PDF Accounting Fundamentals for Non-accountants

[Pages:110]ACCOUNTING FUNDAMENTALS FOR NON-ACCOUNTANTS

U.S. Environmental Protection Agency

Updated January 29, 2014

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 1 of 110

1

Tribal, U.S. Territories and Insular Areas Administrative and Financial Guidance for Assistance Agreements

Accounting Fundamentals for Non-Accountants

Grants Management

U.S. Environmental Protection Agency

Who needs to know about basic accounting fundamentals in a Tribal Nation?

All Tribal Nations need to be able to provide accurate, current, and complete disclosure of finances under federal awards. In order to be successful, Tribal Nations need to have personnel who:

Have experience in accounting and/or an accounting education. Have education or experience with federal assistance agreements and award requirements. Are able to prepare and keep accurate and timely assistance agreement records and files. Are able to produce financial reports that can be compared with the award work plan and

the budget.

In addition there are many others in the Tribal Nation who need to be familiar with, and have a good understanding of the accounting process. These individuals may include:

Program staff involved in the day-to-day management of grants, especially those who approve expenditures.

Tribal grants management personnel. Tribal leaders and administrators who have oversight responsibilities. Finance staff. Office staff involved in grants records management and retention. Bookkeeping and accounting staff, especially those new in their positions, can benefit by

having a better understanding of how their job functions relate to federal grants.

What is the purpose of this module?

This purpose of this module is to provide an introduction and overview of accounting fundamentals for non-accountants. The module also covers important topics such as communication, internal controls, documentation and recordkeeping, records retention and being prepared for a federal audit.

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 2 of 110

Accounting Introduction

In This Module

Accounting Introduction

Accounting Fundamentals ? Chart of Accounts ? General Journal ? General Ledger ? Balance Sheet ? Income Statement ? Accounts Payable ? Accounts Receivable ? Payroll ? Receipts ? Disbursements ? Cash vs. Accrual Accounting Methods

11

U.S. Environmental Protection Agency

12

Accounting Introduction

U.S. Environmental Protection Agency

In This Module, Continued

? Cost Share, Matching and In-kind Contributions ? Direct and Indirect Costs ? Accounting and Grants Management ? Communication ? Internal Controls ? Documentation & Recordkeeping ? Records Retention ? Audits

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 3 of 110

Accounting Introduction

What is Accounting?

13

U.S. Environmental Protection Agency

Accounting is the recording of financial data for all receipts, expenditures, assets, liabilities and net worth for the entire Tribal Nation and includes analysis and measurement of this information.

Accounting information is reported to internal and external decision makers.

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 4 of 110

14

Accounting Introduction

U.S. Environmental

Protection Agency

What's the Difference Between Bookkeeping,

Accounting and Recordkeeping?

ACCOUNTING

Input

Output

BOOKKEEPING

REPORTING

Bookkeeping and reporting can be thought of as the input and output of a complete accounting system.

What's the difference between accounting, bookkeeping, and reporting?

Accounting encompasses the broader responsibilities over developing and maintaining the accounting systems under which bookkeeping functions are performed. Accounting is concerned with the timely and accurate recording of transactions, providing useful management information, and properly reporting such information for various user needs.

Developing and maintaining an accounting system involves setting up and maintaining an appropriate chart of accounts for the organization. Policies and procedures are then developed to provide guidance for all possible financial transactions from source documents (checks, purchase orders, etc.) to journals (payroll journal, cash disbursement journal, invoice register, etc.), to general ledger, (based on the chart of accounts), and ultimately to a variety of reports for all internal and external needs.

Bookkeeping and accounting share two basic goals: - To keep track of income and expenses, thereby improving the organization's ability to achieve profitability - To collect the necessary financial information about the organization's business to file required reports.

Bookkeeping refers to the actual transactional entering and recording of data. Examples include, writing checks, processing payroll, making deposits, recording disbursements and recording receipts.

Reporting, (the output of the data generated through various bookkeeping entries), is used for both internal and external purposes. Internal reports are used within the organization by both management and other personnel. Internal reporting can further be divided into financial and nonfinancial data.

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 5 of 110

Accounting Introduction

15

U.S. Environmental Protection Agency

Policies, Procedures and Processes

Policy is a rule or goal, a course of action set by a governing organization.

Procedure refers to the actions taken to conform to a rule, a prescribed series of steps taken to achieve the goal, or the way in which policy goals are achieved.

Process refers to a formal set of operational tasks performed or procedural steps taken, such as regular duties performed the same way each time.

What needs to be in place before the award is received? Does your program have the essential systems, policies, procedures, and documentation necessary for compliance with EPA assistance agreement regulations? Establish internal control procedures to ensure your systems can comply with federal grant projects.

Policy is a rule or goal, a course of action set by a governing organization. Policies apply to all programs and projects.

Procedure refers to the actions taken to conform to a rule, a proscribed series of steps taken to achieve the goal, or the way in which policy goals are achieved. Procedures are usually set by administrative or management personnel to help a department or project function efficiently.

Process refers to a formal set of operational tasks performed or procedural steps taken, such as regular duties performed the same way each time. Processes are essential to effective completion of repetitive tasks.

Use the questionnaire to periodically examine the systems, procedures, and controls set up at the organizational level. EPA project officers and grants specialists, along with single auditors and others periodically review for compliance but are in no way a substitute for a sound fiscal system.

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 6 of 110

Accounting Introduction

16

U.S. Environmental Protection Agency

Accounting ? Why bother?

? Internal reporting

How did we do? Where are we going and how do we get there? Stewardship of resources ? financial and other

? External accountability

Funders/Stakeholders/Public/Government Stewardship of resources

Accounting Introduction

17

U.S. Environmental Protection Agency

Accounting Procedures

Accounting procedures are part of a financial system that consists of:

Policies, Procedures, and Documents

supporting the:

Collecting Recording, Disbursing, and Reporting

...of all the award recipient's financial activity.

What are the required accounting procedures?

Accounting procedures are the processes a Tribal Nation uses to record all of its financial transactions. Accounting procedures are part of a financial system that consists of policies, procedures, and documents supporting the recording, disbursing, and reporting of the Tribal Nation's financial activity, so that the Tribal Nation's leadership (elected administration), department heads, and the federal government have good information about the financial status of a project.

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 7 of 110

Accounting Introduction

18

U.S. Environmental Protection Agency

Accounting Procedures Manual

? The organization's Accounting Procedures Manual must describe in writing the accounting policies and procedures for all it's operations including federally-issued awards.

? Be sure to provide training to your program staff.

? Review the manual and determine the strengths, limitations and inconsistencies.

If you have an established policy or procedure, auditors and EPA expect you to follow it!

Do we need an accounting manual?

The Tribal Nation must have an accounting manual. This manual should describe in writing the Tribal Nation's accounting policies and procedures for all its operations including federally-issued awards. For example, a general financial policy might read:

The following policies and procedures provide a framework and structure as to how the Tribal Nation's financial accounting system will be managed and operated. The objective of this system is to provide management with reasonable, but not absolute assurances that assets are safeguarded against loss from unauthorized use or disposition; that the Tribal Nation is managing its state and federal programs in compliance with laws and regulations; transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. The system will also provide management and the Tribal Council the data necessary to maximize the beneficial use of financial resources available.

Accounting Fundamentals for Non-Accountants

Last Updated 29 January 2014

Page 8 of 110

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download