financial statements pilot bar academy october 17, 2013 pierce college fort steilacoom
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Financial Statements PilotBAR Academy
October 17, 2013
Pierce College Fort Steilacoom
Today’s Key Topics
This overview will not answer all your questions
Accreditation Standard
Additional Benefits of Financial Statements
Accreditation Cycle/Pilot Group
Proposed Financial Statement/Audit Cycle
Estimated Audit Costs
What does a Financial Statement Look Like
Preparing for Audit
Audit Results
Accreditation Standard
Accreditation standards were changed in 2010 and now require:
For each year of operation, the institution undergoes an external financial audit, in a reasonable timeframe, by professionally qualified personnel in accordance with generally accepted auditing standards. Results from the audit, including findings and management letter recommendations, are considered in a timely, appropriate, and comprehensive manner by the administration and governing board.
What Changed?
Previous Eligibility Requirement The institution’s financial records are externally audited
annually by an independent certified public accountant or on a regular schedule by a state audit agency. The audit must include an unqualified opinion on the financial statement.
Previous Standards and Guide for Self Study If public institutions are, by law, audited by a state agency,
an independent audit is not required except for any funds not subject to governmental audit.
Other Environmental Factors
Federal oversight of accrediting bodies NWCCU is scheduled for review in Fall 2013
Recent articles/issues – Feds being more stringent in their oversight
Timing of state accountability audits No longer performed with an entity focus nor on a regular
schedule
Types of Auditsand Related Auditing Standards
Financial Statement (GAAS, GAGAS = GAO Yellow Book)
Single Audit/Federal Program Reviews (OMB Circular A-133)
Accountability and Compliance (GAO Yellow Book)
Performance (GAO Yellow Book)
Internal Audits (Institute of Internal Auditor’s International Professional Practices Framework)
Subrecipient Monitoring (OMB Circular A-133)
Other internal, system-wide or state-wide processes may not be performed in accordance with a set of standards
GASB 35
Of the 63 pages in GASB 35:
One paragraph/sentence that reads in its entirety: This Statement supersedes footnote 3 of Statement 34,
thereby including public colleges and universities in the scope of that standard.
Effective Date and Transition
Basis for Conclusions
Illustrations
As a result, we’ll speak in terms of GASB 34
Additional Benefits of Audited Financial Statements
Assure governing boards and the administration concerning the financial health of the college
Compare financial measures with other colleges – in Washington or nationally
Provide an audited financial statement to prospective grantors and banks
Make information available to interested members of the public and legislative decision-makers
Accreditation Cycle (Handout)
7 colleges received letters Two in February 2013 and 5 in July 2013
“The college does not meet the Commission’s criteria for accreditation”
Must be “addressed and resolved within the proscribed two-year period”
9 more to receive letters in February 2014
4 in July 2014
10 in February 2015
3 thereafter
Pilot Group Includes:
The 7 colleges that received letters to date
Plus one technical college
Includes BAC members and key BAR members for the 8 pilot colleges
Includes BAR chair and a ctcLink representative
SBCTC staff
Proposed Financial Statement and Audit Cycle (Handout)
Each year’s books must be audited
Two years may be audited at one time
Proposing two groups of 15 districts
Priority given based on accreditation cycle
Will complete two full audit cycles using FMS (Pilot and Group One)
In third year, Tacoma will serve as “mini-pilot” and prepare statements using ctcLink
Financial Statement and Audit Costs Pilot group staff time to date
Staff time for SBCTC to compile preliminary statements
Staff time for colleges to complete financial statement package
Audit cost (SAO charges $89 per hour, plus travel) A 300 hour audit would be $26,700 plus travel costs
Auditors may need more time for first audit(s)?
Willing to incur additional auditor travel cost during pilot to gain consistency and experience
Staff time to monitor audit progress, answer questions, and make adjustments
Pilot group will monitor time spent, to inform other colleges
Colleges that choose to publish or print a “fancy” package will have additional graphics and printing costs
What does a Financial Statement Look Like?
Pass around copies Fancy (CWU, EWU, TESC, UW, WSU)
Plain (WWU)
Links to community college statements http://
www.slcc.edu/accounts-payable/docs/2012%20Annual%20Report.pdf
http://www.fvcc.edu/wp-content/uploads/2012/02/Audit-Report.pdf
http://www.nic.edu/about/annualFinancialReport.pdf
General Approach
SBCTC uses available data (e.g., SMART/IPEDS, disclosure statements) to provide preliminary general financial statements, notes and management discussion and analysis
SBCTC/pilot group provides checklist or instructions
Colleges follow checklist/instructions to verify, adjust, fill in gaps
SBCTC/pilot group will contract with SAO for audits: cost, consistency, legal requirements
Don’t expect perfection in first attempt
What are the General Financial Statements?
Statement of Net Position Aka “Balance Sheet”
Statement of Revenues, Expenses and Changes in Net Position Aka “Income Statement” or “Profit and Loss Statement”
Statement of Cash Flows
Report as a Government engaged in Business Type Activities Enterprise-wide financial statements, not presented by fund
or fund type
Example See spreadsheet (will review in detail with work group)
Formatted general financial statements
Criteria sheet shows rolled up G/Ls used for each line of the general financial statements
Data sheet shows G/Ls by fund that make up the rolled up balance
Includes almost all elements of the Statement of Net Position and Statement of Revenue, Expense and Changes in Net Position but may be missing some elements of the Statement of Cash Flows (SBCTC does not have org code level structure or balances)
Criteria sheet allows colleges to track any adjustments they make to the data provided by SBCTC – whether prior to the audit, or as a result of the audit.
What are the Notes to the Financial Statements?
Describe significant accounting policies
Describes, in narrative form, amounts reported in the general statements
Are an integral part of the Financial Statements
In some cases, include additional detail related to amounts presented on the face of the financial statements
SBCTC will provide a template with suggested language for the colleges’ notes, including options for things colleges may be doing differently
SBCTC will provide a preliminary version of any additional detail, based on information collected through the state CAFR disclosure process
No coincidence that disclosure statements include the information needed, since the state’s CAFR is also prepared in accordance with GASB 34
What is ‘Management’s Discussion and Analysis?
Intended to allow differences and not be cookie-cutter …general rather than specific, to encourage financial
managers to effectively report only the most relevant information and avoid “boilerplate” discussion
Eight proscribed areas
Includes condensed financial information, analysis of overall financial position, description of significant capital asset and long-term debt activity, etc.
SBCTC can develop some pieces, but colleges will have significant pieces to fill in.
Preparing for audit
Take advantage of any verification and monitoring that happens at SBCTC or OFM level Where possible, any audit work that can be done once at
SBCTC saves having to do it at multiple colleges
Colleges collect documentation that is readily available and supports specific balances
Filling in gaps and trouble spots
Auditors may choose to review some automated system process at SBCTC-IT
Examples
May be verified centrally: Cash balances (tested for FY13 CAFR)
Investments if limited to LGIP
Compensated absences
Due To/Due from other agencies
Colleges may have ready access to: Student Loan receivables
Endowments held by college (not Foundation)
Foundation financial statements if audited
Examples - What colleges will need to verify, research or estimate
Analyze your infrastructure SBCTC to provide a tool
Look for cut off issues
Track any adjustments you make so you can provide them to the auditor
Actively manage your receivables
Non-LGIP Investments
Any unbooked inventories? Document inventory count procedures for inventories over $25,000 including Bookstore
Any unbooked deferred compensation (executives)?
Analyze your component units and whether they need to be included: Foundations, LLCs,
Net assets (aka “equity”) - restrictions
Adjustments and Presentation
Questions we want to make sure we answer What is presented to the auditor and in what format?
How are adjustments made and communicated among pilot colleges?
Once audited, how is final financial statement report package complied and published?
Financial Audit Results
Opinion on Financial Statements Unqualified
Qualified
Disclaimer
Adverse
Auditor required to indicate if going concern
Opinion on Internal Controls Related to Financial Statements Material Weakness
Significant Weakness
May include a management letter
Possible Qualifications
Pilot will prepare a single years’ financial statements. Notes and/or MD&A require some comparisons to prior year, which will be unaudited
Infrastructure – GASB allows use of estimates upon initial adoption (to be completed by 2007)
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