Library Bulletins

Budgets

Final Action on Budgets

FINAL ACTION ON BUDGETS

If any reduction is made by the Department of Local Government Finance in the library’s budget and tax levy, the appropriating body should comply with the section of the budget law found in IC 6- 1.1-18-4 which is quoted below:

“Appropriations not to exceed budget – Except as otherwise provided in this chapter, the proper officers of a political subdivision shall appropriate funds in such a manner that the expenditures for a year do not exceed its budget for that year as finally determined under this article.”

Capital Assets              

Establishing the Estimated Cost of Capital Assets

Inventories of Capital Assets

Child Labor Law Restrictions

Claims - Filing and Docketing

Claims for Payments to State and Federal Agencies

Credit Cards

Cybersecurity Incidents - Reporting

CAPITAL ASSETS

ESTABLISHING THE ESTIMATED COST OF CAPITAL ASSETS

When it is not possible to determine the historical cost of capital assets owned by a governmental unit, the following procedure should be followed.

Develop an inventory of all capital assets which are significant for which records of the historical costs are not available. Obtain an estimate of the replacement costs of these assets. Through inquiry determine the year or approximate year of acquisition. Then multiply the estimated replacement cost by the factor for the year of acquisition from the Table of Cost Indexes. The resulting amount will be the estimated cost of the asset.

In some cases estimated replacement cost can be obtained from insurance policies; however, if estimated replacement costs are not available from insurance policies, you should obtain or make an estimate of the replacement costs.

If the replacement cost is estimated to be $76,000.00 and the asset was constructed about 1930, then the estimated cost of the asset should be reported as $5,320.00.

INVENTORIES OF CAPITAL ASSETS

Every library should have a complete inventory of all capital assets owned which reflects their acquisition value. Such inventory should be recorded in the Capital Assets Ledger, General Form 369. A complete inventory should be taken at least once a year for good internal control and for verifying account balances carried in the accounting records.

Capitalization Policy

The governing body should establish a capitalization policy that sets a dollar amount as a threshold to be used in determining which items will be recorded.

Land

The records of each library should reflect land owned, its location, its acquisition date and cost (purchase price). Infrastructure A capital asset account for the cost of infrastructure should reflect the location of each road, bridge, tunnel, drainage system, water, wastewater or stormwater system, dam, or lighting system.

Buildings

A capital asset account for buildings should reflect the location of each building and the cost value (being the purchase or construction cost) and, if improvements are made to the building, the cost of such improvements would be included. If a building is acquired by gift, the account would reflect its appraised value at the time of acquisition.

Improvement Other Than Buildings

A capital asset account should reflect the acquisition value of permanent improvements, other than buildings, which have been added to land. Examples of such improvements are fences, retaining walls, parking lots, and most landscaping. The improvements would be valued at the purchase or construction cost.

Equipment

Tangible property of a permanent nature, other than land, buildings and improvements, should be inventoried. Examples include machinery, trucks, cars, furniture, desks, safes, cabinets, etc. The value of such items should be carried in the inventory at the purchase cost.

Construction Work In Progress

Where construction work has not been completed in the current calendar year, the cost of the project should be carried as “construction work in progress.” When the project is completed, it will be placed on the inventory applicable to the assigned asset accounts.

CHILD LABOR LAW RESTRICTIONS

IC 20-33-3 places certain restrictions on work hours for children under 18 years old. For questions regarding child labor laws, please contact the Indiana Department of Labor. The Bureau of Child Labor home page is located at https://www.in.gov/dol/childlabor.htm. The preferred contact information is childlabor@dol.in.gov.

IC 20-33-3-39 through IC 20-33-3-41 list the penalties for violations of the child employment laws which can be as high as $400 per violation.        

CLAIMS FOR PAYMENTS TO STATE AND FEDERAL AGENCIES

The State Board of Accounts’ audit position is that when statutory payments are due to state or federal agencies, there is no requirement for the state or federal agency to file an invoice or claim for such payments. This audit position would include payments for social security obligations, public employees’ retirement fund contributions, federal, state, or county taxes withheld, sales tax, and other such amounts due state or federal agencies. The disbursing officer should prepare an accounts payable voucher and attach any copies of payroll deduction reports, federal or state invoices, communications, etc., to document the payment. The accounts payable voucher will provide a posting media indicating to whom paid, fund on which drawn, accounts to be charged, and the approval by the proper boards.

FILING AND DOCKETING CLAIMS

Indiana Code 5-11-10-2 states in part:

“(a) Claims against a political subdivision of the state must be approved by the officer or person receiving the goods or services, be audited for correctness and approved by the disbursing officer of the political subdivision, and, where applicable, be allowed by the governing body having jurisdiction over allowance of such claims before they are paid. If the claim is against a governmental entity as defined in section 1.6 [IC 5-11-10-1.6] of this chapter, the claim must be certified by the fiscal officer.

(b) The state board of accounts shall prescribe a form which will permit claims from two (2) or more claimants to be listed on a single document and, when such list is signed by members of the governing body showing the claims and amounts allowed each claimant and the total claimed and allowed as listed on such document, it shall not be necessary for the members to sign each claim.

(c) Applies to solid waste management districts.

(d) The form prescribed under this section shall be prepared by or filed with the disbursing officer of the political subdivision together with… the supporting invoices or bills...

(e) Where under any law it is provided that each claim be allowed over the signatures of members of a governing body, or a claim docket or accounts payable voucher register be prepared listing claims to be considered for allowance, the form and procedure prescribed in this section shall be in lieu of the provisions of the other law.”

The State Board of Accounts has prescribed General Form No. 364, Accounts Payable Voucher Register, which shall be prepared by, or filed with, the disbursing officer of the library, together with the supporting accounts payable voucher, and all such documents shall be carefully preserved by the disbursing officer as a part of the official records of the office.
If members of the governing body would rather approve and sign each individual accounts payable voucher in lieu of signing the Allowance of Vouchers section of General Form 364, this procedure is acceptable.

Indiana Code 5-11-10-1.6 states, in part:

“(c) The fiscal officer of a governmental entity may not draw a warrant or check for payment of a claim unless:

(1) there is a fully itemized invoice or bill for the claim;
(2) the invoice or bill is approved by the officer or person receiving the goods and services;
(3) the invoice or bill is filed with the governmental entity's fiscal officer;
(4) the fiscal officer audits and certifies before payment that the invoice or bill is true and correct; and
(5) payment of the claim is allowed by the governmental entity's legislative body or the board or official having jurisdiction over allowance of payment of the claim…

(d) The fiscal officer of a governmental entity shall issue checks or warrants for claims by the governmental entity that meet all of the requirements of this section. The fiscal officer does not incur personal liability for disbursements:

(1) processed in accordance with this section; and
(2) for which funds are appropriated and available.

(e) The certification provided for in subsection (c)(4) must be on a form prescribed by the state board of accounts.”

The library fiscal officer has the option of certifying either on each Accounts Payable Voucher or by signing the certification section of the Accounts Payable Voucher Register.

CREDIT CARDS

The State Board of Accounts will not take exception to the use of credit cards by a governmental unit provided the following criteria are observed:

1. The governing board must authorize credit card use through an ordinance or resolution, which has been approved in the minutes.
2. Issuance and use should be handled by an official or employee designated by the board.
3. The purposes for which the credit card may be used must be specifically stated in the ordinance or resolution.
4. When the purpose for which the credit card has been issued has been accomplished, the card should be returned to the custody of the responsible person.
5. The designated responsible official or employee should maintain an accounting system or log which would include the names of individuals requesting usage of the cards, their position, estimated amounts to be charged, fund and account numbers to be charged, date the card is issued and returned, etc.
6. Credit cards should not be used to bypass the accounting system. One reason that purchase orders are issued is to provide the fiscal officer with the means to encumber and track appropriations to provide the governing board and other officials with timely and accurate accounting information and monitoring of the accounting system.
7. Payment should not be made on the basis of the statement or a credit card slip only. Procedures for payments should be no different than for any other claim. Supporting documents such as paid bills and receipts must be available. Additionally, any interest or penalty incurred due to the late filing or furnishing of documentation by an officer or employee should be the responsibility of that officer or employee.

If properly authorized, an annual fee may be paid.

REPORTING CYBERSECURITY INCIDENTS

House Enrolled Act 1169 (2021) added IC 4-13.1-2-9 as a new section to the Indiana Code which requires political subdivisions, as defined in IC 36-1-2-13, to report any cybersecurity incident using their best professional judgement to the Indiana Office of Technology (IOT) without unreasonable delay and not later than two business days after discovery of the cybersecurity incident. A cybersecurity incident may consist of one or more of the following categories of attack vectors: (1) Ransomware, (2) Business email compromise, (3) Vulnerability Exploitation, (4) Zero-day exploitation, (5) Distributed denial of service, (6) Web site defacement, (7) Other sophisticated attacks as defined by the chief of information officer and that are posted on the officer’s Internet web site. (IC 4-13.1-1-1.5)

Cybersecurity incidents can be reported on IOT’s web site at the following webpage. https://www.in.gov/cybersecurity/report-a-cyber-crime/

Donations

CONTRIBUTIONS, DONATIONS, GIFTS

Library Gift Funds

Pursuant to IC 36-12-3-11(a)(5), money or securities accepted and secured by the library board as a grant, gift, donation, endowment, bequest or trust may be set aside in a separate fund or funds, and shall be expended, without appropriation, in accordance with the conditions and purposes specified by the donor.

Definitions
The following definitions apply to the gift fund.

"Restricted" gifts are those to which the donor has attached terms, conditions and purposes. These may be quite specific or very general, such as "books", etc.

"Unrestricted" gifts are those to which the donor has not attached terms, conditions or purposes.

Sources
Grants, gifts, donations, endowments, and bequests (hereinafter required to collectively as "gift"). It is the prerogative of the Board to accept or reject any gift.

Income in the form of tax receipts, fees, sale of library property, rental, etc. may not be receipted into the library gift fund.

Accounting
Gifts may be handled in any of the following ways:

Operating Fund. If the gift is unrestricted, the library may receipt the gift into the library operating fund.

A. If deposited into the library operating fund, the gift money must be budgeted, appropriated (in the regular budget or by additional appropriation) in the manner prescribed, including advertising and approval by the Department of Local Government Finance. Any gift receipted to the Library Operating Fund must be posted to Columns A-1 and B-1 of the Library Financial and Appropriation Record. Disbursements are to be posted to Columns A-2 and B-2 and also in the applicable appropriation columns.

B. Gift money placed into the library operating fund may be spent as determined by the library board within the scope of its statutory authority. It is to be expended as other funds of the library.

C. Gift money placed in the library operating fund does not accumulate and must be spent or encumbered within the fiscal year or it will revert to the library operating fund balance and must be re-appropriated before the disbursement.

Separate Fund or Funds. A separate fund may be established for each gift; gifts for like purposes may be receipted into separate funds for each purpose; or all gifts may be placed into one "Gift Fund".

Use of Gift Funds
If the library board chooses to receipt any gift (restricted or unrestricted) to a separate fund or funds, the following will apply.

1. Gift money may be spent without budgeting or appropriation.
2. If restricted, it must be spent according to the donor's restrictions.
3. If unrestricted, it may be spent as determined by the library board within the scope of its statutory authority.
4. The fund or funds may be accumulated and may be spent at any time the library board determines, unless otherwise required by the terms of the donor.

Accounting
If all gifts are placed into a "Gift Fund", the following accounting will be necessary:

1. A subsidiary record to keep track of the disbursements relating to each gift must be maintained.
2. The subsidiary record may be kept on any appropriate commercial form or columnar worksheet, such as a cash journal.
3. A separate sheet should be opened in this subsidiary record for each restricted gift. Entries to this separate sheet would include the receipt of the restricted gift and disbursements chargeable to each gift including the date, amount and explanation of each.
4. Income from the interest on gifts may be receipted into the same fund in which the principal of such gift has been receipted provided it is to be used for the same purpose as the principal. However, if, under the terms of the trust, the principal must be held in trust in perpetuity and only the income used by the governmental unit, there should be two accounts established, one designated as "Trust Principal" and the other designated "Trust Income."
5. Unrestricted gift fund monies may be invested as part of the "total monies on deposit," and the interest thereon receipted to the library operating fund.
6. All funds, regardless of source, are deposited by the treasurer in only one bank account in each designated depository.
7. Receipts to and disbursements from a separate gift fund or funds may be posted in columns D-1, D-2, E-1, E-2, and E-3 or F-1, F-2 , and F-3 on the Library Financial and Appropriation Record if such columns are not being used. If space for additional funds is needed, the optional flyleaf sheet (Library Form No. 1C) should be used. This form contains columns for four additional funds.

Community Foundation Transfers
Gifts to the library may be set aside in an account with a nonprofit corporation established for the sole purpose of building permanent endowments within a community (referred to as a "community foundation"). The earnings on the funds in the account, either deposited by the library or accepted by the community foundation on behalf of the library, may be distributed back to the library for disbursement, without appropriation, in accordance with the conditions and purposes specified by the donor. A community foundation that distributes earnings under this clause is not required to make more than one (1) distribution of earnings in a calendar year. [IC 36-12-3-11(a)(5)(B)]

This action must be authorized by the library board by resolution. Note that the statute does not provide for a return of principal to the library.

Examination of Records and Statement of Engagement Cost

EXAMNINATION OF RECORDS AND STATEMENT OF ENGAGEMENT COST

At the end of an audit engagement the State Board of Accounts sends a notice of Statement of Engagement Cost to each political subdivision, including the County. This statement details a summary of the engagement including the number of days spent on the audit, the daily/hourly rate, and any report processing fees. We would like to point out that this statement is not an invoice that is to be paid by the entities.

A separate invoice for payment of these audit costs will be sent to the County for payment in accordance with IC 5-11-4. Immediately upon receipt of the certified statement, the county auditor shall issue a warrant on the county treasurer payable to the treasurer of state out of the general fund of the county for the amount stated in the certificate. The county auditor shall reimburse the county general fund, except for the expense of examination and investigation of county offices, out of the money due the taxing units at the next semiannual settlement of the collection of taxes.

If the county reasonably believes or knows that it does not have on hand or will not have collected enough taxes by the next distribution date for a taxing unit included on the examination of records billing, then the county auditor will send the certified statement to the taxing unit. The taxing unit should then contact the State Board of Accounts for directions on paying for the cost of the examination directly to the State Board of Accounts, instead of using settlement. It is important that the cost be paid off prior to the next audit. If the audit costs, due the State Board of Accounts, are not paid prior to the subsequent audit, it impairs the independence of the State Board of Accounts. This will delay future audits.

As the amount of federal funding to local governments has increased so has the need for single audits and more frequent audits which has helped drive up audit costs. We are now beginning to see this result in semiannual tax distributions that are not sufficient to pay the audit costs. It is important to plan and budget accordingly for these costs. It might be beneficial once an examination of records has been completed for the taxing unit to go directly to the county auditor if sufficient taxes will not be collected to pay the estimated costs of the examination of records. Having this conversation before receiving the certified statement from the county auditor can prepare the taxing unit for the payment of these costs. You can discuss with your field examiner during the exit, how you may best meet the costs. This may involve the use of other funds such as Rainy Day or if there are ARPA funds remaining under the revenue loss category, those can also be used to pay audit costs. If you have questions after the exit, please feel free to reach out to your State Board of Accounts Director for further assistance in looking for funds that can pay the audit costs.

When determining how these costs will be paid, it is also important to plan for the next year. During this determination, take into consideration the amount of federal assistance that you have disbursed during the year. If you have expended $750,000 or more of federal awards (whether the award is direct or passed-through another entity) in a year the taxing unit is required to have a single audit conducted in accordance with the Federal Office of Management and Budget’s Uniform Guidance. Single audits require an annual audit. If your unit does not need a Single Audit, there may be a longer time between your examinations. Since these costs could become an annual expense for the taxing unit, future budgets would need to be adjusted for those costs.

Health Savings Accounts

HEALTH SAVING ACCOUNT PAYMENTS

It has come to our attention that some units are not using payroll withholding funds to account for the employee directed Health Savings Account payments. Instead, the units make direct deposits to the Health Savings Accounts in a similar manner to the process of making net pay direct deposits to the employee’s bank account. Historically, our audit position has been to take exception to this accounting practice because all payroll transactions were not being recorded in the financial records. The State Board of Accounts has revised the audit position on this process and we will not take audit exception to amounts approved by employees being deposited directly into Health Savings Accounts without the use of a payroll withholding fund, provided the following criteria are observed:

1. Unit is following state and federal guidelines of Health Savings Accounts;
2. Reports of amounts deposited into Health Savings Accounts are produced in detail by employee for each individual payroll period and maintained for audit; and
3. Amounts deposited into Health Savings Accounts (employee and employer share) are approved by the governing board.

Levy Excess Fund

LEVY EXCESS FUND

Each year the Department of Local government Finance will certify to each library figures which show one hundred two percent (100%) of the tax levy for each fund. If the property taxes received exceed one hundred two percent (100%) of the levy, the excess shall be receipted to a levy excess fund. However, if the amount is less than one hundred dollar ($100), no transfer is required. Please see IC 6-1.1-18.5-17 for more information.

Materiality Threshold

Mileage Rates

Monthly Bank Reconcilements

MATERIALITY THRESHOLD

The following are excerpts from the Amended State Examiner Directive 2015-6 regarding a Materiality Threshold for reporting irregular material variances, losses, shortages, and thefts under IC 5-11-1-27(j). Note that this materiality threshold does not apply to a Report of Misappropriation under IC 5-11-1-27(l) as discussed in the previous article.

Indiana Code § 5-11-1-27(j) states: “All erroneous or irregular material variances, losses, shortages, or thefts of political subdivision funds or property shall be reported immediately to the state board of accounts…“.

In general, each political subdivision must develop their own policy on materiality because the causes of irregular variances, losses, shortages, and thefts are as broad and varied as the political subdivisions in which the incidents occur. For example, a $500 variance in Fort Wayne is not necessarily as concerning as a $500 variance in Pershing Township, Jackson County. On the other hand, a $100 variance in Fort Wayne that occurs every Friday may be material. Moreover, each political subdivision is the best determiner of the qualitative and quantitative factors unique to the unit in arriving at materiality.

Political subdivisions must recognize that variances, losses, shortages, and thefts may occur. If an incident occurs, it is imperative that the political subdivision have a policy in place that outlines the steps to be taken. Such a policy must include a materiality threshold at which point the political subdivision reports incidents to the State Board of Accounts.

The policy must be detailed, and it is essential that materiality thresholds distinguish between incidents involving cash and other types of assets. The policy needs to address maintenance of documentation and resolution of incidents that do not meet the materiality threshold…

If a political subdivision does not develop a policy on materiality, then the threshold is $0.00 and the political subdivision is required to report all irregular variances, losses, shortages, and thefts to the State Board of Accounts…

When an irregular variance, loss, shortage, or theft is determined material pursuant to a political subdivision’s policy on materiality (or, if no policy on materiality is developed, whenever there is any incident of irregular variance, loss, shortage, or theft), the subdivision must report the incident to the State Board of Accounts. On the State Board of Accounts’ website there is a notification link, which allows public officials to report via e-mail material irregular variances, losses, shortages, or thefts. Telephone and in-person reporting is also acceptable. Reports will be followed up with a return e-mail or call to gather additional information as necessary…”

Please review the entire contents of the Amended State Examiner Directive 2015-6.

FEDERAL AND STATE MILEAGE RATES

The Federal business mileage rate is available at www.irs.gov. The State mileage rate can be found on the Indiana Department of Administration’s website.

MONTHLY BANK RECONCILEMENTS

IC 5-13-6-1(e) states that all local investment officers shall reconcile at least monthly the balance of public funds, as disclosed by the records of local officers, with the balance statements provided by the respective depositories.

In addition to compliance with statute, monthly bank reconcilements provide internal controls to achieve the safeguarding of public assets. We have received numerous reports that bank routing and account information is being used to create false checks that are clearing bank accounts and stealing public funds. If the unauthorized payments from the account are brought to the attention of the bank in a timely manner, the bank will replace the amount that was stolen. However, if you are not reconciling monthly, you would not be aware of these fraudulent transactions and the delay in reporting these fraudulent transaction to the bank may make it more difficult to get the bank to restore the funds to the bank account. Review the bank statement monthly and verify that all of your recorded deposits are credited to your account and all withdrawals from the account are transactions that trace to checks prepared by your office or electronic funds transfers that you have authorized. By doing this, you would catch any bank errors in a timely manner. In addition you would be able to identify any fraudulent activity as early as possible.

Overdrawn Funds

OVERDRAWN FUNDS AND APPROPRIATIONS

The overdraft of a fund or appropriation is prohibited by law. Expenditures are limited to the balance in the particular fund and, in the case of budgeted funds, to the balance of the appropriation therefore. Please see IC 6-1.1-18-4. The following Uniform Compliance Guideline is in the Accounting and Uniform Compliance Guidelines for Libraries, Chapter 1:

“The cash balance of any fund may not be reduced below zero. Routinely overdrawn funds could be an indicator of serious financial problems which should be investigated by the unit. In an instance in which a unit receives a reimbursement grant, the unit must be claiming reimbursement in a timely manner. In this case, it would be possible for a fund to be overdrawn for a short period of time.”

Pension Note Disclosure

Public Work Projects Costing Less than $150,000

PENSION NOTE DISCLOSURE

The Public Employees’ Retirement System (PERF) Hybrid plan has two components, the defined benefit plan and the member’s annuity savings account. The member’s annuity savings component has been redefined as a “defined contribution” plan effective January 1, 2018. This change in definition will require a change in the disclosure in the notes to the financial statements for pensions. The defined contribution plan must be disclosed in a separate paragraph from the defined benefit plan component. In the past, these plans were presented together.

For the Enhanced Regulatory financial statements for 2019, this information will be shown in the pension note disclosure, however, in reviewing and approving the financial statements and notes to the financial statements, you will need to review that the defined benefit component has been separately identified. On the SBOA website at www.in.gov/sboa under 2019 Gateway-Annual Financial Report (AFR) Changes there are example reports. These reports provide an example of how the note disclosure for the defined benefit component should be reported. If any of your employees are enrolled in the My Choice plan rather than the PERF Hybrid plan, this will also need be disclosed as a defined contribution plan.

PUBLIC WORKS PROJECTS COSTING LESS THAN $150,000

IC 36-1-12-4.9 states:

1. This section applies to a public work for the routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property if the cost of the public work is estimated to be less than one hundred fifty thousand dollars ($150,000).
2. The board may award a contract for public work described in subsection (a) in the manner provided in IC 5-22

We will not take audit exception to expenditures for projects under $150,000 that maintain the existing condition of the asset or restore the asset to normal operating efficiency and which might qualify as routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property under IC 36-1-12-4.9. Included in our audit position could be expenditures for the replacement and repair of elevators, flooring, ceiling, tile, bathroom fixtures, windows, sidewalks parking lots and roofs which would not be part of another public works project. Additionally, the costs associated with reconfiguring the interior of offices (additions/deletions of wiring for electrical outlets, lighting, data lines, and telephones, cubicle walls, etc.) and reconfiguring offices with movable walls which would not be part of another public works project, could be considered. Not included would be additions to the structure, reconfiguring offices with permanent walls, change of purpose of an area that involves substantial addition or removal of plumbing or gas lines (adding a kitchen area or bathroom), addition of elevator shafts, parking lots and other like changes to the interior or exterior that involve changes to the structural integrity of the building or improvements to real property, etc. or expenditures for which a determination has been made of the applicability of other provisions of the Public Works Law, IC 36-1-12-1 et seq. Our audit position is with the assumption a determination has been made by the governmental unit in a public meeting of the applicability of IC 36-1-12-4.9 to the proposed public works project.

Ransomware

Record of Hours Worked

Record Retention

Report of Misappropriation

RANSOMWARE

Ransomware is a type of malicious software designed to block access to a computer system until a sum of money is paid. The principle of ransomware is that the malware encrypts files on a system’s hard drive using an unbreakable key, and this is decrypted by the attacker once a ransom is paid.

There have been increased instances of ransomware recently, both locally and nationally. Beware of unexpected or suspicious emails, especially those containing a link or requesting a reply. Most ransomware is delivered via email and the typical overall themes are shipping notices from delivery companies. Also, many attacks are delivered by mass random emails because the intention is to infect as many as possible to maximize the chances of getting a result.

Consider your library’s policies related to the protection of computer information. The most common advice to recover from an attack by ransomware relies largely on whether a good backup policy is employed. Backup expectations are discussed in the Accounting and Uniform Compliance Guidelines for Indiana Political Subdivisions – Information Technology. Governmental entities also should keep their anti-virus software up-to-date and apply security patches in a timely manner.

If you become a victim of ransomware or any cybersecurity incidents, effective July 1, 2021, IC 4- 13.1-2-9 will require you to report cybersecurity incidents to the Indiana Office of Technology (IOT) within 2 business days after discovery. The IOT will be developing a format by which such notifications will be made. We would also recommend contacting local law enforcement agencies, your software vendor, and the State Board of Accounts.

RECORD OF HOURS WORKED

An employee who works for more than one (1) governmental unit should not be paid by more than one (1) governmental unit for the same period of time worked. Such employee should use his/her accumulated leave time from one (1) governmental unit while serving the other governmental unit when there is an overlap in a work schedule. For example, a library director, who is also a member of a school board, attends a school board meeting during his/her normal library work shift. The director would be expected to use his/her leave time accumulated at the library while attending such meeting. IC 5-11-9-4 requires such officers and employees to maintain records showing which hours were worked each day.

In libraries where timecards are not used, this requirement can be met by preparing an endorsement on the payroll claim form showing the general work schedule and listing the specific affected employees who worked hours different from that general work schedule. The employee’s supervisor/department head would be responsible for preparing such endorsement on the payroll claim for their department or area.

At libraries where timecards are used, each supervisor/department head should be approving the timecards of each of the employees that they are responsible for.

RECORD RETENTION

IC 5-15-6-3 states:

“No financial records or records relating to financial records shall be destroyed until the earlier of the following actions:

1. The audit of the records by the state board of accounts has been completed, report filed, and any exceptions set out in the report satisfied.
2. The financial record or records have been copied or reproduced in accordance with a retention schedule or with the written consent of the administration.”

IC 26-2-8-111 states in part:

“(a) If a law requires that certain records be retained, that requirement is met by retaining an electronic record of the information in the record that:

1. Accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and
2. Remains accessible for later reference…

(e) If a law requires retention of a check, that requirement is satisfied by retention of an electronic record of the information on the front and back of the check in accordance with subsection (a).”

More information on record retention is available on the Indiana Archives and Records Administration website at www.in.gov/iara, including retention schedules and electronic records management.

REPORT OF MISAPPROPRIATION

Indiana Code 5-11-1-27(l) requires a public officer who has actual knowledge or reasonable cause to believe that there has been a misappropriation of public funds or assets to immediately send a written notice to the State Board of Accounts and the prosecuting attorney.

Indiana Code 5-11-1-27(l) states:

(l) A public officer who has actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds or assets of the public office, including:

1. information obtained as a result of a police report;
2. an internal audit finding; or
3. another source indicating that a misappropriation has occurred;

shall immediately send written notice of the misappropriation to the state board of accounts and the prosecuting attorney serving in the area governed by the political subdivision.

The State Examiner Directive 2015-6 also addresses this statute.

The policy must also consider Ind. Code § 5-11-1-27(l), which requires public officials who have actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds to immediately send written notice of the misappropriation to the State Board of Accounts and the prosecuting attorney. There is no materiality threshold applicable to Ind. Code § 5-11-1-27(l). Thus, whenever a political subdivision has actual knowledge or is reasonably certain that a misappropriation of public funds has occurred (regardless of the dollar amount), the political subdivision must send written notice of the misappropriation to the State Board of Accounts and the local prosecuting attorney. Misappropriation occurs when an employee or in-house contractor of the political subdivision wrongly takes or embezzles public funds. When there is a known misappropriation or embezzlement of public funds by an internal actor, materiality is irrelevant. Indiana law requires the political subdivision to report the activity to the State Board of Accounts and the local prosecutor. Ind. Code § 5-11-1-27(l).

We are finding that the requirements of this statute are not being followed consistently. If a public official fails to report the misappropriation of funds or assets in a timely manner, this will result in a finding in the audit report. This may also result in additional audit costs. Also, be aware that reporting the misappropriation to a law enforcement agency does not fulfill the requirements of the statute. Even when you have notified law enforcement officials, you must still notify the State Board of Accounts and the prosecutor. If there are any concerns on the response the board of accounts will take after a report is received or how they will liaison with the law enforcement investigation, you can contact our Director of Special Investigations at (317) 232-2513.

Social Security Verification

SOCIAL SECURITY VERIFICATION
The Social Security Administration provides an online verification of social security numbers of current and former employees at this link: https://www.ssa.gov/employer/ssnv.htm.

This service is useful to ensure that your current employees’ social security numbers match those on file with the Social Security Administration and can provide some assurance that retirees of single-employer pension plans are not deceased. This verification could be a necessary audit procedure if the library offers a single-employer pension plan. Our Field \ Examiners may request that you provide documentation that you have verified retirees receiving benefits from these plans are not, if fact, deceased. Consider enrolling for this service if you have not already done so and performing this verification prior to the start of the audit to avoid any delays in completion of the audit timely.

Temporary Transfers to Depleted Funds

Timely Filing of Required Reports

Travel Expense

TEMPORARY TRANSFERS TO DEPLETED FUNDS

Indiana Code 36-1-8-4 states:

“(a) The fiscal body of a political subdivision may, by ordinance or resolution, permit the transfer of a prescribed amount, for a prescribed period, to a fund in need of money for cash flow purposes from another fund of the political subdivision if all these conditions are met:

1. It must be necessary to borrow money to enhance the fund that is in need of money for cash flow purposes.
2. There must be sufficient money on deposit to the credit of the other fund that can be temporarily transferred.
3. Except as provided in subsection (b), the prescribed period must end during the budget year of the year in which the transfer occurs.
4. The amount transferred must be returned to the other fund at the end of the prescribed period.
5. Only revenues derived from the levying and collection of property taxes or special taxes or from operation of the political subdivision may be included in the amount transferred.

(b) If the fiscal body of a political subdivision determines that an emergency exists that requires an extension of the prescribed period of a transfer under this section, the prescribed period may be extended for not more than six (6) months beyond the budget year of the year in which the transfer occurs if the fiscal body does the following:

(1) Passes an ordinance or a resolution that contains the following:

1. A statement that the fiscal body has determined that an emergency exists.
2. A brief description of the grounds for the emergency.
3. The date the loan will be repaid that is not more than six (6) months beyond the budget year in which the transfer occurs.

(2) Immediately forwards the ordinance or resolution to the state board of accounts and the department of local government finance.”

Funds advanced shall be derived from taxes on property, special taxes, or any other revenue received from any operation of the municipal corporation.

Such temporary transfers should be affected by issuing a warrant and receipt for the amount of the transfer. The warrant should be endorsed and deposited in the depository account designated for the depleted fund. No appropriation is required either for the transfer or the repayment. Also, no interest should be charged on any such temporary transfer.

TIMELY FILING OF REQUIRED REPORTS

The Certified Report of Names, Addresses, Duties and Compensation of Public Employees (Form 100-R) and Annual Financial Report (AFR)

As previously discussed and pursuant to IC 5-11-13-1, all governmental units in the state must file the certified personnel report (Form 100-R) in January of each year with the SBOA. Also, pursuant to IC 5-11-1-4, all local governmental units in the state must file an Annual Financial Report (AFR) not later than 60 days after the close of each fiscal year. The Indiana Gateway for Government Units (Gateway) system was created to collect both of these reports.

Due to the importance of these reports, the State Examiner has established the following procedures for reports not filed timely:

If either the 100R or the AFR are not filed by the statutory due date, the State Board of Accounts will subpoena the fiscal officer to appear in our Indianapolis office with the information necessary to complete the 100R or AFR, as applicable. This subpoena will be served either by certified mail or through personal service by a representative of the Office of the Attorney General (OAG).

If the fiscal officer does not appear or does not submit the 100R or AFR in response to the subpoena, the State Examiner will send a notification to the OAG requesting the OAG to compel the fiscal officer to appear in court to answer as to his or her failure to file the report. The State Examiner may also send notification of the officer’s failure to comply with the law to the local prosecuting attorney.

Indiana Code 5-11-1-10 addresses the penalty for not filing a required report and not following the directions of the State Examiner:

A public officer who:

1. fails to make, verify, and file with the state examiner any report required by this chapter;
2. fails to follow the directions of the state examiner in keeping the accounts of the officer's office;
3. refuses the state examiner, deputy examiner, field examiner, or private examiner access to the books, accounts, papers, documents, cash drawer, or cash of the officer's office; or
4. interferes with an examiner in the discharge of the examiner's official duties; commits a Class B infraction and forfeits office.

If you need submission rights or have any questions regarding the use of Gateway, please contact our help desk at gateway@sboa.in.gov. Also, please feel free to contact our Directors of Audit Services if you are having difficulty completing your Form 100-R or AFR. Contact information is available on our website at www.in.gov/sboa.

TRAVEL EXPENSE

The following sets forth the audit position of the State Board of Accounts with regard to reimbursements made by local governmental units to their officers and employees for travel and meal expenses.

A local unit may reimburse such persons for actual miles traveled in their own motor vehicles on official business of the local unit at a reasonable rate per mile as fixed by an ordinance or resolution of the unit’s legislative body. The mileage rate should be fixed by the board or commission having authority to approve claims for travel expenses. No particular mileage rate has been set by the State of Indiana for local units of government and, consequently, the mileage rate lies within the discretion of legislative body, board or commission, unless otherwise provided by statute. The body setting the mileage rate should also determine whether parking fees and toll charges are included in the rate or, on the other hand, whether such expenses are to be reimbursed separately based on the submission of receipts.

Reimbursed mileage should not include travel to and from the officer’s or employee’s home and regular place of employment. If more than one person rides in the same vehicle, only one mileage reimbursement is allowable. General Form 101 (or an approved substitute) should be used for claiming mileage. The odometer reading columns on this form are to be used only when the distance between points cannot be determined by fixed mileage or official highway maps.

When traveling outside the local unit’s boundaries on official business, officers and employees may also be reimbursed for meals, lodging, and incidental expenses as defined in the travel policy. The claim for reimbursement should be supported by itemized receipts from hotels, restaurants, and taxi cabs used by the officer or employee while traveling on official business.

It is permissible for the legislative body of the local unit or the board or commission having the authority to approve claims to adopt an ordinance or resolution establishing a reasonable per diem rate intended to cover travel expenses other than hotel and mileage costs and the officer or employee may be reimbursed on the basis of such a per diem rate in lieu of submitting receipts. If a fixed per diem rate is established by policy, the policy should clearly indicate which type of expenses, in addition to meals, are included in the rate and which related expenses are to be reimbursed on the basis of actual receipts being submitted by the officer or employee. The policy should also define the local unit’s boundaries for purposes of reimbursing travel; i.e. outside a 50-mile radius of the office, outside of the county, etc. The policy should cover a proportionate reduction in the per diem rate when meals are provided by an outside party.

When state statutes govern the amounts of allowable travel reimbursements, those statutes supersede local policy. Also, when determining the reasonableness of a mileage rate or per diem rate, consideration should be given to rates established by the State of Indiana and the Federal government. The local unit should, however, consider the income tax implications of setting its rates higher than the current Federal rates.

In all cases, an officer or employee requesting reimbursement for overnight travel is required to submit a receipt from the hotel or other meeting place where such accommodations were provided.

Year-End Duties

YEAR-END DUTIES

The following is a listing of duties and reports that occur each year end.

• Monthly and Annual Engagement Uploads
• Audit Preparation
• Cancellation of Warrants – Old Outstanding Checks
• Certification of Names and Addresses to County Treasurer
• Encumbered Appropriations – Balance Available
• Dormant Fund Balances – Transfers Authorized
• Internal Control Considerations

MONTHLY AND ANNUAL ENGAGEMENT UPLOADS

In keeping with State Examiner Directive 2018-1, the following files and governmental unit information are required to be uploaded annually:

• Year-end bank statement
• Year-end outstanding check list
• Year-end investment statements
• Detail of receipts for the year
• Detail of disbursements for the year
• Current year salary ordinance
• Annual vendor history report

Annual files are due to be uploaded on Gateway no later than February 29, 2020.

SBOA personnel have developed a user guide for the Upload App located at: https://gateway.ifionline.org/userguides/engagementguide. If, after consulting the user guide, you still have questions, please contact the helpdesk at gateway@sboa.in.gov.

Exceptions to certain requirements set forth in this Directive, such as for manual records, units audited by private CPA firms, and other exceptions, are discussed in the user guide. Contact information for questions and other help, including a "Frequently Asked Questions" section, is also available on the user guide.

More information is available on the SBOA website by clicking the “Political Subdivisions” link on the left hand menu and then by selecting the appropriate unit type. Then scroll down and select the Gateway section and the Gateway Upload Application link.

AUDIT PREPARATION

When we arrive to conduct an audit, oftentimes officials have to spend time gathering information, records, and other documentation per our requests. Year-end is a good time to consider preparing some of those items in advance of our arrival so they can easily be produced when we arrive – saving time for you and the examiners.

Here are some items you can get ready at year-end that should help your engagement get off to a good start:

• Minutes of Board meetings
• Bank reconcilements complete and bank information (statements, etc.)
• Claims in order with supporting documentation available
• Copies of new resolutions, or significant contracts from the year
• Written policies and procedures (internal controls, accrued leave, travel, etc.)
• Financial reports filed with other state or federal agencies
• Grant awards and agreements (federal and state)

CANCELLATION OF WARRANTS – OLD OUTSTANDING CHECKS

Pursuant to IC 5-11-10.5, all checks outstanding and unpaid for a period of two years as of December 31 of each year are void.

Not later than March 1 of each year, the fiscal officer shall prepare, or cause to be prepared, a list in duplicate of all checks outstanding for two or more years as of December 31 last preceding. The original copy shall be filed with the library board and the duplicate copy maintained by the fiscal officer of the library. The fiscal officer shall enter the amounts so listed as a receipt to the fund or funds upon which they were originally drawn and remove the checks from the list of outstanding checks. If the fund from which the check was originally drawn is not in existence or cannot be ascertained, the amount of the outstanding check shall be receipted into the operating fund of the library.

The list prepared must include:

1. the date of issue of each warrant or check;
2. the fund upon which the warrant or check was originally drawn;
3. the name of the payee;
4. the amount of each warrant or check issued; and 5. the total amount represented by the warrants or checks listed for each fund.

CERTIFICATION OF NAMES AND ADDRESSES TO COUNTY TREASURER

IC 6-1.1-22-14 states that on or before June 1 and December 1 of each year, the disbursing officer of each political subdivision shall certify the name and address of each person who has money due the person from the political subdivision to the county treasurer of each county in which the political subdivision is located. Upon the receipt of this information, the county treasurer shall search the records to ascertain if any person so certified is delinquent in the payment of property taxes.

IC 6-1.1-22-15 states that if the county treasurer finds that a person whose name is certified to him under 6-1.1-22-14 is delinquent in the payment of taxes, he shall certify the name of that person and the amount of delinquency to the official of the political subdivision who is to make payment to the person. The disbursing officer shall periodically make deductions from money due the person and shall pay the amount of these deductions to the county treasurer.

ENCUMBERED APPROPRIATIONS – BALANCE AVAILABLE

With the opening of a new budget year and a new set of ledgers, it is advantageous to review the unpaid purchase orders and contracts which remain on the ledgers as “encumbered.”

Unpaid purchase orders and those items under contract are to be added for each appropriation account and the total carried to the new corresponding account. The actual unpaid amount of the purchase orders or contracts should be totaled and shown as a separate amount on the appropriation ledger sheet for, with proper explanation, and added to the appropriation for the same purpose. By properly carrying out this procedure, the budget will not be expected to stand any expense not anticipated in making the budget.

We suggest the proper officials of the library make a listing of these encumbered items and make it part of the minutes in the last business meeting of the year. The Department of Local Government will request this information from each unit. The information will be used to validate the current year financial worksheet during following year’s budget cycle.

Keep in mind the appropriations encumbered and carried forward can be used for no other purpose other than the purchase order or the contract for which they were appropriated.

DORMANT FUND BALANCES - TRANSFERS AUTHORIZED

IC 36-1-8-5 gives the library board the authority to order the transfer to the general fund or rainy day fund any unused and unencumbered balance in any fund raised by a general or special tax levy, the purposes of which have been fulfilled. This action may be taken by the library board at any public meeting.

IC 36-1-8-5 states in part:”

1. This section applies to all funds raised by a general or special tax levy on all the taxable property of a political subdivision.
2. Whenever the purposes of a tax levy have been fulfilled and an unused and unencumbered balance remains in the fund, the fiscal body of the political subdivision shall order the balance of that fund to be transferred as follows, unless a statute provides that it be transferred otherwise….

(4) Funds of any other political subdivision, to the general fund or rainy day fund of the political subdivision, as provided in section 5.1 of this chapter...”

INTERNAL CONTROL CONSIDERATIONS

At the end of the year, it is a good idea to evaluate the effectiveness of the internal controls of your library and determine whether changes are necessary to provide reasonable assurance that the objectives of your library are met. We also recommend documenting internal control procedures and reviewing for evidence of procedures being performed as intended. Please note that IC 5-11-1-27 requires all “personnel,” as defined in the statute, to be trained on internal controls. Please make sure that all “personnel,” including newly hired employees in 2019, have viewed the SBOA approved training video. The SBOA approved training is required only one time, but we do always recommend additional training on internal controls as determined by your library.