Municipalities: Tips to Improve the Year End Grind and Summer Cleanup
By Heidi Wohlleb, CPA, Partner of Nisivoccia
Would you like to make your year-end process easier, have less questions from your auditors, and possibly generate some extra funds for surplus/financing of capital ordinances?
Let’s get started!
Prior Year Audit Journal Entries
Be sure to obtain and post any prior year audit journal entries. Your auditor may have additional journal entries from the Annual Financial Statement to the final audit process. If any of these journal entries affect the appropriation reserves, be sure to make the necessary adjustments to individual appropriation reserves accounts to ensure that there are no over-expenditures.
Call/Email your Auditor – The most satisfying part of my job is helping my clients. If you have a question, concern or problem reach out to your auditor. No question is a stupid question. Chances are we have seen the situation before or someone else we work with has. If for some reason we do not have the answer, we have the resources available to put on our detective hats to find the answer. (Personally, I am one of those geeky accountants who likes to do research and I do much of the research in our Public Entity practice.)
Reconcile Monthly – Some of us are procrastinators and have things we put off or avoid (That’s exercising for me!), it does not get easier if you wait until the end. So, reconcile those bank accounts for each account/fund; reconcile cash collections between the revenue reports/general ledger with the various departments; reconcile with the collector and make sure your budget expenditure reports are reconciled with the control account in the general ledger. You will thank yourself come December or January when you have one less thing to do.
Monitor Appropriation Reserve and Current Year Budget Reports
Review these reports at least monthly to ensure that there are no over-expenditures or accounts which may be over-expended. Obtain explanations from the respective departments for any large variances between budget and actual expended. This might be helpful with budgeting for the next year which many of you start in the late fall.
Employee Health Benefit Contributions
I suggest posting the refunds related to these contributions preferably monthly but at least quarterly. These refunds can be significant. Also, you may want to review the calculations for any employees with changes to their marital status – single to married or changes in position such as a promotion to determine whether there is an increase in the employee health benefit contribution.
Keep copies/notes/emails – I find I cannot remember everything I once did/said as I am getting older so if I keep backup/copies about something unusual that happened it helps to job my memory. This will save time for you and your auditor when they ask you about something come audit time. We, as auditors, have this spooky ability to find/test the unusual items.
Submit Grant or Other Reimbursement Requests Timely – Remember to work with your engineer to request the 75% of NJ Department of Transportation grant funds upfront. Submit other grant reimbursement requests regularly/timely. Having a large Due from Federal and State Grant Fund in the Current Fund can have a big impact on Current Fund fund balance. Make sure that what is requested agrees with the accounting records. The request should at least be reviewed/approved by someone in the Finance Office.
One of the most frequent comments we see in the DLGS’ budget review notes are that there are a number of older grant receivable or appropriated reserve balances. On average and of course there are exceptions but you should try to limit grant balances to two years. So, I suggest taking a proactive approach and if you have time during the year that it is a little slower, review those balances to determine if any balances should be cancelled or any balances which should be requested for reimbursement/can be expended. If there are balances which can be cancelled, then prepare a cancellation resolution for approval by the governing body. Any unexpended federal and state grant fund appropriated grant balances without offsetting grant receivable balances are excess funds that go to Current Fund surplus.
Dedication by Riders for Trust Funds
Another common DLGS budget review note the last several years is that a municipality does not have a dedication by rider for a particular Trust reserve. This year the budget reviewers were requiring that the municipality prepare a dedication by rider resolution prior to obtaining the DLGS’ approval for adoption of the budget. There are no automatically approved riders so you will need one for such reserves such as Police Outside Services and Unemployment Compensation Insurance.
If you need to obtain a fixed assets appraisal, now would be the time to at least start the process to obtain such an appraisal.
If you do obtain such an appraisal, then be sure to review the report generated by the appraisal company to ensure that there are no significant items missing such as a vehicle which may not have been on the premises on the date of the appraisal. Fixed assets are required to be recorded at historical cost or estimated historical cost so the values for your existing assets as of the last appraisal should not change.
Whether you utilize one bank account for all your payroll activity or separate bank accounts for net payroll and payroll agency, you should at least periodically review the balances in the account by deduction such as pensions for validity. This account/these accounts should be clearing accounts meaning that they should have a minimal balance after payments are made for the respective deduction each pay period/month.
Clear Interfunds – Monthly or at least quarterly as possible.
Revenues – Scan your budget revenue report to see if there are any revenues which you still need to collect before year end such as the Payment In lieu of Taxes from the local nursing home. Remember, no cash, no revenue to your municipality.
Tax and Utility Levy/Billings and Adjustments
Work with your tax and utility collector to post the tax levy/utility billings monthly. Or, at least periodically throughout the year so you have less to reconcile at year end. This would also include any senior citizen/veteran and other billings adjustments/cancellations for taxes and any billing adjustments for utilities.
Periodically check the Ch.159 listing on the DLGS website to ensure your submitted Ch. 159 resolutions are on your municipality’s listing.
Improvement Authorization Balances
Review older improvement authorization balances for cancellation especially those older than 5 years with no current year activity. Funded balances can be cancelled, and those funds if cancelled appropriately back to the capital fund balance or capital improvement fund may be used to finance new improvement authorizations.
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