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ACCOUNTING FOR REVENUE
SCOPE
This chapter provides information on the laws, approved forms, reports, and procedures used in the accounting for revenue received by state agencies. Specific instructions and examples are given for the various types of revenue and deposit transactions. Other related transactions summarized include refunds of expenditure, refunds of revenue, returned checks, and debit/credit memos.
- CHAPTER
- 4.1 STATUTORY AUTHORITY ................................................................................................................................... Table of Contents
- 4.1.1 Daily Deposit Law ........................................................................................................................................
- 4.1.2 Cash Book ....................................................................................................................................................
- 4.1.3 Bonding Authority .......................................................................................................................................
- 4.2 ACCOUNTING THEORY ......................................................................................................................................
- 4.3 INTERNAL CONTROLS .......................................................................................................................................
- 4.3.1 PeopleSoft Roles ..........................................................................................................................................
- 4.3.2 Basic Internal Control Procedures for Handling of Receipts ........................................................................
- 4.4 BUSINESS PROCESSES .......................................................................................................................................
- 4.4.1 Accountability for Collections ......................................................................................................................
- 4.4.1.1 Receipts ..............................................................................................................................................
- 4.4.1.2 Cash Book (Cash Receipts Journal) .....................................................................................................
- 4.4.1.3 Reconciliation Procedures...................................................................................................................
- 4.4.2 Deposits with Treasurer of State .................................................................................................................
- 4.4.2.1 Report of Collections ..........................................................................................................................
- 4.4.2.2 TOS Deposit Approval .........................................................................................................................
- 4.4.2.3 Discovery of Errors on Deposit after Approval by TOS ........................................................................
- 4.4.3 Accounting Information Entry .....................................................................................................................
- 4.4.4 Agency Specific Processes............................................................................................................................
- 4.4.4.1 Temporary outside Deposit Accounts .................................................................................................
- 4.4.4.2 Lockbox Systems .................................................................................................................................
- 4.4.4.3 Electronic Funds Transfer ...................................................................................................................
4.4.5 Accounting for Other Receipts .....................................................................................................................
4.4.5.1 Refunds of Expenditure .......................................................................................................................
4.4.5.2 Refunds of Revenue ..........................................................................................................................
4.4.5.3 Accounting for Returned Checks from Outside Parties -- NSF ..........................................................
4.4.5.4 Monetary Donations .........................................................................................................................
4.4.6 Bank Debit/Credit Memos .........................................................................................................................
4.5 APPENDICES ....................................................................................................................................................
4.5.1 Revenue Accounts .....................................................................................................................................
4.5.2 Cash book example....................................................................................................................................
4.5.3 Accounts Receivable PeopleSoft Delivered & Custom Reports and Queries ..............................................
4.1 STATUTORY AUTHORITY
4.1.1 Daily Deposit Law
Indiana Code (IC) 5-13-6-1(b) states in part: “ all public funds collected by state officers... shall be deposited with the treasurer of state, or an approved depository selected by the treasurer of state, not later than the business day following the receipt of the funds... Deposits do not relieve any state officer from the duty of maintaining a cashbook under IC 5-13-5-1. ”
IC 5-13-4-20 defines public funds as "all fees and funds of whatever kind or character coming into the possession of any public officer by virtue of that office."
IC 35-44.2-2 notes that failure to deposit public funds as required is a Class A misdemeanor. “ However, the offense is a Level 6 felony if the amount involved is at least seven hundred fifty dollars ($750), and a Level 5 felony if the amount involved is at least fifty thousand dollars ($50,000).”
IC 5-13-6-1(f ) states: “An office of: (1) the department of natural resources; or (2) the department of state revenue; that is detached from the main office of the department is not required to deposit funds on the business day following receipt if the funds on hand do not exceed five hundred dollars ($500). However, the office must deposit the funds on hand not later than the business day following the day that the funds exceed five hundred dollars ($500). ”
IC 5-13-6-1(g) states: “ The following are not required to deposit funds on the business day following receipt if the funds on hand do not exceed five hundred dollars ($500): (1) An office of the legislative branch of state government... However, the funds on hand must be deposited not later than the business day following the day that the funds exceed five hundred dollars ($500). ”
4.1.2 Cash Book
IC 5-13-5-1 states: “ (a) Every public officer who receives or distributes public funds shall: (1) keep a cashbook into which the public officer shall enter daily, by item, all receipts of public funds; and (2) balance the cashbook daily to show funds on hand at the close of each day. (b) The cashbook is a public record and is open to public inspection in accordance with IC 5-14-3. (c) A person who violates this section is subject to criminal prosecution under IC 35-44.2-2-2. ”
Licenses, permits, goods for sale, invoices, etc., are considered accountable items for which a corresponding deposit must be made.
Receipts should be issued and recorded at the time of the transaction; for example, when cash or a check is received, a receipt is to be immediately prepared and given to the person making payment. Licenses, permits, etc., should be issued timely.
Collections must be deposited intact. Deposits are to be made within the next business day in compliance with IC 5-13-6-1.
Safeguard the collections through locked drawers, cabinets or safes, particularly during breaks, lunchtime, and overnight. Cash receipts books, licenses, etc., should be inaccessible to unauthorized persons.
Collections and other accountable items should reconcile to the bank statements and the agency’s cash book. There is no authority for an agency to maintain an “over” or “short” fund.
The duties of collecting monies, processing the receipt, license, permit, etc., preparing and making deposits, and performing reconciliations should be segregated to the fullest extent possible considering the size of the agency and the materiality of collections.
Supporting documentation for monies received must be maintained and made available for audit to provide supporting information for the validity and accountability of monies received. Documents must be filed in such a manner as to be readily accessible, or otherwise reasonably attainable, upon request during an audit.
4.4 BUSINESS PROCESSES
4.4.1 Accountability for Collections
Each agency is responsible for establishing procedures to attain a high level of accountability for funds collected and for ensuring that these funds are deposited with the Treasurer of State, or other approved depository, in accordance with state statute.
4.4.1.1 Receipts
Some method of recording receipts of money must be utilized for all money received. If the volume is not extremely high, the simplest and most effective method is to issue an official receipt (either prescribed or approved by the State Board of Accounts) to each person paying in money to the state agency.
For a greater volume of collections, the State Board of Accounts may approve a substitute method of accounting for the revenue -- cash registers, cash books, the validating of documents, the use of data processing cash listings, etc. Any system other than the issuance of prescribed cash receipt forms must have State Board of Accounts approval.
Official receipts should be consecutively pre-numbered, whether paper or electronic. If a paper form, the agency clerk must complete in ink the date, entity or person submitting payment, description, and indication of the form of payment. Official receipt forms have three copies, the original for the payer, the second copy to be retained with the agency's ROC, and the third copy to remain intact in the receipt book.
All three copies of a voided receipt must remain intact in the receipt book. These may be stapled together. All copies must be defaced. If an electronic receipt system is used, voided receipt numbers must not be used for subsequent receipts.
Regardless of the receipting method, the agency should always be able to trace an individual receipt from a payer to the corresponding Report of Collection. If no receipts on file, agency must maintain either a copy of the check or note details from the check with their copy of the ROC. In the event of a lost deposit by the bank or carriers, it will be the agency’s responsibility to contact the payers and recreate the deposit.
All checks should be restrictively endorsed by the first agency employee receiving the checks.
4.4.1.2 Cash Book (Cash Receipts Journal)
If money is received on a regular basis, some type of cash book (paper or electronic) is required by Indiana Code (See 4.1.2). This cash book must list the revenue by classification and amount in detail. Noting cash and checks separately is helpful for reconciliation to the final Report of Collection. The cash book may include the receipt number or daily summaries from a source document or data processing listing. The amount deposited with the Treasurer of State and the corresponding PeopleSoft Deposit ID must also be shown on the cash book. The process of issuing a receipt and posting the cash receipts journal can be incorporated into one function. Only actual collections of money, whether it be cash, check or money orders, must be included in the cash book. This is a method of assuring that these monies reconcile with the actual deposits with t he TOS. Corrections, wire transfers and other bank to bank transfers wouldn’t be necessary to include, as no one in the agency physically receives or handles money in these cases.
Since there is no standard cash book (also referred to as a cash receipts journal) prescribed for state agencies, all types of internal cash books or journals must be approved in writing by the State Board of Accounts. Send proposed cash books to Formapproval@sboa.in.gov for SBOA approval. An example of the minimum requirements for a Cash Book is included in the Appendices of this chapter, 4.5.2.
4.4.1.3 Reconciliation Procedures
Reconcile deposits with the cash book or receipts book to assure that all funds received were deposited. It is recommended that this be reconciled daily as approved ROCs are returned to the agency. The reconciler should be a person other than the initial cash book entry maker or ROC preparer/deposit courier. The reconciler should not have physical access to the money received.
4.4.2 Deposits with Treasurer of State
The Treasurer of State (TOS) is the receiver and custodian of all state revenue. All state departments and agencies must make deposits to the TOS or submit records of deposits made to the credit of the treasury in an approved depository. State agencies shall not maintain funds outside of the PeopleSoft accounting system without specific statutory authority. In addition to cash and checks, money received includes, but is not limited to, bank deposit receipts for money deposited to an outside bank account, bank credit memoranda, wire transfer receipts for letters of credit, and ACH totals.
4.4.2.1 Report of Collections
Prior to making a deposit with the TOS, an agency staff member must enter certain financial deposit information into the PeopleSoft system and print a Report of Collection (ROC). Each deposit, and the related ROC, will be assigned a separate deposit ID number by PeopleSoft. Only one user is permitted for each deposit ID. Transactions can be summarized or detailed, depending upon the agency's individual requirements. If details of individual transactions are maintained in a system outside of PeopleSoft, totals
NSF – A Not-Sufficient-Funds returned check will be immediately entered on the PeopleSoft system by the TOS as a negative deposit to the business unit. When the BU receives notification of an NSF from the TOS, the BU will make the direct journal entries in order that the correct funds, accounts, etc. be charged and, if receivables are maintained, the amount is added back to the receivable. No ROC will be generated for an NSF transaction. To record revenue when the NSF is recollected, see 5.4.5.3.
TOTAL – The Grand Total on the ROC must equal the total of all deposits submitted with the ROC.
4.4.2.1.2 Calculator Tape for Checks
Prepare a calculator tape directly from the “ face ” of the checks in the deposit, verifying that the total amount agrees with the total as calculated on the ROC. Large numbers of checks for the same amount should be grouped and the group total only added in the tape with a note on the tape margin describing the group. For example: 200 @ $10.00 describing a group total of $2,000; 185 @ $5.00 describing a group total of $925.00. Money orders should be grouped separately to aid in tracking and accounting for the deposit. Make each tape at least three inches long and fasten with a paper clip or rubber band (if a large bundle).
If more than one check is included in the deposit, prepare a duplicate tape and bring both to the TOS when making the deposit.
4.4.2.2 TOS Deposit Approval
Upon receiving the deposit, while the agency courier is waiting, the office of the TOS will verify that the amount of the cash, checks, deposit slips or other evidence of receipt are the exact amounts as shown on the ROC and in the PeopleSoft system. If verified, the TOS will enter into the PeopleSoft system a deposit identifier number from their independent system and select “Approved”. The TOS agent will initial the agency copy of the ROC for the agency records. If the deposit is not verified, the TOS will select “Deny” and give the ROC and a signed receipt for the cash/checks to the depositor to return to the agency for correction.
Once approved, a deposited amount cannot be modified in the particular deposit ID. A sequential document number and transaction date will be stamped onto the ROC form (TOS copy) in the top right section of the form labeled "For Treasurer Use Only".
Note: The TOS deposit window closes at 3:00 p.m. each workday.
4.4.2.3 Discovery of Errors on Deposit after Approval by TOS
The TOS reconciles cash received to entries made on their separate system at the end of each day. If an agency error of an incorrect dollar amount is discovered on a deposit (unreconciled item), the agency contact will be notified to correct the error. Corrections should be made as described in 4.4.2.1. DEBIT/CREDIT and in the example below. It is imperative that an agency devote immediate attention to the resolution of an error in the report of collections in order to facilitate the daily balancing of processed collections between the Treasurer of State system and PeopleSoft.
Example: Both the BU and the TOS incorrectly entered/approved a deposit for $10,000 that was actually $1,000. The bank notified TOS of the error; TOS notified the BU that a DR ROC for $9,000 must be created.
Solution: Enter a new deposit in AR, creating a new ROC
Reference the initial Deposit ID on the Payment Line in the new deposit Take the ROC to TOS; TOS will approve, using ZERO for an approval code Open new deposit; make correct chart field entries, using two lines for each correction DR (+) error line chart fields, to remove this original CR CR (-) correct chart fields
4.4.3 Accounting Information Entry
Fund and account details can be completed after the TOS has entered an identifier number and approved the deposit. Any monies deposited, but not yet identified to funds and accounts, will be held in a Cash Control account. This information should be completed as soon as possible after making a deposit with the TOS. This includes any debits/credits made to the ROC and NSF notifications.
As noted in 4.4.2.1, unidentified checks should be deposited along with other receipts; these unidentified amounts will remain in the Cash Control Account until the type of receipt can be identified by the agency and applicable accounting information entered into PeopleSoft. As amounts are identified and accounted for, they should be marked as “complete” by the AR Accounting Approver in order that they will be included in the overnight automatic posting by the system. It is critical that this information on all deposits be entered timely, preferably within one business day of making the deposit.
At the end of each week, determine if any amounts are still in the Cash Control account due to accounting information not completed and complete these transactions as soon as possible.
4.4.4 Agency Specific Processes
Various agencies with branches in other areas of the state have a variety of arrangements designed to provide maximum accountability of funds collected.
4.4.4.1 Temporary outside Deposit Accounts
Agencies located outside of the downtown Indianapolis area may be depositing daily in local banks as a temporary measure for convenience. Agencies using such accounts shall submit, at least monthly, a PeopleSoft generated ROC with a check attached equal to the total and payable to the Treasurer of State. The proper preparation of the ROC must include the date the monies were received at the agency office in the description section. A cash receipts journal should be maintained at the agency for referencing the supporting revenue source documentation to the bank deposit and to the ROC. Entry of the check number which transmitted the collections to the Treasurer should also be recorded.
4.4.4.2 Lockbox Systems
Lockbox systems are an efficient means of processing high-volume, repeating types of revenue transactions. The revenue, which generally involves agency issuance of statements of amounts due, is mailed directly to the financial institution by the payer. Data entry is performed by the bank using scanning devices to record information such as date, amount, and payer. According to parameters established by the bank and the unit, the bank may reject transactions with incomplete or incorrect information. Within one business day, the bank has recorded the deposit to the treasury account and performed the data entry. The bank then forwards to the agency a lockbox notice of deposit, the processed documents, a report listing a count of items processed and total amount entered, and rejected documents with checks attached.
The lockbox revenue must be entered into the agency accounting records, which would involve classifying transactions and posting the batch totals to the cash receipts journal. The agency is responsible for reviewing the processed documents.
If a rebate in the form of a credit (or credit card) is received from a vendor, it should not be
recorded until used. When the credit is used, a zero dollar General Ledger entry should be made to
credit Account 444100 and debit the correct expense account that reflects the item that was purchased.
4.4.5.2 Refunds of Revenue
Although a refund of revenue is actually a process for paying monies out, a discussion is included in this chapter due to the relationship of such disbursements to money previously deposited and recorded on a ROC. The refund may occur due to an overpayment made or the agency's rejection of a transaction.
4.4.5.2.1 Recording Refunds of Revenue
When entering the refund in the PeopleSoft AP voucher process, the transaction should reference the original deposit and document the calculation of the overpayment or other reason for refund. The reference to the original deposit should include the Deposit ID and date. A debit (+) to the original account (4xxxxx) which was credited (-) to record the original receipt is the acceptable accounting entry.
4.4.5.3 Accounting for Returned Checks from Outside Parties -- NSF
When a check previously deposited by a ROC is returned to the Treasurer of State because of insufficient funds in the payer ’s account , the agency which receives the check must take necessary action to collect the amount due. As described in 4.4.2.1.1, The TOS will process a negative receipt to AR; including the correct chart fields. When an agency collects on a returned check, the agency submits the collection together with a new ROC to the NSF chart fields and Payment Type. Do not use the NSF Payment Type.
4.4.5.4 Monetary Donations
If an agency has statutory authority to accept donations, the donation should be deposited in a
fund designated for that purpose. If an agency does not have statutory authority to accept donations, the
donation should be deposited in the General Fund. A revenue account in the 463xxx series should be used.
4.4.6 Bank Debit/Credit Memos
Occasionally, the bank may discover an error in a deposit. In this case, the bank will issue either a debit or credit memo to document the decrease or increase, respectively, to the TOS account to correct the error. See 4.4.2.3 above for business processes to adjust for such errors.
4.5 APPENDICES
4.5.1 Revenue Accounts
All account codes are six digit numbers which classify the accounting transactions. The first digit
of all revenue objects is the number “ 4 ”, followed by a digit which signifies the following major categories
of revenue. The last four digits represent the specific type of transaction (4XXXXX):
40 - Adjustments, such as prior period adjustments to revenue.
41 - Non-exchange revenues, such as taxes, for which no direct exchange is given for monies received. 42 - Exchange revenues, such as fees, licenses (Excluding sales). 43 - Sales and rental revenues. 44 - Grant revenue. 45 - Fines and penalties. 46 - Forfeiture, abandoned property, donations. 47 - Other revenue, such as retirement fund contributions, lottery distributions, etc.
4.5.2 Cash book example
See 4.4.1.2. The example below was created by the State Board of Accounts. It contains fields and instructions that are considered minimum requirements of a cash book. Agencies may add fields to suit agency needs. Agency cash books should be sent to Formapproval@sboa.IN.gov for State Board of Accounts review and approval.
4.5.3 Accounts Receivable PeopleSoft Delivered & Custom Reports and Queries
The following delivered and custom reports are located in PeopleSoft:
Report/Name Purpose Data Prerequisite PeopleSoft Navigation ROC Listing by Deposit Status - SOIAR
Shows status of TOS acceptance of deposits
ROC accepted/denied by TOS; Wire Transfer funds received by TOS
Accounts Receivable> Payments>Reports>
Payment Detail - AR
Detail of deposits for each Deposit ID
Accounts Receivable> Payments>Reports> Payment Summary - AR
Totals and status of each Deposit ID
Accounts Receivable> Payments>Reports>
AGENCY CASH BOOK (CASH RECEIPTS JOURNAL)
INSTRUCTIONS:
SBOA Note: The cash book can be modified to suit agency needs. The default cash book is the minimum information needed.
Date Received
Fund Type (Check, Cash, etc.)
Amount Check or Document No.^ Name of Payor^ Transaction Description^ Funds Received by: Agency User 1^ Funds Received by: Agency User 2 Daily Total Deposit ID Deposit Date
Deposit Amount and Deposit ID Reconciled By: Agency User 3
_6. Access to cash book should be restricted to initial money receivers and reconciler. ROC creator/deposit courier should not have edit access to cash book.
- The TOS approved ROC should be reviewed and reconciled against the cash book entries. Reconciler should not be the money receiver or the ROC preparer/deposit courier.
- Record cash, check, money order, etc. at point of initial receipt (i.e. opening of the mail, or physical collection of monies). Mail should be opened and money amounts entered into the cash book by two people, resources permitting.
- Both mail openers/money receivers should initial the entry in the cash book, verifying accuracy of the entry (Agency Users 1 and 2). Checks should be restrictively endorsed and date stamped at receipt.
- ROC preparation and deposit of the monies with the Treasurer of State should be made by someone other than those who initially recorded monies received in cash book. ROC preparer and deposit courier can be the same person. ROC preparer/deposit courier should not have edit access
- Reconciler (Agency User 3) should verify all receipts were deposited by initialing the cash book and recording the Deposit ID for each receipt._
