Auditing Issues Suzanne Hatfield by jizhen1947

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									Current Audit Issues
Georgia Department of Audits
and Accounts




                                                            GASBO
                                                  November 6, 2008
                      Presented by: Suzanne L. Hatfield, CPA, CGFM
                                         Kristina Turner, CPA, CISA
   OVERVIEW
GASB 43 and 45 Other
 Postemployment Benefits
GASB 48 Sales and Pledges of
 Receivables and Future Revenues and
 Intra-Entity Transfers of Assets and
 Future Revenues



                 Department of Audits and Accounts
   OVERVIEW
GASB 49 Accounting and Financial
 Reporting for Pollution Remediation
 Obligations

GASB 50 Pension Disclosures-an
 amendment of GASB Statements No. 25
 and No. 27

GASB 51 Accounting and Reporting
 for Intangible Assets

                  Department of Audits and Accounts
   OVERVIEW

Risk – A Client’s View
Control Implementation and
 Documentation
Examples of Documentation



              Department of Audits and Accounts
   OVERVIEW
SAS 114 – The Auditor’s
 Communications With Those Charged
 With Governance

FY 2008 Procedures for Data
 Collection Form
  Federal Audit Clearinghouse



                 Department of Audits and Accounts
   OVERVIEW
Significant Adjustments
Questions




               Department of Audits and Accounts
GASB 43 and 45
Other Postemployment Benefits
 Note disclosure provided by Sandra Warr of the SAO and
  approved by GDOE and DoAA

 Note __: POSTEMPLOYMENT BENEFITS
   Georgia Retiree Health Benefit Fund

    Plan Description. The School District contributes to the Georgia Retiree
       Health Benefit Fund (“GRHBF”), a cost-sharing multiple-employer defined
       benefit postemployment healthcare plan administered by the Department
       of Community Health. GRHBF provides health insurance benefits to
       eligible retirees and their qualified beneficiaries. Pursuant to Title 45,
       Chapter 18 of the Official Code of Georgia Annotated, the authority to
       establish and amend the benefit provisions of the plan is assigned to the
       Board of Community Health. The Department of Community Health
       issues a publicly available financial report that includes financial
       statements and required supplementary information for GRHBF. That
       report may be obtained from the Department of Community Health at 2
       Peachtree Street, Atlanta, Georgia 30303.




                                   Department of Audits and Accounts
Other Postemployment Benefits
  Funding Policy. The contribution requirements
    of plan members and participating employers
    are established and may be amended by the
    Board of Community Health. Contributions of
    plan members or beneficiaries receiving
    benefits vary based on plan election,
    dependent coverage, and Medicare eligibility
    and election. On average, plan members pay
    approximately twenty-five percent (25%) of the
    cost of health insurance coverage.


                     Department of Audits and Accounts
Other Postemployment Benefits
  Participating employers are statutorily required to contribute in
    accordance with the employer contribution rate established by
    the Board of Community Health. This contribution rate is
    established to fund both the active and retired employee health
    insurance plans based on projected pay-as-you-go financing
    requirements. The employer contribution rates for the combined
    active and retiree plans for the fiscal year ended June 30, 2008,
    was as follows:

      Teachers          18.534% of state-based salaries
      Non-Certificated Employees $162.72 per month

  The School District’s contribution to the health insurance plans for
    the fiscal year ended June 30, 2008, was $__________, which
    equaled the required contribution.




                             Department of Audits and Accounts
Other Postemployment Benefits

 Assuming that school districts
 usually pay their assessed amount
 (at this time, we are not aware that
 school districts will be billed
 beyond the historical pay-as-you-go
 amount), there should be no
 liability.


                Department of Audits and Accounts
GASB 48
Sales and Pledges of Receivables
and Future Revenues and Intra-Entity
Transfers of Assets and Future
Revenues
GASB 48
 Effective FY 2008

 First part of the new statement relates to
  collateralized borrowing versus the sale which
  will not be relevant to School Districts since you
  cannot sell or pledge receivables.




                      Department of Audits and Accounts
GASB 48
 Assets (or future revenues) sold or donated
  within the same financial reporting entity should
  continue to be reported at their current carrying
  value when those assets or future revenues are
  transferred. (Example: transfer of a building or
  equipment to a Charter School)




                      Department of Audits and Accounts
GASB 49
Accounting and Financial Reporting
for Pollution Remediation Obligations
GASB 49
 Effective FY 2009

 This statement outlines the requirements
  for capitalizing or expensing pollution
  remediation obligations, which are
  obligations to address the current or
  potential detrimental effects of existing
  pollution by participating in pollution
  remediation activities such as site
  assessments and cleanups
                   Department of Audits and Accounts
GASB 50
Pension Disclosures-an amendment of
GASB Statements No. 25 and No. 27
GASB 50
 Effective FY 2008

 More closely aligns the financial reporting requirements
  for pensions with those for other postemployment
  benefits (OPEB), and in doing so, enhances information
  disclosed in the notes to the financial statements or
  presented as required supplementary information (RSI)
  by pension plans and by employers that provide pension
  benefits.

 Might slightly modify note disclosure.



                          Department of Audits and Accounts
GASB 51
Accounting and Reporting for
Intangible Assets
GASB 51
 Effective for FY 2010
 Requires that all intangible assets not
  specifically excluded by its scope
  provisions be classified as capital assets
  and amortized according to estimated
  useful life (if definite)




                   Department of Audits and Accounts
GASB 51
 Existing authoritative guidance related to
  accounting/reporting for capital assets
  should be applied to intangible assets,
  as applicable




                   Department of Audits and Accounts
GASB 51
 Requires retroactive restatement of
  beginning Net Assets in first year of
  implementation (if material)




                 Department of Audits and Accounts
GASB 51
 Types of intangibles
   Computer software
     Internally generated software
     substantial modifications to packaged
      software
   Rights of ways
   Easements
   Patents
    Copyrights
   Broadband Licenses


                     Department of Audits and Accounts
Risk – A Client’s View
Department of Audits and Accounts
    Step One: Defining Objectives
 Step One: What are the objectives of your organization?
      Education of students, Test Scores
      Safety of Students
      Employment of Faculty and Staff
      Effective use of LocalTax Dollars


 Financial Reporting Objectives
      Complies with GAAP
      Supports Informative Disclosures
      Reflects Entity’s Activities
      Financial Statements are Complete and Include Only Valid Transactions that
       have occurred and are related to the Organization. These transactions
       should occur within the period reported in the statements. Transactions
       should be recorded properly in the correct accounts and at the appropriate
       amounts.


                                      Department of Audits and Accounts
 Step Two: Identify Potential Risk
 Step Two: Identify Potential Risk
    The things that will keep you from meeting your
     objectives.

 For Financial Reporting
   Identify Significant Processes & Systems
    (IT) in place to meet your financial objectives
   Common Processes: Employee
    Compensation, Expense with or without
    Pos, Capital Assets, Cash
                        Department of Audits and Accounts
                         AcctBal Tab                                                RevRec Tab
                          X Cash Maintenance                                          State Appropriations
                          X Investment Maintenance                                    Federal Appropriations
                          X Receivable Maintenance - Student                          State Grants
Processes/ Transaction      Receivable Maintenance - Federal Financial Assistance     Operating Grants and Contracts
                            Receivable Maintenance - State                            Non-operating Grants and Contracts
Classes                     Receivable Maintenance - Tax                              Sales and Services
                            Receivable Maintenance - Other                            Registration/Enrollment/Tuition & Fees
                            Student Notes Receivable Maintenance                      Continuing Education
                            Inventories - Resale                                      Interest/Investment Income
                            Inventories - Supply                                      Capital Grants and Gifts
                            Prepaid Assets                                            Rents and Royalties
  The                       Accounts Payable Maintenance
                            Salaries & Benefits Payable Maintenance
                                                                                      Gifts and Donations
                                                                                      Reciepts received by Mail
  questionnaire             Contracts & Retainage Payable Maintenance
                            Deferred Revenue
                                                                                      Property Tax Disclosure
                                                                                      Wired Taxes - SPLOST/Other

  lists the most            Capital Lease Maintenance
                            Compensated Absences
                                                                                      School Food Service Meal Sales
                                                                                      Athletic Gate Receipts

  common process            Bond Debt Maintenance
                            Funds Held For Others
                                                                                      Other Principal Accounts Receipts
                                                                                      Non-Monetary Transactions

  known to the              Capital Asset Maintenance
                         ExpDis Tab
                                                                                      Auxiliary - Parking
                                                                                      Auxiliary - Bookstore

  DOAA. You can             Operating Cash Disbursement - P.O.
                            Operating Cash Disbursement - Non P.O.
                                                                                      Auxiliary - Housing
                                                                                      Auxiliary - Cafeteria

  select the                Operating Cash Disbursement - Bids
                            Operating Cash Disbursement - State-wide Contract
                                                                                      Auxiliary - Health Services
                                                                                      Auxiliary - Intercollegiate Athletics

  process by                Third Party Administrator
                            Construction
                                                                                      Auxiliary - Other
                                                                                    EmpComp Tab

  placing an X
                            Debt Payments - Bonds                                     Hourly Employee Compensation
                            Capital Leases                                            Salary Employee Compensation

  beside it. Please
                            Operating Leases                                          Supplemental Pay
                            Food Inventory Consumption                                Termination Compensation
                            Depreciation Expense                                      On-behalf Benefits
  feel free to add          Purchasing Cards                                          Payroll Benefits
                            Travel                                                  Other Items Tab
  any processes             Scholarship/Fellowship                                    Journal Entries
                            Utilities                                                 Accounting Estimates
  not identified.           Cash Disbursements - Principal Accounts                   Accounting Estimates - Contra Tuition
                                                                                      Special Items or Items Unusual in Nature
                                                                                      Financial Statement Presentation
                                    Primarily College/Universities                    MD&A Presentation
                                    Primarily School Districts                        Notes Disclosure Presentation

                                              Department of Audits and Accounts
Step Two: Identify Potential Risk
 As an organization ask: What can keep us
  from meeting our objective of financial
  reporting?
   What would keep the account balances from
     being complete?
   Without proper cutoff procedures, what can
     happen to the account balances?
   What would cause a payment to be made for
     services or goods that have not occurred or
     been received?

                    Department of Audits and Accounts
Step Three: Risk Management
 Develop an Approach to Addressing Risk
 Consider the Likelihood and Magnitude
 Ways to Address Risk
    Implement Controls or Procedures
    Insurance (Surety Bonds, Theft)
    Accept Risk (may result in control deficiency)
 Document, Document, Document




                         Department of Audits and Accounts
Documentation
The solution should be documented
 Formalize Risk Assessment process
 Identification of Risk (shows
   awareness)
 Indication of Decision related to risk
   – mitigation or acceptance



                 Department of Audits and Accounts
Documentation
 Reference to policies and
  procedures
 Identification of items used as part
  of the control process




                Department of Audits and Accounts
Control Implementation &
Documentation
Management’s Responsibilities
COSO Model




              Department of Audits and Accounts
 Definitions
Internal control is
 a process consisting of specific policies and
   procedures designed to provide management with
   “reasonable assurance” about the achievement of the
   entity’s objectives with regard to
     reliability of financial reporting,
     effectiveness and efficiency of operations,
     and compliance with applicable laws and regulations.



                         Department of Audits and Accounts
 Components of Internal
 Control

 Control environment sets the tone of an
  organization, influencing the control
  consciousness of its people. It is the
  foundation for all other components of
  internal control, providing discipline and
  structure.


                   Department of Audits and Accounts
Components of Internal
Control
 Risk assessment is the entity's
  identification and analysis of relevant
  risks to achievement of its objectives,
  forming a basis for determining how
  the risks should be managed.




                  Department of Audits and Accounts
 Components of Internal
 Control

 Control activities are the policies and
  procedures that help ensure that
  management directives are carried out.
  Policies and Procedures




                   Department of Audits and Accounts
  Components of Internal
  Control

 Information and communication systems
  support the identification, capture, and
  exchange of information in a form and time
  frame that enable people to carry out their
  responsibilities.
   Vouchers, Reconciliation, Reports



                    Department of Audits and Accounts
Components of Internal
Control
 Monitoring is a process that assesses
  the quality of internal control
  performance over time.
   Outside of the control process
   Role to ensure control is being
    performed




                 Department of Audits and Accounts
 Mitigating Factors

 The control environment and risk
  assessment components may have an effect
  on the likelihood and/or magnitude of a
  misstatement due to a risk.
 Deficiencies in these components could
  result in a significant deficiency or material
  weakness over numerous processes.


                     Department of Audits and Accounts
 Mitigating Factors

Where a component is weak, a strong control
 environment and risk assessment process
 can be used to lessen the severity of the
 identified deficiency in control




                   Department of Audits and Accounts
Control Environment
Considerations
Code of Ethics – Tone at the Top
Audit Committee
Internal Audits
Oversight Agency
Budgets




                Department of Audits and Accounts
Control Environment
Considerations
Personnel
 Hiring Policies
 Performance Appraisals
 Training
 Experience / Knowledge
 Turnover Rates


               Department of Audits and Accounts
What Should Your Focus Be?
Knowing What Significant
 Processes exist in your
 organization
Knowing What Procedures are in
 place to ensure proper reporting
Being Aware of What Can Go Wrong
Documentation

              Department of Audits and Accounts
Examples of Documentation
Employee Compensation
Cash Maintenance
SAS 114
The Auditor’s Communication With
Those Charged With Governance
Definitions
 Those charged with governance
    “those responsible for overseeing the strategic
     direction of the entity and obligations related to the
     accountability of the entity. This includes
     overseeing the financial reporting process and
     internal control over financial reporting.
       For entities with a board of directors, this term
        encompasses the term board of directors or audit
        committee used elsewhere is GAAS.




                          Department of Audits and Accounts
Definitions
 Management
   “those responsible for achieving the objectives of
    the entity and who have the authority to establish
    policies and make decisions by which those
    objectives are to be pursued.”
      Responsible for financial statements, including
       designing,     implementing,       and    maintaining
       effective internal control over financial reporting.




                         Department of Audits and Accounts
Required to Communicate
 The auditor’s responsibilities under GAAS
    Auditor responsible for form and expressing an
     opinion
    Does not relieve management and those charged
     with governance of their responsibilities
    Audit designed to obtain reasonable, but not
     absolute, assurance
    Includes consideration of internal control, but not
     an opinion on its effectiveness



                         Department of Audits and Accounts
Required to Communicate
 An overview of the planned scope and timing of the audit
 Significant findings (issues) from the audit
    Qualitative aspects of significant accounting policies
    Significant difficulties, if any, encountered
    Uncorrected misstatements
    Disagreements with management
    Other significant and relevant findings or issues
    Material corrected misstatements
    Management representations requested
    Management’s consultation with other accountants
    Significant issues discussed with management


                           Department of Audits and Accounts
SAS 114
 Communicate the form, timing and expected
  content of communications

 Communicate significant findings in writing if
  oral communication would not be adequate
    Other communication may be oral or written




                      Department of Audits and Accounts
SAS 114
 Requirement to evaluate two-way
  communication between the auditor and those
  charged with governance

 Document significant matters communicated

 Communicate events or conditions that indicate
  that there is a substantial doubt about the
  entity’s ability to continue as a going concern




                     Department of Audits and Accounts
FY 2008 Procedures for Data
Collection Form
  Federal Audit Clearinghouse
Data Collection Form (Form SF-SAC )
Submission for FY 2008 Audits
 OMB Circular A-133 (Para 320) requires that
  auditees provide a reporting package to the
  Federal Audit Clearinghouse
    The reporting package includes an audit report and
     a Data Collection Form (SF-SAC)

 Through FY 2007 Audits, a paper copy of the
  Board’s Audit Report and Form SF-SAC was an
  acceptable means of submission



                        Department of Audits and Accounts
Data Collection Form (Form SF-SAC )
Submission for FY 2008 Audits
 All submissions will now be Electronically
  Submitted to the Federal Audit Clearinghouse
  (FAC) …Both Audit Report and SF-SAC
 All Submissions Will Be Made Via Internet Data
  Entry System (IDES)

 Complete DCF Submission Instructions on FAC
  website at:
   http://harvester.census.gov/fac/collect08/main_instruct.pdf




                             Department of Audits and Accounts
Changes to Submission Process for
FY 2008 Audits
 DOAA Will:
    Establish each Board’s SF-SAC on the IDES including a
     report ID# and a password

    During the course of the audit, the Board will be required
     to provide an Email Address for the Board’s “Certifying
     Official”

    Upon Issuing the Audit:
        Complete the Auditor’s Section of Board’s SF-SAC on the
         IDES
        Submit (electronically) a PDF copy of the audit report to
         the IDES




                            Department of Audits and Accounts
Changes to Submission Process for
FY 2008 Audits
 Upon completion of the Board’s SF-SAC on IDES and
  submission of the Board’s audit report to IDES, DoAA will
  send an email to the Board indicating:


    The report’s identification number and password

    Then the Board will receive an email from FAC
     requiring the Board’s certification of SF-SAC




                          Department of Audits and Accounts
Changes to Submission Process for
FY 2008 Audits
 Upon receipt of FAC’s email, the Board will be instructed to:

     Log onto FAC’s website using report ID# and password, then:

          Click the “Certifying Form SF-SAC “ button from Main Menu;

          Click “Auditee Certification” button;

          Review SF-SAC for accuracy;

          Review the “Certification Statement”;

          Enter name and title of certifying official;

          Enter Unique Signature Code provided in FAC’s email

          If board agrees, then Certifying Official should click the “Agree to
           Auditee Certification Statement” button

                                     Department of Audits and Accounts
Changes to Submission Process for
FY 2008 Audits
 Auditor (DoAA) will go through same process
  for certifying SF-SAC upon receiving FAC’s
  email
 When both Board and DoAA have certified the
  SF-SAC, then Board will:
    Go to “Main Menu” and click “Submit A-133”
     button;
    Read instructions and if OK, then click “Submit A-
     133” button to transmit A-133 Package*
      * Package - Audit report and SF-SAC



                        Department of Audits and Accounts
Changes to Submission Process for
FY 2008 Audits
 After transmitting A-133 package, the following
  page will reflect confirmation of A-133
  submission
 Copy of Form SF-SAC can then be printed
 FAC will process the submission and then
  email a submission confirmation to both Board
  and DoAA
 Status of submission can be verified @
    http://harvester.census.gov/fac/dissem/disclaim.html




                           Department of Audits and Accounts
Summary of DoAA Activities

  1.   Establish each Board’s FY 2008 SF-SAC on the IDES,
       including a Report ID# and a Password
  2.   Provide email addresses of auditor and Board’s
       Certifying Official on IDES file
  3. Complete the auditor’s section of Board’s SF-SAC on
     IDES
  4. Transmit PDF file of Board’s audit report to IDES
  5. Email report ID number and password to Board for
       access to SF-SAC for Board’s review and certification
  6. Provide auditor’s certification of SF-SAC




                           Department of Audits and Accounts
Summary of Board’s Responsibilities

  1. Provide email address of Board’s Certifying Official
     to DoAA during audit process
  2. Upon receipt from DoAA, via email, safely maintain
     Report ID Number and Password
  3. Upon receipt of FAC email notification, complete
     the Auditee’s Section of the SF-SAC on IDES
  4. Provide Auditee’s Certification of SF-SAC on IDES
  5. Submit A-133 Audit Package to Clearinghouse




                        Department of Audits and Accounts
Language of the FAC’s Email Request
For Certification
 Initial Statement:

     The Form SF-SAC data and a copy of the A-133 reporting
      package have been successfully entered into the Federal Audit
      Clearinghouse (FAC) Internet Data Entry System (IDES) for
      (Name of Board) with a fiscal period ending on 6/30/2008. To
      complete the A-133 submission, you must certify the Form SF-
      SAC data entered into the FAC IDES. Once the auditee and
      auditor have both certified the data, you may submit the Form
      SF-SAC and A-133 reporting package to the FAC for processing.




                             Department of Audits and Accounts
Language of the FAC’s Email Request
For Certification
   Certification Process:

     1. In order to certify the submission, click the following link:
          http://harvester.census.gov/fac/collect/pswdqry.html.

     2. Enter the Report ID and password to access the submission.
         REPORT ID: 29XXXXXX
         PASSWORD: This is available from the auditor contact

     3. On the Main Menu, click the “CERTIFY FORM SF-SAC” button.

     4. Click the “AUDITEE CERTIFICATION” button.

     5. Review the Form SF-SAC and the A-133 reporting package from this
        page.
     6. Read the AUDITEE CERTIFICATION STATEMENT



                                      Department of Audits and Accounts
Language of the FAC’s Email Request
For Certification
   Certification Process:

    7.   Enter the following signature code to represent your signature in the
         "Signature of certifying official" text box.
                   Auditee Signature Code: 399449393523

    8.   If you agree with the Form SF-SAC, the A-133 reporting package, and
         the AUDITEE CERTIFICATION STATEMENT, then click the “Agree to
         Auditee Certification Statement” button.

    9.   If you disagree with the Form SF-SAC, or the A-133 reporting package,
         or the AUDITEE CERTIFICATION STATEMENT, then click the “Reject
         Auditee Certification Statement” button and contact the auditor to
         discuss making changes to your submission.

    10. Once the submission has been certified by both the auditee and
        auditor, the “SUBMIT A-133 SUBMISSION” button must be clicked.
        This will electronically send the submission to the FAC processing
        center for processing.

                                  Department of Audits and Accounts
Significant Adjustments
Fund Statements
 Beginning Fund Balance ties to prior
  year audit report
 July and August salary accruals




                  Department of Audits and Accounts
Fund Statements
 Sales Tax receivables
  Received within 60 days of close of FY
 Property Taxes
  Recognize revenues, net of estimated
    uncollectibles, in the period for which the
    taxes are levied
 QBE receivables



                     Department of Audits and Accounts
Fund Statements
 Contracts and retainages payable
 Material gains/losses on investments
   QZAB escrow accounts
 Material funds not included on financial
  statements
   QZAB escrow




                   Department of Audits and Accounts
Fund Statements
 New bond issues are properly reported
 Transfers to cover fund deficits
 Elimination entries for activity posted
  between funds, i.e., indirect costs,
  activity between schools and central
  office, contributions to self-insurance
  funds



                  Department of Audits and Accounts
District-wide Statements
 Beginning Net Assets ties to prior year
  audit report
 Any adjusting entries made to fund
  financial statements
 Delinquent property tax receivable
 Amortize premiums on bonds sold
 Defer discounts on bonds sold



                   Department of Audits and Accounts
District-wide Statements
 Defer bond issuance costs
 Construction in progress
 Capital outlay purchases not included on
  capital assets additions
 Capital leases not included in long-term
  debt activity




                  Department of Audits and Accounts
District-wide Statements
 Increase Invested in Capital Assets, Net
  of Related Debt by the amount of the
  bond proceeds that remain unspent (Use
  worksheet provided in the Audit Toolkit.)
 Decrease Restricted for Capital Projects
  for the above amount
 Material omissions from capital assets



                   Department of Audits and Accounts
QUESTIONS?




        Department of Audits and Accounts

								
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