AUDIT
UNIT FREQUENTLY ASKED QUESTIONS |
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| How
do I prepare for a PERAC audit?
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The
audit process will proceed at a faster pace if you have
the following records available for the auditors when
they arrive:
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| 1.Copies
of the last 3 annual statements |
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| 2.Copies
of the last 3 supplemental schedules |
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| 3.Copies
of bank statements and reconciliation’s from
the ending date of the last audit
through the most current month |
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| 4.Cashbooks,
trials, and journal entries for the past three
years |
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| 5.Appropriation
letters, funding schedules, and actuarial valuations
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| 6.Minutes
of Board Meetings |
This is not intended to be a complete
list but it will help you avoid a rush to find these
documents.
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| Do
I need to record every investment transaction in my
cashbook? |
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No! You may utilize the summary information provided
by your custodian and enter on the cashbook the total
buys, sells, gain, or loss and income by investment
category. |
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| Who
is responsible for reconciling the bank accounts? |
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In accordance with G.L. c.32(23)(2), the treasurer is
custodian of the system. The treasurer, as custodian,
is responsible for reconciling all cash accounts on
a monthly basis. The treasurer must present a copy of
the reconciliation to the board each month listing any
items that are in transit or outstanding. |
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| What
is a pooled fund and what accounting entries need to
be made? |
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Any investment that is comprised of more than one underlying
individual security is considered a pooled fund. Examples
include mutual funds, commingled funds, index funds,
venture capital, real estate, international equity,
and international and fixed income funds.
Debit: Cash
Credit: Investment Income
Debit: Investment Pooled Funds
Credit: Cash
- To record fees (Two entries are
required):
Debit: Management Fees
Credit: Cash
Debit: Cash
Credit: Investment Pooled Funds
- To record a sale or distribution:
Debit: Cash
Credit: Investment Pooled Funds
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| What
steps should be taken when making a change in custodian?
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An RFP should be prepared wherein
exactly the services that you need are specified. The
RFP must include all the PERAC reporting requirements.
You should also try to schedule the change in custodian
to occur on December 31st. |
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| What
am I required to do each month to insure that my custodian
report is correct? |
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Each month you should match the
individual confirms of the purchase and sales of investments
to insure that each transaction has been properly recorded
by the custodian. |
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| Am
I required to continue to keep investment cards? |
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If you have a computerized program
with the same information that is on the manual card,
you do not have to continue to keep the cards manually.
Also, if you have a custodian bank that has the same
information on its statements, you may utilize the statements
rather than keep individual cards. |
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| How
do I record a merger or other change in the name of
the equity that I own? |
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Record a sale of the stock in
the cash receipts page at $0 with the gain being the
current book value. You then purchase the new stock
by entering in the cash disbursements page at a cost
of $0. The value of the stock will be increased to market
at the end of the year. Any cash received should be
recorded as investment income. |
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| When
do you transfer money to the Expense Fund in order pay
for expenses paid? |
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At the end of the year,
when you make the closing entries, you will transfer
from Investment Income the exact amount that was expended
during the past year for expenses. Please note that
for the 1997 calendar year the amount transferred from
investment income will be less the amount of the balance
of the Expense Fund as of January 1, 1997. The Expense
Fund each December 31st from 1997 forward must equal
zero. |
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