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​The Annual Financial Report for 2018 (Part 1)


February 25, 2019 by Toni Nelson
Category: Financial Reporting

​The Annual Financial Report for 2018 (Part 1)

The State Auditor’s Office (SAO) has just released its new “My BARS,” and along with this release is the annual update to accounting and reporting requirements (BARS Alerts & Overview of Significant Changes). These changes to financial reporting will impact your 2018 financial report and there a few changes that SAO has provided advanced notice for (such a fiduciary fund classification). In this 2-part series, I will be recapping the highlights from the “overview” but would encourage you to carefully review the SAO summary to help you evaluate what areas may impact your financial report preparation. 

Admittedly, over the years that I have been working with local government my focus has been on ‘cash basis’ rather than GAAP reporting requirements. This has been driven by my experience in working with small to mid-size local government jurisdictions that account and report cash basis, and the fact that the majority (80%) of the entities in Washington State use cash basis as their method of accounting and reporting. In fact, as the Governmental Accounting Standards Board (GASB) continues to add to its rapidly growing list of statements, there also seems to be a growing movement by mid-sized GAAP reporting entities towards cash basis reporting. This brings another observation: As more entities move to ‘cash basis’ accounting and reporting there are increased elements of GASB reporting requirements being required in the cash basis financial report. For example, reporting of component units, classifying and reporting fund balance (reserved or unreserved), reporting of pension liability, and the foreseeable incorporation of OPEB (Other Post-Employment Benefits) are just a few of the GASB reporting requirements now found in the cash basis financial report.

In fact, as I look back over the changes of the past 10 years, cash basis reporting is no longer as simple as uploading your Schedule 01 to the SAO online filing portal; it now requires that you carefully evaluate the data on the schedule prior to your submission. Issues such as fund classifications, BARS code use, fund balance designations, and other SAO reporting requirements cannot be evaluated electronically and must be reviewed by each local government entity prior to the upload to assure that the resulting financial statements generated by the SAO online filing system will reflect true and accurate financial information about your jurisdiction.

As a result of the increased complexities for cash basis entities in the drafting and filing of your annual financial report, MRSC has developed the Annual Financial Report Workshop for cash-basis entities to assist you with this process. Beginning next month, workshops in Spokane, West Richland, DuPont and Stanwood will focus on the steps and reconciliation items needed to assure that your report is ready for upload to the SAO online filing portal. Here is a link to our workshop registration webpage. I look forward to seeing many of you there. Be sure to bring your yearend financial reports and questions! 

For the past few years I have endeavored to speak to both cash and GAAP entities where I could. There are definitely some common denominators between the two forms of accounting and reporting, including the Chart of Accounts, the supplementary schedules (09, 16), and some of the other SAO Annual Report Schedules (Schedules 01, 15, 17, 19, 20, 21). Those of you who prepare financial reports according to GAAP know that this complex process requires a more comprehensive reporting format and a considerable amount of time and staff devoted to its completion. Since I lack the required expertise for GAAP/GASB reporting, and because SAO, WFOA, and others provide considerable support on this more complex reporting method, I will be primarily speaking to ‘cash’ entities.

Changes to: Chart of Accounts

Changes to the BARS codes (Chart of Accounts) can have significant impacts on your annual report preparation. These codes are used to record the financial transactions of your entity and will subsequently flow to Schedule 01 – Revenues/Expenditures, which is the heart of the online filing system for the SAO. Accuracy here is critical, and BARS manual section #4.8.1.20, reporting for Schedule 01, requires that local government update the incorrect financial data. Here are some important changes:

  • 3132500 Housing and Related Services Sales & Use Tax: This new account code is for those entities collecting sales & use tax as authorized by RCW 82.14.530
  • 3360211 County Fair Fund: This code is to record revenues distributed under Chapter 15.76 RCW.
  • 51530xx, Legal Services: This code has been expanded to segregate the costs between internal (5153x) and external (5154x) legal services. This BARS code change will be required for 2018 reporting.
  • Elimination of Object code 50, Intergovernmental Services & Payments: Since this change is actually effective in 2019, the reporting requirement will not be applicable until next year; but for many, it will take this year to assess and re-code these intergovernmental payments to the appropriate object code of 30 or 40.

TIP: Upload your draft Schedule 01 to the SAO online reporting portal to see which (if any) BARS codes are being red-flagged and address these items prior to continuing with your financial report. 

It will be important to refer to the Overview of Significant Changes for your entity type (Cash or GAAP) to assure that you are using the most recently prescribed BARS codes.

Stay Tuned

Due to the amount of information and discussion about the changes to the 2018 Annual Financial report, I have divided this blog post into two parts. In Part 2, I will focus on the changes to the Notes to Financials and Supplemental Schedules.

If you have questions about information in the first half of this series, please feel free to contact Toni Nelson, MRSC Financial Consultant, via email: tnelson@mrsc.org or by phone: (206) 625-0916 x109. If you have a question about another topic, please use our Ask MRSC form or call us at (206) 625-1300 or (800) 933-6772

About Toni Nelson

Toni has over 24 years of experience with Local Government finance and budgeting. Toni's area of expertise include "Cash Basis" accounting and reporting, budgeting, audit prep and the financial issues impacting small local government.

VIEW ALL POSTS BY Toni Nelson

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