Financial Reporting Checklist For North Carolina Counties

11m ago
98 Views
1 Downloads
651.50 KB
21 Pages
Last View : 12d ago
Last Download : 1m ago
Upload by : Abby Duckworth
Transcription

Financial Reporting Checklist for North Carolina CountiesThe checklist below is provided as a supplement to other audit programs and checklists thatalready address compliance with generally accepted accounting principles or federal programs.This checklist addresses issues within the context of the North Carolina Local Government Budgetand Fiscal Control Act (LGBFCA) ) (North Carolina General Statute 159 Article 3) that are specificto local government audits in North Carolina and the presentation of the audited financialstatements. Also, many of the following items will be used in compiling comparative statisticaldata reports, which will be published statewide in the spring, following the receipt of the audits.Other audit procedures are included based upon prior years’ audit review results. Many of thesteps and procedures below are interrelated and may be done in conjunction with other auditprocedures. Please refer to resources for the annual audit on the NC Department State Treasurer’Annual Audit webpage for an audit program focusing on the auditee’s compliance with theLGBFCA and internal control environment. Please read the suggested procedures beforebeginning the audit work. Note that the LGBFCA is applicable to all units of local government andpublic authorities in North Carolina as defined in NCGS 159-7. References to “the unit” or “thelocal government” are not meant to, and do not, exclude public authorities, or auditors of publicauthorities, from using the following suggested audit procedures, as appropriate. This checklistis not intended to be all-inclusive; professional judgment should be used in determining the extentof tests and the use of procedures not included herein. A full understanding of the LGBFCA isessential to a thorough audit of a local government or public authority in North Carolina. TheGeneral Statutes of North Carolina are available on the North Carolina General Assemblywebpage. The auditor should use professional judgment if any results of these checklist itemssuggest that a statutory violation has occurred. The auditor should consult with the unit’s legalrepresentative to determine if a violation of North Carolina law has actually occurred.Some terminology has been revised for current GASB Statements. Users should considerwhether the suggested procedure is of benefit as they audit.The GASB Emergency Toolbox. is designed to help quickly identify the authoritative guidancethat could be relevant to the current impact of coronavirus on the County. North Carolina LocalGovernment COVID-19 Resources may also provide relevant guidance a unit may need duringtheir current circumstances.Revised 8/20201

County ChecklistSuggested Procedure / Checklist itemPerformedBy or NAIndependent Auditor’s ReportDoes the report include Independent Auditors Report on the top of the firstpage? (AU-C 700, ¶.23). Is the report signed (stamped or manual signature),dated, and is the firm’s city included? (AU-C 700, ¶.39,.41) It is preferred thatthe opinion is presented on the firm’s letterhead.If other auditor(s) audit a component and the group engagement partner doesnot want to assume responsibility for the work of the component auditor, is(are) other auditor(s) referenced in the auditor’s responsibility paragraph andopinion paragraph?(AU-C 600, ¶.28)If other auditor(s) is (are) referenced and the audit was performed usingyellow book standards, is there a statement that the DCU(s), not audited bythe group auditor and not subject to yellow book standards (ABC Boards andTDAs), was (were) not performed under yellow book standards?((AICPA GAS/UG ¶4.74, ¶4.75).Opinion paragraph includes applicable references for the following:unmodified opinion, opinion units (as listed in the first paragraph andpresented in the financial statements), budgetary comparison statements(General Fund and annually budgeted major Special Revenue fundspresented in the basic financial statements), and cash flows (if cash flowstatement is presented for enterprise fund(s)).Is an “Other Matters” paragraph included for Required SupplementaryInformation presented for MD&A and any other statements that have RSI (LawEnforcement Officers’ Special Separation Allowance (LEO), Other PostEmployment Benefit (OPEB), or Local Government Retirement System(LGERS))?If an “Other Matters” paragraph for Supplementary Information is presented,does it properly reference the appropriate schedules? Most commonlyreferenced are combining and individual fund financial statements, budgetaryschedules, other schedules (ad valorem tax schedules), and schedule ofexpenditures of federal and State awards.If there has been a change in accounting principle that has a material effecton comparability of the financial statements, a paragraph headed “Change inAccounting Principle” should be added after the Opinion paragraph.(AU-C 708.08)If the auditor’s report is subject to other reporting responsibilities, such asGovernmental Auditing Standards, a paragraph subtitled “Report on OtherLegal and Regulatory Requirements” or otherwise as appropriate to thecontent of the section. For yellow book audits, an appropriate subtitle shouldbe “Other Reporting Required by Governmental Auditing Standards.”(AU-C ¶700.37)Report date & date of compliance reports are the same. If not, is there dualdating of the reports?Revised 8/20202WorkpaperReference

Management Discussion and Analysis (MD&A)Does the MD&A discuss the current-year results in comparison with the prioryear, with emphasis on the current year? “This fact-based analysis shoulddiscuss the positive and negative aspects of the comparison with the prioryear. The use of charts, graphs, and tables is encouraged to enhance theunderstandability of the information.” (GASBS 34 ¶ 9)Does the MD&A include, at a minimum, an analysis of the government'soverall financial position and results of operations to assist users in assessingwhether financial position has improved or deteriorated as a result of the year'soperations.? “The analysis should address both governmental and businesstype activities as reported in the government-wide financial statements andshould include reasons for significant changes from the prior year, not simplythe amounts or percentages of change. Important economic factors, such aschanges in the tax or employment bases, effects from the Coronaviruspandemic that significantly affected operating results for the year should bediscussed.” (GASBS 34 ¶ 11.c.)Does the MD&A include, at a minimum, an analysis of balances andtransactions of individual funds? “The analysis should address the reasonsfor significant changes in fund balances or fund net assets and whetherrestrictions, commitments, or other limitations significantly affect theavailability of fund resources for future use” and inclusion of “[a] description ofsignificant capital asset and long-term debt activity during the year, includinga discussion of commitments made for capital expenditures, changes in creditratings, and debt limitations that may affect the financing of planned facilitiesor services.” (GASBS 34 ¶ 11.d.)At a minimum, does the MD&A include “ a description of currently knownfacts, decisions, or conditions that are expected to have a significant effect onfinancial position (net assets) or results of operations (revenues, expenses,and other changes in net assets)”? (GASBS 34 ¶ 11.h.)Do all schedules presented and references agree to the financial statementsand applicable notes?If comparative financial statements (basic financial statements) and RSI arepresented for both years, are two years presented in the MD&A along with theprior year (three years total) presented? (If comparative data is provided fornon-comparative financial statements, the three-year presentation is notrequired). (GASB No. 34, Implementation Guide Q8)ExhibitsStatement of Net PositionDoes the statement report all financial and capital resources?Is the statement of net position presented as assets, plus deferred outflows ofresources, less liabilities, less deferred inflow of resources equals netposition? (GASB No. 63 ¶ 8)Are assets and liabilities presented either in order of their relative liquidity orclassified between current and long-term? Liabilities whose average maturitiesRevised 8/20203

are greater than one year should be reported in two components, the amountdue in one year and the amount due in more than one year.(GASB No. 34 ¶ 31, 97, 99 or GASB No. 62 ¶ 30-35),Verify that Unexpended bond proceeds, Powell Bill, Pension (ROD) Assets orother cash not available for operations of the fund(s) are classified asrestricted cash and investments in the financial statements and are clearlydescribed in the notes.Does the restricted component of net position include significant unspentrelated debt proceeds or deferred inflow of resources attributable to theunspent amount? (GASB No. 63 ¶ 9)Verify that Internal balances net to zero between Governmental Activities andBusiness-type Activities, and tie to the fund statements. (GASB No. 34, ¶ 58)Have differences in amounts reported in the fund statements as interfundreceivables and payables been presented as internal balances? Are amountsreported as receivables from or payables to fiduciary funds included in thestatement of net position as receivables or payables and not internalbalances?Capital assets are separated between non-depreciable & depreciable.(GASB No. 34 ¶ 20)Restricted net position and restricted for stabilization by state statute (RSS)should tie to each of the appropriate fund statements.Bond anticipation notes should be classified as current liabilities.Are deferred outflows and inflows of resources itemized? Deferred outflowsor inflows of resources should include a name and amount either in the notesOR on the face of the applicable statements. (GASB No. 63 ¶ 13)Are Prepaid cash receipts properly classified as either liabilities or deferredinflows of resources?Verify that all references to “deferred revenues” are replaced by “unavailablerevenues”, “deferred inflows of resources” or another appropriate term as analternative. Bond Issuance costs, except for prepaid insurance, are no longercapitalized and should not be reported on the Statement of Net Position.Deferred gains and losses on refunding debt should be presented as DeferredOutflows (losses) or Deferred Inflow (gains). [GASB 65]Verify that Bond issuance costs, EXCEPT FOR PREPAID INSURANCE, donot appear on the Statement of Net Position. They should be expensed in thecurrent year. [GASBS 65 ¶15]Verify that deferred gains and losses on refunding debt appear as a deferredinflow of resources if a loss and a deferred outflow of resources if a gain.[GASBS 65 ¶6]The equity section of the Statement of Net Position should reflect threecomponents: Net investment in capital assets, Restricted (distinguishingbetween major categories of restrictions including Stabilization by StateStatute), and Unrestricted.Does the restricted component of net position include significant unspentrelated debt proceeds or deferred inflow of resources attributable to theunspent amount?(GASB No. 63 ¶9)Revised 8/20204

Restricted net position and restricted for stabilization by state statute (RSS)should tie to the appropriate fund statements. Net position resulting from RODamounts should be restricted.Is the net investment in capital assets calculation reasonably correct? Thecalculation includes any capital assets, including restricted capital assets, netof accumulated depreciation and reduced by the outstanding balances of anybonds, mortgages, notes, or other borrowing that are attributed to the capitalassets. Any significant unspent debt proceeds at year end related to thecapital assets should be backed out of the calculation of net investment incapital assets. (GASB No. 63 ¶ 9)Verify that no negative cash is shown in the statement. If a unit pools cashinto one bank account and one fund is in a deficit cash position, a “due to”amount should be recorded in the appropriate fund and a “due from” shouldbe recorded in the fund that is supporting the deficit fund. If a specific bankaccount is overdrawn, a bank overdraft liability should be shown in both thefund and government-wide financial statements rather than a negative cashbalance.AICPA's Audit and Accounting Guide State and Local Governments 5.28(March 2013)For counties that participate in LGERS and/or ROD, do the numbersappearing in the financial statements agree to the data tables provided byDST? (make sure you have combined the data from multiple ORBITaccounts if applicable)? Net pension asset or liability? Deferred outflows and inflows of resources?For counties that participate in LGERS and/or ROD, have the net pensionasset or liability, deferrals, or pension expense been allocated among allrelevant funds?For counties that participate in LGERS and/or ROD, are pension deferralsproperly itemized on the face of the financial statements or in the notes tothe statements?Are assets held to fund LEOSSA accounted for in a GASB defined trust?Has GASB Statement No. 68 been implemented?For those units that have implemented GASB Statement No. 73, do theexhibits, notes and RSI refer to Total Pension Liability (TPL) and not NetPension Obligation or Net Pension Liability? Net pension liability is used if theunit is reporting under GASB Statement No. 68. “Net Pension Obligation” isnow obsolete. (GASB No. 73 ¶25)For those units that have implemented GASB Statement No. 74, do theexhibits, notes and RSI reference the plans’ liability (assets) as Net OPEBLiability (asset)? “Net OPEB obligation” is now obsolete; any situation in whichthe total OPEB liability exceeds the OPEB plan’s fiduciary net position shoulduse the term “Net OPEB liability.” If the plan’s fiduciary net position exceedsthe total OPEB liability, “net OPEB asset” should be used.If the County has an internal service fund and governmental activities are thepredominate or only participates in the internal service fund, are the internalservice fund assets, deferred outflows of resources, liability, and deferredRevised 8/20205

inflows of resources balance that are not eliminated in the statement of netposition reported in the governmental activities column? If the enterprisefunds predominate or are the only participants in an internal service fund, theresidual assets and liabilities should be reported in the business-typeactivities. (GASB No. 34 ¶62 and GASB No. 63 ¶7-8)Total or Net OPEB Liability should be presented on the Statement of NetPosition, depending on funding arrangement.Statement of ActivitiesDoes the statement present activities accounted for in governmental funds byfunction and are those activities accounted for in the enterprise funds bydifferent identifiable activities? (GASB 37 ¶ 10)Are all expenses reported by function (governmental) or activities (businesstype) except those that are reported as special or extraordinary? Are allexpenses reported by function and consistent with those functions reported inthe fund level statements, as applicable?Are program revenues separately reported in three categories – charges forservices, program-- specific capital grants, and contributions?Is interest on general long term liabilities that are not considered directexpense, reported on a separate line? (GASB 34, ¶ 46)Ensure transfers are shown separately & net to zero, except when transfersto/from a blended component unit with a different fiscal year end.Are all general tax revenues reported separately by the type of tax?Special and/or Extraordinary items are properly disclosed and agree to thedisclosure notes following the financial statements.Do the amounts reported as ending balances for net position tie to theamounts reported on the Statement of Net Position? Do beginning balancesreported tie to the amounts reported on the prior year financial statements?For counties that participate in LGERS and/or ROD, have the net pensionasset or liability, deferrals, or pension expense been allocated among allrelevant funds?If there is a Prior Period Adjustment or a Restatement, is it described in thenotes to the financial statements?Fund Financial StatementsGovernmental Fund – Balance SheetMajor funds should be presented individually and consistently on the BalanceSheet (displaying assets plus deferred outflows of resources equals liabilitiesplus deferred inflows of resources, plus fund balances) and the Statement ofrevenues, expenditures, and changes in fund balances.The non-major funds should be labeled as such and presented in theaggregate on the balance sheet and the statement of revenues, expenditures,and changes in fund balance.All General Fund and annually budgeted major special revenue Funds musthave budget to actual statements presented in the Basic FinancialStatements.Verify that units with 911 funds have a separate Emergency TelephoneSystem Fund and budget to actual presented.Revised 8/20206

Verify that units with a Community Development Block Grant passed throughfrom NC Department of Commerce, Division of Community Assistance, arereported in a separate Special Revenue or Capital Projects Fund.Verify that unearned revenues (prepaid cash receipts) from exchangetransactions are classified as liabilities and that unearned revenues from nonexchange transactions are shown as deferred inflows of resources. Ex:uncollected tax revenue (property taxes receivable) is reported as deferredinflows of resources on the governmental fund balance sheet. Prepaid taxesare deferred inflows of resources on both the government-wide Statement ofNet Position and the Governmental Fund balance sheet. GASBS 65 ¶53, 67Verify that all references to “deferred revenues” are replaced by “unavailablerevenues”, “deferred inflows of resources” or another appropriate term as analternative. Deferred gains and losses on refunding debt should be presentedas Deferred Outflows (losses) or Deferred Inflow (gains). GASB 65Are Prepaid cash receipts properly classified as either liabilities or deferredinflows of resources?Verify that the amount restricted for stabilization by state statute (RSS) iscalculated correctly and is shown on both the Statement of Net Position andthe Governmental Fund balance sheet (GASB 54). Calculation total fundbalance less the fund balance available for appropriation equals the totalamount that must be restricted. The total amount to be restricted lessencumbrances, the non-spendable for prepaid amounts, the non-spendablefor inventories, and any other non-spendable that are not available to supportexpenditures in the coming fiscal year (e.g. assets held for resale) equals theamount to be reserved by state statute. The Calculation for RSS is included inthe Fund balance for Appropriation template on the DST website.G.S.159-8(a)Verify that the total fund balance designated for subsequent year’sexpenditures and other governing board designations do not exceed the fundbalance legally available for appropriation in any fund. G.S. 159-8(a)Verify that only the General Fund has a positive unassigned fund balance. Itmay be necessary to report a negative fund balance for other governmentalfunds. GASBS 54 ¶17Verify that appropriate fund balance classifications are used: non-spendable,restricted, committed, assigned, and unassigned. GASBS 54 ¶6-19Verify that governmental fund inventories, prepaid assets and long-termbalances of loans receivables are shown as a non-spendable component offund balance on the balance sheet (GASB No. 54 ¶ 6)Is the reconciliation of changes in fund balance of governmental funds to thechanges in net position of governmental activities presented on the face of thefinancial statements or in a separate schedule?[GASB No. 34 ¶77, ¶85, and ¶90].Does the reconciliation appear reasonable?Revised 8/20207

Governmental Fund – Statement of Revenues, Expenditures, andChanges in Fund BalanceVerify funds reported as major and non-major on the balance sheet are alsoreported accordingly in the statement of revenues, expenditures, and changesin fund balance.Are revenues reported by major source and expenditures by function?Verify that non-departmental or miscellaneous expenditures on the statementof revenues, expenditures and changes in fund balance do not exceed 5% oftotal expenditures.If there is an appropriation for “contingencies,” verify that the amount does notexceed 5% of all other appropriations in the same fund. G.S. 159-13(b)(3)Verify that the transfers between the statement of revenues, expenditures, andchanges in fund balances – governmental funds, and the statement ofrevenues, expenses, and changes in fund net position – proprietary funds areequal.Verify that transfers in and out are shown as separate line items on thestatement of revenues, expenditures, and changes in fund balances –Governmental funds, and the statement of revenues, expenses, and changesin fund net position – proprietary funds. * If the unit is making contributions toa Pension Trust Fund for the Law Enforcement Officers’ Special SeparationAllowance, the contribution should be an expenditure of the general fund, nota transfer.Do the amounts reported as ending balances on the fund balance sheet tie tothe amounts reported on statement of revenues, expenditures, and changesin fund balance? Do beginning balances reported tie to the amounts reportedon the prior year financial statements?Activities of a special revenue fund that does not meet the definition of aspecial revenue fund for GASB No. 54 purposes should be consolidated intothe General Fund. GASB 54 ¶ 30-31Is the reconciliation of changes in fund balance of governmental funds to thechanges in net position of governmental activities presented on the face of thefinancial statements or in a separate schedule? (GASB No. 34 ¶ 77, 90) Doesthe reconciliation appear reasonable?Governmental Fund – Statement of Revenues, Expenditures, andChanges in Fund Balance – Budget and ActualBudget to Actual Statements are presented in the basic financial statementsfor the General Fund and all annually budgeted special revenue funds (exceptTrust and Agency). The statement should present both the original and finalappropriated budgets. (GASB No. 34 ¶ 130, footnote 53)Annually budgeted funds reported on the statement of revenues,expenditures, and changes in fund balance – Budget and actual arereferenced in the auditor’s opinion in the opinion paragraph as budgetarycomparison statements for the general fund and any major annually budgetedspecial revenue fund.If debt service expenditures are reclassified from other functional areas, verifythat the budgeted amounts have been reclassified also.Revised 8/20208

Verify that all budgets presented are balanced in accordance with theLGBFCA. If the county has adopted an unbalanced budget, verify that astatutory violation is disclosed in the stewardship notes. G.S. 159-8(a)Verify that any fund balance appropriated is included in the budgetpresentation as an “other” financing source.Verify that fund balance appropriated does not exceed the statutory limit.G.S. 159-8(a)If a special revenue fund has been consolidated into the general fund forGASB 54 purposes, there should be a reconciliation at the bottom of thegeneral fund budget-to-actual that reconciles the amount for ending fundbalance to the amount presented on the statement of revenue, expendituresand changes in fund balance.Proprietary Funds – Statement of Fund Net Position/Statement ofRevenues, Expenditures, and Net PositionDo the funds report activities that provide goods and services for which a feeis charged to external users? Are the funds for activities that are financed withdebt that is secured by a pledge of net revenues from fees and charges toexternal users for the activities? Do the laws or regulations or price policiesrequire that the cost of providing services be recovered by fees and chargesto external users?Is the statement of net position in the format that displays assets, plus deferredoutflows of resources, less liabilities, less deferred inflow of resources, equalsnet position?Major funds should be presented individually and consistently on thestatement of net position, the statement of revenues, expenditures, andstatement of net position, and statement of cash flows. Each major fundshould be presented in a separate column.The non-major funds should be labeled as such and presented in theaggregate, in a single column, on the Statement of Fund Net Position, theStatement of Revenues, Expenditures, and Statement of Net Position, andStatement of Cash Flows. (GASB No. 34 ¶ 75, 96)Restricted cash is separately reported from unrestricted cash and is clearlydescribed in the notes.For counties that participate in LGERS and/or ROD, do the numbersappearing in the financial statements agree to the data tables provided byDST? (make sure you have combined the data from multiple ORBIT accountsif applicable)? Net pension asset or liability? Deferred outflows and inflowsof resources?For counties that participate in LGERS and/or ROD, have the net pensionasset or liability, deferrals, or pension expense been allocated among allrelevant funds?All references to “deferred revenues” should be replaced by “unavailablerevenues”, “deferred inflows of resources” or another appropriate term as analternative. Bond Issuance costs, except for prepaid insurance, are no longercapitalized and should not be reported on Statement of Net Position. DeferredRevised 8/20209

gains and losses on refunding debt should be presented as Deferred Outflows(losses) or Deferred Inflow (gains). [GASB 65]Bond Issuance costs, except for prepaid insurance, are no longer capitalizedand should not be reported on Statement of Fund Net Position but reportedas an expense in the period incurred. (GASB No. 65 ¶ 15)Are Prepaid cash receipts properly classified as liabilities or deferred inflowsof resources?Do the amounts reported as ending total net position on the Government-widestatement of Net Position tie to the amounts reported on Statement of NetPosition? Do beginning balances reported tie to the amounts reported on theprior year financial statements?Liabilities payable from restricted assets should be properly identified on theStatement of Net Position and the Government-wide Statement of NetPosition.Does the Statement of Revenues, Expenses, and Change in Fund NetPosition present the following information, in detail, when applicable?:Operating revenues, total operating revenues, operating expenses, ratingrevenues/expenses, income before other revenue, expenses, and transfers,capital contributions, increase/decrease in net position, net position beginningof period, net position end of period. (GASB No. 34 ¶100)Are revenues presented by major source and discounts and allowancesdisclosed either on the face of the statement or in the notes?(GASB No. 34, footnote 41)Verify Internal Service Funds are only used to report activities that providegoods or services to other funds, departments or agencies of the primarygovernment and its component units, or to other governments, on a costreimbursement basis and for which the reporting government is thepredominant participant in the activity. [GASB 34 ¶68]Verify the aggregate internal service funds are presented in a single columnto the right of the total enterprise funds column. [GASB 34 ¶96]Proprietary Funds – Statement of Cash FlowsIs the direct method used to present cash flows from operating activities, whichreports major classes of gross cash receipts and gross cash payments andtheir combined sum? If applicable, the Statement of Cash Flows should reportnet cash provided (used) by operating, noncapital financing, capital andrelated financing, and investing activities and the effect on these inflows.(GASB No. 9 ¶ 7)Verify on the Statement of Cash Flows that changes in due to / due from arepresented as non-capital financing and not as part of the reconciliation to “cashflows from operations”. (GASB No. 9 ¶ 21)Do ending cash and cash equivalents tie to the related fund statements? Doesbeginning cash tie to prior year statements? (GASB No. 9 ¶ 8) Do transferstie to related fund statements?Revised 8/202010

Cash flows should be classified into four categories: Cash flows fromoperating activities, Cash flows from noncapital financing activities, Cash flowsfrom capital and related financing activities, and Cash flows from investingactivities.Operating Activities Cash receipts and payments from the following activitiesas cash flows from operating activities: a) Cash inflow from customers forsales of goods and services, including receipts from collection of accountsreceivables and both short- and long- term notes receivable from customersarising from those sales. b) Cash payments to suppliers for goods andservices. c) Cash payments for taxes, duties, fines, and other fees orpenalties. d) Cash collected for deposits and returned of deposits. e) Cashreceipts and payments for interfund provided and services used, includingreceipts and payments in lieu of taxes that are payments for, and reasonableequivalent in value to, services provided. f) Payment to employees. g) Cashpayments on program loans. h) Cash receipts and payments for grants fromor to other governments or organizations for specific activities that areconsidered operating activities of the grantor government or organization. i)All other cash receipts and payments that do not result from transactionsdefined as capital and related financing, noncapital financing, or investingactivities.Noncapital financing activities Cash receipts and payments from thefollowing activities as cash flows from noncapital activities: a) Proceeds fromissuing bonds, notes, and other short- or long- term borrowings not attributedto acquisition, construction, or improvement of capital assets, or programloans. b) Cash receipts from grants or subsidies except those for specificactivities that are considered to be

Financial Reporting Checklist for North Carolina Counties . The checklist below is provided as a supplement to other audit programs and checklists that already address compliance with generally accepted accounting principles or federal programs. This checklist addresses issues within t