FINANCIAL SYSTEM SUMMARY
2018
REVISED 2020
How we manage our finances is dictated by the Washington State “Budget, Accounting, Reporting, System” (BARS) manual. In years past the District has been somewhat casual in how it conforms to the BARS manual because the State Auditor made the assumption that the County Treasurer handled all of our budgeting and reporting.
That assumption has only been partially correct, and becomes less so as the County delegates more of the budgeting and accounting responsibility to the District. The big water shed happened for our District when the County decided we were directly responsible for the annual reports to the state auditor. We had previously relied on the County to generate our annual reports. With that no longer being the case, the reports we generate in house must conform to the BARS manual.
Even when the County handled all of the accounting and reporting, they did not do so in a detailed enough fashion to manage the operations of the District. In the past we have depended on what amounted to a second set of books that, hopefully, could be reconciled to the County records, in order to have sufficient detail. The problem with that system was that it was difficult to completely reconcile the District’s records with the County records. What we have now is a system that is essentially an expansion of the County records.
The third difficulty is that we were not keeping good track of the “non-public” money. Those are primarily the deposit accounts, Meter Installation, Rent, and Developer Extension. This is not “public” money because each deposit remains the property of the individual who made the deposit. Each deposit is, in part or in whole, refundable to the original depositor. Accurately tracking this money is just as important as exact records for the public money.
The BARS manual requires the District to manage our finances using an approach called Fund Accounting on a Cash Basis. All of our financial activities are divided up into funds. The District has eight funds. Each fund has both a number and a name.
FUNDS:
401 Regular Maintenance Fund: This is the fund in which most of our activity occurs. The revenue from rate payers ends up in this fund, and we pay the majority of our bills from this fund. A portion of the fund is invested and earns a small amount of interest.
This Fund coincides with, and is reconciled to, the County Treasurer’s “Water Dist #2 Maint” Fund.
402 Revenue Bond Reserve (USDA): This is the fund into which we have collected the reserve required by the USDA. This is classified as a “Restricted” fund. Restricted funds are those funds whose use is limited by outside agencies. In this case, USDA. The balance is equal to the final payment on the USDA loan.
Aside from the original transfer from the 401 Fund to establish this fund, no additional money is transferred into it. However, it is invested and earns a small amount of interest.
This Fund coincides with, and is reconciled to, the County Treasurer’s “Water #2 Bond Rsv” Fund.
403 Capital Replacement Fund: This fund works in conjunction with the Asset Management Plan. Money is deposited in this fund from the 401 Fund based on calculations in the Asset Management Plan. It is classified as an “Assigned” fund.
This fund is used to replace, acquire and/or upgrade capital assets. Money for this fund is transferred from the 401 Fund.
404 Debt Service Fund: This fund is used to accumulate the semi-annual payments on the USDA loan. In the future it may also be used to accumulate money for any other loans.
Money to fund this fund is transferred from the 401 Fund. It is classified as an “Assigned” fund.
405 Major Repair Reserve: This fund accumulates money to cover unexpected major repairs outside the Capital Replacement Fund, such as water main breaks. It is funded by transfers from the 401 fund. It is classified as an “Assigned” fund.
410 General Facilities Fund: This is an Assigned Fund. These funds are used to make general system expansions to accommodate growth.
As identified by the District, these funds would be used for general upsizing projects, such as installing higher capacity well pumps, acquiring additional water rights, or expanding our control capabilities. The money for this fund comes from General Facilities payments, which are the “connection fees” that are paid at the time a new connection to the system is requested.
Actual system expansion in order to serve new connections, such as extended water mains, in keeping with District policy, is paid for by the benefited properties through a Developer Extension Agreement.
This Fund coincides with, and is reconciled to, the County Treasurer’s “Water Dist #2 Fac Reserve” Fund.
600 Refundable Deposits: These are funds that do not actually belong to the District. They are funds that have been deposited into our keeping for specific purposes. Refundable deposits include the Rent Deposit, Developer Extension Deposit, and Meter Deposit.
When charges are taken out of these funds, the cost of installing a meter for instance, the money is transferred into one of the other funds. Typically the 601 Clearing Fund and then into the 401 Regular Maintenance Fund. Any money remaining is refunded to the customer.
These funds do not coincide with any County fund designations. The County Treasurer has no record of these funds. The Accounts associated with this Fund are reconciled to the Bank of the Pacific.
601 Clearing Fund: Not to be confused with the #1 Clearing Account (we will get into “accounts” in a bit). This is the fund into which we deposit receipts prior to transferring them to the County Treasurer.
The fund also serves to manage the time delay between when we receive a credit card payment and when that payment is deposited in the Clearing Account by the processing company.
This fund does not coincide with any County funds. The only Accounts in this fund are the #1 General Maintenance Account and the #11 EFT Clearing Account. It is reconciled to the Bank of the Pacific and to the credit card processing company’s reports.
ACCOUNTS:
Since this is Fund Accounting on the Cash Basis, there have to be cash accounts. Unlike business accounting, “Accounts” refer specifically to cash accounts. Typically, they can be thought of as checking accounts, which some of them actually are. What are thought of as “Accounts” in business, such as “Office Supplies” or “Electricity” are styled “BARS Accounts” and are typically referred to as “budget line items”.
While the Funds each have a three digit number, Cash Accounts are simply numbered sequentially. All Cash Accounts are associated with a Fund.
#1 General Maintenance: This is the checking account into which we deposit receipts from rate payers for water bills, various fees associated with water service, and General Facilities Funds. This is a clearing account from which we write a monthly check(s) to the County Treasurer.
The #1 General Maintenance cash account is attached to the 601 Clearing Fund. It is reconciled with the Bank of the Pacific.
#2 County Treasurer: We can think of the money transferred to the Treasurer as a checking account. The money in this account comes from the #1 General Maintenance Account through the monthly check(s) to the County Treasurer. It is attached to the 401 Regular Maintenance Fund.
This account is reconciled with the County Treasurer reports.
#3 Rent Deposit: We receive a deposit equaling two base rate billing cycles from tenants when the property owner requests that the water bill be sent to the tenant.
The tenant is refunded any money left in the account after all water bills have been brought current at the time the tenant vacates the property.
This account is attached to the 600 Refundable Deposits Fund. It has no connection to the County Treasurer and is reconciled to the Bank of the Pacific.
#4 Developer Extension: This accounts receives deposits required by our Developer Extension Agreement. The money is used to cover the expenses of reviewing and monitoring developer extension projects that are to be deeded over to the District.
Any money left in the account after completion of the project is refunded to the developer.
This account is attached to the 600 Refundable Deposits Fund. It has no connection to the County Treasurer and is reconciled to the Bank of the Pacific.
#5 Meter Deposit: We receive a deposit at the time a service meter is requested (or when a meter is to be moved at the customer’s request). The money is used to cover the District’s costs of installing a meter.
This account is attached to the 600 Refundable Deposits Fund. It has no connection to the County Treasurer and is reconciled to the Bank of the Pacific.
Any money left over following installation of the meter that is not transferred (by check) to the #1 General Maintenance cash account but is refunded to the customer.
#10 Petty Cash; We keep a petty cash account from which we make change and for small purchases.
This account is attached to the 401 Regular Maintenance Fund. It has no connection to the County Treasurer and is reconciled on a monthly basis.
#11 EFT Clearing
This account is used to handle credit card payments. When a credit card payment is made, the funds do not go directly into the #1 General Maintenance account. It takes a few days for the transaction to clear the processing company. When funds clear, the processing company makes a deposit into the #1 General Maintenance account.
When a credit card payment is made, the transaction is recorded in the #11 EFT Clearing Account. When the processing company deposits funds into the #1 General Maintenance Account a General Ledger entry is made transferring the amount deposited from the #11 EFT Clearing Account into the #1 General Maintenance Account.
This account is reconciled to the processing company’s monthly transaction report and the Bank of America statement for the #1 Regular Maintenance account.
#12 Maintenance Investment
The District strives to keep as much money in the State investment pool as practical. This account tracks 401 Regular Maintenance funds that have been transferred to the State investment pool.
This account is reconciled with the County Treasurer monthly reports.
#13 Facilities Investment
This account tracks the 410 General Facilities funds that have been transferred to the State investment pool. It is reconciled to the County Treasurer monthly reports.
#USDA Investment
The District is required to keep one annual payment on the USDA loan in reserve for the life of the loan. This account contains that final payment. The money is invested and earns a small amount of interest.
This account is reconciled with the County Treasurer monthly reports.
REPORTS:
TREASURER’S REPORT
Page 1 of the report summarizes the condition and activity of the Funds.
The “Claims Clearing”, “Payroll Clearing” and “Outstanding Deposits” columns should generally be zero. Balances in these columns indicate that some transactions were not included in the various reconciliations.
The total at the bottom of the “Ending Balance” column should equal the total at the bottom of the “Adjusted Ending Balance”.
Page 2 summarizes the activity in the cash accounts. I have already discussed these accounts in detail above.
The important thing to notice on Page 2 is that the Ending Balance and the Adj. Balance should balance, the Outstanding columns should be zero, and the total at the bottom of the Adj Balance column should equal Adjusted Ending Balance on Page 1. The Funds (Page 1) and Accounts (Page 2) should balance.
Page 3 and 4: These pages report transfers to and from the investment accounts. Page 1 and Page 4 will almost always agree. If they don’t there will be an indication as to why in one of the “Outstanding” columns.
Why does everything have to have a number? In dealing with all of this on a daily basis, much clearer communications occur if the funds and accounts are referred to by number.
RECONCILED BUDGET POSITION
This report details the revenues and expenditures for the previous month and the year and compares those amounts to the budget. In the private sector this report would be the profit and loss report.
It is divided into sections by Fund.
The revenue section of the 401 Fund appears somewhat odd because of history. You will note that there are revenue BARS Accounts with zero balances. That is because we used these accounts in the past, but no longer do. All revenue now appears in the 397 BARS Accounts “Interfund Transfers”. The detail now appears in the 601 Fund section of this report.
There may be an un-reconciled version of this report. You will see those when the County Treasurer reports did not arrive in time to reconcile the county’s records with the district’s prior to preparation of the reports for the Commissioners’ meeting.
RECEIPT REGISTER
This report simply details all the cash receipts for the previous month. Commissioners will be notified if receipts are not reconciled with the bank records. Typically, bank statements are available on line on the first business of the following month, so reconciliation is generally not an issue.
CLAIMS PAYMENT REQUEST
This report is the detail of all the bills we want the County Treasurer to pay.
ADDITIONAL REPORTS
There are other reports generated that serve as the background to the reports generally presented at the Commissioners’ meetings. All the presented reports are reconciled to the base reports.
Some of these reports include the county reports and the reconciliation reports.
The commissioners may request these reports at any time.
GLOSSARY
Not in any order
ACCOUNTS: Literally, checking accounts. This includes the County Treasurer, who is, for
all intents and purposes, a checking account.
FUNDS: Funds are dedicated money. For instance, the General Maintenance Fund is
dedicated to supporting the day-to-day operations of the District.
There are four “Classifications” for funds based on what the money is to be used
for. Only two of the classifications apply to the District, Restricted and
Assigned. All the District’s funds are “Assigned” except the 402 Fund, which
is “Restricted”.
BARS ACCOUNTS: The BARS Accounts comprise our Chart of Accounts. These are the line items
into which our budget and financial reports are divided.
MONEY: We often think of “money” as “funds”. In order to avoid confusion within
the financial management system, “money” is money, and “funds” are Funds.