HomeMy WebLinkAboutAudit of General Purpose
Augusta Richmond GA
DOCUMENT NAME: A cvJd:, o~ be-il'e.ml Vu.rpo~e:.
DOCUMENT TYPE:
YEAR: 0 (
BOX NUMBER: \l
FILE NUMBER: \ Coi.J~5
NUMBER OF PAGES: JJ
:~
., ' I
:CHERRY!
'BEICAERr81
rHOLLANIl)
CERTIFIED PUBUC .
: ACCOUNTANTS I!l. .',
,CONSULTANTS .1
To the Augusta-Richmond County Commission
Augusta, Georgia
In planning and performing our audit of the general-purpose financial staten:ents o~ ~ugusta,
Georgia (the "Government") for the year ended December 31, 2000, we consldered ItS l.nternal
control structure in order to determine our auditing procedures for the purpose of expressmg our
opinion on the fInancial statements and not to provide assurance on the internal control struc~e.
However, we noted certaln matters involving the internal control structure and accountmg
procedures of the Government that we would like to bring to your attention.
GASB 34 implementation
· In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement 34
Basic Financial Statements and Management's Discussion andAnalysis for State and Local
Governments. This Statement establishes new financial reporting requirements for state and
local governments throughout the United States. When implemented, it will require new
information and restructure much of the information that governments have presented in the
past. Comparability with reports issued in all prior years will be affected. The Government
is required to implement this standard for the fiscal year beginning January 1, 2002.
Recommendation
We recommend that the Government assess and determine the full impact that the adoption
of GASB Statement 34 will have on the fmancial statements and all necessary systems from
which information will be required. We recommend that the Government take ,active steps in
! order to comply with GASB Statement 34 for the fiscal year ended December 31, 2002.
Management Response
Finance has engaged a consultant to access the needs of the Government and to help develop
a plan of implementation to assUre compliance.
This report is intended solely for the information and use of management and the Augusta-
Richmond County Commission.
~~~~~t.(,.~
Augusta, Georgia
May 18,2001
:'
GOVERNMENTAL ACCOUNTING STANDARDS BOARD
401 Merritt 7, P.O. Box 5116, Norwalk, Connecticut 06856-5116 I 203-847-0700
Fax: 203-849-9714
~:~
NEWS
Media Contact: Deborah Harrington
(203) 847-0700, ext. 268
For Immediate Release
GASB Approves Most Significant Change
In History of Government Financial Reporting
Norwalk, CT, June 10, 1999-By unanimous vote, the Governmental Accounting Standards
Board (GASB) gave the go-ahead today to issue the most comprehensive governmental accounting
rule ever developed. The new standard will significantly change the way state and local governments
report their finances to the public.
Under the new rule, anyone with an interest in public finance-citizens, the media, bond raters,
creditors, legislators, and others-will have more and easier-to-understand information about the gov-
ernment in question. For the first time, a government's financial reports will have information about the
fun cost of providing services to its citizens. Also for the first time, information about the government's
infrastructure assets-bridges, roads, storm sewers-will be available. An additional feature of finan-
cial reports presented under the new standard is management's narrative analysis of the government's
frnancial performance.
"This is the most significant change to occur in the history of governmental financial reporting," said
GASB Chairman Tom L. Allen. "Never before has the public been able to get a comprehensive over-
view of a state or local government's finances in one place. This new financial reporting system will
give citizens a clearer picture of what a government is doing with the taxes it collects: Are current
revenues paying for current services, or will the services be paid for by the next generation? How much
is invested in roads and bridges? Are taxes subsidizing the local public pool or are swimmers' fees
covering operating costs? The new financial statements could help to answer those questions."
Mr. Allen explained that "right now, government financial reports focus on the funds of government,
which are intended to provide some information qbout various activities or sources of revenue. But the
number of funds can run anywhere from two.to ,20Gor more, making it difficult at times to pull the
information together and make sense out of it. Financial reports prepared under the new system will
not only improve information provided for major funds, but, most importantly, will provide financial
information from a total government perspective-an entirely new concept in public finance."
The new reporting system will affect a broad spectrum of the public, Mr. Allen noted. "Reports
prepared under the new standard will help to determine whether the government's financial health is
improving or deteriorating. The reports could provide vital information to a company planning to
relocate to a particular state. They could help city council members better understand the long- and
short-term implications of policy decisions. They could help investors better understand the financial
health of governments participating in the financial markets. They could help taxpayers better assess
the fiscal'soundness of their elected officials' actions."
(continued on back page)
;~
c'
-2-
An important aspect of the new standard is the reguiremenr to provide information abom infrastruc-
ture assets. "The fact that no information about this enormous category of assets currently exists in
annual financial reports leaves readers with an incomplete picture of government," Mr. Allen said. "For
example, if a state decided to issue bonds specifically to finance improvements to its in-state highway
system, the current financial statements would show the debt, bm not the corresponding assets. Does
the debt on the state's books mean that it is less well off? No, because the state used the proceeds from
the bond sale to make an investment. But that investment currently does not appear on the state's
books: Our new reporting system will make financial reports more complete."
The new GASB standard will begin to take effect for larger governments in fiscal years beginning
after June 15,2001. Medium-sized governments have until fiscal years beginning after June 15,2002
and smaller governments until fiscal years beginning after June 15,2003.
The GASB is the private-sector organization formed in 1984 that sets financial accounting and.
reporting standards for state and local governments. Its seven members are drawn from the Board's
diverse constituency, including preparers and auditors of state and local government financial state-
ments, users of those statements, and members of the academic community.
More details about the new financial reporting system can be found on the GASB's web site,
www.gasb.org. Copies of the new standard will be available at the end of June fromthe GASB's Order
Department, telephone (800) 748-0659.
#
#
#
I
CHERRY .
BEl<AEIU8..
HOll~ND
CERTIFIED PUBLIC
ACCOUNTANTS &
CONSULTANTS
I
August 1, 2002
Mr. David Persaud, Finance Director
Augusta-Richmond County Commissioners
530 Greene Street
Augusta, Georgia 30901
GASB 34 STATUS ASSESSNIENT - PHASE ill
Dear Mr. Persaud and Commissioners:
We enjoyed the opportunity to meet with you and the other members of Augusta-Richmond County's (the
"Government's") GASB 34 implem~ntation team to discuss the action plan that was identified in our recently
completed GASB 34 status assessment. Based on this meeting and our subsequent discussions, the Government has
requested our assistance in the following areas:
· analyzing program and general revenues
· reconstruction of missing capital asset records
· determining the estimated useful lives fo~ each category of capital assets
· computing accumulated depreciation as of December 31, 2001
· mapping Go Fund
· computing beginning of the year conversion adjustments
· computing beginning of the year net assets
· drafting beginning of the year notes to the general purpose financial statements
· preparing pro~forma Government Wide Financial Statements as of December 31,2001
· preparing a preliminary Management's Discussion & Analysis using December 31,2001 data
· drafting government wide financial statements and notes as of December 31, 2002
The following proposed process outlines our'overall approach as well as describing the individual elements and
outcomes of each project. We expect to. conduct many of these projects on parallel tracks.
Analysis of all revenues
We will assist the Government in completing the GASB 34 Analysis of Revenues template that was developed
during our GASB 34 status assessment. The deliverable for this project will be the completed template
breaking out all revenues between general and program.
Reconstruction of missing capital asSet records
Our review of capital asset records indicated that the Government had lump sum balances for capital assets
acquired prior to a specific date. Our deliverable will be to go through the capital asset records and allocate
these lump sum balances between existing assets.
Establishment of estimated useful lives
Once all of the capital assets records have been established, we will assist the Government in establishing the
estimated useful lives for each category of asset. Once a policy has been established, we will incorporate this
data into the capital assets module.
Cherry, Bekaert & Holland. L.L.P.
1029 Greene Street (30901) . P.O. Box 2247. Augusta. GA 30903. (706) 724-3557. Fax (706) 724-1667
Offices Throughout The Southeast. Represented Internationally Through Summit International Associaces.lnc.
. .-
Computation of beginning of the year accumulated depreciation
Once we have accumulated all of the data required for the capital asset subsidiary ledger, we will calculate and
record beginning of the year accumulated depreciation balances.
Go Fund mappings
The Government has elected to use Go Fund to accumulate the data necessary to produce the government wide
Financial statements. OUf deliverable for this project will be to go through the December 31,2001 trial balance
and map the existing general ledger accounts so that the' detail information can be sorted as required to produce
the government wide financial statements for December 31,2002.
Computation of beginning of the year conversion adjustments
GASB 34 requires that the Government present government wide financial statements for the year ended
December 31,2002. This is going to require that the Government calculate and record beginning of the year
conversion entries for the governmental funds. The entries required will be the recording of accounts
receivable, capital assets, long term debt, accumulated depreciation, and the elimination of internal service
funds. Our deliverable will be the accumulation of these entries as of December 31,2001 into a template that
can be used at December 31, 2002.
. .
Computation of beginning of the year net assets
GASB 34 requires that net assets be presented on government wide financial statements in the following
categories, investment in capital assets, net of related debt, restricted and unrestricted. Our deliv~rable will
include the development of a template which calculates these balances as of December 31, 2001 that can be
used at year end.
Drafting of notes to the basic financial statements
The new reporting model will require that additional disclosures be included in the notes to the basic financial
statements. Our deliverable for this project will be to draft these additional note disclosures based upon the
December 31, 2001 financial statements and provide them to you in a word document.
Preparation of pro-forma Government Wide Financial Statements
We will prepare pro-forma government wide financial statements based upon the December 31,2001 financial
statements. The statements to be included will be the statement of net assets and statement of activities. The
statement of net assets will report on all of the non-fiduciary activities of the Government and its component
units. The statement of activities will report the degree to which the direct expenses of a given function or
segment are offset by program revenues. All of this information will be provided to you on a template.
Preparation of a preliminary Management's Discussion & Analysis
We will prepare a preliminary management's discussion and analysis based upon the December 31, 200 1 basic
financial statements and the pro-forma government wide financial statements. Areas to be addressed in this
report includes financial highlights, an overview of the financial statements, an analysis of the government
wide financial statements, a discussion of budgetary highlights, and a discussion of capital asset and debt
administration.
Preparation of Government Wide Financial Statements as of December 31,2002
We will prepare government wide financial statements for the year ended December 31,2002. The statements.
to be included will be the statement of net assets and statement of activities. The statement of net assets will
report on all of the non-fiduciary activities of the Government and its component units. The statement of
activities will report the degree to which the direct expenses of a given function or segment are offset by
program revenues. All of this information will be provided to you on a template.
The working papers for the engagement are the property of Cherry, Bekaert & Holland, L.L.P. and constitute
confidential information. Except as discussed below, any requests for access to our working papers will be discussed
with you prior to making them available to requesting parties.
Our Firm, as well as all other major accounting firms, participates in a "peer review" program, covering our audit and
accounting practices. This program requires that once every three years we subject our quality assurance practices to an
examination by another accounting firm. As part of the process, the other firm will review a sample of our work. It is
possible that the other firm for their review may select the work we perform for you. If it is, they are bound by
professional standards to keep all information confidential. If you object to having the work we do for you reviewed by
our peer reviewer, please notify us in writing.
In the event we are requested or authorized by YOll or required by government regulation, subpoena, or other legal
process to produce our working papers or our personnel as witnesses with respect to our engagement for you, you will,
so long as we are not a party to the proceeding in which the information is sought, reimburse us for our professional
time and expense, as well as the fees and expenses of our counsel, incurred in responding to such a request.
If any dispute, controversy or claim arises in connection with the performance or breach of this agreemen t, either party
may, on written notice to the other party, request that the matter be mediated. Such mediation would be conducted by a
mediator appointed by and pursuant to the Rules of the American Arbitration Association or such other neutral
facilitator acceptable to both parties. Both parties would exert their best efforts to discuss with each other in good faith
their respective positions in an attempt to finally resolve such dispute or controversy.
If any dispute, controversy, or claim arising out of or in connection with the performance or breach of this agreement
cannot be resolved by mediation, then the dispute, controversy, or claim would be settled by arbitration in accordance
with the rules of the American Arbitration Association (AAA) for the Resolution of the Accounting Finn Disputes.
The award issued by the arbitration panel may be confirmed in a judgment by any federal or state court of competent
jurisdiction.
The charges for our work are based on the time spent, and calculated at our regular hourly rates in effect, from time to
time, plus direct expenses. Our rates vary according to the degree of responsibility involved and the skill required. Our
fee for services, including out of pocket expenses, is estimated to range from $27,500 to $32,500. Throughout the
engagement, we will provide status updates as to the progress made on the engagement and fees billed.
All invoices are payable within thirty days from invoice date. A service charge will be added to past due accounts equal
to 1-112% perffionth (18% annually) on the previous month's balance less payments received during the month, with a
minimum charge of $2.00 per month.
If the foregoing is in accordance with your understanding, please sign the original of this letter in the space provided
and returns it to us.
Very truly yours,
CHE~E
Kip ,:?1, CPA
Partner
RESPONSE:
This letter correctly sets forth the understanding of Augusta-Richmond County, Georgia
Signature:
Title:
."
...::......;.:.;~.':...
. Resist vendor conversion and implementation proposals
that unnecessarily raise fees by going beyond the strict re-
quirements of GASB Statement No. 34.
Timing of implementation. The mandatory deadline for
implementmg the prov1SlOns of GASB Statement No. 34 de-
pends upon "each government's total revenues for its first fis-
cal year ending after June 15, 1999. Total revenues for this
purpose includes only the governmental funds and enter-
prise funds of the primary government, and excludes other fi-
nancing sources and extraordinary items. On that basis,
implementation dates have been established and are listed
in the accompanying Implementation Schedule for Provi-
sions of GASB Statement No. 34.
Implementation Schedule
for Provisions of GASB Statement No. 34
'~~~t':\L:, ' All PrOVISIOns" of GASH, ""
~~fl;k~ue~~~~f~~t4?~~~~
$100 Million Starting fiscal years Starting fiscal Year~
~ore ending June 30, 2002 ending June 3D, 2006
$10 Million Starting fiscal years Starting fiscal years
to $100 Million ending June 30, 2003 ' ending June 30,2007 I
Less than
$10 Million
Starting fiscal years
ending June :30, 2004
Retroactive reporting
of infrastructure assets not
\' required
Using this guide. This guide, like others in GFOA's Elected
Official's Guide series, is presented using a simple question-
and-answer format. The questions may be approached con-
secutively to provide a comprehensive overview of the new
governmental financial reporting model; or, users may
choose to look specifically for questions and answers that
most interest them. Collectively, the questions in this guide
describe the new governmental financial reporting model as
well as provide practical information on how to evaluate and
interpret the information in the new model.
.:-o..N ELECTED OFFlCUL'S GUlDE TO THE
.~ .'
1~~;;:;..~t. .
EXHIBIT 5
The New Governmental Financial Reporting Model
'Government-Wide
;Financial . '.
, . Statements
Fund Financial: Statements ' .
. Fiduciary
. funds
F
I .
1 N
~RSI A
N
C
I
) A
L
1 Audited R
Basic
J Financial E
Sta tements p
0
R
T
I
J~] N
G
M
0
0
E
L
Management's
discussion and
analysis
+
Governmental
funds
Notes:to the Financial Statements .
+
Other required
supplementary
information
The financial reporting model is concerned with the mini-
mum requirements for fair presentation in conformity with
GAAP.-:Governments are encouraged, however, to go beyond
. these minimum requirements and to present a comprehen-
sive annual financial report (CAFR).
A CAFR has three basic sections: introductory, financial, and
statistical. The introductory section furnishes general infor-
mation on government structure, seryices, and operating en-
vironment. The financial section contains all basic financial
statements and RSI, as well as information on all individual
funds not reported separately in the basic fmancial statements.
Go~ernments also sometimes use the financial section to pro-
vide other supplementary information that is not required.
The statistical section provides trend data and nonfinancial
data useful in interpreting the basic financial statements.
The CAFR and its relationship to the financial reporting
model are illustrated in Exhibit 6.
::.;1
;~.::
NEW GOVERNMENTAL FINANCIAL REPORTING MODEL
"
EXHIBIT 6
Relationship of the Financial Reporting Model
to the Comprehensive Annual Financial Report
Introductory Section
1',\1' Introductory
, Section
+
Basic
Financial
Statements
and RSI
Financial
Section
CAFE
+
Statistical Section
Statisical
Section
"
A.N ELECTED OFFICIA.L'S GUIDE TO TH
'..
. -"'-:'''7'.. ....~~. ":...!.."~.:.::~~>:..~......,:,..,,,:~. --~ . ~ ....'.:.;:-->~~:",~ :'o:"~' ."'~
:,~,:"""",,":'':';~''';'r.:,,:,~,~~'''.' "',' '^:~
".,'
'.
Appendix A, continued
~~;};:':\ ~""'d,,~?~~,:.t;~'t<!~?;:;;~:;m~~~~~i~?,~;~::;r ~~R'1~;:r~~~~~~~Ifkt~S~/:
I Required for individual I
enterprise funds or I
Required in a variety of identifiable activities I
within an individual
Segment information situations for individual enterprise fund for which
I enterprise funds I revenue-backed debt' with I
an identifiable revenue
stream is outstanding I
Expendable trust, I '
d bl t t I Pnvate-purpose trust,
Fiduciary fund types nonexpen a e rus , ' ,
, t ' , t penSlOn trust, mvestment
pensIOn rust. mvestmen It t d
trust and agency rus an agency
Escheat assets I Reported in expendable !Reported in private-
trust fund , purpose trust fund
I Reported in expendable 1 I
State unemployment com- I Reported in enterprise
pensation benefit plans trust fund : fund I
I IRC Section 457 deferred I
I Reported in expendable I Reported in pension (and
compensation plans trust' fund other employee benefits)
I I trust fund
Transfers Residual equity and I Transfers (1 category)
operating (2 categories)
Object of budgetary com- Final amended budget Both original and final
parison amended budget
Focus of budgetary com- General fund and major
Governmental fund type individual special revenue
paris on funds
I Status of budgetary com- Required supplementary
Basic financial statement information
I parison (Option to report as basic
fmancial statement)
I Na~ative introduction, I Management's discussion
INot required and analysis (required
I overview and analysis supplementary
I information)
I Colleges and universities Option to use specialized Use governmental
re ortin model re ortin model
'I,
I
I
I Governmental entities us-
I,ing not-for-profit account-
,lUg ,
1
p g
I Option to use specialized
I reporting model
p g
II Use governmental
reporting model
!
AN ELECTED OFFICIAL'S GUIDE TO THE
. r,.
,~. ....
APPENDIX A
Comparison of the Traditional and New
Governmental Financial Reporting Models
:::;,,~..',:it4f.~r?:~':);;h~.:;:V}~diti~~~irM~d~r':{I':'::'"i,Ne:;;M~del.' '. . .',\
Terminology for minimum I General purpose financial \' B ,'" ' 1 t t t:
GAAP t t . \ . t t aS1C ImanCla s a emen s I
presen a lon sta em en s I !
I . I Combined financial II ,I I
I Hlghest level of aggrega- I statements (data Government-wlde
tlonlconsohdatlon j' t db fund t ) lfinanclal statements \
I pres en e y ype
\ Measurement focus for \ Funds=curren t financial \
Current financial resources
\ governmental fundslactivi- resources \ Government- \
bes wide=economic resources
I Basis of accounting for ' Modified accrual \ F=d,"modifi.d "om,] \
\ governmental funds/activi- Governmen t- wide=accrual I
I bes Reported in general fixed Reported in government-
General capital assets assets account group and wide financial statements
(other than infrastructure) not depreciated and depreciated
General infrastructure as- Reported in government- \
sets Reporting optional wide financial statements
and (normally) depreciated
General long-term liabili- Reported in general long- Reported in government-
ties I term debt account group wide financial statements
\ Major funds'
(governmental and
Focus of fund reporting Fund types enterprise funds)
Fund types (internal
service and fiduciary
funds)
General, special revenue, General, special revenue, \
Governmental fund types \ capital projects and debt capital projects, debt
servlce service and permanent
Equity of proprietary I Contributed capital and \Net assets
funds I retained earnings
Reporting cash flows from \ Direct method or indirect I Di"';t m.thod
operating activities 'in the I method'
statement of cash flows
'i
'" . --~.._-
NEW GOVERNMENTAL FINANCIAL REPORTING MODEL
~'~~'-'r"".