Cash Receipt and Disbursement Records
Supporting Documentation for Cash Book
Classification Book or Worksheet
Required Reports: Reporting from the Cash Book
Bank Ledger (Master Check Register)
Substantive or Validation Tests
Procedures for Handling Unclaimed Checks
This chapter discusses operational procedures and reporting requirements imposed upon municipal treasurers to ensure their proper accounting for all municipal monies in their care.
Cash Receipt and Disbursement Records
The treasurer must maintain a number of journals and other materials to account for municipal monies turned over to the treasurer's office, including a cash book and bank ledger, together with records of municipal debt, tax title accounts, trust funds, and payroll and vendor accounts. In addition, the treasurer must preserve materials containing back-up authentication for entries in these books and records. This chapter discusses the format and use of the treasurer's accounting documents and includes a sample cash book.
All cities and towns should prepare their general purpose financial statements using accounting principles that are in conformity with the Uniform Municipal Accounting System (UMAS) promulgated by the Department of Revenue.
Historically, Massachusetts cities and towns had the option to administer their accounts using a "statutory system" that mingled all municipal activities together. Although local financial officials found this system quite easy to administer, managers and interested outside users of financial statements had difficulty understanding reports prepared from it. In any case, the statutory system has now been rendered obsolete by Statement 34, issued in June of 1999 by the Government Accounting Standards Board (GASB), a private sector organization formed to establish and improve financial accounting and reporting standards for state and local governments. Statement No. 34, entitled, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, established new criteria concerning the form and content of governmental financial statements. Governments must adhere to GASB pronouncements in order to issue their financial statements in conformity with Generally Accepted Accounting Principles (GAAP). Users of the financial statements depend also on independent auditors’ opinions. If a community's financial statements depart significantly from GAAP, independent auditors may issue a qualified opinion or a disclaimer, resulting in an adverse effect on the community's bond rating and its ability to borrow money. A failure to issue audited financial statements may also result in the violation of an existing bond covenant.
UMAS is a multi-fund accounting system based on GAAP for governmental units. The principles of this accounting system are accepted and used nation-wide, enabling an analyst to compare a statement from any particular United States town with the financial statements of a municipality in any other part of the country. UMAS has been updated in accordance with the requirements of GASB 34 and utilizes a number of discrete funds to account for the variety of activities performed by a municipality. Normal operations accounted for in the general fund, and other operations in separate, special funds. Accordingly, the treasurer must take particular care to identify all receipts distinctly and to report them accurately in order to properly classify these monies in the accounting records.
Municipal treasurers must "annually render a true account of all [their] receipts and disbursements and a report of their official acts." 41:35 This statutory provision necessitates treasurers' use of a cash book. The cash book provides a control that enables treasurers to reconcile the cash on hand with bank statements and with the general ledger.
The treasurer should make original entries in the cash book of the dates and amounts all receipts and deposits, using separate columns for receipts and deposits. On the left-hand page, the treasurer should record the beginning balance of the various accounts, followed by a detailed, daily reporting of all receipts and deposits, and on the right-hand page, a list of payments, by warrant. The treasurer should balance the cash book daily, with a pencil notation at the foot of the last column. Balancing less frequently increases the difficulty of locating errors.
A cash book may vary in form to suit a particular community’s needs; however, it should always have a permanent binding. Furthermore, the treasurer of a larger community may have multiple cash books, utilizing a separate volume for each of the various funds.
Pages 3-21 through 3-23 set out sample pages of a cash book and include instructions for posting cash receipts and disbursements.
Various municipal officers and departments turn over money to the treasurer. The following list identifies some of these officers and departments and includes and explanation of the particular receipts acquired from each source.
Semiannual System : Under the semiannual system, real and personal property taxes are due in 2 installments, depending on the date of mailing of the tax bills. For the first installment, if the bills are mailed on or before October 1st, that payment is due on November 1st. If, on the other hand, the bills are mailed after October 1st, the first installment is due on the 30th day following the date of mailing. For the second installment, if the bills are mailed on or before April 1st, that payment is due on May 1st, but if the bills are mailed after April 1st, the second installment is due on the 30th day following the date of mailing.
Quarterly System : A municipality may make real and personal property taxes due in 4 installments by accepting Ch. 59 §57C. Under this system, the first two installments are due on August 1st and November 1st, respectively, so long as the bill, called a preliminary bill, is mailed on or before July 1st. Sending a bill after July 1st requires approval of the Commissioner of Revenue, a condition of which is the submission to the Commissioner of a pro forma recap sheet. A late-mailed bill is due in 2 installments, the first 30 days after mailing, and the 2nd on November 1st.
The second two installments are due on February 1st and May 1st respectively, so long as the bill, called an actual bill, is mailed by December 31st. The actual bill can only be issued after the establishment of the tax rate for the fiscal year.
If the actual bill cannot be mailed by December 31, an additional preliminary bill may be issued upon approval of the Commissioner. This third quarter bill is due on February 1st, or 30 days after the date of mailing, whichever is later. The actual tax bill issued upon the establishment of the tax rate is then due on May 1st, or 30 days after the date of mailing the bill, whichever is later.
Delinquent property taxes accrue interest at 14% under both the semiannual and the quarterly systems; however, interest accrues from a different date under the two systems. Under the semiannual system, interest on the first half bill accrues from October 1st, if the bill is mailed on or before October 1st. If the tax bill is mailed after October 1st and remains unpaid after the 30th day from the date of mailing, interest accrues from the date of mailing. If the second half of the bill is not paid on or before May 1st, interest accrues from April 1st. Under the quarterly system, if payment is not received on or before the August 1st, November 1st, February 1st and May 1st due dates, interest accrues from the respective due date.
A taxpayer who receives a tax abatement that results in an overpayment of the tax is eligible for a refund in the amount of (a) the overpayment, (b) interest paid on the overpayment and (c) interest at 8% per annum on the overpayment, calculated from the due date or the payment date, whichever is later. (59:69) The treasurer cannot issue a refund in an amount less than one dollar. (59:58A)
The Registry of Motor Vehicles annually calculates the value of all registered motor vehicles for the purpose of excise assessment, enters billing information on computer tapes, and mails the tapes, with commitments, to the cities and towns for their use in producing motor vehicle excise bills. Because of the volume and variety of types of vehicles, the Registry is unable to provide billing information for all vehicles at the same time. Rather, the billing tapes, with commitments, are prepared and distributed in batches subsequent to January 1. The first batch, usually mailed out in early January of each year, is comprised of passenger motor vehicles which were registered as of the preceding January 1. Billing information and commitments for other types of vehicles and all vehicles registered after January 1 are sent in later batches. Excise bills are due on or before the 30th day after the date of mailing. If a motor vehicle excise is not timely paid, interest accrues on any unpaid amount at 12% per annum from the date the payment was due until the date it is paid.
Municipalities are required to assess an excise upon any person who owns a boat on July 1st and moors, docks or principally situates that boat for the summer season in the city or town. The excise is due on or before the 60th day following the mailing of the bill. If a boat excise is not timely paid, interest accrues on any unpaid amount at the rate of 12% per annum from the date the payment was due until the date it is paid. In addition, the boat owner must pay a penalty in the amount of $20 or 20% of the amount of the excise due, whichever is greater.
Any municipality that collects a boat excise must establish a Waterways Improvement and Maintenance Fund under Ch. 40 §5G and credit 50% of all boat excise revenue received to the fund. [60B §2(i)]
Whenever a specific area of a city or town benefits from a public improvement, or betterment (e.g., water, sewer, sidewalks, etc.), the municipality may assess special property taxes upon the property owners of that area to reimburse the governmental entity for all, or part, of its costs in constructing the improvement. Each property parcel receiving the benefit is assessed a proportionate share of the cost, which may be paid in full, or apportioned over a period of up to 20 years. If apportioned, each year's amount, together with one year’s committed interest, computed from October 1st to October 1st, is added to the tax bill until the betterment has been paid. Under the semiannual system, betterments and other special assessments are billed to the first half real estate bills. Under the quarterly system, the assessors may commit betterments and other special assessments with the preliminary tax.
A community which makes its tax collector a city or town collector by voting to accept Ch. 41 §38A may extend its collector’s authority to the collection of “all accounts due the city or town....” In such communities, the collector collects utility payments and should turn those payments over to the treasurer on a daily basis.
Miscellaneous receipts, such as demand charges ($5.00), cemetery receipts, ambulance service fees, certificates of municipal liens (60:23), etc. should be turned over to the treasurer at least weekly.
Departments turning over money to the treasurer should utilize a Schedule of Departmental Payments to Treasurer. (See Form AD 9, pg. 3-26 and AD 10, pp. 3-27 through 3-28.) One copy of this form should be transmitted to the accountant or auditor, a second to the treasurer, and the third retained by the department.
In any municipality with a separate department to handle the billing and collecting of water, sewer, and electric light receivables, the treasurer should insist that the department, at least weekly, and preferably daily, (a) pay over all monies collected to the treasurer or (b) deposit those monies into a designated bank account, sending a copy of the deposit slip to the treasurer. In either case, the department should utilize a Schedule of Payments to the Treasurer. The treasurer should ensure that all persons responsible for such collections are properly bonded. Notwithstanding the fact that the General Laws only set out requirements that collectors, treasurers, clerks and assistants be bonded, all other employees handling money should also be bonded, either individually or under a blanket employee fidelity policy.
A number of municipal officials who perform local inspections collect fees for their services. These include building, electrical, gas and plumbing inspectors, along with the sealer of weights and measures. Other officials collect fees for licenses issued by municipal department, including licenses for street openings, marriage and death certificates and alcoholic beverages pouring licenses. The school department collects monies for tickets to athletic events, for school lunches and through student activity fees. The treasurer should insist that all of these monies are turned over to the treasurer at least weekly.
Two local acceptance statutes permit municipalities to earmark user fees for particular services to support the costs of the departments providing those services.
Offset Receipts (44:53) -- This local option provision permits estimated receipts of a particular department to be earmarked for use of the department and appropriated to offset its annual operating budget. The statute limits the amount of offset receipts appropriated to no more than the actual receipts collected for the prior fiscal year. The Director of Accounts must approve use of a higher amount before appropriation. Actual collections greater than the amount appropriated close to the general fund at year-end. If actual collections are less, the deficit must be raised in the next year’s tax rate.
Revolving Funds (44:53½) -- This local option provision permits a community to raise revenues from a specific service and to use those revenues without appropriation to support the service. The statute specifies that each fund must be re-authorized each year at annual town meeting or by city council action, and that a limit on the total amount that may be spent from each fund must be established at that time. The aggregate of all revolving funds may not exceed 10% of the amount raised by taxation by the city or town in the most recent fiscal year, and no more than 1% of the amount raised by taxation may be administered by a single fund. Wages or salaries for full-time employees may be paid from the revolving fund only if the fund is also charged for all associated fringe benefits.
Sums not in excess of $20,000 recovered under the terms of fire or physical damage insurance policies or received in restitution for damage done to municipal property may be used by the officer or department having control of the property for its restoration or replacement without specific appropriation.
Commonwealth
The Cherry Sheet is the official notification to cities, towns and regional school districts of the next fiscal year’s state aid and assessments. The name derives from the cherry colored paper on which the notices were originally printed. Cherry Sheet aid distributions are based on formulas and reimbursements that provide funds for costs incurred during a prior period for certain programs or services. The State Treasurer must annually distribute Cherry Sheet payments to cities and towns on or before September 30th, December 31st, March 31st and June 30th. (58:18A) The State Treasurer disburses these monies electronically, providing with each distribution a cover letter that indicates what funds (e.g., Ch. 70, Lottery, Highway Fund) will be made available, less quarterly assessments. The Town Treasurer should include a copy of this letter with the Schedule of Treasurer’s Receipts, sent to the accountant or auditor for record keeping purposes.
No Cherry Sheet distribution may be made in any fiscal year to a city or town that has not submitted its prior fiscal year’s Schedule A to the Department of Revenue. In addition, no Cherry Sheet distribution may be made to a regional school district that has not submitted it prior year's annual financial reports, as prescribed by the Director of Accounts, to the Department of Revenue. All withheld aid is distributed to the appropriate municipality and school district once the requisite reports have been submitted and accepted by the Division of Local Services. (58:18F)
The state distributes to local communities some monies that do not appear on the Cherry Sheet. These monies include court fines and restitutions (280:2), hotel/motel excise distributions (64G:3A) and Chapter 90 Highway Funds (58:18B).
The state awards grants at various times throughout the year, depending on when a community qualifies for a particular program. Although the General Laws require all copies of grants and contracts to be on file in the accountant’s or auditor’s office, the treasurer should obtain copies of grants to be aware of their requirements in order better to comply with these requirements.
The treasurer must credit all interest earned on grant funds to the general fund unless some specific provision of the grant or of general or special law otherwise provides. (44:53) Certain grants received from the Massachusetts Department of Public Works provide an example of an instance in which a special law expressly provides that interest earned on grant funds becomes part of the grant. (See IGR 86-102, pages 3-29 through 3-30.)
Treasurers should arrange to have grants and other state payments to their respective municipalities sent directly to their depository banks for deposit into the treasurer's account. Further, treasurers should direct their depository banks to give them notice as soon as possible after receiving such payments to enable them to quickly invest these monies for maximum earnings.
When the treasurer issues debt and the bank credits the loan proceeds, together with accrued interest and any premium, to the municipality's general fund, the treasurer should separately identify the proceeds, interest and premium when reporting to the accountant or auditor on the Schedule of Treasurer’s Receipts. (See AD Form 11LL on page 3-31.)
Treasurers receive money from a variety of other sources throughout the year, including refunds from vendors, rental payments for use of municipally-owned property, health insurance payments from retired municipal employees, and insurance recoveries from fire or physical damage policies. The treasurer should clearly identify the source of all receipts when recording them in the cash book.
The treasurer possesses sole responsibility to pay the bills of a city or town and must make such payments in strict accordance with the General Laws. This responsibility is set out in Ch. 41 §35, which states, “[The treasurer) shall receive and take charge of all money belonging to the town, and pay over and account for the same according to the order of the town or its authorized officers. No other person shall pay any bill of any department.”
Ch. 41 §56 details the mandatory procedures for submitting, approving, and paying bills. This section states, in pertinent part:
The selectmen and all boards, committees, heads of departments and officers authorized to expend money shall approve and transmit to the town accountant as often as once each month all bills, drafts, orders and pay rolls chargeable to the respective appropriations of which they have the expenditure. Such approval shall be given only after an examination to determine that the charges are correct and that the goods, materials or services charged for were ordered and that such goods and materials were delivered and that the services were actually rendered to or for the town as the case may be…. The town accountant shall examine all such bills, drafts, orders and pay rolls, and, if found correct and approved as herein provided, shall draw a warrant upon the treasury for the payment of the same, and the treasurer shall pay no money from the treasury except upon such warrant approved by the selectmen…. The treasurer shall not pay any claim or bill so disallowed by the town accountant. So far as apt this section shall apply to cities.
This statute delineates several steps involved in the payment process. This process incorporates a check and balance system between the treasurer and other city or town officials. Fundamental to the process is the preparation of a warrant by the accountant or auditor. The warrant communicates authority to the treasurer to pay bills and payrolls. The accountant or auditor examines the legitimacy of the bills provided by officers and departments of the municipality and may disallow and refuse to approve for payment any claim deemed to be fraudulent, unlawful or excessive. The accountant or auditor then prepares a warrant, placing on that warrant all of the bills which examination has determined should properly be paid. The accountant or auditor then submits the warrant to the selectmen or city council for approval. (See Schedule of Departmental Bills Payable on pp. 3-32 & 3-33 and Treasury Warrant on pg. 3-34.) Upon signing a warrant, the selectmen or city council transmits it to the treasurer for payment. The most common warrants, discussed below, are vendor warrants and payroll warrants. A number of special types of warrants, however, are used with less frequency.
Some variations exist in check preparation among the various cities and towns. Generally, the treasurer’s office prepares the checks to be signed and issued. In some communities, however, the accountant or auditor prepares the checks, utilizing a computer system to print the checks at the same time the warrant is printed. Certainly, if the accountant or auditor prepares the checks, the treasurer should carefully verify the information on them, as ultimate liability rests with the treasurer, the person statutorily responsible for the issuance of checks.
In any case, the treasurer's office should carefully maintain a check register to record all disbursements and should regularly reconcile this register with bank balances. Whether a check is written for individual vouchers or batched to the vendors using consolidated checks, the treasurer must maintain a clear record that discloses for each check the payee, the payment amount, the warrant and voucher numbers, the payment date, and the check number.
For effective cash management purposes, the treasurer should fix the timing of disbursements in such as way as to pay out money from the treasury at the last possible moment. Of course, the treasurer must, at the same time, make payments timely in order to treat vendors fairly and equitably. (See on pg. 3-35 a sample form that a treasurer might send to department heads to request them to forecast, on a quarterly basis, anticipated expenditures over $20,000.)
The treasurer and accountant or auditor should work cooperatively with all major municipal departments to effectively schedule warrant payments in a way that enhances good cash management. Beneficial timing of vendor payments can produce a very significant cash benefit for a municipality, alleviating cash flow issues and enabling the treasurer to keep funds invested for a longer period of time, maximizing interest revenue to the municipality.
In timing payments, The treasurer should utilize a system of “aging payables” to improve disbursement control. As invoices are received, they should be analyzed and a payment date affixed. The invoices can then be placed into a tickler file in order to enable making disbursements contemporaneously with the due dates of the invoices. Such factors as vendor discounts, invoice processing policies, vendor mandates, and payment delivery procedures can substantially affect payment dates.
No material difference exists between processing a payroll warrant and a vendor warrant. In both cases, the treasurer must create a record that discloses the payee, the amount paid, the voucher numbers, the accounts charged, and the gross amount disbursed. (See pp. 3-36 & 3-37). In processing a payroll, however, the treasurer must be vigilant in ensuring compliance with all federal and state withholding forms and requirements. Chapter 7 provides a very detailed discussion of issues and legal requirements involved in making payrolls.
A treasurer may utilize a special warrant or separate warrants to authorize payment from certain restricted funds, such as:
Under the UMAS system, however, these fund disbursements are usually included on the vendor or payroll warrant, but designated by the fund number pertaining to the particular fund.
Supporting Documentation for Cash Book
Treasurers should retain all documentation that relates to particular receipts in a file or loose-leaf book, indexing this material to the cash book. This documentation is of especial importance in the case of receipts from federal and state agencies and certain miscellaneous sources. Some types of documentation include:
Documentation is essential for a good audit trail, not only for the treasurer, but also for anyone who might audit a community. A poor audit trail in any department could be very costly to a municipality when an audit is performed because of the additional time required to verify transactions and perform the audit work.
Classification Book or Worksheet
It is a good practice for the treasurer to keep a classification book or worksheet that will provide a detailed breakdown of amounts posted to the cash book. The book or worksheet should be maintained daily or at least weekly. Preserving these records will be helpful in completing reports such as the Schedule of Treasurer’s Receipts and the annual reports.
The classification book or worksheet should be set up and maintained in a manner that will not only aid the treasurer in preparing the Schedule of Treasurer’s Receipts submitted to the town accountant or city auditor, but also will be helpful in the preparation of Schedule A.
Required Reports : Reporting from the Cash Book
All of the reports that the treasurer must make, either to internal departments or to external agencies, can be prepared from the cash book. These reports include:
From time to time, other reports may be required by governmental agencies or internal departments. The cash book should provide all the necessary information relating to municipal receipts that a treasurer will need to provide these reports, as well.
Bank Ledger (Master Check Register)
Municipalities using multiple banks and a variety of banking services may find a bank ledger to be helpful in keeping track of daily balances and in reconciling total cash each month, although a computerized spreadsheet may be even easier.
A bank ledger is a multiple column spread sheet with a separate column for each bank account. A bank ledger need not be bound. Total daily deposits, warrants paid, transfers in and out, and miscellaneous debits and credits should be posted in the appropriate columns. The bank ledger should agree with the cash book since both records reflect deposits, net of total warrants paid. Reconciled bank statements that reflect outstanding checks, deposits in transit, and other timing adjustments should also agree with both records. A bank ledger provides a particularly good trail in municipalities that transmit and receive frequent wire transfers of funds.
All in all, a bank ledger is an important tool that provides easily traceable documentation of investments and other transactions for a particular time period. (See a sample bank ledger on pg. 3-44.)
A check register lists checks paid in numerical sequence, identifying for each check the payee, date drawn, and amount paid. A separate check register should be maintained for each checking account. Check registers may be produced as part of an electronic data processing (EDP) of warrants.
The check register is the primary record for preparing the outstanding check list necessary to reconcile bank statements at the end of each month. The check register may also serve as a control for the use of checks since they are accounted for in numerical sequence. (See a sample check register on pg. 3-45.)
An investment log is a multiple column form or computerized spreadsheet disclosing for each investment such information as the date of purchase, amount paid, name of the bank or custodian, and the date and value at maturity. It is a valuable aid for the treasurer in keeping track of fixed-term investments and in computing investment income. (See a sample investment log on pg. 3-46.)
All municipal finance officers must understand their respective roles in preparation for and in the course of an audit conducted by an independent public accounting firm. Communication and cooperation between municipal officers and the audit team are essential for the effective and efficient performance and timely completion of the audit.
In preparing for an audit, a treasurer should assemble several documents for the auditors to review during their work, including:
The treasurer should be prepared to discuss with the auditors, at their request, these and any other documents relating to the financial activities of the treasurer's office.
Normally, auditors initiate an audit of a municipality's finances with a review the municipality's internal control. A municipality's internal control consist of its plan of organization, together with all of the coordinate methods and measures adopted by it to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed fiscal policies.
An internal control review encompasses four phases:
Documentation.
During the documentation phase of the internal control review, the auditors develop work papers to obtain a basic understanding of the treasury system. They learn how the treasurer performs the duties of the office.
The work papers may consist of any combination of flow charts, written narratives, copies of sample forms and reports. To develop the work papers, the auditors may need organization charts, job descriptions, procedure manuals and other documents. The auditors may also conduct interviews with employees involved in billing and collecting taxes, making daily deposits and performing monthly reconciliations. The treasurer may find the documentation materials developed by the auditor to be useful to the future performance of the duties of the office. Accordingly, the treasurer should request copies of these materials.
Preliminary Review.
After completing the documentation phase, the auditors will commence a preliminary review or evaluation of the municipality's internal control. They will ascertain whether the system contains sufficient safeguards. If they conclude the system is safe, the amount of auditing work necessary will be greatly reduced. Conversely, if they conclude otherwise, the amount of that work will be greatly expanded.
A distinct segregation of functions and duties constitutes a key element of internal control. If different individuals perform key functions, the auditors will anticipate a decreased likelihood of a problem's going undetected. For example, if a department head were to place persons on the payroll, submit the weekly time sheets and distribute checks to employees, that department head would be in a position to place a fictitious employee on the payroll and then retain and cash fraudulent checks.
While conducting the preliminary review, the auditors will begin to compile comments for the management letter. The treasurer should not hesitate to request the auditor for any comments on the internal control system. Hearing the comments right away will permit the treasurer to initiate corrective action during the audit. In this way, the management letter might include the statement, “The town official responsible has already implemented corrective action.”
Compliance Testing.
If the auditors conclude that they can rely on the internal control system, they must next ensure that the system is actually being used. This step is called “compliance testing.” It involves taking samples of transactions (normally a statistical sample) and reviewing the documents that were involved in these transactions (i.e., warrants, invoices, canceled checks, and time and attendance records). The auditors will check to see that warrants have been signed, that invoices are mathematically accurate and that purchase orders were properly approved. The auditors will also review postings in ledgers, cash books and journals. In addition, they will review the minutes of town meetings to attest that financial articles were properly recorded.
Final Evaluation.
Once the auditors have completed compliance testing, they will perform a final evaluation. This evaluation will determine whether the procedures of the system are being followed. Of course, the audit fee will relate directly to the number of hours required to perform the audit. Accordingly, audit costs are substantially reduced if a municipality has adequate internal control procedures and follows those procedures.
Substantive or Validation Tests
After the internal control review, the auditors will develop an audit program to perform substantive or validation tests. These tests will entail verifying bank account balances, reviewing legal documents, performing various analyses, and requesting management and legal representation letters. To comply with generally accepted auditing standards, the auditors will put the audit program in writing and make it a part of their working papers.
Substantive or validation testing involves reconciling a document prepared by an external organization with the town’s records to ensure the accuracy of those records. One normal substantive test is reconciling the town’s cash account with a bank statement sent directly to the auditor from the bank.
The auditor may also request a standard written confirmation with the bank statement. On such a confirmation, the bank would enumerate all town bank accounts, their account numbers, and their balances on the audit date. Such a confirmation helps the auditor to be confident that all banking accounts at particular banks have been taken into account.
Auditors frequently prepare, in addition, a list of individuals and firms that the municipality's records of receivables indicate owe money to the town on the audit date. Subsequently, they send a statement to those individuals and firms, asking them to verify the amount they owe. After they receive these statements back, they can investigate any discrepancies, thereby ascertaining the authenticity of the municipality's records.
Other substantive tests may include an analysis of investments, insurance policies, and contracts. The auditors may also review various records for the period after the audit date to determine whether transactions after the audit period that should have been recorded during that period were properly executed.
The treasurer's involvement with the audit decreases substantially after completion of this testing. At this point, the audit firm deals primarily with the municipality's executive's officers. Notwithstanding, the treasurer may be asked for assistance at any time.
All in all, since the treasurer's operations constitute a major focus of a financial audit, the treasurer must always prepare in advance by being careful to maintain up-to-date and accurate records of all financial transactions.
(See IGR 86-101 on pp. 3-47 through 3-51 for information on federal audit requirements.)
Procedures for Handling Unclaimed Checks
Ch. 200A §9A makes available to cities and towns a more advantageous procedure for handling unclaimed checks than the escheat provisions applicable to other holders of unclaimed funds, whereby they must turn over such checks to the state. Indeed, if the treasurer complies with the procedures set out in this statute, instead of having to turn the checks over to the state, the municipality can retain them.
The §9A procedures require the treasurer to declare, in writing, an intention to retain the unclaimed checks and to file that declaration with the municipal clerk. The treasurer must then give notice to the apparent owner of each check. For an uncashed check issued by the municipality in the amount of $10 or more, the treasurer must mail notice to the apparent owner, explaining how that person may solicit the money. For an uncashed check issued by the municipality in the amount of $100 or more, the treasurer must cause a notice of the check to be published.
The owner of an unclaimed check has 1 year from the date of notice to file a claim for that check. If no claim if filed, the treasurer may credit the unclaimed check to the general fund of the municipality.
If, on the other hand, a claim is filed, the treasurer possesses the sole right to determine the claim and must send written notice of the determination to the claimant. Within 20 days of this notice, the claimant may apply for a hearing and redetermination of the claim. After an appropriate hearing, the treasurer must make a final determination within 30 days after the hearing. A claimant adversely affected by the treasurer's decision may appeal within 20 days of receiving notice to the district, municipal, or superior court. If the court rules in favor of the claimant, the treasurer must pay over the amount of the check, with interest at the rate one-twelfth of 1% per month, from the date the claimant first made the claim.
The following pages (3-20 through 3-22) contain an example of a sample cash book. Section A (3-21) deals with cash receipts, Section B (3-22) with cash disbursements, and section C (3-22) with cash reconciliations. The explanations below will briefly explain the steps shown in the cash book.
A. Cash Receipts
(A.1) Beginning balance — reconciled balance brought forward from the previous month.
(A.2) Date — usually the date of receipt. Sometimes, as in the case of the direct deposit of state receipts, the entry in the cash book will be a day or two after the date of receipt in the bank account. Use both the date of entry and the date of receipt in this instance.
(A.3) Sources — primary sources of revenue are taxation and state receipts. For accurate accounting and reporting, the source must be clearly identified. If a receipt is not immediately identifiable, record and deposit it, and then follow up on it.
(A.4) Amount of receipt.
(A.5) Subtotal amount.
(A.6) Amount of deposit — when deposits to more than one bank are made, each bank should be identified.
(A.7) Total of monthly cash receipts.
B. Cash Disbursements
(B.1) Date of warrant.
(B.2) Warrant number.
(B.3) Type of warrant—this will vary with each community. Some have only one weekly warrant that includes all expenditures; others have separate warrants for payrolls, revenue sharing, investments, community development, etc. If separate cash books are maintained by fund, the treasurer should record the warrant in the cash book where receipts are recorded.
(B.4) Check series used on warrant.
(B.5) Amount of warrant.
(B.6) Total of monthly warrants.
C. Cash Reconciliation (Refer also to chapter on reconciliation.)
(C.1) Bring forward the month’s beginning balance.
(C.2) Add to this amount the total receipts for the current month.
(C.3) Deduct the total warrants paid during the month.
(C.4) Reconcile bank statements with check register balance. (Refer to information on check registers in this chapter.)
(C.5) List all banks, account numbers, types of accounts, reconciled cash balances, and cash on hand. Cash on hand consists of receipts recorded in the cash book in the current month but not yet deposited to the bank. The total of this list should equal the total cash book balance and the general ledger cash balance.
Table of Contents | Forward | Contributor’s List | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | Chapter 12 | Appendix