Making Sense of your CAFR - An Overview of the CAFR and How to

Understand ItPresented by Janice Grassia, CPA, RMA, CFE Stefanie DeSantis, CPA, RMA, PSA

AGENDAOPENING REMARKS/OVERVIEW

PRESENTATION: Making Sense of your CAFR - An Overview of the CAFR and How to Understand It

1. Let's Test Your CAFR Knowledge…

2. Understanding Your CAFR

TOP TEN…

PRESENTATION: Fraud in School Districts--A Discussion on How to Prevent and Detect Fraud

1. Interesting Statistics

2. Discussion--School District Specific Scenarios

We will go through the CAFR back to front…

Single Audit Section/Findings and Recommendations

• Includes:– Two Auditor's Reports

• Report on Internal Control• Report on Single Audit Compliance

– Schedule of Expenditures of Federal Awards, Schedule A– Schedule of Expenditures of State Financial Assistance,

Schedule B– Notes to the Schedules of Awards and Financial

Assistance– Schedule of Findings and Questioned Costs– Summary Schedule of Prior Audit Findings

Statistical Section

• Financial Trends– J-1 Net Position by Component– J-2 Changes in Net Position– J-3 Fund Balances—Governmental Funds– J-4 Changes in Fund Balances—Governmental

Funds– J-5 General Fund Other Local Revenue by

Source

Statistical Section (Cont’d)

• Revenue Capacity– J-6 Assessed Value and Estimated Actual Value

of Taxable Property– J-7 Direct and Overlapping Property Tax Rates– J-8 Principal Property Taxpayers– J-9 Property Tax Levies and Collections

Statistical Section (Cont’d)

• Debt Capacity– J-10 Ratios of Outstanding Debt by Type– J-11 Ratios of General Bonded Debt Outstanding– J-12 Direct and Overlapping Governmental

Activities Debt– J-13 Legal Debt Margin Information

• Demographic and Economic Information– J-14 Demographic and Economic Statistics– J-15 Principal Employers

Statistical Section (Cont’d)

• Operating Information– J-16 Full-time Equivalent District Employees by

Function/Program– J-17 Operating Statistics– J-18 School Building Information– J-19 Schedule of Required Maintenance

Expenditures by School Facility– J-20 Insurance Schedule

So where do I obtain this information anyway??

Would you like a cheat sheet??

See Attachment 2

I Statements – Debt Service Fund

I-1 Schedule of Serial Bonds◦ Provides detailed information about outstanding bonds

including the date of issuance and original issue amount, annual maturities and maturity dates, interest rates, balance at the beginning of the year, additions, retirements, and balance at the end of the year.

I-2 Schedule of Obligations Under Capital Leases◦ Similar to Schedule of Serial Bonds◦ Includes Date and Term of Lease

I-3 Budgetary Comparison Schedule◦ Shows Revenues and Expenditures as Budgeted for the Debt

Service Fund

• H-1 Combining Statement of Fiduciary Net Position– Balance Sheet for the Trust and Agency Funds– Shown as Assets, Liabilities, Net Position and Reserves.

• H-2 Combining Statement of Changes in Fiduciary Net Position– Income Statement for the Trust Funds – Shows additions (receipts) and deductions (expenditures) to the

District's net position.• H-3 Student Activity Funds by School

– Shows a breakdown of the Student Activity Funds beginning balance, receipts, disbursements and ending balances by school.

• H-4 Payroll Agency Fund Schedule of Receipts and Disbursements– Detailed analysis of receipts and disbursements for the payroll and

payroll agency funds. – Provides additional information not shown on Exhibit H-1.

H Statements – Fiduciary Fund

• G-1 Combining Statement of Net Position– Balance Sheet – Assets, Liabilities, Net Position– Inventory, fixed assets, accumulated depreciation and compensated absences ARE

shown.• G-2 Combining Statement of Revenues, Expenses and Changes in Net Position

– Operating Revenues• Includes Daily Sales or Charges for Services

– Operating Expenses – including Depreciation Expense and Cost of Sales– Non-Operating Revenues (Expenses)

• Reimbursements received from Federal and State Sources for School Breakfast and Lunch Programs

• G-3Combining Statement of Cash Flows– Cash Flows from Operating Activities - cash received from the sale of goods or

services and cash disbursed to employees, suppliers, etc. so that services can be provided.

– Cash Flows from Non-Capital Financing Activities - Reimbursements received for Federal and State School Breakfast and Lunch Programs.

– Cash Flows from Capital and Related Financing Activities – Capital Assets– Cash Flows from Investing Activities - Interest

G Statements – Proprietary FundFood Service and Other Enterprise Funds

Internal service funds are used to account for goods or services provided by one department within the district to other departments within the same district or to other districts (charter schools or governmental units) on a cost-reimbursement basis.

• G-4 Combining Statement of Net Position• G-5 Combining Statement of Revenues, Expenses

and Changes in Net Position• G-6 Combining Statement of Cash Flows

G Statements – Internal Service Funds

• F-1 Summary Statement of Project Expenditures– Provides a summary of all projects currently in progress including the total

amount appropriated for that project, all prior expenditures, current fiscal year expenditures and the balance remaining at year end.

• F-2 Summary Statement of Revenues, Expenditures and Change in Fund Balance – Budgetary Basis– Shows the source of the funds available to complete approved projects.– Summarizes current year expenditures for all projects in progress.

• F-2a Summary of Revenues, Expenditures, Project Balance and Project Status – Budgetary Basis– Shows the budget by project including sources (revenues) allocated and

available to complete approved projects.– Provides detail information as to how funds have been budgeted and

charged.– Gives the reader additional information related to the specific project as

applicable including the Project Number, Grant or Bond Authorization Date, Authorized and Revised Authorized Costs, Expected Date of Completion.

F Statements – Capital Projects Fund

E Statements – Special Revenue Fund

• E-1Combining Schedule of Revenues and Expenditures – Budgetary Basis– Shows the Revenue Source – Federal, State, or Local– Details expenditures by budget account.– Breaks down expenditures into type – Instruction, Support

Services, Facilities Acquisition– Each Column presents the above information by individual

program or program year.• E-2 Schedule of “Program” Aid Expenditures– Provides detailed budget appropriations and expenditures.– Presented on a Budgetary Basis– Shows the calculation of Budget and Carryover amounts.

D Statements - School Based Budgeting

• D-1 Combining Balance Sheet– Column for Fund 10-13, column for Fund 15 and column for

totals• D-2 Blended Resource Fund – Schedule of Expenditures -

Allocated by Resource Type – Actual– Shows Expenditures by Funding Source– Separate Schedule for Each School and a District-Wide Total

• D-3 Blended Resource Fund – Schedule of Blended Expenditures – Budget and Actual– Shows Expenditures by Budget – Separate Schedule for Each School and a District-Wide Total

C Statements

• C-1 Budgetary Comparison Schedule - General Fund - Attachment 3– Shows general fund revenue and expenditures in accordance

with the budget– Most important statement for budgeting purposes– Includes the last state aid payments as revenue– Fund balance allocation at bottom of statement

Fund Balance July 1Total RevenuesTotal ExpendituresTotal Other Financing Sources/(Uses)

Fund Balance June 30

$1,197,997 25,890,551 24,210,660

(166,717)

$2,711,171

C Statements - Excess Surplus Calculation

• Take total fund balance, calculate 2% unassigned and then subtract all fund balances off the total leaving you with excess surplus

• Let's do it together…attachment 4

C Statements – C-1 (Cont’d)

• Reconciles fund balance from C-1 to B-1

Fund Balance June 30 (C-1)Less: Last State Aid Payments

Fund Balance June 30 (B-1)

$2,711,171 (553,478)

$2,157,693

C Statements (Cont’d)

• C-2 Budgetary Comparison Schedule - Special Revenue Fund– Shows revenue and expenditures on a budgetary

basis for each federal, state and local program recorded in the special revenue fund

– Revenues = Expenditures– Expenditures include encumbrances and accounts

payable

C Statements (Cont’d)

• C-3 Budget-to-GAAP Reconciliation– Reconciles revenue and expenditures from C-1 & C-2 to B-2

• General Fund:– Revenues are adjusted for last state aid payments

• Special Revenue Fund:– Revenues are adjusted for last state aid payments– Revenues and Expenditures are adjusted for encumbrances

» Current Year Encumbrances Subtracted» Prior Year Encumbrances Paid Added

• Let’s Take a Look at it – attachment 5

B Statements

• B-4 through B-8 are the same statements as the G's and H's -- no need to review

• B-1 Balance Sheet - attachment 6– Presented on the modified accrual basis– Differences from budgetary statements not

included on C-3 statement• Possible difference in recording of SDA revenues

B Statements (Cont’d)

• B-2 Statement of Revenues, Expenditures and Changes in Fund Balance - attachment 7– Presented on the modified accrual basis

• B-3 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities– Crosswalk of the change in fund balance on the B-2 (modified accrual

basis) to the change in net position (different name for fund balance) on the A-2 statement (full accrual basis)• Will discuss differences between A's and B's

A Statements

• A-1 Statement of Net Position - attachment 8– Same type of statement as B-1 but presented on the full accrual basis – A-1 statement includes the following which are not included in the B-1 and C-1:

• Compensated Absences• Fixed Assets• Debt• Accrued Interest on Debt• Amortization of Bond Refunding Losses• Amortization of Bond Premiums• Amortization on Loss of Defeasance of Debt• Includes Internal Service Fund as Governmental rather than Proprietary

– Interfunds are eliminated among the governmental funds– Classifications of net position on A-1 are different from classifications of fund balance on B-1

A Statements (Cont’d)

• Crosswalk from B-1 Fund Balance to A-1 Net Position (another name for fund balance)

• Let’s Take a Look at it – attachment 9

A Statements (Cont’d)

• Crosswalk from B-1 Fund Balance classifications to A-1 Net Position classifications

• Let’s Take a Look at it – attachment 10

A Statements (Cont’d)

• A-2 Statement of Activities– Same type of statement as B-2 and C-1 but

presented on the full accrual basis – Same adjustments are required as previously

discussed between B-1 and A-1 however they are made to revenues and expenditures

Management, Discussion and Analysis (MD&A)

• Requirements

– Brief discussion of the basic financial statements, including the relationships of the statements to each other, and the significant differences in the information they provide.

– Condensed financial information derived from government-wide financial statements comparing the current year to the prior year.

– An analysis of the overall financial position and results of operations (addressing both governmental and business-type activities) to assess whether financial position has improved or deteriorated during the year, including reasons for significant changes from the prior year and important economic factors that significantly affected operating results.

– An analysis of balances and transactions of individual funds, including the reasons for significant changes in fund balances or fund net position and whether restrictions, commitments, or other limitations significantly affect the availability of fund resources for future use.

Management, Discussion and Analysis (MD&A) (Cont’d)

• Requirements

– An analysis of significant variations between original and final budget amounts and between final budget amounts and actual budget results for the general fund, including reasons for those variations that are expected to have a significant effect on future services or liquidity.

– A description of significant capital asset and long-term debt activity, including a discussion of commitments made for capital expenditures, changes in credit ratings, and debt limitations that may affect the financing of planned facilities or services.

– A description of currently known facts, decisions, or conditions that are expected to have a significant effect on financial position (net position) or results of operations (revenues, expenses, and other changes in net position).

– Refer readers to separately issued financial statements, if any, for component unit(s).– A few other requirements not applicable to NJ School Districts.

Fraud in School Districts--A Discussion on How to Prevent and Detect Fraud

Let’s look at some statistics from the 2014 ACFE Report to the Nations on

Occupational Fraud and Abuse

ACFE – Association of Certified Fraud Examiners

In what way is fraud most likely detected?

TipsManagement ReviewInternal AuditBy AccidentAccount Reconciliation

42.20%16.00%14.10% 6.80% 6.60%

What was the median fraud loss by victim organizations?

Private CompanyPublic CompanyGovernmentNot-for-ProfitOther

160,000.00 200,000.00 90,000.00 108,000.00 127,000.00

Median Loss Based on Presence of Anti-Fraud Controls

ControlControl In

PlaceControl Not

In Place

Proactive Data MonitoringManagement ReviewFraud Training for ManagersHotlineFraud Training for EmployeesAnti-Fraud PolicyJob Rotation/Mandatory VacationRewards for Whistleblowers

73,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00

181,000.00 208,000.00 168,000.00 168,000.00 164,000.00 155,000.00 150,000.00 135,000.00

Age of Perpetrator?

Age Frequency Median Loss

< 2626-3031-3536-4041-4545-5051-5556-60> 60

3.90%11.30%15.90%17.60%18.10%14.60% 9.00% 5.40% 3.40%

35,000.00 57,000.00 90,000.00 168,000.00 153,000.00 190,000.00 200,000.00 238,000.00 450,000.00

Perpetrator’s Gender?

67%

33%

Very Interesting…

MaleFemale

Perpetrator’s Tenure?

Tenure Frequency Median Loss

Less than 1 Year1-5 Years6-10 YearsMore than 10 Years

6.80%40.70%27.30%25.20%

51,000.00 100,000.00 200,000.00 220,000.00

Behavioral Red Flags• Living Beyond Means• Financial Difficulties• Unusually Close Association with Vendor/Customer• Control Issues, Unwillingness to Share Duties• Divorce/Family Problems• Irritability, Suspiciousness or Defensiveness• Addiction Problems• Complain about Inadequate Pay• Refusal to Take Vacations• Excessive Pressure from Within Organization

Cases Referred to Law Enforcement

60.9

30.1

Referred?

ReferredNot Referred

Results

Plead Guilty/No ContestConvicted at TrialDecined to ProsecuteAcquittedOther

Recovery of Victim Organization's Losses

No Recovery1-25%26-50%51-75%75-99%100%

58.40%11.70% 7.70% 5.10% 3.50%13.60%

Most Common Reasons for Case Not Referred to Law Enforcement

• Fear of Bad Publicity• Internal Discipline Sufficient• Private Settlement• Too Costly

Let’s discuss some scenarios specific to you…

Scenario 1

Teacher, Pam, is collecting cash and checks from a student candy bar fundraiser. She collects

$500 dollars in cash and $250 dollars in checks from various students. She deposits $600 and keeps $150 in cash for herself. She records the

deposit of $600 for the candy sale.

Scenario 2

Teacher, Dave, is selling tickets for entrance to a student basketball game. He sells 2 adult tickets at $6.00 each, records the sale of 2

student tickets at $3.00 each and keeps the difference. He does this throughout the

evening.

Scenario 3

Food Service employee, Brenda, is ringing sales at the cash register during lunch. When

students purchase alacarte items with cash she frequently takes the cash but fails to ring the

purchase through the register.

Scenario 4

Payroll Clerk, Denise, creates a fictitious employee at the start of the school year. The fictitious

employee has the same name as one of Denise's friends. The fictitious employee has a fairly low

salary and Denise charges the salary to a significantly large budget line. Denise's friend

cashes the checks and splits the money with Denise.

Scenario 5

Principal, Greg, is in charge of the student activity account in his school. He periodically submits

paperwork to be reimbursed for items that he bought for his personal use (items such as supplies and

refreshments that could also be used for student events). The principal is one of two signers on the checks and also authorizes all purchases. His secretary is the other signer of the checks but she

doesn't think anything is wrong because the purchases seem legitimate (and she

doesn't want to question her boss).

Scenario 6Accounts Payable Clerk, Dorothy, keeps copies of old paid

invoices from an educational supply company. She changes the dates on them through a program on

her computer and generates new PO'sto be paid. She forges the signature of the department head. The BA glances at the invoices and signs off for payment. After the bill

list is generated shechanges the vendor to a company owned by a friend of hers, prints and mails the checks. The fraudulent company has a very similar

name as the legitimate vendor. The bank does not return canceled checks, they only provide small copies attached to the bank

statement.

Scenario 7I-pods and I-tunes gift cards were purchased with grant funds as

incentives for students. The schoolprincipal, Steve, was put in charge of the incentives. In total,

100 incentives were purchasedbut only 80 students received those incentives. Steve kept the

remainder for himself.