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ACCOUNTING ISSUES AND CODING EXAMPLES

ACCOUNTING ISSUES AND CODING EXAMPLES. Kathy Guralski, Auditor, School Finance Team Wisconsin Department of Public Instruction 2007. Audio Difficulties?. Make sure the volume on Media Site live is turned up (volume button located beneath the speaker’s picture)

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ACCOUNTING ISSUES AND CODING EXAMPLES

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  1. ACCOUNTING ISSUES AND CODING EXAMPLES Kathy Guralski, Auditor, School Finance Team Wisconsin Department of Public Instruction 2007

  2. Audio Difficulties? • Make sure the volume on Media Site live is turned up (volume button located beneath the speaker’s picture) • Make sure the volume on your computer is turned up (volume icon located on the right hand side of your computer task bar) • Contact your IT department

  3. This presentation is the third webcast that will focus on reporting by public elementary and secondary schools in the State of Wisconsin. • The first webcast focused on the Wisconsin Uniform Financial Accounting Requirements “WUFAR” • The second webcast provided examples of revenue accounting transactions and how to properly account for them • The third webcast will provide examples of expenditure accounting transactions and how to properly account for them

  4. WUFAR Account Format Fund Location Object/ Function Source -------------------------------------------------- XX XXX XXX XXXXXX Most of the commercial software used in districts will display account codes in this order. In DPI reporting you will see the function number preceding the object or source. DPI reporting does not require location detail.

  5. FUNCTION CLASSIFICATION FUNCTION DESCRIBES THE PURPOSE FOR WHICH A SERVICE OR MATERIAL OBJECT IS ACQUIRED. Reporting to DPI is often at the 2 or 3-digit function level, but local districts can use more detail for tracking expenditures.

  6. Defined Purposes: (AKA: FUNCTIONS) • Instructional (100000) limited to activities between students and teaching staff • Support Services (200000) administrative, technical & logistical support to both instructional and non-instructional programs • Community Services (300000) • Non-Program Trans. (400000)purchasedinstructional services,, interfund transfers, open enrollment tuition are included here • District-Wide (500000)used only withrevenue sources

  7. OBJECT CODING MOST-USED OBJECT CODES • Salaries (100 Objects) • Fringe Benefits (200 Objects) • Purchased Services (300 Objects) • Non-Capital Objects (400 Objects) • Capital Objects (500 Objects) • Debt Retirement (600 Objects)

  8. ACCOUNTING ISSUES AND CODING EXAMPLES • http://www.dpi.state.wi.us/sfs/wufar.html

  9. DEBT Proceeds: Generally - Fund 10 Cash Flow Borrowing Capital Lease Operational Long Term Debt Fund 38/39 Refinancing Fund 49 Long Term Debt - Capital Project

  10. DEBT • Principal and Interest Payments: • Generally – • Fund 10 • Short term borrowing • Capital lease • Fund 38/39 • Operational long-term debt • Long-term debt

  11. DEBT FUNCTIONS • 281000 • Repayment of interest and principal on long-term notes, bonds, state trust fund loans, capital leases • 282000 • Payment of existing district obligation through issuance of long-term debt (refinancing) • 283000 • Payment of interest on temporary borrowing and principal and interest payments on loans for operational purposes • 285000 • Payment of interest and principal on debt incurred for purpose of funding post employment benefits • 289000 • Payment of interest and principal on other long-term district debt which includes debt incurred to pay off unfunded prior service liability

  12. DEBT OBJECTS • 670 – Principal payments • 673 – Long-term note • 674 – State Trust Fund Loan • 675 – Long-term Bond • 676 – TEACH Loan • 677 – Land Contract • 678 – Capital Lease • 680 – Interest payments • 682 – Temporary Note • 683 – Long-term note • 684 – State Trust Fund Loan • 685 – Long-term Bond • 686 – TEACH Loan • 687 – Land Contract • 688 – Capital Lease • 690 – Other Debt costs

  13. CASH FLOW BORROWING • GENERAL FUND TRANSACTION (Fund 10) • PRINCIPAL • Record proceeds in 10B 811100 as a liability • INTEREST • Record interest expense in 10E 283000 682 • Record debt related costs in 10E 283000 690 • ACCRUED INTEREST PAYABLE AT JUNE 30 • Debit 10E 283000 682 • Credit 10B 811700 as a liability

  14. CASH FLOW BORROWING (cont’d) • Accounting transactions: • Dr. Cash $1,000,000 • Cr. Temporary Notes Payable $1,000,000 • (Acct. 10B 811 100) • Dr. Interest Expense $ 40,000 • (10E 682 283 000) • Cr. Interest Payable $ 40,000 • (10B 811 700)

  15. CAPITAL LEASE • Normally the General Fund (Fund 10) is used to account for capital lease or installment purchase transactions. However, recording in another fund may at times be more appropriate. For example, if a capital lease is used to acquire food service equipment, the above transaction is recorded in the Food Service Fund (Fund 50)

  16. CAPITAL LEASE • http://www.dpi.state.wi.us/sfs/doc/cap_lease.doc • “BORROWING” FROM A VENDOR TO ACQUIRE ITEM • JOURNAL ENTRY TO RECORD FINANCING TRANSACTION • Debit appropriate expenditure (value of the asset) • Credit Source 878 • PRINCIPAL AND INTEREST PAYMENT TRANSACTIONS • Payments of principal and interest on the lease are usually made out of the same fund that recorded the initial lease transaction, except if the transaction was recorded in the Capital Projects Fund (Fund 49). Then payment on the lease is recorded in the General Fund (Fund 10). No payments on Capital Leases are recorded in the Debt Service Fund (Fund 38/39). • Function 281000, Objects 678 (principal)/688 (interest)

  17. CAPITAL LEASE • EXAMPLE • District enters into a lease agreement for a copier. The lease agreement has a bargain purchase option which qualifies it as a capital lease. The copier is worth $5,000. The total lease payments over 3 years are $5,700 which includes principal of $5,000 and interest of $700. Payments are $158.33/month (for this example in month one the principal is $138. and interest is 20.33) • Year lease is entered into: • In fund 10: • Debit appropriate function, object 550 for $5,000 • Credit source 878 for $5,000 • Monthly lease payments • In fund 10: • Debit function 281000, object 678 for $138.00 • Debit function 281000, object 688 for $20.33 • Credit cash for $158.33

  18. OPERATIONAL DEBT • Rare – only 2 districts currently have operational debt • District borrows a long term note for current operational purposes • Proceeds - Fund 10, Source 873 • Payment of principal and interest – Fund 38/39, function 283000, object 673 (principal) and 683 (interest) • Source and object will differ with various forms of debt (i.e. state trust fund)

  19. DEBT REFINANCING • http://www.dpi.state.wi.us/sfs/doc/debt_refin.doc • INCUR NEW DEBT AND USE PROCEEDS TO “PAY OFF” EXISTING DEBT • RECORDED IN FUND 38 OR FUND 39 • FUNCTION 282000 ONLY • CONTACT DPI FOR ASSISTANCE WITH RECORDING

  20. BACKGROUND • EQUALIZATION AID IS CALCULATED USING SHARED COST • A MAJOR COMPONENT OF SHARED COST IS DEBT SERVICE COSTS (PRINCIPAL AND INTEREST) • REFINANCING TRANSACTION COSTS ARE NOT PART OF SHARED COST EVEN THOUGH REPORTED IN THE DEBT SERVICE FUND

  21. WHAT HAPPENS IF DEBT SERVICE EXPENDITURES ARE CODED INCORRECTLY? • SHARED COST MAY BE CALCULATED INCORRECTLY, RESULTING IN WRONG AID BEING PAID TO DISTRICT • DISTRICT’S ANNUAL REPORT DEBT TABLE WILL NOT RECONCILE FROM BEGINNING TO END OF YEAR

  22. Long-Term Debt • http://www.dpi.state.wi.us/sfs/doc/cap_proj.doc • Fund 49 - If used for acquiring capital assets, receipted into Capital Projects Fund & expended from same fund • Proceeds • Debit 49B Cash • Credit 49R appropriate 870 source • Acquisition of capital asset • Debit 49E appropriate function and object of capital asset • Credit 49B Cash • Examples of capital items are buildings, equipment, books

  23. Long-Term Debt • Repayment of debt for capital items (fund 38/39) • Source to repay debt • Fund 38 • Tax Levy • Operational transfer from fund 10 • Fund 39 • Tax levy • Debt Payments • Debit 38/39E 281000, appropriate 600 object

  24. BUDGET FOR DEBT • Levy and budget taxes on the calendar year - budget payments on the fiscal year ending June 30 • Example: • LT Debt Payments Due (principal & interest) • October, 2007 $101,000 • March, 2008 $502,000 • October, 2008 $ 98,000 • Levy and budget revenue in November, 2007 • ($502,000 + $98,000) Calendar year • Budget payments for 2007-08 • ($101,000 + $502,000) June 30th Fiscal Year

  25. WRS Unfunded Liability • http://www.dpi.state.wi.us/sfs/doc/wrs_doc.doc • Payoff : • use of fund balance • 10E Function 290000, Object 219 • refinancing the prior service liability through the use of general obligation debt • Fund 38/39 as a refinancing transaction (both proceeds and payoff of WRS unfunded liability) • Principal and interest payments reported in function 289000 • Contact DPI

  26. BOND ANTICIPATION NOTES • http://www.dpi.state.wi.us/sfs/doc/bond.doc • Often taken out prior to receiving proceeds of “permanent” debt issuance • Proceeds • Credit source 873 in capital projects fund 49 • Interest payments - Debt service fund – operating transfer or levy • BAN is paid off with new debt issue - refinancing in fund 38/39 • Contact DPI

  27. Reporting District Long-Term Debt • Districts are required to notify DPI via the reporting portal of any changes to long-term debt repayment schedules • Prepayments of principal, refinancing, new loans will require adjustments by district • Updating of online debt schedules can be done at any time during the year • https://www2.dpi.state.wi.us/safr/

  28. Reporting District Long-Term Debt • Debt amortization schedules linked to Annual Report • Be sure that the function 281000, 283000, 285000, 289000 for principal and interest amounts used in your general ledger agree to debt schedules

  29. PAYROLL

  30. PAYROLL ITEMS • ACCRUAL AT JUNE 30 FOR EMPLOYEE SERVICES PROVIDED • SALARIES • RELATED BENEFITS • INCLUDES “SUMMER PAYROLLS” • NO ACCRUAL FOR POST-EMPLOYMENT BENEFITS

  31. UNSETTLED EMPLOYEE CONTRACTS • If mediation/arbitration when filing report—lowest offer is recorded • If settlement occurs after filing report but before October 1, amend report to show increased cost • Settlement occurs after October 1—additional cost is reported in year settlement occurs • http://www.dpi.state.wi.us/sfs/doc/unsettled_contract.doc

  32. COMPENSATED ABSENCES • Compensated absences are generally in the form of vacation, sick leave or earned “comp” time. • No expenditure is recognized on the books of the District when the absence is earned and accumulated. Rather, compensated absences are accounted for as expenditures in the fiscal period in which they are paid. • It is accounted for in the same manner as the regular wage paid for the pay period. • If compensated absences are paid by lump-sum settlement to a former employee, they should be accounted for under function 290000, object 219 “Other Employee Benefits”. • http://www.dpi.state.wi.us/sfs/doc/comp_absence.doc

  33. COMMODITIES • Obtained from the commodity internet system at: http://www.dpi.wi.gov/fns/index.html • The total value of commodities received is in the CARS Report and is labeled “Total Value Received: Entitlement, Bonus, DoD, and Cheese Processing.” • Year end entry: • Debit Function 257000, Object 410 • Credit Source 714

  34. COMMODITY HANDLING CHARGES • http://www.dpi.state.wi.us/sfs/doc/commodity_handling_charges.doc • Aids register – • Federal food service aid is reported at gross amount • Commodity handling charge is reported as a negative amount (titled 714) • Accounting – • Debit Cash for payment received • Debit Commodity Handling Charge – Function 257000, Object 387 • Credit Federal Food Service Aid – Source 717

  35. COMMODITY HANDLING CHARGES 11/29/07 50B 711000 $7311.55 50E 257000 387 $1104.81 50R 717 8416.36

  36. PURCHASED INSTRUCTIONAL SERVICES (FUNCTION 430 000) • INSTRUCTIONAL SERVICES PROVIDED RESIDENT DISTRICT BY OTHER ENTITIES • LINKED WITH A 300 “PURCHASE SERVICE” OBJECT • NON-INSTRUCTIONAL SERVICES CHARGED TO APPROPRIATE 200 000 FUNCTION WITH 300 OBJECT • http://www.dpi.state.wi.us/sfs/doc/funct_430.doc

  37. WUFAR Account Format Fund Location Object/ Function Program/ Source Project ---------------------------------------------------------------- XX XXX XXX XXXXXX XXX Most of the commercial software used in districts will display account codes in this order. In DPI reporting you will see the function number preceding the object or source. DPI reporting does not require location detail.

  38. PROGRAM/PROJECT CLASSIFICATION Program/Project is designed to identify a group of activities. Generally these activities are identified separately for financial support. They may also be used for internal tracking by district.

  39. Resources for Expense Coding • WUFAR (full document & expense matrix) • http://www.dpi.wi.gov/sfs/wufar.html • Special Education Transaction Coding • http://www.dpi.state.wi.us/sfs/presentations.html • http://www.dpi.state.wi.us/sfs/speced.html

  40. Special Education Expense Coding • Project number • Identifies the aid eligibility status and funding source • 011 317 019 340 091 515 092 517 315 599

  41. How am I supposed to know what WUFAR codes to use in Fund 27??????? DPI has published Directions for State Categorically Aidable Special Education Costs in Fund 27 and “Special Education” Claim. This is available at: http://www.dpi.wi.gov/sfs/se_report.html

  42. ADDITIONAL RESOURCES • Self-funded Health Insurance • DISTRICT SELF FUNDS HEALTH/DENTAL BENEFITS • SERIES OF GENERAL FUND BALANCE SHEETS ACCOUNTS THAT ACT AS “INSURANCE COMPANY” • http://www.dpi.state.wi.us/sfs/doc/self_fund.doc • Fund 60 – Student Activity Funds • Student organizations and clubs • Students manage activities and faculty advisor approves transactions • District acts as agent maintaining records and accounting for activity • http://www.dpi.state.wi.us/sfs/doc/stud_acct.doc • http://www.dpi.state.wi.us/sfs/presentations.html • http://media2.wi.gov/DPI/Catalog/?cid=2352cf23-e130-4a9c-b83f-8f8e90b15f41

  43. ADDITIONAL RESOURCES • Fund 73 – Employee Benefit Trust Fund • Resources held in trust for formally established defined benefit pension plans, defined contribution plans, or employee benefit plans. • http://www.dpi.wi.gov/sfs/emp_benefit_trust_fund.html • Fund 80 – Community Service Fund • Community Programs and Services • http://www.dpi.state.wi.us/sfs/comm_serv.html

  44. QUESTIONS? School Finance Auditors Kathy Guralski - (608) 266-3862 kathryn.guralski@dpi.state.wi.us Gene Fornecker - (608) 267-7882 eugene.fornecker@dpi.state.wi.us Natalie Rew - (608) 267-9212 natalie.rew@dpi.state.wi.us

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