840 CMR 4: Financial Operations and Standard Method of Accounting

Summary

840 CMR 4.00 establishes the standard methods of accounting that all retirement boards must follow, ensuring uniform financial reporting across all Massachusetts public retirement systems. Boards must maintain PERAC-prescribed ledger accounts, enter transactions daily, run monthly trial balances and general ledgers, and submit monthly financial reports to PERAC. The regulation defines core accounting terms and requires boards to send annual statements by May 1 each year (with extensions available upon written request). Boards that fail to file timely reports may have their investment exemptions revoked after 14 days' written notice.

Full Text

840 CMR 4.00, establishing standard methods of accounting for boards, is promulgated by PERAC pursuant to M.G.L. c. 7, § 50 and M.G.L. c. 32, § 21. Except as may otherwise be provided by PERAC, or by supplementary rules of a particular retirement board approved by the PERAC pursuant to 840 CMR 14.02: Supplementary Rules, or by statute, 840 CMR 4.00 shall govern methods of accounting of all retirement boards.

4.01 Definitions

Accounting Period – January 1st through December 31st.

Adjusting Journal – contains all entries that do not involve cash.

Cash Books – includes the following reports: cash receipts, cash disbursements, adjusting journal entries, trial balance and general ledger.

Cash Disbursements Journal – contains entries of all cash disbursements from the system.

Cash Receipts Journal – contains entries of all cash receipts into the system.

Extension – when PERAC allows a board, upon a written request, to submit the Annual Statement by June 1 rather than May 1.

General Ledger – a means for keeping record of the system's total financial accounts. It includes all accounts, entries and balances for: Assets, Liabilities, Funds, Receipts and Disbursements.

Pre-Close Trial Balance/General Ledger – lists all ledger accounts and balances before the closing entries are made.

Post-Close Trial Balance/General Ledger – produced after the closing entries are made to zero out the receipts and disbursements accounts.

Trial Balance – list of all ledger accounts showing a beginning balance, debits, credits, and ending balance.

4.02 Entries and Posting of Accounts; Trial Balance and General Ledger

Every board shall establish, number, and maintain ledger accounts in the form prescribed by PERAC.

Transactions shall be entered daily. A Trial Balance shall be run monthly. A General Ledger shall be run monthly.

4.03 Copies to be Sent to PERAC

After all entries for the month have been posted, the board shall send to PERAC in the prescribed format the following for the month:

(a) monthly cash receipts;
(b) monthly cash disbursements;
(c) adjusting journal entries;
(d) trial balance; and
(e) general ledger.

4.04 Failure to File Financial Reports

If a retirement board fails to file the Annual Statement by May 1, or by the date of an approved extension request, the Commission may revoke the exemption from the investment restrictions of the retirement board pursuant to M.G.L. c. 32, § 23(2)(g), after providing a 14 day written notice. Any board so requesting shall be given a hearing before the Commission's Executive Director, or his designee, to show cause as to why the exemption should not be revoked.

4.05 Copies to be Shared with Board Members

Board members shall have access to all financial reports required by 840 CMR 4.00.

REGULATORY AUTHORITY: 840 CMR 4.00: M.G.L. c. 7, § 50; c. 32, § 21.