200,000 will usually be
  limited to an accountability and legal compliance
  audit.
• Less than 200,000 will usually have an audit
  assessment However, must complete and return
  the questionnaire!!!

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SAO Homepage
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SAO Helpdesk
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Sample Questions

• Do you have something that rates accounting
  software packages? We are currently using ACCPAC
  and would like something better.
• Can the Port prepare cash basis financial
  statements if they have historically prepared
  financial statements that follow GAAP?
• We are considering becoming our own Treasurer. We
  are a small Port with 5 employees. I double as
  the Finance Manager and Auditor. Could I also be
  the Treasurer? Do you have guidelines, duties of
  the Treasurer?

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Subscription Services
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Local Government Categories
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What is the Annual Report?

• Yearly financial activity information assembled
  in the format required by SAO. The format is
  described in the Cash Basis Ports BARS manual.
  It is comprised of
• The C-1 Financial statement
• Financial notes that provide information about
  the financial condition and organizational
  performance.
• Schedules that provide information concerning
  financial, legal and contractual requirements.

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Why an Annual Report?

• RCW 43.09.230 requires an annual report to be
  filed within 150 days after year end.
• Designed to provide essential financial
  information for management of local government
  and legislative officials.
• To inform the public of the financial affairs and
  condition of their local government.

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Reports to Duane by end of May!
Year End reporting LGCS and
LGFRS
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2007 Port Filing Statistics

• 54 of 76 on Time
• 4 Late
• 18 Non Filers
• Filing Format
• 15 Electronic
• 14 E-mail 1 CD
• 2 PDF
• 6 Word
• 7 Excel
• 43 Paper

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Where does the Annual Report data go?
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LGCS Publication

• SAO statutorily required to produce
• Comparative Data
• City
• County
• Port
• Transit
• Library
• Conservation
• Fire
• State Library
• Contact SAO [phone] or tagmanl_at_sao.wa.gov

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LGCS Sample - Revenues
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LGCS Sample - Expenses
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Internet - LGFRS

• Created as a result the 1997 Local Government
  Finance Study
• Legislature desired greater access to local
  Government fiscal data
• Ten years of data is available on the SAO website
• Users
• Legislature
• State and Federal Agencies
• Media and Academia
• Citizens

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SAO Audit Staff

• Internal Site for SAO Auditors
• Series of Analytical Reports
• Source Data Schedules 04/05/09 and 16

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LGCS Reports
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What are our financial reporting requirements?

• They are prescribed by SAO
• and are located at
• sao.wa.gov/LocalGovernment/BARS/Index.htm
• Ports Districts Cash Basis
• Budgeting, Accounting and
• Reporting System Manual

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Overview - BARS Manual

• Part Zero - Introduction
• Part One - Uniform Chart of Accounts
• Part Two - Budgeting
• Part Three - Accounting Issues
• Part Four - Reporting
• Part Five - Appendix

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BARS Manual Review

• Part Zero Introduction
• Reporting requirements
• Updates
• Part One Uniform Chart of Accounts
• Design and prescription
• General ledger and Capital Asset accounts
• Grant Reporting
• Revenue Accounts
• Expense Accounts

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BARS Account Code Structure

• ? ? ? ? ? ? ?
• ______ ______ ______ ______
  ______ ______
• L L L L L L L L L P
  P P P P P P
• ______ ______ ______ ______
  ______ ______
• Fund Local Option Local Option Prime
  and Element and Object and
• field field field
  BASUB Subelement Subobject
• field field
  field
• \________________________/ \_____________________
  ____/
• Organizational Number
  Account Number
• P Specific coding is prescribed in the BARS
  manual.
• L The fields are established in the BARS
  manual, but specific numbers are
• assigned by each local government.

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Revenue Coding Example

• Port furnished electricity to users at Marine
  Terminal
• Prime Digit 600 Revenue
• Basic Account 630 Marine Terminal
• Subaccount 631 User Charge
• Element 631.8 Utilities
• Subelement 631.82 Electricity
• Object 631.82.X
• Subobject 631.82.XX
• Notes
• Also expense example in the BARS manual

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General Ledger and Capital Asset Account Codes

• Part 1 Chapters 2 3
• These account codes are not applicable to Cash
  Basis Reporting.
• Entities should use inventory records/ lists to
  control capital assets they are responsible for.

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Chapter 4Grant Revenue Coding

• Need to know the source of the revenue and
  whether it is for supporting operational
  activities or purchasing capital assets (693.XX
  vs 651.XX).
• Why did you get the money (capital or operating)?
• Where did the money come from (State, Federal)?
• What coding information do you need to record it?
• Grant Revenue could be from either
• Federal (direct or indirect)
• State
• Local
• Must have a Federal Single Audit if expend
  500,000

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Federal Grant Other than Department of Health and
Human Services

• EXAMPLE Port receives a grant from FAA. CFDA
  20.106 for airport improvement operational
  grant.
• The CDFA - 20.106. The BARS coding is
  693.20.1X.
• BARS CODE 6 9 3. 20.6 X
• 1. Revenue
• 2. 3. operational
• 4. 5. 6. First three digits of CFDA
  number
• 7. For Local Use
• 1. For revenue for capital grants use 651.XX.XX
• 2. Grants from Department of Health and Human
  Services special coding
• 693.9X.XX, use 9 and X.XX are last three digits
  of CFDA number

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State Grant Non federal funds

• EXAMPLE Port receives a grant from the State
  Department of Transportation (agency number
  03.6X).
• The BARS coding is 693.03.6X.
• BARS CODE 6 9 3. 03.6 X
• 1. Revenue
• 2. 3. Operational
• 4. 5. 6. State Agency Number
• 7. For Local Use
• For local grants use numbers 07.0X 09.99
• For revenue for capital grants use 651.XX.XX

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Revenue Account Codes

• In general revenue accounts are coded by
  function and detailed by activity within the
  function.
• Basic Accounts Function
• 610 Airport
• 620 Marina
• 630 Marine Terminal
• 640 Local Option
• Capital Contributions
• 660 Property Lease Rental
• 670 Non revenues
• 680 General and Administrative
• 690 Non operating

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Expense Account Codes

• In general revenue accounts are coded by
  function and detailed by activity within the
  function.
• Basic Accounts Function
• 710 Airport
• 720 Marina
• 730 Marine Terminal
• 740 Local Option
• 750 Local Option
• 760 Property Lease Rental
• 770 Non expenses
• 780 General and Administrative
• 790 Non operating

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Non Expenses - Debt

• 77x.xx Used by single-entry, cash-basis
• 771.XX Debt Redemption Principal
• Interest 799.91
• BARS Code is determined by Type of Debt
• General Obligation Debt backed by tax dollars
• Revenue Debt backed by user fees
• Principal Amounts should equal Schedule 09
• Principal Interest (771.XX 799.91) total
  should match Debt section of Notes to Financials

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Non Operating

• 799.90
• 799.91 Interest Expense
• 799.92 Election Expense
• 799.98 Environmental Expense

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Quiz
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Part Three General Accounting Issues

• Describes accounting issues specific to cash
  basis ports
• Internal Controls Employee Bonding
• Electronic Funds Transfer Membership in
  Organizations
• Payroll Accounting Cell phones and phone cards
• Petty Cash Cancelled Checks/ Warrants
• Voucher Certification Salary Increase for
  Elected
• Investments Officials
• Duplicate Instruments
• Cash Receipting
• Promotional Hosting
• Employee Travel
• Loss of Public Funds

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Part Four - Reporting

• RCW 43.09.230 Financial Reports are to be
  certified and sent to SAO within 150 days of
  yearend.
• Statements
• C-1 Statement of Activities Arising from Cash
  Transactions
• F-1 Notes to the Financial Statements
• Schedules
• 04 Details of Revenues and Other Sources
• 05 Details of Expenses and Other Uses
• 09 Long Term Debt
• 16 Expenditures of Federal Awards/ State Local
  Assist.
• 19 Labor Relations Consultants

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C-1 ReportingStatement of Activities Arising
From Cash Transactions

• Operating Section
• Operating Revenues (610s-60s and 80s)
• Operating Expenditures (710s-60s and 80s)
• Operating Income or Loss
• Non operating section
• Revenues/ receipts (651, 671, 693, 699s)
• Expenses/ disbursements (771, 773, 799.xx, .91,
  .92, .98)
• (Do not include 672, 772, sale of investments)
• Total Non operating activity
• Net Increase (Decrease) in Cash and Investments
• Beginning Cash and Investments
• Ending Cash and Investments

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F-1 Reporting - Notes

• Example notes are located in the BARS manual.
• Modify language to describe your entity.
• Incorporate those areas unique to you and remove
  those that are not applicable.
• Must tie back to Statements and Schedules
• Update EVERY YEAR (refer to BARS manual)
• Do not need to have exact number as examples

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Note 1 - SSAP

• Summary of Significant Accounting Policies
  (SSAP).
• This note provides basic information about the
  Port and the methods used in financial reporting.
  Need to review and complete applicable sections.
• Reporting Entity
• Basis of Accounting
• Cash, Deposits
• Capital Assets
• Investments
• Compensated Absences
• Long term debt
• Risk management

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Note 2 - Investments

• Need to list all investments held by the Port
• If the investments are uninsured or unregistered
  and held by a third party in the name of the Port
  the details need to be disclosed.
• If the Port has derivatives (i.e. complex
  investment or debt contracts used to increase
  earnings or hedge costs) the nature of the
  transactions need to be disclosed.

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Notes 3 4 Property Taxes Long Term Debt
and Capital leases

• Note 3 Property Taxes
• If you receive property taxes you should complete
  this note.
• If you have a special tax levy it should be
  discussed.
• Note 4 Long Term Debt and Capital Leases
• Need to disclose debt by type and give the
  amortization schedule. If have capital leases
  use a separate column.
• Additional information for debt issues should be
  provided.
• May want to disclose debt requirements.

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Notes 5 6 Construction in Progress Pension
Plans

• Note 5 Construction in Progress
• If the Port has engaged in construction the
  status of the individual projects should be
  disclosed in a schedule. Individual information
  should be listed so users of the financials will
  know the status of each project.
• Note 6 Pension Plans
• If the port offers pension benefits these need to
  be disclosed in the notes.
• If the plan is the State PERS plan the template
  note may be used.
• If the Port administers another pension plan the
  details of the that plan need to be disclosed.

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Notes 7 8 Contingencies and Litigation and
Other Items

• Note 7 Contingencies and Litigation
• Disclose any legal or contractual violations and
  steps taken to resolve them.
• If there are major lawsuits against the Port the
  details need to be disclosed. If there is an
  outstanding amount for a judgment it should be
  reported on the schedule 9.
• Note 8 Other Items
• Corrections of prior errors Related party
  transactions
• Extraordinary events Subsequent events
• Participation in Joint Ventures Material
  Commitments

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Annual Report - Schedules

• Schedules
• 04 Detail of Revenues and Other Sources
• 05 Detail of Expenses and Other Uses
• 09 Long Term Debt
• 16 Expenditures of Federal Awards and
  State/Local Financial Assistance
• 19 Labor Relations Consultant(s)
• Audit Assessment Survey
• Districts below 200,000 in total revenue

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Schedule 04

• Purpose To report the revenues for each port so
  that the State Auditors Office can collect
  information about the total amounts received.
• Specific account numbers are required.
• The level of detail should equal that shown in
  the BARS Manual chart of accounts.
• To the third digit
• To the fourth digit for non-operating revenues
  (699 series)
• Source data for LGCS and LGFRS

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Schedule 04
Valid Account Code?
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Schedule 05

• Purpose To report the expenses for each port so
  that the State Auditors Office can collect
  information about the total amounts received.
• Specific account numbers are required.
• The level of detail should equal that shown in
  the BARS Manual chart of accounts.
• To the third digit
• To the fifth digit for non-operating expenses
  (799 series)
• Source data for LGCS and LGFRS

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Schedule 05
Valid Account Code?
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Common Errors

• Invalid Account Codes
• Check Chart of Accounts
• Yellow Tabs Ch. 5 Revenues, Ch. 6 Expenses
• Grants
• Yellow Tabs Ch. 4 Grant Source Codes
• Amounts on Schedules do not Equal C-1

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Sample

• Schedule 04 lists
• 610 Airport - User Charges 23,450
• 610 Airport Aircraft Parking Fees 7,650
• 699 Ad Valorem Taxes 157,323
• 699 Interest 1,311
• Suggested Account Codes
• ____611.00______ Airport User Charges
• ____611.30______ Aircraft Parking Fees
• ____699.20______ Ad Valorem Taxes
• ____699.10______ Interest

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Grants

• Schedule 04 lists
• 693 Grants 2,450,000
• Upon further review, multiple grants were
  received by
• Federal CFDA 20.106 2,000,000
• State DOT 450,000
• Suggested BARS Codes
• ___693.20.10___ Federal Aviation Administration
• ___693.03.60___ Department of Transportation

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C-1 Reporting - Revenues

• Schedule 04
• 611 Airport User Charges 422,322
• 616 Airport Rentals 101,323
• 61X Total Airport 523,645
• 621 Marina User Charges 195,736
• 626 Marina Rentals 31,923
• 62X Total Marina 227,659
• 6991 Interest Income 3,127
• 6992 Property Taxes 75,009

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C-1 Reporting Revenues

• OPERATING REVENUES?
• 61X Airport operations 523,645
• 62X Marina operations 227,659
• 63X Marine terminal operations __________
• 66X Property lease/rental operations __________
• 68X General and administrative __________
• 64X Other____________________ __________
• Total Operating Revenues 751,304
• Non-Operating
• 6991 Interest Income 3,127
• 6992 Taxes Levied 75,009

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C-1 Reporting - Expenses

• Schedule 05 Subtotals
• 711 Airport - Operations 324,572
• 713 Airport - Maintenance 50,227
• Total Airport 374,799
• 721 Marina - Operations 173,127
• 723 Marina - Maintenance 75,009
• Total Marina 248,136
• 771.20 Debt Principal 50,000
• 799.91 Debt Interest 5,232

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C-1 Reporting Expenses

• OPERATING EXPENSES?
• 7X1 General Operations _497,699__
• 7X3 Maintenance __125,236__
• (781783)General and Administrative __________
• 74X Other____________________ __________
• 75X Other____________________ __________
• Total Operating Expenses ___622,935_
• Non-Operating
• 771.X Principal paid on long-term debt
  __50,000___
• 799.91 Interest paid on long-term debt
  ___5,232___

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Schedule 09

• Purpose Provides information about the long-term
  debt of the district.
• Two Categories
• General Debt backed by the districts full
  taxing authority
• Revenue Debt backed by specific revenue sources

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Schedule 09
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Common Errors

• ID numbers are missing
• Math Errors
• (Beginning New Issues Redeemed Ending)
• Last Years Ending Balance does not equal Current
  Years Beginning
• Amounts Redeemed on Schedule 09 should equal
  Principal Payments on Schedule 05 (771.X0) and
  Statement C-1
• Amount Issued on Schedule 09 should equal Debt
  Proceeds (671.X0)on Schedule 04 and Statement C-1

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Sample Edit Report - Principal
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Sample Edit Report - Proceeds
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Statement C-1

• NONOPERATING REVENUES/RECEIPTS (EXPENSES/DISBURSEM
  ENTS)
• (699.10) Interest income __________
• (699.20) Taxes levied for __________
• (699.80) Disposal of capital assets __________
• (773.30) Purchase of capital assets __________
• (671.X0) Long-term debt proceeds __250,000_
• (771.X0) Principal paid on long-term
  debt __70,380__
• (799.91) Interest paid on long-term
  debt __________
• (699.61) Gain (loss) on investment __________
• (65X) Capital contributions __________
• (699.50) Extraordinary/Special items __________
• (679, 699.90) Other Non-operating
  revenues __________
• (779, 799) Other Non-operating (expenses) ______
  ____
• (799.92) Election expenses __________

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Schedule 16

• An essential document for planning and conducting
  the audit of your organization.
• If 500,000 or more in federal awards are
  expended in a year, you must contact the State
  Auditors Office
• Consists of two Schedules
• Federal and State

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Schedule 19

• Statutorily required since the 1993 Legislature
  required the State Auditors Office to collect
• The public has a right to be kept informed about
  the role of outside consultants in public sector
  labor relations
• A labor relations consultant is someone who
  agrees to perform such services for compensation.
  
• Required to be filed regardless if a labor
  consultant is hired

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Audit Assessment Survey

• Districts with revenues consistently less than
  200,000
• Once completed and returned, the assessment is
  reviewed.
• If an assessment is not completed and returned,
  district will have a regular audit
• Will be a component of the Annual Report

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Annual Report Filing

• Before filing, must complete a review process
• Mailto
• Annual Report
• Local Government Support
• PO Box 40031
• Olympia, Wa. 985004-0031
• E-Mail
• walzd_at_sao.wa.gov
• Review CD Materials

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Audit Preparation

• The following document describes auditor
  procedures when conducting an audit of a cash
  basis Port. This details specific steps in a
  financial audit note, some of the steps may not
  be applicable.
• Verify the correct financial statements, notes
  and schedules are present and tie to each other.
• Preliminary procedures analytical and high risk
  analysis.
• Internal controls evaluation knowledge and
  oversight.
• Audit procedures to determine if financial
  statements represent the transactions that took
  place at the port.

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Questions???