CHART OF ACCOUNTS By JAN M. GRAYSON, Director Illinois Department of Commerce and Community Affairs

This month, I'd like to discuss one of the foundations of local government accounting systems — the Chart of Accounts. The Chart of Accounts provides a means to classify, summarize and record a governmental body's financial transactions, providing a uniform classification throughout the financial cycle of budgeting, accounting and reporting. Utilizing the same terminology, a uniform chart helps the auditor to evaluate the operations of a municipality and report the findings on a consistent basis, providing a numeric classification of all financial transactions of the municipality. Without a uniform chart, municipalities tend to classify financial transactions differently for each document. With a chart, confusion is eliminated when the clerk, treasurer, comptroller or any other related finance person is replaced. And, once the municipality establishes a uniform system for recording all of its financial transactions, it will help eliminate any guesswork in classifying financial data.

The Chart of Accounts recommended by the Department of Commerce and Community Affairs provides adequate codes and documentation to handle most municipalities up to 50,000 population, while still allowing for the special needs of the municipality in the final design. The chart is designed to meet most of the principles outlined by the National Council on Governmental Accounting (NCCA). Certain deviations have been made to the standards to allow greater flexibility in the handling of financial transactions while still meeting requirements.

The Chart of Accounts provides numeric classifications for Funds, Assets, Liabilities, Equity, Revenues and Expenditures. An asset is something owned by the municipality, divided between current and fixed. A liability is something owned by the municipality, divided between current and long-term. Equity is the net worth of the municipality, either classified as fund balance or retained earnings, depending upon the type of fund. Revenues are the cash and other types of income received by the municipality. Expenditures/expenses are cash payments, liabilities created and fixed asset purchases incurred by the municipality.

DCCA utilizes the following numeric classifications in the Chart of Accounts: Assets, 100; Liabilities. 200;

Equity, 200; Revenues, 300; and Expenditures/Expenses, 400-900, Under these major groupings are further breakdowns based upon various classifications of data required. Expenditures/Expenses are subdivided into the following major groups: Personnel, 400;

Contractual Services, 500; Commodities, 600; Debt Service, 700; Capital Outlay, 800; and Other Expenditures, 900. The chart also provides the following numeric classification for funds: 01-09, General Fund; 10- 29, Special Revenue Funds; 30-39, Capital Project Funds; 40-49, Debt Service Funds; 50-59, Enterprise Funds; 60-69, Internal Service Funds; 70-79, Trust and Agency Funds; and 80-89, Account Groups. An additional code is provided for those municipalities that wish to further break down their Expenditures/Expenses into specific activities of operation. Codes are also provided for function and programs.

DCCA utilizes a numeric coded chart since it is easily adapted to computerization. Even small municipalities are beginning to switch from the manual system of accounting to the use of computers. By adopting DCCA's chart or something similar, a municipality will be in a good position to begin providing more detailed financial reports to its department heads, governing body and citizens of the community. Uniform classification is the key to improvements.

DCCA's Chart of Accounts is available upon request by either calling 1-800-562-4688 or writing to the Department of Commerce and Community Affairs, Local Government Management Services, 620 East Adams Street, Springfield, Illinois 62701. •

Credits to: Richard Rynke, Local Government Management Services

May 1991 / Illinois Municipal Review / Page 9

Appointed by Gov. Jim Edgar in March 1991, Grayson joined state government after more than two decades in top management positions within the private sector. From 1988 until 1990, Grayson served as a partner in the Coopers & Lybrand consulting firm, leading the company's efforts to counsel troubled companies in need of crisis management.

Before joining Coopers & Lybrand, Grayson served for two years as executive vice president and chief financial officer for Charles A. Stevens & Company, a Chicago-based retailer. Although the company already was in financial difficulty and eventually liquidated, Grayson was lauded for his efforts to maximize cash flow, obtain outside financial support and improve day-to-day operations.

From 1970 until 1986, Grayson held various management positions with Deloitte-Touche, a leading accounting and business consulting firm. During this period, he provided financial, strategic planning and information systems consulting services with many manufacturing, service and financial institutions, including Navistar, Deere & Company and the Social Security Administration. During his final three years with the company, Grayson served as partner in charge of the firm's Chicago small business consulting practice.

Grayson has had significant international experience serving clients in the United Kingdom, France and the Middle East lie also has had banking experience working for the Northern Trust Company prior to joining Deloitte-Touche.

A former high-school mathematics teacher and college instructor, Crayson, 49, holds a bachelor of science degree in biology, a master's degree in business administration from the University of Chicago, and is a CPA. He resides in Chicago.

Page 10 / Illinois Municipal Review / May 1991