Audit Guide Update 2016-17...© 2017 Crowe Horwath LLP Audit Guide Update 2016-17 April 13, 2017 Matthew Nethaway, Partner. Jeffrey Jensen, Partner

© 2017 Crowe Horwath LLP

Audit Guide Update 2016-17

April 13, 2017

Matthew Nethaway, PartnerJeffrey Jensen, Partner

© 2017 Crowe Horwath LLP

© 2017 Crowe Horwath LLP 22

Agenda

•The 2016–17 Audit Guide

• Deleted Programs/Procedures

• New Programs/Procedures

• Amended Programs/Procedures

•Common Issues/Findings

•The Audit Report


The 2016-17 Audit Guide


Update

•Deleted Programs/Procedures• None!

•New Programs/Procedures• One – Mental Health

•Amended Programs/Procedures• Two – mainly wording

https://eaap.ca.gov/

https://eaap.ca.gov/


New Audit Procedures – Mental Health

Who is it applicable to?•Any LEA or Special Education Local Plan Area (SELPA) that has mental health related services expenditures from Budget Item 6100-161-0001, Provision 14 (SACS Resource Code 6512) in 2016-17.

Requirements•Verify that the funds expended were used to provide mental health related services, including out-of-home residential services for emotionally disturbed pupils.

•For additional guidance on mental health services, visit CDE’s website: http://www.cde.ca.gov/sp/se/ac/useofmhfunds.asp

If not in compliance:•LEA is to make a correcting journal entry otherwise considered a finding.

http://www.cde.ca.gov/sp/se/ac/useofmhfunds.asp


Amended Audit Procedures

•California Clean Energy Act – Prop 39

• Removed that subsequent project expenditure reports were to be submitted to Citizens Oversight Board.

• Minor wording changes.


Amended Audit Procedures (cont’d)

•BB Mode of Instruction

• Change what constitutes a finding.

• If any ADA reported to the CDE as classroom-based instruction was not generated in compliance with all of the preceding conditions, but was generated in full compliance with the requirements set forth in the Audit Guide Section CC (Nonclassroom-based instruction/Independent Study), state in a finding the number of units of ADA that were misreported as classroom-based instruction but eligible for nonclassroom-based ADA.


Common Issues/Findings


Common State Compliance Findings

•Unduplicated Local Control Funding Formula Pupil Counts

•Independent Study

•Kindergarten Continuance

•Instructional Time


Unduplicated Local Control Funding Formula Pupil Counts

•Did not have proper supporting documentation to support their designation (FRPM, EL)

•Students were ineligible for designation

•Unduplicated pupil counts were inaccurate due to clerical errors

•Resource for what to provide auditors: http://www.cde.ca.gov/fg/aa/lc/lcfffaq.asp#AUDIT

Presenter

Presentation Notes

Close to 200 findings each year

http://www.cde.ca.gov/fg/aa/lc/lcfffaq.asp#AUDIT


Unduplicated Local Control Funding Formula Pupil Counts (cont’d)

•Provision 2 or 3 or Community Eligibility Provision under the NSLP

• Supporting documentation for the school can be either:

1. Collected in the current year under audit; OR

2. Collected in the school’s designated LCFF Base Year - Students enrolled after the base year should have supporting documentation from the year enrolled.

Presenter

Presentation Notes

Close to 200 findings each year


Independent Study

•The written agreement is not signed by the correct individuals

• The agreement must be signed by all three required parties

•The written agreement was signed after the District started claiming ADA

• Dates associated with the signature lines

•The written agreement doesn’t contain all required information


Kindergarten Continuance

•The District or the school site used an incorrect form

•The District or the school site did not complete a form for a retained student

•Link to approved CDE form: http://www.cde.ca.gov/ci/gs/em/documents/parentagreeform.pdf

http://www.cde.ca.gov/ci/gs/em/documents/parentagreeform.pdf


Instructional Time

•The school site revised the instructional bell schedule and didn’t notify the District Office – as a result of the revisions the school site fell below the required number of instructional minutes for the school year.

•The minimum number of minutes offered per day were found to be below the required minimum daily instructional minutes per Education Code.


To Avoid Potential Findings

USE YOUR AUDITORS throughout the year•Send examples of support ahead of time to ensure supporting documentation will satisfy the requirements.

•Send bell schedules and school calendars early in the year to ensure compliance.

•Send independent study agreement templates to ensure all required elements are present.

• If you are not sure, ASK! There is no harm in asking.

•Request auditors to reach out to CDE to get clarification in advance.


The Audit Report


The Audit Report Overview

•Management’s Discussion and Analysis

•Basic Financial Statements• Two components:

1. Fund financials (from your unaudited actuals)2. Government-wide financials

•Reconciliations • Shows differences between fund financials and government-wide financials

•Notes to the Financials• Provides the readers of the financial statements with further background on the District and more detailed information on the balances presents on the face of the District’s financial statements

Presenter

Presentation Notes

Explain: Green smiley – good to look at Yellow smiley - neutral Why? MD&A – Good overview of what has occurred at the District - significant changes


The Audit Report Overview (cont’d)

•Required Supplementary Information• Budgetary Comparison Schedule – compares originally adopted and final budget

• Required for the General Fund, and any major Special Revenue Fund• Other Postemployment Benefits (OPEB) funding progress schedules• CalSTRS and CalPERS required schedules

Presenter

Presentation Notes

Why? Supplementary Information Audit Adjustments – shows any differences from unaudited actuals, or what a great job the business office did!


Required Supplementary Information – OPEB Schedule of Funding Progress



•Supplementary Information • Non Major Fund financial information• Agency Fund (ASB) financial information• Organization – who’s who• Scheduled of ADA - P-2 and P Annual and a corrected ADA column if any state compliance findings are identified that question ADA totals reported by the District

• Scheduled of Instructional Minutes• Schedule of Expenditure of Federal Awards • Audit adjustments – unaudited actuals to audited numbers • Schedule of Trends and Analysis – General Fund only – compares actuals year over year• Schedule of Charter Schools

Presenter

Presentation Notes

Why? Supplementary Information Audit Adjustments – shows any differences from unaudited actuals, or what a great job the business office did!



•Opinions – Independent Auditor’s Report on…• Financial Statements• State Compliance• Government Auditing Standards• Federal Compliance

Example:

Presenter

Presentation Notes

Why? Opinions – the results of the audit – see example



•Findings and Recommendations

• Summary of Auditor’s Results• Financial Statements • Federal• State Compliance

• Prior Year Status

Presenter

Presentation Notes

Why? Summary of Auditor’s Results – best page – shows opinions, if significant deficiency or material weakness, noncompliance


Findings – Summary of Auditor Results






Findings – When do they need to be reported??

•Financial Statements Findings

• Significant Deficiencies (SD) and Material Weakness (MW) ONLY

• Deficiencies are often reported to support the District • Example – ASB is often only a deficiency not a SD or MW. It is often reported per the request of District

management to hold sites accountable or because the Board members and management prefer to have all issues presented, small or large.


Findings – When do they need to be reported?? (cont’d)

•Federal Compliance Findings

• Uniform Guidance increased the threshold requirements• Threshold from $10,000 to $25,000; or • Known or likely fraud affecting the award


Findings – When do they need to be reported?? (cont’d)

•State Compliance Findings

• We must report what the audit guide prescribes

• Materiality is not a factor for state compliance findings

• If an attendance finding is below 0.50 ADA there is no fiscal impact nor is P-2 revision required however the finding must still be reported.


GASB 54 – Fund Balance Classifications

•Nonspendable• Prepaids• Inventory• Revolving cash

•Restricted• Any fund balance in a fund that is not the General Fund (Fund 01, 17 and 20)• These funds are restricted by nature

•Committed• Commitments require specific board action

•Assigned and Unassigned• General Fund only


GASB 34 – Translating Fund Balance to Net Position

•Reconciliations of the Fund financial statements to the full-accrual financial statements.• There are two reconciliations presented:

• Fund Balance to Net Position• Change in Fund Balance to the Change in Net Position

• Typical reconciling items:• Capital assets• Long-term debt• Deferred Outflows/Inflows of Resources• Internal service fund balances• Cash to accrual interest payable on long-term debt

• These reconciling balances exist in the footnotes of the audited financial statements and should agree to the same amount.












GASB 68 – How to Interpret

•Use CalPERS and CalSTRS information for the District financial statements.

• Determine the District’s proportionate share of net pension liability, deferred inflows, deferred outflows and pension expense• Calculate the amount contributed to the pension subsequent to the measurement date• Calculate the change in proportion• Other amounts taken directly from CalPERS and CalSTRS reports

•Future changes take into consideration changes in the NPL of the pension, changes in deferred items and changes in the District’s proportionate share.


GASB 68 – Schedule of the District’s Proportionate Share


GASB 68 – Schedule of the District’s Proportionate Share


GASB 68 – GASB 68 – Schedule of the District’s Contributions


GASB 68 – Schedule of the District’s Contributions


GASB 68 – Schedule of the Deferred Items


Reading the Opinions

•Opinions rendered for your District/County Office

• Financial Statements

• Federal Compliance (if applicable)

• State Compliance

• Government Auditing Standards (GAS Opinion)

• First Five Program (if applicable)


Reading the Opinions (cont’d)

•Four possible types of opinions –

•Unmodified Opinion –• Clean opinion• Job well done

•Modified (Qualified) Opinion –• Everything looked good EXCEPT….

•Disclaimer Opinion –• Auditors were not given access or proper documentation needed to render an opinion

•Adverse Opinion –• Auditor and client cannot materially agree


Reading the Opinions (cont’d)

•Ensure consistency between the Summary of Auditor’s Results page and the opinions themselves

•Make sure you understand the opinions and agree with their conclusions• Read the opinions• Ask your auditor for any clarification


ASK THE AUDITOR

QUESTIONS


In accordance with applicable professional standards, some firm services may not be available to attest clients.

This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction.

© 2017 Crowe Horwath LLP, an independent member of Crowe Horwath International crowehorwath.com/disclosure

Matthew Nethaway, [email protected]

Jeffrey Jensen, [email protected]

Thank you

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Audit Guide Update 2016-17...© 2017 Crowe Horwath LLP Audit Guide Update 2016-17 April 13, 2017 Matthew Nethaway, Partner. Jeffrey Jensen, Partner