Managing District Finances – Technology Does Matter

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Managing District Finances – Technology Does Matter

  1. 1. CSDA Annual Conference Managing District Finances: Technology Does Matter September 23, 2008 ASSOCIATES LLP
  2. 2. Mission Statement To provide responsive, innovative services of the highest quality to our clients; and to provide a positive, rewarding environment encouraging our employees to fulfill their professional and personal goals. Sacramento Office 2515 Venture Oaks, Suite 135 Sacramento, CA 95833 Tel (916) 929-0540 Fax (916) 929-0541 www.muncpas.com Justin J. Williams, CPA – Partner Dustin Cassady – Senior Accountant Introduction: ASSOCIATES LLP
  3. 3. Overview <ul><li>Using technology to improve your District’s financial reporting from an auditor’s point of view </li></ul>ASSOCIATES LLP
  4. 4. Presentation Topics <ul><li>New Audit Standards </li></ul><ul><li>Computer Security </li></ul><ul><li>Financial Reporting </li></ul><ul><li>Other Ways to Increase Efficiency </li></ul>ASSOCIATES LLP
  5. 5. Audit Standards <ul><li>New Audit Standards issued by the American Institute of Certified Public Accountants </li></ul>ASSOCIATES LLP
  6. 6. Audit Standards <ul><li>What are some of the new audit standards? </li></ul><ul><li>SAS No. 112 </li></ul><ul><li>SAS No. 104 through No. 111 </li></ul><ul><li>SAS No. 114 </li></ul>ASSOCIATES LLP
  7. 7. Audit Standards <ul><li>SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit </li></ul><ul><li>SAS No. 104 through No. 111, “ The Risk Assessment Standards” </li></ul><ul><li>SAS No. 114, Auditors Communication with Those Charged with Governance </li></ul>ASSOCIATES LLP
  8. 8. Audit Standards SAS No. 112 <ul><li>SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit </li></ul><ul><li>Effective for periods ending on or after December 15, 2006. </li></ul><ul><li>Requires written communication of significant deficiencies and material weaknesses to management and those charged with governance. </li></ul>ASSOCIATES LLP
  9. 9. Audit Standards SAS No. 112 <ul><li>3 Levels of Control Related Matters: </li></ul><ul><ul><li>Control Deficiency </li></ul></ul><ul><ul><li>Significant Deficiency </li></ul></ul><ul><ul><li>Material Weakness </li></ul></ul><ul><ul><li>Which is the most severe? </li></ul></ul>ASSOCIATES LLP
  10. 10. Audit Standards SAS No. 112 <ul><li>Other information from SAS 112: </li></ul><ul><ul><li>The auditor cannot be part of the client’s system of internal control. </li></ul></ul><ul><ul><li>Internal control over financial reporting encompasses controls over the preparation of the financial statements and notes. </li></ul></ul>ASSOCIATES LLP
  11. 11. Audit Standards SAS No. 112 <ul><li>How do we avoid significant deficiencies and material weaknesses? </li></ul><ul><ul><li>Ensure proper controls are implemented and are operating effectively </li></ul></ul><ul><ul><li>Review prior year management letters and SAS 112 letters to ensure recommendations have been implemented </li></ul></ul><ul><ul><li>Talk to your auditor </li></ul></ul>ASSOCIATES LLP
  12. 12. Computer Security <ul><li>Section 2- Computer Security </li></ul><ul><ul><li>Internal Control Objectives </li></ul></ul><ul><ul><li>Sample Controls </li></ul></ul>ASSOCIATES LLP
  13. 13. Computer Security <ul><li>Internal Control Objectives </li></ul><ul><ul><li>IT strategic planning and risk management process </li></ul></ul><ul><ul><li>Reliable systems that include appropriate data backup and recovery processes </li></ul></ul>ASSOCIATES LLP
  14. 14. Computer Security <ul><li>Internal Control Objectives (cont.) </li></ul><ul><ul><li>Physical security and access to programs and data are appropriately controlled </li></ul></ul><ul><ul><li>Program changes and systems acquisition and development are appropriately managed </li></ul></ul>ASSOCIATES LLP
  15. 15. Computer Security- Internal Control Objectives <ul><li>IT Strategic Planning and Risk Management Process </li></ul><ul><ul><li>Does a Technology Plan Exist? </li></ul></ul><ul><ul><li>Does it Support the Entities Financial Reporting Requirements? </li></ul></ul>ASSOCIATES LLP
  16. 16. Computer Security- Internal Control Objectives <ul><li>Reliable Systems That Include Appropriate Data Backup and Recovery Processes </li></ul><ul><ul><li>Backups performed and secured </li></ul></ul><ul><ul><ul><li>File Servers and Application Data </li></ul></ul></ul><ul><ul><li>Environmental controls exist </li></ul></ul><ul><ul><ul><li>Fire/Smoke Detection </li></ul></ul></ul><ul><ul><ul><li>Temperature/Humidity Controls </li></ul></ul></ul><ul><ul><ul><li>Backup Power Supply </li></ul></ul></ul>ASSOCIATES LLP
  17. 17. Computer Security- Internal Control Objectives <ul><li>Physical security and access to programs and data are appropriately controlled </li></ul><ul><ul><li>Timely action relating to user accounts </li></ul></ul><ul><ul><ul><li>Requesting, establishing, issuing, suspending, modifying, and closing </li></ul></ul></ul><ul><ul><li>Appropriate IT segregation of duties </li></ul></ul><ul><ul><ul><li>IT personnel do not have transaction and accounting duties </li></ul></ul></ul>ASSOCIATES LLP
  18. 18. Computer Security- Internal Control Objectives <ul><li>Physical security and access to programs and data are appropriately controlled (cont.) </li></ul><ul><ul><li>Database access is appropriately restricted </li></ul></ul><ul><ul><li>Procedures to maintain effectiveness of authentication and access </li></ul></ul><ul><ul><ul><li>Password length, password history, password expiration, and lockout for failed attempts </li></ul></ul></ul>ASSOCIATES LLP
  19. 19. Computer Security- Internal Control Objectives <ul><li>Physical security and access to programs and data are appropriately controlled (cont.) </li></ul><ul><ul><li>Physical access to computer room </li></ul></ul><ul><ul><li>Controls over perimeter and network </li></ul></ul><ul><ul><ul><li>Firewalls, routers, terminal service devices, wireless security </li></ul></ul></ul>ASSOCIATES LLP
  20. 20. Computer Security- Internal Control Objectives <ul><li>Program changes and systems acquisition and development are appropriately managed </li></ul><ul><ul><li>Application, database, and operating system changes tracked </li></ul></ul><ul><ul><li>Application controls considered and documented during implementation of new information systems </li></ul></ul>ASSOCIATES LLP
  21. 21. Computer Security <ul><li>Questions? </li></ul>ASSOCIATES LLP
  22. 22. Financial Reporting <ul><li>Section 3- Financial Reporting </li></ul><ul><li>Financial Closing and Reporting </li></ul><ul><li>Capturing and Processing Non-Routine Information </li></ul><ul><li>Preparing and Reviewing Financial Statements and Disclosures </li></ul>ASSOCIATES LLP
  23. 23. Financial Reporting- Financial Closing and Reporting <ul><li>Discussion Question: </li></ul><ul><li>Time to close the books. </li></ul><ul><li>Where do you start? </li></ul>ASSOCIATES LLP
  24. 24. Financial Reporting- Financial Closing and Reporting <ul><li>Tips/Procedures for a Successful Close </li></ul><ul><ul><li>Have a documented period close process with timing and assigned tasks </li></ul></ul><ul><ul><li>Non-routine events or transactions should be documented with supporting analysis or documentation as they occur </li></ul></ul>ASSOCIATES LLP
  25. 25. Financial Reporting- Financial Closing and Reporting <ul><li>Tips/Procedures for a Successful Close (cont) </li></ul><ul><ul><li>Ensure all journal entries have adequate supporting documentation </li></ul></ul><ul><ul><li>Review prior year ending trial balance for significant variances to ensure all items captured </li></ul></ul><ul><ul><li>Review prior year closing journal entries and auditor’s adjusting entries </li></ul></ul>ASSOCIATES LLP
  26. 26. Financial Reporting- Non-Routine Information <ul><li>Improper recording of non-routine transactions is responsible for the majority of audit adjustments </li></ul>ASSOCIATES LLP
  27. 27. Financial Reporting- Non-Routine Information <ul><li>Examples of non-routine transactions </li></ul><ul><ul><li>Depreciation </li></ul></ul><ul><ul><li>Debt issuances </li></ul></ul><ul><ul><li>Capital Leases </li></ul></ul><ul><ul><li>Fixed asset additions/disposals </li></ul></ul><ul><ul><li>Allowance for bad debt </li></ul></ul>ASSOCIATES LLP
  28. 28. Financial Reporting- Non-Routine Information <ul><li>Sources of information used to capture non-routine transactions </li></ul><ul><ul><li>Board minutes and board resolutions </li></ul></ul><ul><ul><li>Budget to actual comparisons </li></ul></ul><ul><ul><li>Prior year journal entries </li></ul></ul><ul><ul><li>Discussions with department managers </li></ul></ul>ASSOCIATES LLP
  29. 29. Financial Reporting: Preparing and Reviewing Financial Statements <ul><li>SAS 112 </li></ul><ul><ul><li>Auditor cannot be part of entity’s internal controls </li></ul></ul><ul><ul><li>This includes controls over financial reporting </li></ul></ul><ul><ul><li>So does that mean the Districts have to prepare their own financial statements? </li></ul></ul>ASSOCIATES LLP
  30. 30. Financial Reporting: Preparing and Reviewing Financial Statements <ul><li>Gathering information for financial statements </li></ul><ul><ul><li>Disclosure checklist </li></ul></ul><ul><ul><ul><li>Ask your auditor for a copy </li></ul></ul></ul><ul><ul><li>Review of prior year audited financials </li></ul></ul><ul><ul><li>Examples of common disclosures </li></ul></ul><ul><ul><ul><li>PERS and other Retirement Plans </li></ul></ul></ul><ul><ul><ul><li>Operating Leases </li></ul></ul></ul><ul><ul><ul><li>Subsequent Events </li></ul></ul></ul>ASSOCIATES LLP
  31. 31. Financial Reporting <ul><li>Questions? </li></ul>ASSOCIATES LLP
  32. 32. Other Ways to Increase Efficiency <ul><li>Email and Calendar </li></ul><ul><li>Hardware </li></ul><ul><li>Moving Away From Paper </li></ul>ASSOCIATES LLP
  33. 33. Other Ways to Increase Efficiency <ul><li>Email and Calendar </li></ul><ul><ul><li>Spam Filtering </li></ul></ul><ul><ul><li>Turn off new mail alerts </li></ul></ul><ul><ul><ul><li>Set specific times to check emails </li></ul></ul></ul><ul><ul><li>Recurring and Assigning of Tasks </li></ul></ul><ul><ul><li>Calendar Sharing </li></ul></ul><ul><ul><li>Search Utilities </li></ul></ul><ul><ul><ul><li>Google Desktop </li></ul></ul></ul>ASSOCIATES LLP
  34. 34. Other Ways to Increase Efficiency <ul><li>Hardware </li></ul><ul><ul><li>Dual Monitors </li></ul></ul><ul><ul><li>PDAs, Smartphones </li></ul></ul><ul><ul><li>Specialized Devices </li></ul></ul><ul><ul><ul><li>Wireless meter readers </li></ul></ul></ul><ul><ul><ul><li>In-office barcode scanners </li></ul></ul></ul>ASSOCIATES LLP
  35. 35. Other Ways to Increase Efficiency <ul><li>Moving Away from Paper </li></ul><ul><ul><li>Document Management Systems </li></ul></ul><ul><ul><li>PDF instead of Fax </li></ul></ul><ul><ul><ul><li>www.pdf995.com </li></ul></ul></ul><ul><ul><ul><li>www.efax.com </li></ul></ul></ul>ASSOCIATES LLP
  36. 36. Questions? ASSOCIATES LLP
  37. 37. Resources and Links <ul><li>AICPA Governmental Audit Quality Center </li></ul><ul><ul><li>http://gaqc.aicpa.org </li></ul></ul><ul><li>FASB Statements </li></ul><ul><ul><li>www.fasb.org/st </li></ul></ul><ul><li>GASB Statements </li></ul><ul><ul><li>www.gasb.org </li></ul></ul><ul><li>AICPA Statement of Auditing Standards </li></ul><ul><ul><li>http://www.aicpa.org/Professional+Resources/Accounting+and+Auditing/Audit+and+Attest+Standards/ </li></ul></ul><ul><li>CSDA </li></ul><ul><ul><li>http://www.csda.net </li></ul></ul>ASSOCIATES LLP
  38. 38. Mission Statement To provide responsive, innovative services of the highest quality to our clients; and to provide a positive, rewarding environment encouraging our employees to fulfill their professional and personal goals. Sacramento Office 2515 Venture Oaks, Suite 135 Sacramento, CA 95833 Tel (916) 929-0540 Fax (916) 929-0541 www.muncpas.com Justin J. Williams, CPA – Partner [email_address] Dustin Cassady – Senior Accountant [email_address] Contact Info: ASSOCIATES LLP

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