Fundamentals of Governmental Accounting

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Fundamentals of Governmental Accounting Debbie
Hilson Mike Luft Bill McCormick
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• Debbie Hilson
• Manager, Appropriation Section
• Bureau of State Accounting Operations
• Email Appropriations_at_osc.state.ny.us

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Central Accounting System (CAS)

• The Office of the State Comptroller (OSC) is
  responsible for the operation and development of
  the NYS Central Accounting System (CAS)
• The CAS is the hub of financial activity in the
  State it is used for accounting for all revenues
  of the State, controlling agency appropriations
  and spending levels, processing 18 million
  financial transactions annually, issuing 15,000
  payments daily, reflecting the results of these
  transactions in more than 700 reports for a wide
  range of users, and generating critical input to
  the audited financial statements for the State.

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State Government Structure

• Executive ALL State Departments and Agencies
• Legislative Assembly Senate
• Judicial Court Administration

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Statutes That Guide Us

• The State Constitution
• State Finance Law
• Article VII Appropriation Bills
• Article VII Language Bills
• Other Consolidated Laws
• Federal Laws and Regulations

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State Constitution

• Requires Annual Budget Submission
• Restricts Payments From State Treasury
• Defines Appropriation/Reappropriation

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State Finance Law Key Fiscal Provisions

• Article 2 - GENERAL FISCAL PROVISIONS 2 -
  Definitions 2A - Additional Definitions 3 -
  Fiscal Year 4 - Payments, Transfers and
  Deposits 7 - Duties of Dept of Taxation
  Finance 8 - Duties of the Comptroller
• 8B - Additional Duties of the Comptroller
• Article 6 - ( 70 - 99-S) FUNDS OF THE STATE
• Article 7 - (100-122-A) ACCOUNTS AUDITS

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State Finance LawArticle 3 The Budget

• 20. Division of the Budget
• 21. Auxiliary Powers of Executive Department
• 22. The Budget Contents
• 22-a. Synopsis of Requests for Appropriations
  Submittal by Budget Director
• 22-b. Report of the Legislature on the Enacted
  Budget
• 22-c. Capital Program and Financing Plan
• 23. Plans and Estimates
• 24. Budget Bills
• 25. Reappropriation Bills
• 26. Maintaining Capital Assets
• 27. Scheduled Maintenance Appropriations

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Appropriation Accounting

• In this segment, we will
• Discuss Executive Budget Submission
• Discuss Fundamental Principles for accounting and
  controlling authorized State spending
• Examine the nature of an appropriation, its
  characteristics and underlying principles

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Executive Budget Submission

• Legislative Session Begins
• Legislature convenes on the first Wednesday after
  the first Monday in January.
• Budget Due
• On or before the 2nd Tuesday following the annual
  meeting of the legislature
• On or before the February 1st in each year
  following the election of Governor and Lieutenant
  Governor
• Bottom Line
• Third Tuesday after the first Monday in January,
  except in years following gubernatorial elections
  when it must be submitted by February 1.

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Article VII Bills

• As part of the Executive Budget, the Governor
  presents to the Legislature a number of
  appropriation and language bills which provide
• the legal authorization for spending from Funds
  of the State and the means to finance such
  spending.

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Article VII Appropriation Bills

• Public Protection General Government
• Legislature and Judiciary
• Debt Service
• Education, Labor Family Assistance
• Health and Mental Hygiene
• Transportation, Economic Development and
  Environmental Conservation

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Article VII Language Bills

• Along with the submission of the Appropriation
  Bills, the Governor also submits legislation to
  amend State laws governing programs and revenues.
• This Legislation is needed to implement the
  States Financial Plans for the upcoming fiscal
  year, and beyond.

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Budget Amendments

• The State Constitution permits the Governor to
  amend or supplement the Executive Budget within
  30 calendar days after its submission or, with
  the consent of the Legislature, at any time
  before the close of the legislative session. Such
  revisions, additions or deletions, conveyed to
  the heads of the fiscal committees in a
  memorandum, reflect necessary corrections or
  responses to new situations or conditions arising
  after the preparation of the Executive Budget

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Appropriation Bills Become Law

• Executive Budget Appropriations (those
• recommended by the Governor) are Law
• Immediately Upon Enactment by the Legislature
• EXCEPT For
• Legislature and Judiciary
• Additions by the Legislature

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Appropriation - Defined

• An appropriation is a statutory authorization to
  make expenditures during a specific State fiscal
  year, and to make disbursements for the purposes
  designated, up to the stated amount of the
  appropriation
• By a State Dept or Agency
• For a Named Program
• Payable From A Specified Fund/Account
• For Specified Purposes, Activities or Projects

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Appropriation Periods

• State Constitution 2 Year Life Maximum
• State Finance Law-Section 40
• Provides Liability Periods, Appropriation
  Periods and Lapse Dates
• Budget Bills Oftentimes NOTWITHSTAND State
  Finance Law and Permit Liabilities Heretofore
  Or Hereafter To Be Paid From Current Year
  Appropriations

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Deficiency Appropriation

• A deficiency appropriation is used to meet actual
  or anticipated obligations not foreseen when the
  annual budget and any supplemental budgets were
  enacted.
• It might add to a previously authorized
  appropriation anticipated to be inadequate, or
  provide a new appropriation to finance an
  existing or anticipated liability for which no
  appropriation exists.
• A deficiency appropriation typically applies to
  the fiscal year during which it is made.

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Appropriation Types State Operations

• Personal Service
• Supplies and Materials
• Travel
• Contractual Services
• Equipment and Maintenance
• General State Charges including Employee Fringe
  Benefits

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Appropriation Types Local Assistance

• Used for GRANT Payments to
• Local Governments
• School Districts
• Not-for-Profit Organizations
• Financial Assistance To, Or On Behalf Of,
  Individuals

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Appropriation Types Debt Service

• Principal Interest on State Debt
• Principal Interest on Public Authority Debt
• Lease-Purchase and Contractual Obligations for
  State Facilities and Programs Financed with
  Non-State Debt
• Debt-Related Expenses

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Appropriation Types Capital Projects

• State Construction Projects
• State Assistance for Local Government Projects
• Construction Management (e.g. Design
  Supervision)

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OSC - Appropriation Management

• The Appropriation (Budget) Management function
  ensures that agencies do not obligate or disburse
  funds in excess of those appropriated or
  segregated. This function also provides agencies
  with tools for managing appropriations, for
  example, organization, program, project and cost
  center levels.
• Appropriation Management consists of structuring
  the budget and allocating and controlling funds
  In Accordance With State Laws.

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Appropriation Details

• POLICING THE THRUWAY PROGRAM
• Special Revenue Funds - Other / State Operations
• Miscellaneous Special Revenue Fund - 339
• New York State Thruway Authority Account
• Personal service--regular.........................
  .. 27,714,000
• Holiday/Overtime compensation...5,835,000
  
• Fringe benefits ..................................
  ..... 15,017,000
• Indirect costs ...................................
  ..... 1,373,000
  49,939,000

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Appropriation Example

• What is an Appropriation?
• POLICING THE THRUWAY PROGRAM 49,939,000
• Budget Certificates Are Used to
• Allocate or Segregate appropriated funds for
  specified purposes, activities or objects
• Personal service--regular ......................
  ........ 27,714,000
• Holiday/Overtime compensation..
  5,835,000
• Fringe benefits ...........................
  ... 15,017,000
• Indirect costs .................................
  .......... 1,373,000
• Control Spending from appropriated funds (e.g.,
  quarterly allocations) and to distribute lump-sum
  appropriations within State agencies.

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Budget Certificates Required

• Pursuant to State Law No Spending From an
  Appropriation Can Occur Until Approved by The
  Budget Director
• Exceptions Courts Legislature

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Budget Certificate

• EXECUTIVE DEPARTMENT - DIVISION OF BUDGET
• CERTIFICATE OF APPROVAL OF AVAILABILITY
• Purpose __ Appropriation Add (SGR)
  Originating Organization 01060
• __ Appropriation Change (SGC) Batch
  No(s) 123456
• __ Interchange (ITR) ______
• Certificate Date 04/01/09
  Amends Certificate Dated MM/DD/YY
• Orig Chapter/Section/Law 0050/01/09
  Bill Page Line
  233/1-12
• Reapprop Chapter/Section/Law cccc/ss/200x
  Bill Page Line PPP/LL
• Program Name POLICING THE THRUWAY
• State Operations Program Total 49,939,000
• Interchange From Internal 123456
  0
• Suballocations Transfers 0
• 
  Total Certificate Amount 49,939,000
• For services and expenses . . . in accordance
  APPROPRIATION ATTRIBUTES Organization
  Code 01060
• with the following schedule
  Fund/Subfund
  339-08

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Budget Certificate (contd)
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Budget Certificate (contd)
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Transactions That Affect Appropriation Records

• Contract Encumbrance Reservation of Unspent
  Balance
• Voucher Payments Reduce Unspent Approp/Segr
  Balance
• Payroll Transactions
• Journal Vouchers - Transfer expenditures
• Refunds of Appropriation Expense (AC1286)
• Repayment of Appropriated Loan Receivable
• Bondable Capital Projects (Activity Codes)

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• Restrictive Language MUST Make Sense
• Embedded in Appropriations
• Added to Language Bills

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Movement of Appropriation Authority

• There are 3 types
• Suballocations
• Interchanges
• Transfers
• It is important to understand the differences
• between them and the proper way to reappropriate
• the available funds if necessary.

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Suballocations

• Authorizes the movement of authority between
  agencies within the same fund and for the same
  program expenditures as appropriated.
• The appropriation authority maintains its
  original appropriation identity including program
  name and program code.
• It is not added to an existing appropriation
  within the receiving agency.
• To continue the availability of funds, the
  original appropriation must be reappropriated.
  OSC will extend the lapse date of the original
  appropriation and all suballocations associated
  with it.

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Interchanges

• Movement of authority between appropriations
  within an agency and fund.
• Appropriation authority which has been
  interchanged takes on the identity of the
  receiving appropriation.
• To continue the availability of funds, the
  appropriation receiving the interchange must be
  reappropriated (rather than the donor
  appropriation).

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Interchanges

• State Operations and Aid to Localities
  interchanges are authorized by Section 51 of
  State Finance Law.
• Allows for interchanges within the same agency,
  fund/subfund and program without limit.
• Allows for interchanges among programs within the
  same agency and fund/subfund as long as the total
  amount appropriated for any program does not
  increase or decrease by more than the aggregate
  of 5 of the first 5 million, 4 of the second
  5 million and 3 of the amounts in excess of 10
  million.

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Interchanges

• Capital Project interchanges are authorized by
  Section 93 of State Finance Law.
• Allows for interchanges within the same agency,
  comprehensive construction program (CCP) and
  purpose without limit.
• Allows for interchanges among purposes within the
  same agency and CCP as long as the total amount
  appropriated for such purpose does not increase
  or decrease by more than the aggregate of 25 of
  the first 5 million, 20 of the second 5
  million, 15 of the third 5 million and 10 of
  the amounts in excess of 15 million.

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Transfers

• Transfers authorize the movement of appropriation
  authority between appropriations within or
  between agencies, funds and/or programs.
• Transfers between two enacted appropriations
• The amount transferred-in is additive to the
  receiving program appropriation.
• The appropriation attributes and period of
  availability (including lapse date) of the
  receiving appropriation remain unchanged.
• Transfers requiring the creation of a new
  appropriation record in the receiving fund or
  agency
• The receiving appropriation will be assigned a
  lapse date pursuant to 40 of the State Finance
  Law that made may be different than the lapse
  date of the appropriation from which the transfer
  was made.
• These types of transfers are problematic to
  administer and should be discouraged.
• To continue the availability of funds, the
  appropriation receiving the transfer must be
  reappropriated (rather than the donor
  appropriation).

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• Bill McCormick
• Manager, Revenue and Receivable Accounting, and
  Check Control Section
• Bureau of State Accounting Operations
• Email revproc_at_osc.state.ny.us

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Accounting for Revenues

• ? Taxes
• ? General Fund vs. Dedicated
• Refunds
• Check Replacements
• Miscellaneous Receipts
• Agency-Derived Revenues
• Statutory Authority to Collect
• Statutory Authority to Deposit

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Accounting for Revenues (cont.)

• Federal Grants Payment Management
• Based on disbursements made
• Relies on Grant Award contained in
  Appropriation/Segregation records
• Revenue Contracts
• Repayment of Appropriated Loans Receivable (ALR)

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How Revenues Are Recorded in CAS

• Forms
• Report of Monies Received (AC909)
• Refund of Appropriation Expenditures (AC1286)
• Salary Refunds (AC230)

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Report of Moneys Received

• Wire transfers and checks
• Agency operations (fees, fines, sales, taxes,
  federal grants)
• Sweep money from sole custody accounts not on the
  CAS system
• Unidentified receipts (object code 35390)
• Revenue contracts or repayment agreements
• Expenditure refunds relating to a lapsed
  appropriation (object code 35327)
• Reimbursements of accounts receivables (ALRs
  Cash Advances)

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Refund of Appropriation

• Refund of Appropriation (AC1286) is used by
  agencies to request a credit to an active
  appropriation, for expenditures made from that
  appropriation. These represent a reversal of the
  original voucher.

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Acceptable Reasons for Refunds

• Payments made in error and a check will not be
  reissued (PMT)
• Refund of personal service expenses (SVC)
• Other than personal service reimbursements from
  non-state entities (telephone, fax, photocopier
  usage) (NPS)
• Incorrect payee or amount and a check will be
  reissued (INC)
• Audit disallowances and recoveries (AUD)
• Treasury write-offs of checks returned (Treasury
  use only) (TSY)
• Reduction of cash advance accounts (ADV)
• All other refunds and reimbursements authorized
  in state appropriation or statute (REI)

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Chart of Accounts

• The States system for accounting is very complex
  and includes dozens of accounting codes that
  includes agency, cost center, fund, subfund
  (account), year program, authority, project,
  activity, object, etc., etc., etc., etc

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Transaction Account Codes
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• Mike Luft
• Manager, General Ledger Section
• Bureau of State Accounting Operations
• Email genledger_at_osc.state.ny.us

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FUND ACCOUNTING

• What is a fund?
• Why do we have funds?
• How can I get information on my funds?
• How are funds affected each year?
• What are my responsibilities once a fund is
  assigned to my agency?

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GENERAL LEDGER ACCOUNTING

• Funds Defined
• The State Finance Law Defines and Mandates the
  Use of Seven Fund Types
• Accounting Standards set by GASB
• Separate Accounting Entity
• Self-Balancing Set of Accounts
• Used to Record Financial Information
• Used to Provide Financial Reports to Interested
  Parties

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GENERAL LEDGER ACCOUNTING

• Accounts or Subfunds
• An ACCOUNT is a subdivision of a fund
• Specific financial transactions and financial
  resources are recorded and managed
• Cash is separate and not commingled with another
  account
• Example State Special Revenue Fund-339
• Policing The Thruway Account (339-08)
• Love Your Library Fund (339-LL)

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GENERAL LEDGER ACCOUNTING- FUND TYPES

• GOVERNMENTAL FUNDS
• General
• Not required to be deposited to another fund
• Special Revenue
• Specific revenue sources
• Legally restricted for specified purposes
• Capital Projects
• Acquisition and construction of capital
  facilities
• Debt Service
• Resources and payment of PI on GO, LP and other
  contractual obligations
• Permanent
• Legally restricted to available earnings

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FUND ACCOUNTINGREPORTING HIERARCHY
EXAMPLE
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General Ledger Accounting

• Fund Types (Contd)
• Proprietary Funds
• Enterprise
• Operate like a business
• Commissaries
• Sheltered Workshops
• Internal Service
• State agencies providing goods and services for
  other State agencies
• OGS Centralized Services
• Correctional Industries

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General Ledger Accounting

• Fund Types (Contd)
• Fiduciary
• Private Purpose Trust
• PI benefit individuals, private organizations or
  other governments
• Agriculture and Milk Producers
• Agency
• Monies held in trust for someone else
• Health Insurance
• Lottery Prizes
• Pension
• Monies held in trust for the members and
  beneficiaries

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Creating Funds Accounts

• Legislation in Budget Bills or Special Acts
• State Finance Law Article 6
• Statutory authorization
• 92-g. Motorcycle safety fund. 1. There is
  hereby established in the joint custody of the
  state comptroller and the commissioner of
  taxation and finance a special fund to be known
  as the "motorcycle safety fund".
• fees collected pursuant to paragraph (c-1) of
  subdivision two of section five hundred three of
  the vehicle and traffic law
• Moneys of the fund, following appropriation by
  the legislature, shall be made available to the
  department of motor vehicles only for the
  administration and implementation of the
  motorcycle safety program established pursuant to
  section four hundred ten-a of the vehicle and
  traffic law.

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Creating Funds Accounts

• Other Purposes
• Special Accounting Required
• Federal Grant funds
• Agency Request
• Temporary until legislation is passed

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Sole Custody Funds

• Funds or Accounts held in the Sole Custody of a
  State Agency outside of CAS
• Patient or Inmate Funds
• HCRA Pools
• Commissary Accounts
• Annual Web-Based Reporting
• 1,421 reports filed for Fiscal Year ending March
  31, 2009
• Updated each year for legislative/administrative
  changes
• Reported in the Comptrollers Annual Reports
• SFL 107 requires custodians to report month end
  cash balance to the State Treasurer for inclusion
  in the State Registry (See Accounting Bulletin
  A-597)

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Financial Reporting
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OSC Website - Information for State Agencies
Procedure Manuals, Bulletins, Fund Classification
Manual
Procedure Manuals, Bulletins, Fund Classification
Manual
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FUND CLASSIFICATION MANUAL
ALL FUNDS OF THE STATE
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FUND CLASSIFICATION MANUAL
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Fund Classification Page
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OSC WEBSITE USER PROCEDURE MANUALS
User Procedures Manuals
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USER PROCEDURE MANUALS
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OSC Website PRESS RELEASES REPORTS
Press Releases
Financial Reports
Financial Reports
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OSC Website - STATE FINANCIAL REPORTS
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Financial Statement Presentation
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Short-Term Investment Pool (STIP) WHAT IS IT ?

• State Finance Law Section 98-a
• Represents
• States General Checking Account
• Includes ALL Funds of the State Treasury

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Short-Term Investment Pool (STIP) (contd)

• Investment Policies
• Interest is Shared with all Funds authorized to
  receive interest
• Distribution based on
• Average Daily Balance
• Average STIP Balance
• Monthly Interest Yield
• State Finance Law - If Temp Loans are authorized,
  then agencies must request interest !

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Questions?

• Thank You