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

Treasury

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

Finance AcademyFinance Academy

Overview

AnnualBudget

Contracts/Purchasing

Accounts Payable

GeneralAccounting

Treasury

Payroll

GovernmentalGovernmental

Accounting

Accounting Standards

• Generally Accepted Accounting Principles (GAAP)

• Financial Accounting Standards Board (FASB) • Financial Accounting Standards Board (FASB) - Business & Not-for-Profit Organizations

• Government Accounting Standards Board (GASB) - State and Local Governments

• County Budget Act – County Governments

Governmental Accounting –Funds

• Governmental resources are allocated and accounted for in separate entities, called FundsFunds

• 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• 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• 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• Recognize Expense when Cash is Paid

Full Accrual Accounting –Proprietary Funds

• Revenues recognized when Earned regardless of Cash timing

• Expenses recognized when Incurred • Expenses recognized when Incurred regardless of Cash timing

• Balance Sheet• Accounts Receivable – Current & Non-Current

• Accounts Payable – Current & Non-Current

• Current and Long-Term Capital Assets

• Current and Long-term Notes Payable

Balance Sheet

Assets

Liabilities

Net

Assets

Full Accrual

Cash Full

Accrual

Assets

Cash

$ 10,000

$ 10,000

Investments 100,000 100,000

Cash

Full

Accrual

Assets

Cash

$ 10,000

$ 10,000

Investments 100,000 100,000 Receivables -- 50,000 Total Assets 110,000 160,000

Investments 100,000 100,000

A/R -- 50,000 Total Assets 110,000 160,000

Liability

Payables -- 5,000 Prepaid -- 20,000

Total Liabilities -- 25,000 Net Assets 110,000 135,000

Total 110,000 160,000

Liability

Payables -- 5,000 Deferred Rev. -- 20,000

Total Liabilities -- 25,000 Net Assets 110,000 135,000 Total Liab. & Net Assets 110,000 160,000

Modified Accrual Accounting –Governmental Funds

• Revenues recognized in period available and measurable – 60 Days after June 30th

• Expenditures recognized in the time • Expenditures recognized in the time period incurred

• Balance Sheet

• Current Assets

• Current Liabilities

• Fund Balance

Balance Sheet

Current

Current

Liabilities Modified

AccrualAssets

Fund

Balance

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.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

• Debt Service

• Self Insurance• Self Insurance

• Workers Compensation

• Unfunded Pension Liability

• Accrued Leave

Budgetary AccountingBudgetary Accounting

• Annual Budgets are required by the County Budget Act (State Government Code)

• Adopted Budgets include Legal Appropriations

Budgetary Accounting –Governmental Funds

• Adopted Budgets include Legal Appropriations and Estimated Revenues. An appropriation is a legal authorization granted by the legislative body to incur liabilities for purposes specified in the Annual Budget Resolution

• Budgets are used control expenditures (Budget to Actuals) and measure revenue inflows

BUDGET

Appropriations = Estimated Revenue + Fund Balance

Budgetary and Operating Equations & Relationship

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 other expected expenditures chargeable to an appropriation

• The encumbrance is a placeholder until the expenditure is made.

Available

Appropriations Expenditures Encumbrances Balance

Date Explanation CR (DR) DR (CR) DR (CR) CR (DR)

Ledger for Budgetary Control

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 ReportingFinancial Reporting

In our opinion, based on our audit the financial statements present fairly, in all material respects, the respective financial

Audit Opinion from Independent Auditor

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

$691,242,120minus

$232,748,828

Government-Wide –Net Position $678,550,781

Who Reviews Financial Reports?

• Bond Holders & Trustees

• Rating Agencies• 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 Statemets fairly present the County’s fiscal position

Single Audit –Federal Programs

• Report on whether the County complied with the types of compliance requirements for major Federal Programsrequirements 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.