ETHICS IN SCHOOL FINANCE

1. ETHICS IN SCHOOL FINANCE DR. LEN ELOVITZ

2. As chief educational officer, you have a fiduciary responsibility to insure that the district follows laws and regulations, operates efficiently, safeguarded its assets, accurately prepares and files required reports and school funds are correctly collected and expended.

3. Case Study #1 • It has come to your attention that your high school principal is using the funds leftover from defunct student activities as his school’s “sunshine fund” sending flowers and cards to teachers who are ill, having a baby, etc. • What course of action would you as superintendent take? • Would your actions be different he was using the funds for personal gain?

4. Case Study #2 • School supplies representative runs into you, the superintendent, one summer and asks if he can help you with your ordering. It seems that the district is always returning about 10% of the order for refunds. • What would you do?

5. Case Study #3 • The auditor brings to your attention that he came across the possibility that the district is making payments to a phantom company. • What would you do?

6. Other Cases • 3 for 2 computer deal • Instrument rentals – Supe’s daughter clarinet • Staff development payments – AP clerk cashing checks • Junkets for administrators and their paramours

7. ISLCC STANDARDS • Standard 3: A school administrator is an educational leader who promotes the success of all students by ensuring management of the organization, operations, and resources for a safe, efficient, and effective learning environment. • Standard 5: A school administrator is an educational leader who promotes the success of all students by acting with integrity, fairness, and in an ethical manner.

8. AASA Code of Ethics • http://www.aasa.org/content.aspx?id=1390 2. Fulfills all professional duties with honesty and integrity and always acts in a trustworthy and responsible manner. 7. Avoids using his/her position for personal gain through political, social, religious, economic or other influences. 10. Honors all contracts until fulfillment, release or dissolution mutually agreed upon by all parties.

9. ASBO International • ASBO_Professional_Standards • See Page 19

10. SCHOOL ETHICS ACT - 1991 • New Jersey School Ethics Act • State Employee Ethics Training

11. Fiscal Accountability • Too many superintendents have been fired because they did not pay attention to the fiscal conditions of their school district. • Some constituencies are more concerned with the finances than anything else. • The quality of the instructional program will be affected by the district’s financial health

12. Fiscal Integrity is Exemplified by • An ongoing process of • Revenue Projection • Expenditure Budgeting • Budget Monitoring • Auditing

13. Revenue Projection • Awareness of Revenue sources • State Aid • Federal Aid • Tax base • District ratable trends • Surrounding districts finances • Grants • Knowledgeable • Proactive • Never send anything back • Alternative revenue sources • Advertising • Foundation

14. Expenditure Budgeting Superintendents Role • Evaluate economic climate - talk to the board • Estimate other revenues • Come up with an idea of what might fly in terms of percentage • Translate into building budget base • Consider enrollment projections • Provide principals and other purchase center heads with their base and budget planning forms • Personnel • Principal defense • Compile budget • Make adjustments • Present to Board • Get Board approval • “sell” the budget • Election/Board of School Estimate • Pass/Fail

15. Budget Monitoring • Monthly review • Pay attention to salary accounts • Time of year • Encumbrances • Unencumbered balances • Fiscal resolutions • Bill list • ASK THE SBA

16. AUDITING • A systematic procedure for verifying the the financial operations of a school district. • The purpose is to determine that property and funds are being used in a legal and efficient way. • Rarely results in the discovery of dishonesty • Helps in correcting procedural errors and as a reporting mechanism to public • Required yearly external audit • Review of citations

17. Comprehensive Year-end Audits Usually Include: • A study of BOE minutes • Verification of all monetary receipts • Verification of all expenditures • Review of all financial records • Reconciliation of all statements and accounts • Review of all subsidiary records – deeds, insurance policies, inventories, etc. • Review of student activity and other fiduciary accounts

18. CAFR • The Comprehensive Annual Financial Report (CAFR) is the basis for the district’s official annual report in NJ and most other states. It should include all of the funds and account groups of the LEA. It is organized into three primary sections: 1) an introductory section, 2) a financial section, and 3) statistical section.

19. Receiving and Depositing Funds • Most school districts in NJ are fiscally independent • The district has control of its own budget and has custody of its own funds • Taxes are collected by municipal officials on behalf of the school district • All funds are deposited in the bank or banks designated by the BOE as its depository

20. Expending School Funds • Authorization for the expenditure of school funds is strictly controlled by statute and code. • In NJ, who can spend school district funds?

26. The Purchase Cycle • PO is cut • SBA approves • Business Office Numbers, Bursts, distribute • Vendor receives PO and Voucher • Principal receives receiving copy and file copy • Business Office copy is placed in circular file • District receives good or services • Principal signs and returns receiving copy to B.O. where it is attached to B.O. copy in the circular file • Vendor sends invoice and voucher to B.O. where it is attached to B.O copy in the circular file • When all documents are received they are placed in file for payment • At a designated time they are recorded on payment list which generates the bill list and prints the checks • The bill list is passed by BOE and checks are distributed

27. Purchasing and Contracts • Bidding Laws – NJ Local Public Purchasing Law Title 40:11 • NJ Bidding threshold $17,500 • Exceptions • Professional services • Extraordinary unspecifiableservice • Insurance

28. Protecting School Funds • Surety Bonds • Protects the district against fraud or loss • Motivates officials to be businesslike in handling funds under their jurisdiction. • Types • Fidelity • Public Official • Contract • Guarantees the performance of a contract or obligation • If a monetary loss occurs, the surety company reimburses the board and goes after the individual or company to recover the loss.