Using the States Accounting Procedures Manual and the

Using the States Accounting Procedures Manual and the

Using the States Accounting Procedures Manual and the Uniform Chart of Accounts Presented to Michigan Townships Association Annual Educational Conference January, 2015 David R. Williamson, CPA, Partner PSLZ, LLP Plymouth, Michigan 734-453-8770 [email protected] Special Thanks To Providers of Some of the Materials Michigan Department of Treasury Local Audit and Finance American Institute of Certified Public Accountants Prentice Hall Professional Business Publications, Arens/Elder/Beasly Presentation to LCPA Baton Rouge Chapter,

Suzanne Elliott, May 29, 2007 Accounting Procedures Manual Published by the Department of Treasury in 2007 Townships and other local units of government required to follow Each Chapter is divided into three sections: Concept Statements Required Procedures Best Practices Chapter 1-Internal Accounting Control Internal accounting control is a series of procedures designed to promote and protect sound practices, both general and financial. Internal control procedures will significantly increase the likelihood that: financial information is reliable assets and records of the organization are not stolen or misused the organizations policies are followed government regulations are met

Developing an Internal Accounting Control System Control environment-setting the tone at the top of the organization, meaning the integrity, ethical values, and competence of the entitys people Risk Assessment-Identify areas where errors or irregularities can occur Cash Receipts Cash Disbursements Payroll Fixed Assets/Inventory Developing an Internal Accounting Control System Control environment-setting the tone at the top of the organization, meaning the integrity, ethical values, and competence of the entitys people Risk Assessment-Identify areas where errors or irregularities can occur Cash Receipts Cash Disbursements

Payroll Fixed Assets/Inventory Developing an Internal Accounting Control System Control activities. -Policies and procedures that help ensure that directives are carried out. These include activities such as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets, and segregation of duties. Information and communication- Components that address the need in the organization to identify, capture, and communicate information to the right people to enable them to carry out their responsibilities. Information systems within the organization are key to this element of internal control. Developing an Internal Accounting Control System Monitoring- The activity undertaken by management and others in the organization with regard to the

internal control system. It is key that internal control deficiencies reported to the township board. These components are linked together, thus forming an integrated system that can react dynamically to changing conditions. Whose responsibility is it to design and maintain internal control? According to Michigan Law, and professional auditing Literature, this responsibility lies with the Township. Management, Other Personnel, and Those Charged With Governance (The Township Board) are required to design, monitor, adjust, and maintain the system of accounting control Financial Policies-Chapter 2 Adopt required policiesElectronic Transactions Credit Card Investment Others

Build on required with optional policies Purchasing Travel Ethics/Conflicts of Interest Electronic Payments Permissible Under Michigan Law PA 738 of 2002 (MCL 124.301) requires the governing body of all local units of government to approve a resolution authorizing payments of

automated clearing house (ACH) transactions, which is a way to process electronic payments or receipts to external parties. The act requires the resolution the following: an ACH policy; designation of electronic transfer officer; documentation of payments, and The establishment of internal controls system. Internal Controls/Fraud Protection Prior to commencing electronic payments and receipts, townships should work with their banks, data processing professionals and auditors to ensure that the township is protected from fraud. A recent study conducted by the Government Finance Officers Association showed that governments are using the ACH system more frequently to accomplish vendor payments, payroll, and intergovernmental payments (e.g. property tax disbursements), and accept payments, but lag in implementing fraud protection.

Internal Control Suggestions Use ACH Filters and Blocks-in the GFOA study, only 34% of the governments use ACH filters and blocks. These tools would allow the township to block all ACH transactions in specified accounts, or filter the ACH transactions to allow payments and receipts from authorized sources only. Use separate ACH bank account-only 24% of the governments surveyed in the GFOA study use separate bank accounts. GFOA Recommendations Enhancing computer virus protections Passwords for initiating transactions Periodic internal control reviews that address control, data confidentiality, data integrity, and other general computer security controls Written agreements with financial institutions covering ACH transactions Dollar limits for authorized personnel, and dual

passwords required for dollars above a specific limit. Dual controls to establish repetitive transactions, and non repetitive payments Reconcile ACH transactions or accounts dailyperson other than originating party Credit Card Policies-Requirements Use must be in compliance with PA 266 of 1995, which also requires the township board to adopt a resolution and adoption of a credit card policy that indicates responsibility for the cards use, and monitoring and oversight. credit cards can only be used for official township business. persons using the card are responsible for protection and custody of the cards. persons using the card must return it immediately after termination of employment. Credit Card Policies-Requirements Continued requires adoption of a system of internal controls monitoring use approval of credit card bills prior to payment.

timing of payments on the card (no later than 60 days from statement date) disciplinary actions for failure to follow policy Investment Policies Required by PA 20, of 1943, as amended-MCL 129.91, Townships should review their policies (required since 1997) to ensure they address: Credit Risk-The risk that the issuer will not pay off on the investment when it matures. Third Party Risk-Risk of fraud in connection with the physical existence of the securities being purchased. Investment Policies-Continued Interest Rate Risk-The risk that a change in interest rates will cause an investment to decline in value. Maturity Risk-Cash may be tied up for a long time, and the townships must pay a penalty or suffer decrease in value if the investment is cashed in early. Opportunity Risk-Risk that interest rates will rise during an investments term, and the township will

have foregone the higher return. Purchasing Policies-help insure that purchases of goods and services provide the best value for the township and that vendors are treated equally. Most communities have several different methods used to select vendors: competitive bidding quotations small purchase orders (blankets) Policy Development Challenges Townships must weigh the costs of developing bid specs, and administration, with the benefits of the competitive bidding through a formalized process. Many communities have a high dollar threshold for purchasing through competitive bids, or RFP (request for proposals), a mid term policy for other purchases (quotes), and a small purchase

policy, where department heads and employees can accomplish small purchases through blanket orders. Other Challenges to Policy Development Procurement standards for purchases of goods and services for state and federal grants usually require adherence to Office of Management and Budgeting (OMB) standards. Centralized or Decentralized Systems? Other Optional Policies-Travel Elements to Consider: a copy of the form used to request reimbursement list of supporting documents to attach to the form the timeline to submit the reimbursement request; we recommend 30 days after travel a list of when prior authorizations are needed

the reimbursement rates for mileage, hotel stays, meals and airfare. Many travel policies specify maximum amounts for meals, airfare or other items. Chapter 3-Bank Accounts and Reconciliation All Funds can be pooled except those that specifically are required to have separate funds: Debt Service-State says SADs can be pooled with other SADs and GO Unlimited Bond DSF can be pooled with other GO Unlimited . Property Tax Collection Cash Account Recommendations Separate Depository Accounts From Disbursing Accounts-GFOA Recommendation-creates a firewall around the Townships largest cash deposit. Pooling Depository Accounts Will Reduce Bank Fees, However State Law will Require Certain Accounts to Be Separately Maintained-Tax Collection, Debt Service.

Recommended Cash Disbursement Accounts Accounts Payable (small dollar limited individual transactions) Accounts Payable Larger transactions EFT Account (Should be reconciled daily) Payroll Account Property Taxes General Fund The depository account would have ACH and Debit Blockstransfers only Accounts Payable ACH blocks

Fire Fund Water & Sewer Depository Payroll ACH filter- direct deposits and tax payment ACH ACH filters for authorized vendors only Key Control Activity for Most Township is the Bank Reconciliation Challenges: Frequently prepared late (why would the State put on the APR otherwise)

Not Reconciled to the General Ledger Reconciled by the custodian of the accounts-ideally this should be someone independent of the process Bank Reconciliation Should be (ideally) performed by someone NOT involved in cash receipts or disbursements. Involves comparison of information coming from the bank to the books of the township, specifically the general ledger account(s) Cash in the Bank. Often, reconciliation process involves only the Treasurers check register. In this case problems often arise as the townships books are not reconciled to the outside source (bank)-this also results in poor segregation of duties. Bank Reconciliation Specifics Monthly bank statement is a listing of all the deposits, checks, other debits and credits which cleared the bank. General ledger shows all cash received and paid within the month.

Neither balance is correct without adjustment for timing differences, know as reconciling items. Bank Reconciliation Steps The purpose is to start with each balance (book and bank) and work towards the true balance. Bank adjustments Deposits in transits-should be deposits within the last few days of the month. Outstanding Checks-checks written but not clearedwatch for old outstanding items. Bank Errors-rare these days but they happen! Bank Reconciliation Steps Book balance adjustments are generally for items that cleared without information. NSF deposits Bank service charges Book Errors Good communication between Clerk and Treasurer can minimize these reconciliation adjustments. Book adjustments generally require adjusting journal entries to fix the error.

Bank Reconciliation Steps Checks should be reconciled to cancelled checks clearing the account, not to the listing on the statement. It is important to review the checks clearing for agreement to date, amount, payee and endorsement. All unusual items should be followed up; e.g. check clears for the correct amount; but payees are different. Deposits in transit should not be outstanding for more than a few days. Bank Reconciliation-Final Step Review bank reconciliation example on worksheet. Very important the Clerk and Treasurer reconcile the general ledger bank balance to the Treasurers cash records. Key element of control-Treasurer should insist on getting a copy of the bank reconciliation, along with the cancelled checks, and bank statements to facilitate reconciliation.

Type Cherry Lane Township-General Fund Cash General Ledger Date Num Name Debit Credit beginning balance Cash receipts 11/01/2012 1101-1109 Check 11/05/2012 1043 Check 11/05/2012 1044 Check 11/05/2012 1045 Check 11/05/2012 1046 Check 11/05/2012 1047

Deposit 11/15/2012 1110-1115 Check 11/30/2012 1048 Check 11/30/2012 1049 Check 11/30/2012 1050 Deposit 11/30/2012 1116-1120 16,164.44 First Bank of Cherry Cherry Road Commission Miller Canfield Cherry County FD Janet O Nimby 32,500.00 985.50 1,821.00 16,000.00

46.17 619.55 Patrick P Pushover Sherry L Myw ay Fred P Firefighter 985.50 1,821.00 77.35 985.50 Balance 99,584.44 115,748.88 83,248.88 82,263.38 80,442.38 64,442.38 64,396.21 65,015.76 64,030.26

62,209.26 62,131.91 63,117.41 National Bank Of Cherry Lane Cherry Lane Tow nship General Fund, Account 123456 Statem ent for Novem ber 30, 2012 Beginning Balance Checks and other Debits: 11/02/2012 1041 11/05/2012 1042 11/10/2012 1039 11/11/2012 1043 11/12/2012 1044 11/15/2012 1045 11/07/2012 1046 11/08/2012 1047 11/30/2012 1048 11/30/2012 1050 deposit returned NSF total checks and other debits Deposits and other credits

11/01/2012 11/01/2012 11/15/2012 total deposits and other credits Ending Balance 101,346.22 2,755.33 41.44 16.01 32,500.00 985.50 1,821.00 16,000.00 46.17 985.50 77.35 50.00 55,278.30 1,051.00 16,164.44 619.55

17,834.99 63,902.91 Bank Reconcilation-November 30, 2012 Balance per Bank Less: Outstanding Checks check number Add: Deposits in Transit 1049 11/30/2012 63,902.91 -1,821.00 985.50 63,067.41 Balance per Books Journal entry to record NSF returned item

63,117.41 -50.00 63,067.41 Cash Receipting (Chapter 4)Michigan Law Requires: Township Treasurer must complete a formal receipt for all revenues coming into the Township. This can be accomplished by: Computerized point of sales systems Cash registers Manual three part receipts OFFICIAL CHERRY LANE TOWNSHIP RECEIPT GENERAL FUND

NO: 1060 DATE: 5-15-14 RECEIVED FROM: CITY RECYCLING $ TWO THOUSAND EIGHT HUNDRED EIGHT AND NO/ 100'S ------------------------------------------FUND ACCOUNT NO.AMOUNT GENERAL 101-000-675 IN PAYMENT FOR: 2,808.00 DOLLARS RECYCLING

2,808.00 AUTHORIZED SIGNATURE USE AUTOMATED PROCESSES TO RECONCILE CASH RECIEPTS BS&A Has An Automated Processes To Batch Deposit Entries in the Same Way the Treasurer Batches Deposits. Quick Book Users? Have To Do Work Arounds Property Property Tax Tax Fund Fund Books should be maintained by both clerk and treasurer. Treasurers records tracks monies collected and disbursed by tax roll, usually totaled by deposit, by month. Clerk should post General Ledger by month.

48 Tax Tax Collections Collections The treasurer must maintain a Tax Collection Receipts Journal of the property tax collections. At least one entry per day for the total amount collected must be made. If desired, the treasurer may enter each individual tax receipt in the journal, however, it is not mandatory. The form of the journal may vary, but it must provide for an immediate determination of the amount collected for each tax collected Note BSA Equalizer provides reports that meet this purpose Property Property Tax Tax Manual Manual Receipts

Receipts Date Receipt No. Total County Township S.E.T. Cherry SD Admin Fee 1-Dec 1-4 236,340.00

52,000.00 13,000.00 39,000.00 130,000.00 2,340.00 3-Dec 6-30 181,600.00 40,000.00 10,000.00 30,000.00

100,000.00 1,600.00 417,940.00 92,000.00 23,000.00 69,000.00 230,000.00 3,940.00 Sub Total 7-Dec 31-47

181,600.00 40,000.00 10,000.00 30,000.00 100,000.00 1,600.00 10-Dec 48-60 363,600.00 80,000.00 20,000.00

60,000.00 200,000.00 3,600.00 545,200.00 120,000.00 30,000.00 90,000.00 300,000.00 5,200.00 963,140.00 212,000.00

53,000.00 159,000.00 530,000.00 9,140.00 Sub Total Month to Date Cash Cash Disbursements-Tax Disbursements-Tax Fund Fund Should be charged to liability accounts. Generally are initiated by treasurer and signed by treasurer. Townships should consider improvements to internal

control over taxes. 51 PSLZ, LLP-Certified Public Accountants 52 Tax TaxFund FundManual ManualDisbursement Disbursement Account no. Date Num Payee

12/20/2014 3087 Cherry Lane Twp Amount 62,140 12/20/2014 3088 Cherry Schools 530,000 12/20/2014 3089 Cherry County 212,000 12/20/2014 3090 Cherry County SET

159,000 Totals 222 963,140 226 222.1 225.00 53,000 226.10 9,140 530,000

212,000 159,000 212,000 53,000 159,000 530,000 9,140 Cash 703-000-001 100 236,340 181,600 181,600 363,600

963,140 100 Due to SET 703-000-222.1 BB 39,000 30,000 30,000 60,000 159,000 EB - 212,000 EB Due to SD 703-000-225 BB 130,000 100,000 100,000 200,000

530,000 EB - Due to Township 703-000-226 Due to Twp-PTAF 703-000-226.1 BB 100 13,000 10,000 10,000 20,000 Due to County 703-000-222 52,000 40,000

40,000 80,000 BB 53,000 EB 2,340 1,600 1,600 3,600 9,140 100 EB - Chapter 5-Cash Disbursements-Michigan Law Requires Certain Control Features for

Townships Generally the Clerk maintains the accounting records Treasurer maintains physical custody of the assets All disbursements, except (the property tax collection) require approval of the Board Internal Control: Michigan Law Requires: Dual signatures are required for all checking accounts (except the separate tax collection checking account). The dual signatures MUST be the clerk (or deputy clerk) and the treasurer (or deputy treasurer). The separate tax collection bank account statutorily only requires the signature of the treasurer. We recommend that the Clerk post activity and reconcile banks to the general ledger Internal Control: Michigan Law Requires Adequate security must be provided over unused checks. Checks must NOT be signed prior to being

completely filled out. All functions (i.e. deposit, write checks, issue checks, reconcile account) regarding a checking account should NOT be performed by the same individual. Internal Control: Michigan Law Requires Numerically controlled, pre-numbered checks must be used. Actual checks must be returned to the township (record retention requirement). Under the Records Media Act electronically stored checks should meet this requirement. Appropriate documentation (supporting invoices) must be attached for all disbursements. Original bills, not copies, must be used for documentation. Internal Control: Michigan Law Requires All disbursements must be approved by the legislative body. The board may establish a formal policy to authorize

payments prior to approval to avoid finance or late charges and to pay appropriated amounts and payroll (including related payroll taxes and withholdings). Internal Control: Michigan Law Requires This policy must be very limited and a list of payments made prior to approval must be presented to the legislative body for approval. Checks should not be returned to the originating office for distribution. OUR SUGGGESTION-after the Board approves payments, Treasurer should counter sign and mail payments to vendors. THEY SHOULD NOT BE RETURNED TO THE CLERKS OFFICE, OR THE OFFICE WHICH ORIGINATES THE CHECKS. Building on the Basics Use Positive Pay- township provides its disbursement bank with an electronic check register as often as checks are issued. Whenever a check is presented for payment but there is no record of it being issued, the bank refers the check to its customer client for a

pay/no pay decision. The bank delivers MICR line information describing exception items, and banks such can also deliver images of those items to clients. Consider moving from entry level software, e.g. QuickBooks, to more robust programs that have built in audit trails and internal control features. What is Positive Pay? An Electronic check register is sent to the bank as often as checks are issued. Whenever a check is presented for payment but there is no record of it being issued, or a difference in the amount, the bank refers the check to its customer client for a pay/no pay decision, or is rejected for payment. According to the GFOA, only 15% of the governments under 50,000 use positive pay, even though many of these smaller units have poor internal control. 62

Positive Pay DATE, DOLLAR AMOUNT, CHECK NUMBER and PAYEE can all be reviewed and compared against the check issue file 63 Bank Match Positive Pay - How It Works Physical Check Disbursed File Transmission Received at Bank Check Issue File File Submitted Submitted to Bank Client Pay/No Pay Decisions

Web Delivery Bank Bank Posting Posting of Check Issue Information Information Checks Checks Presented Presented for for Payment Payment Electronic Positive Pay Validation Notification 64

Update ARP System Ch 6-Payroll Human and Human Resources-we have a full workshop today but consider Elected Officials Have a Full Plate in keeping up with fast changing payroll rules and regulations. Many Townships Dont Have Dedicated HR person. Rely on a Single Employee to Accomplish Payroll, File and Pay Taxes. Third Party Solutions Large Publically Traded Companies like Paychex, and ADP offer HR and Payroll services, that many private sector employers use. Payroll can be no reconcile accounts, by either writing all payroll disbursements off of third party account, or using ACH direct deposits and prepaid debit cards for those without bank accounts. Third parties can mail or email payroll reports

directly to the Clerk AND Treasurer, or other board members. EFT Drafts can be transferred by the Treasurer, based on authorized payroll and withholdings. Chapters 7-11 Chapter 7 covers general ledger postings, journal entries and the like. Chapter 8 internal accounting and reporting, what reports do you run and when? Chapter 9- External reporting audit due dates, and F65 reporting Chapter 10-Capital Assets and related record keeping. Chapter 11-Special Reporting for TIFAs and IFTs special record keeping and reporting General General Journal Journal General Fund received $100,000 in State Shared Revenues Through the ACH System Assets

+ 100,000 = Liabilities + Fund Balance + 100,000 Journalizing Journalizing General Journal a chronological record of transactions. Journal Entries are recorded in the journal. date Acct desc 12/31/2012 Cash State Shared

Revenue number 101-000-001 101-000-574 debit credit 100,000 100,000 Posting Posting to to Ledger Ledger Posting the process of transferring amounts from the journal to the ledger accounts. Date 12/ 31/ 2012 Account

General Journal Title Cash State Shared Date 12/ 31/ 2012 12/ 31/ 2012 GJE1 Ref . Debit GJ E 1 100,000 GJ E 1

General CASH Ledger Explanation Ref. 100,000 101- 000- 001 Debit Beginning Balance State Shared Credit Credit Balance 43,000

GJ E 1 100,000 143,000 Posting Posting to to Ledger Ledger Posting the process of transferring amounts from the journal to the ledger accounts. Date 12/ 31/ 2012 Account General Journal Title Ref .

Cash GJ E 1 State Shared Date 12/ 31/ 2012 GJE1 Debit 100,000 GJ E 1 100,000 General State Shared Ledger

Explanation Ref. Credit Debit 101- 000- 574 Credit Beginning Balance State Shared Balance - GJ E 1 100,000 100,000

Trial Trial Balance Balance Trial Balance a list of each account and its balance; used to prove equality of debit and credit balances. Acct. No. Account 101-000-001 Cash Debit $ Credit 143,000 101-000-201 Accounts Payable $

3,000 101-000-390 Fund Balance 88,000 101-000-401 Property Tax Revenue 62,000 101-000-574 State Shared Revenue 100,000 101-000-664 I nterest I ncome 101-171-706 16,000 Supervisor Salary

38,000 101-215-706 Clerk' s Salary 38,000 101-253-706 Treasurer's Salary 38,000 101-260-910 I nsurance Expense 12,000 $ 269,000 $ 269,000 Adjusting

Adjusting Entries-Why? Entries-Why? Revenues - recorded in the period in which they are measurable and available. Expenditures - recognized in the period in which they are incurred. Adjusting entries - needed to ensure that revenue and expenditure recognition required by GAAP are followed-they are also used to correct errors made in posting from source journals like payroll, accounts payable, cash receipt , and cash disbursements. These are sometimes also referred to as reclassification adjustments. Preparing Preparing Financial Financial Statements Statements Financial FinancialStatements Statementsare

areprepared prepared directly directlyfrom from the the Adjusted AdjustedTrial TrialBalance. Balance. Balance Sheet Statement of Revenues and Expends. Statement of Fund Balance or

Retained Earnings Statement of Cash Flows (Proprietar y Funds) Adjusted Trial Balance Cash Debit $ Balance Sheet Credit Assets 143,000

Accrued Payroll Cash 3,000 Prepaid I nsurance 2,000 Total Assets Def erred Revenue 3,200 Prepaid I nsurance 12,000 Accounts Payable Fund Balance 88,000

Property Tax Rev. State Shared I nterest I ncome Supervisor Salary 38,000 Clerk Salary 38,000 Treasurer Salary 38,000 Gen. Serv. Payroll 2,000 $ 271,000 $

$ 143,000 12,000 $ 155,000 Liabilities Accounts Payable 58,800 Accrued Liabilities 100,000 Def erred Revenue 16,000 Equity 3,000 2,000 3,200 Fund Balance 146,800 Total Liab. & Equity $ 155,000 271,000

75 Adjusted Trial Balance Cash Prepaid I nsurance Debit Credit $ 143,000 12,000 Accounts Payable $ 3,000 Accrued Payroll

2,000 Def erred Revenue 3,200 Fund Balance 88,000 Property Tax Revenue 58,800 State Shared Revenue 100,000 I nterest income 16,000

Supervisor Salary 38,000 Clerk Salary 38,000 Treasurer Salary 38,000 General Serv. Payroll 2,000 $ 271,000 $ 271,000 Revenues: Property Taxes State Shared I nterest income Total revenue

Expenditures: $ 58,800 $ 100,000 16,000 174,800 Supervisor Salary 38,000 Clerk Salary 38,000 Treasurer Salary 38,000 General Service Salary 2,000

Total expenses 116,000 Excess of Revenues $ 58,800 Beginning Fund Balance 88,000 Ending Fund Balance $ 146,800 76 ACTUAL Orig Budget AMENDED Actual PROPOSED

2012 2013 BUDGET Year to date 2014 PROPERTY TAXES 403.000 Property Taxes 434.000 Tax Administration Fee TOTAL PROPERTY TAXES $ 149,187 6,507

$ 145,000 5,000 $ $ 155,694 $ 150,000 $ 1,466 5,005 6,471 $ 150,000 6,000 $

148,888 6,322 $ 150,000 5,000 156,000 $ 155,210 $ 155,000 2,000 5,000 2,000 5,000 31

5,550 2,000 5,000 7,000 $ 7,000 $ 5,581 $ 7,000 LICENSES & PERMITS 482.000 Building Permits 484.000 Other Permits TOTAL LICENSES & PERMITS $

INTERGOVERNMENTAL 576.100 State Shared Revenues TOTAL STATE-SHARED REVENUE 125,005 125,000 125,000 127,331 125,000 125,005 $ 125,000 $ 125,000 $ 127,331 $

125,000 4,173 6,000 6,000 2,820 6,000 $ 4,173 $ 6,000 $ 6,000 $ 2,820 $

6,000 $ 6,223 5,000 4,100 2,110 $ 3,000 $ 6,223 $ 5,000 $

4,100 $ 2,110 $ 3,000 $ 2,547 3,000 1,500 5,000 1,500 5,000 1,688 3,500 $

1,500 5,000 $ 5,547 $ 5,188 $ 6,500 $ CHARGES FOR SERVICES 640.000 Miscell. Charges TOTAL CHARGES FOR SERVICES INTEREST 664.000 Interest Income

TOTAL INTEREST $ $ $ OTHER REVENUE 671.000 Miscellaneous Income 672.000 Admin. Charges-Other Funds TOTAL OTHER REVENUE 699.000 Appropriations from Surplus TOTAL OTHER SOURCES TOTAL REVENUES AND OTHER SOURCES $

- $ 6,500 $ - $ - $ $ 303,113 $ - $

6,500 $ - $ 299,500 $ - - $ 304,600 $ - 155,679 $ 155,679

298,240 $ 458,179 Internal Reporting Chapter 8 in manual indicates Townships should produce the budget to actual reports at least quarterly (required by law for Charter Townships) Best practices-monthly: Treasurers Report General Ledger Budget to Actual Balance Sheet External Audits and F-65 Due six months after fiscal year, with very limited exceptions Late filing will impact qualifying status-delay revenue sharing payments, and other possible state actions F-65 somewhat complex, should consider including in audit proposal.

Annual audits required for populations above 4,000, everyone should consider State Uniform Chart of Accounts All Michigan Townships must use the State mandated general ledger number system called the Uniform Chart of Accounts-available at: http://www.michigan.gov/documents/ uniformchart_24524_7.PDF State Uniform Chart of Accounts The Michigan chart of accounts uses nine digits, with an option for an additional three numbers for sub accounts: The first three digits indicate the fund number. The next three indicate the department (no departments for balance sheet accounts or revenues). The last three digits are line item. State Chart of Accounts 101-000-001

206-000-001 101-253-706 206-336-706 General Fund Cash Fire Fund Cash Treasurer's Salary Fire Fund Salaries Michigan Michigan Chart Chart of of Accounts Accounts Structure is left mostly up to individual governmental units; only a limited number of required accounts: Revenues-401 Taxes, 450 Licenses and Permits, 501 Federal Grants, 539 State Grants, 580Contribution from Local Units, 600 Charges for Services 655, Fines and Forfeits, 664 Interest and Rents, 671Other Revenue Michigan

Michigan Chart Chart of of Accounts-detail Accounts-detail Only six mandatory expenditure line items: 701 Personal Services, 726 Supplies, 800 Other Services and Charges, 970 Capital Outlay, 990 Debt Service, 999Transfer Out Must balance simplicity with needs of the township. More accounts may be necessary to assist in budgeting and analysis. Departments Departmentsor orActivities Activities Balance Sheet accounts (Assets, Liabilities, and Equity) are always 000 for the middle grouping of account numbers. Expenditures-have to be grouped in departments or activities

The number of activities depends upon the complexity of the townships operations. However, the fewest number of departments dont necessarily provide the best data. Departmental Departmental Examples Examples 101-Township Board 171- Supervisor 191-Accounting Department 215-Clerk 247-Board of Review 253-Treasurer 257-Assessor 260-General Government 265-Building and Grounds 266-Attorney/Corporation Counsel 276-Cemetery Department ExamplesPUBLIC SAFETY 301-439

301-Police/Sheriff 336-Fire Department 371-Building Inspection Department PUBLIC WORKS 441-599 446-Highways, Streets, Bridges (Not Act 51) 448-Street Lighting Departmental Departmental Examples Examples OTHER FUNCTIONS851-899 851-Insurance and Bonds 852-860-Various Employee Fringe Benefits CAPITAL OUTLAY 901-904 DEBT SERVICE 906-929 TRANSFERS IN AND OTHER SOURCES 931-964 Cost

Cost Allocation Allocation Considerations Considerations Classifying all fringe benefits to Other may not capture all departmental costs necessary to measure compliance (e.g., Property Tax Administrative Fees, Code Enforcement Revenues). General office expensesmay wish to set up central department to pay for postage, copier, fax, and computer expenses, if internal resources arent available to allocate. Should consider cost allocation to millage supported funds.

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