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LP-67
in this publication, i.e., not obtained from other sources, is freely granted,
BY THE
tion grant projects. As such, the examples are not intended to take the
place of existing financial management systems which would achieve the same
ui
TABLE OF CONTENTS
Chapter Page
Abstract m
I. Minimum Accounting Procedures 1
Indirect Costs 19
iv. construction grant accounting system ...... 25
V. General Governmental Accounting System ..... 45
VI. The Single Audit Act 59
FIGURES
/
/
MINIMUM ACCOUNTING PROCEDURES
The accounting procedures in this chapter are for basic and simplified
SYSTEMS.
APPLIED.
competitive bidding.
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B. Minimum Records
Project Ledger).
-2-
to account for all of each such employee's time, and signed
segregation of responsibilities.
-3-
2. no one person should have complete control over all phases of a
4. Written procedures concerning how things are done and who has the
-4-
SAMPLE TIME SHEET
CITY OF ANYTOWN
TIME AND LEAVE REPORT
TIME PERIOD Jan. 1-31. 1981 EMPLOYEE NAME John Doe
ORGANIZATION-^ ~~~ EMPLOYEE NO. 111-22-3333
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8 8 8 9 !8 8 8 4 j8 8 7 _8_ JSl. 7 ftl1 _L54
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Vacation Time 2i ! t
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-mmados£l OF EMPLOYEE
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SI>TUftE _
OF SUPERVISOR
EPA CONSTRUCTION GRANT
SAMPLE ENTRIES (FIGURE 2) STEP 3 PROJECT LEDGER
GRANTEE; City of Hometown, Texas PROJECT #C-48- 5555-03 LEDGER SHEET #i_ OF
BREAKDOWN OF PAYMENTS
CHECK RECEIPTS PAYMENTS ADMINISTRATIVE TOTAL
DATE DESCRIPTION ENGINEERING CONSTRUCTION AND FORCE ACCOUNT
NUMBER
ELIGIBLE INELIGIBLE ELIGIBLE INELIGIBLE ELIGIBLE INELIGIBLE ELIGIBLE INELIGIBLE
en
6-26-81 75% of Eligible Expenses 1,125.00 c=
m
I ABC Engineering Invoice #601
cr»
i 6-28-81 General Supervision 952 Eligible 1672 316.00 300.00 (1) 16.00 300.00 ~ 16.00
AAA Construction Co. (Estimates #1)
1673 (2) 24,000.00 22,800.00 1,200.00 22,800.00 1,200.00
6-29-81 32 Complete 95% Eligible
Resident Inspection For June p. 507
p. 508 (3) 842.00 800.00 (1) 42.00 800.00 42.00
6-30-81 City Force Account 95% Eligible
Frienge Benefit Expenses For June
97.00 92.00 (1) 5.00 92.00 5.00
6-30-81 11.52 of Res. Insp. Salaries
Total Eligible Costs For June
300.00 22,800.00 892.00 23,992.00 1,263.00
6-30-81 Payment Request #2 Submitted
EPA Grant Check (P.R. #2)
7-24-81 752 of Eligible Expenses 17,994.00
ABC Engineering Invoice #602
(4) 500.00 500.00
7-28-81 Final Plan of Operations
(1) Since 952 of Construction Is (2) Construction complete ($26,667) less 102 (4) Cost Incurred, not yet paid (when paid,
Eligible, only 952 of Engineering retalnage equals $24,000 due contractor enter check number and amount of payment)
! and TncnprHnn 1«; Flinlhlp.
(3) Resident Inspector's salary paid from
I
i city's General Operating Funds (payroll)
• 1 . ,
CHAPTER II
Federal regulations require that a grantee cowly with the following property
management standards. Recipients may use their own property management
system if the system meets the following minimum standards.
identification.
NUMBER.
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USED TO DETERMINE THE PRICE, OR THE METHOD USED TO DETERMINE
WITH THE PROPERTY RECORDS, AT LEAST ONCE EVERY TWO YEARS. YOUR
INVENTORY MUST VERIFY TFE CURRENT USE AND CONTINUED NEED FOR THE
PROPERTY.
-10-
Sample Property Management Procedures
Figure 3
ENTITY:
PROPERTY AND EQUIPfEKT CONTROL
POLICY
GENERAL
possession of the entity. all items, either owned by the entity, or loaned
$500 or more and a useful life of two years or more are covered by this
procedure. land, permanent buildings and structures are excluded from this
procedure.
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DEFINITIONS
Acquisition value or individual unit value: The price of the item paid
at the time of purchase by the entity, including applicable taxes,
PROCEDURE
-12-
ENTRY SHALL BE MADE IN THE ENTITY'S PROPERTY LOG MAINTAINED BY THE
__ AND AN INDIVIDUAL PROPERTY CARD SHALL BE
THE .
-13-
(5) Acquisition cost - this is the price paid for the item,
department.
-14-
INDIVIDUAL ITEM. THE LOCATION ENTRY ON THIS CARD SHALL BE
REVISED EACH TIME THE ITEM IS MOVED TO A NEW LOCATION, AND/OR THE
OF ACQUISITION.
PERSON WHO IS NOT ASSIGNED TO THE DEPARTMENT AND WHO HAS NO CONNECTION
-15-
IF ANY PROPERTY ITEMS ARE LOCATED, WHICH ARE NOT TAGGED, THEN THESE
NOTIFIED OF THE LOSS, AND THE ACTION BEING TAKEN TO RECOVER THE LOST
ITEM.
property log:
-16-
This policy and procedure approved and adopted:
SIGNATURE DATE
SIGNATURE DATE
SIGNATURE DATE
SIGNATURE DATE
SIGNATURE DATE
-17-
CHAPTER III
A. Administrative Expenses
project must clearly be for the benefit of that project and not
-21-
B. Force Account
Whenever a grantee uses its own employees or material for work under
Use of the force account method requires prior written approval by the
mb project engineer when the costs are over $25,000 in step 3, unless
the grant agreement stipulates the force account method. a grantee
should use EPA Form 5700-41 to detail the costs of the proposed force
account work in the grant application.
Labor costs should be supported by time sheets which account for all of
the time of each employee (see sample entries for time sheet). payroll
records, including labor distribution, should document all labor costs.
Materials and supplies purchased for the project will require invoices
AND PROOF OF PURCHASE (CANCELLED CHECKS) AS SUPPORTING DOCUMENTS. In
SOME INSTANCES, MATERIAL MAY BE OBTAINED FROM SUPPLIES ON HAND. SOME
METHOD OF EQUITABLE ALLOCATION OF THE MATERIAL TO THE GRANT PROJECT
Indirect costs are those costs incurred for a common or joint purpose
benefiting more than one cost objective. slnce the costs are not
-22-
READILY IDENTIFIABLE TO A PARTICULAR COST OBJECTIVE, THEY ARE USUALLY
PERCENTAGE.
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FIGURE 4
Example - Indirect Cost Rate Computation (Rate includes both G&A and
Fringf Benefits)
Non-Allowable Allowable
Category Indirect Cost Indirect Cost
Indirect Salaries $46,200
Vacation Leave 10,200
Sick Leave 1,900
Military Leave 800
Holiday Leave 1,200
Group Insurance 1,500
FICA Tax 10,000
TEC Unemployment Tax 1,200
Maintenance and Repair 9,900.
Supplies 2,600
Telephone 1,200
Rent 4,800
Utilities 1,500
Indirect Travel 1,000
Depreciation 3,000
Contingencies $2,000
Contributions 1,1100
Entertainment 6,000
Interest Expense 7,000
Slb.lUU $1(JU,UUU
-24-
CHAPTER IV
CONSTRUCTION GRANT ACCOUNTING SYSTEM
CONSTRUCTION GRAM" ACCOUNTING SYSTEM
Background Information
AS AUTHORIZED BY THE WATER QUALITY ACT OF 1987, PROVIDES FOR GRANT AND
Under the Texas Water Code, the Texas Constitution provides for finan
-27-
Construction Grants
the proper accounts* the construction fund is to be used for the recording
COSTS*
BANK ACCOUNT*
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5* a general ledger should be maintained to record all
accounting transactions*
documentation*
ON THIS PROJECT*
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FIGURE 5
Sample Transactions
1. to open a new bank account in the construction. fund, the clty of nearview
transferred $1,000.00 fpcm its general fund on october 2, 1976,
2. The Third National Bank of Nearview charged the City of Neapview $10.00 for
printing checks.
4. The City of Nearview received the bond proceeds from the Water Quality
Enhancement Fund of $250,000.00 and the accrued interest of $3,437.00,
5. Cheatham & Cheatham, Attorneys at Law, were paid legal fees of $6,000,00,
6. Second Southwest Company, the City Financial Advisors were paid for
handling the bond issue. $7,500.00.
13. Made transfer of Interest accrued on Bonds at Date of Sale to Interest and
Sinking Fund.
14. Total and rule journals for the month; Post totals to General Ledger.
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CONSTRUCTION FUND
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CONSTRUCTION FUND
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SHEET NO. ACCOUNT NO.
RATING NAME Construction in Progress
CREDIT LIMIT address Construction Project - Sewer
TERMS
DATE ITEMS fOUS * OEBITS CREDITS B
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' SHEET NO.. ACCOUNT NO..
RATING name Fund Balances - Construction Project
CREDIT LIMIT address Allocated from Grants - EPA Se
TERMS
DATE ITEMS «U0 > DEBITS CREDITS B
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RATING name Fund Balances - Construction Project
CREDIT LIMIT address Allocated from Sale of Bonds Sewer
TERMS
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RATING NAME Transfers - Construction Project
CREDIT LIMIT address ' Transfers to Debt Service Fund
TERMS
DATE. ITEMS mis \ OEBITS CREDITS B
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FIGURE 7
DISBURSEMENTS:
(Date) (Signature)
-41-
List Expenditures for the Month of October 19 76
List All Project Invoices that are unpaid as of End of this Month
-42-
CHAPTER V
Governmental entities must comply with many and varied legal regulations
-45-
UTILIZED IN RECORDING, SUMMARIZING, AND REPORTING THE OPERATING AND FINANCIAL
DATA REQUIRED BY MANAGEMENT FOR ITS OWN USE IN CONTROLLING THE ACTIVITIES
SYSTEM-
The journals must be closed at the end of each accounting cycle and
must be closed at the end of the entity's fiscal year- additionally, the
general ledger and subsudiary ledgers must be closed at the end of the
-46-
1. Cash Receipts Journal - This is a multi-column, special
tion takes place in this journal, thus the debit and credit
-47-
General Ledgers
summary of accounts is kept in which all debits and credits from the
has spaces for entering the date of the entry, the source of the entry,
debit and credit amounts, description of the entry, and the account
BALANCE- Only one GENERAL ledger is needed to account for all funds-
Subsidiary Ledgers
should be verified at the end of each accounting cycle* the more common
-48-
a construction project ledger is a subsidiary ledger which serves
to account for the cost of fixed assets being contructed by the entity-
subsidiary ledger has columns for entering the date of the transactions,
Files
into three cusses: (1) transaction source document files, (2) accounting
-49-
c Tax Receipts File - This is a file of all tax receipts
paid and with the date of payment are batched and attached
SEQUENCE-
-50-
adjusting and closing entry transaction source documents
-51-
d- Bond File - This file contains a copy of the bond
Directors or Council-
-52-
b- Board Orders File - This file contains a copy of each
specific order issued by the entity's board of directors
or Council-
Internal Control
-53-
Chart of Accounts
IS BROUGHT INTO ACTION BY CUSS IFY ING ACCOUNT DATA- THE CHART ADOPTED
WILL SERVE TO CONTROL THE LEDGER ARRANGEMENT, THE COLUMNAR HEADINGS OF THE
THE AUXILIARY RECORDS AND PRINTED FORMS- THE ACCOUNTS SHOULD BE ARRANGED
THE ADDITION OF NEW ACCOUNTS IN SEQUENCE FOR REASONS AT FIRST NOT FORESEEABLE
-54-
FIGURE
Account
Number Account Title
ASSETS
Construction Projects
LIABILITIES
FUND BALANCES
-55-
TRANSFERS TO OTHER FUNDS
The accrual basis of accounting is recommended for all funds used by the
governmental entity. However, certain revenue and expense items ape exempt
from this rule and these items should be recorded on the cash basis.
it must be both measurable and available, Some expense items do not quality
for accrual basis accounting treatment.
Additional Information
-56-
VI
On April 12, 1985, the Office of Management and Budget (OMB) issued OMB Circular
a-128 which implements the single audit act of 1984 (pub. l. 98-502). the
Single Audit Act establishes audit requirements for State and local government
recipients of federal assistance. epa's general regulation for assistance
programs (40 CFR 30, Appendix E) currently requires State and local government
recipients to comply with the audit requirements of omb circular a-128.
The Act requires State or local governments that receive $100,000 or more
a year in Federal funds to have an audit made for that year in accordance with
the Act. It specifies that the OMB Director shall designate "cognizant" Federal
FOR THE COST OF AUDITS, AND PROVIDE PROCEDURES TO ASSURE THAT SMALL FIRMS OR
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