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School District Expenditures SF101B Introduction to School Finance

School District Expenditures SF101B Introduction to School Finance

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School District Expenditures SF101B Introduction to School Finance

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  1. School District ExpendituresSF101B Introduction to School Finance Benny L. Gooden ASBO July 9, 2012

  2. Why are you/we here? • ASBO Certification • Increase personal knowledge • Tier 1 Requirement—Expenditures • Tier 1 annual update • To make the day complete • Summer heat causes delirium • Bad economy prevents excessive shopping

  3. Evolution of Account Classifications • Handbook II, Financial Accounting for Local and State School Systems: Standard Receipt and Expenditure Accounts, 1957 • Handbook II Revised, Financial Accounting: Classification and Standard Terminology for Local and State School Systems, 1973

  4. Account Classification Standards-Present Edition • Handbook II R2- 1990 Reflects changes and clarifications in generally accepted accounting principles (GAAP) • Financial Accounting for Local and State School Systems. 2003 Edition (NCES) • NCES Revised Edition published June, 2009. http://nces.ed.gov/ppubsearch/pubsinfo.asp?pubid2009325 • State Accounting Systems (ADE, etc.) adapt Handbook II R2 for use by local school districts Note: Account structures and codes are changed with relative frequency—check latest ADE guidelines.

  5. Access on APSCN site

  6. Legal Authority for School District Revenue in Arkansas • Constitution of Arkansas (1874 as Amended) • Article 14 § 1. Free school system § 2. School fund—use –Purposes § 3. School tax—Budget—Approval of tax rate Amendments 11, 40 & 74 § 4. Supervision of schools

  7. Selected Statutory Guidelines for School District Finance- • Attend meetings of school board. • Determine mission and direction of district. • Adhere to state and federal laws. • Enact, enforce and obey policies. • Employ staff. • Understand and oversee school district finances. • Manage facilities. • Approve curriculum and ensure that it is taught. • Visit district schools and classrooms. • Obtain training and professional development. • Do “all other things necessary and lawful..” § 6-13-620 A.C.A. Revised 2009

  8. Selected Statutory Guidelines..continued • Board disbursing officer § 6-13-618 • Best Financial Practices § 6-15-2301 • Classified School Employee Minimum Salary Act § 6-17-2203 • Teacher compensation guidelines § 6-17-2104 and § 6-17-2403 • Independent Audit deadlines § 6-20-1801 • Training Requirements § 6-20-1805

  9. Basis of Accounting • Establishes point-in-time when revenues or expenditures and related assets and liabilities are recognized in district accounts and reported in financial statements • Determines timing with which the accounting system recognizes transactions

  10. Basis of Accounting-Options • Cash Basis- Recognized when cash is received or disbursed • Accrual Basis- Measures financial position based on economic resources and obligations • Single Entry/Double Entry Accounting

  11. Cash Basis • Revenue recorded when cash is received • Expenses recorded when cash is paid • Financial condition measured by cash balance • Receivables, payables or accrued items are not recognized

  12. Accrual Basis • Revenues are recognized when earned—regardless of when received • Expenses are recognized when incurred—regardless of when paid • Economic status reflects resources and obligations—regardless of cash flow timing

  13. Single-Entry/Double EntryAccounting • Involves choosing method of recording transactions • Many school districts use a combination of single/double-entry records • Single-entry records can be converted to double entry in the preparation of a balance sheet • Electronic systems imbed these qualities into their program features.

  14. Double Entry Accounting • Provides for Equality of Debits and Credits • Maintains balance between assets and liabilities • Balances reserves and fund equities • Provides date specific financial status • Provides checks and balances in system • Documents financial position of district

  15. Good Expenditure Planning begins with Consistent Classification and Recording Now Required by Law! With a penalty clause!

  16. Classification of Account Revenues andExpenditures • Fund X • Source of Funds XXX • Function XXXX • Location/Operational Unit XXX • Program XXX • Subject/Project XX • Object XXXXX

  17. The Budget Strip-in practice • 2281-1105-040-987-00 66100 Object Fund/Source of Funds Function Program Subject Location

  18. Fund/Source of Funds/Project • Fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources. Funds are established to account for financing or specific activities of the district’s operations. • Source of funds codes are required for a number of categories—ADE provides • Revenues may be segregated by source or further classified using the program code. • Expenditures may be segregated by purpose

  19. Fund Classifications X • Teacher Salary Fund • Operating Fund • Building/Capital Projects Fund • Debt Service Fund • Capital Outlay/Dedicated M & O Fund • Federal Grants Fund • Activity Fund • Food Service Fund • Fixed Asset Fund

  20. Function • Describes the activity being performed when a service is provided or a material object is received. Functions of a school district are classified into five broad categories. • Functions and subfunctions consist of activities which have somewhat the same general operational objectives.

  21. Function Classification XXXX • Instruction 1000 • Regular Programs 1100 • Special Education 1200 • Workforce Education 1300 • Adult/Contin. Education 1400 • Compensatory Education 1500 • Other Instruction 1900

  22. Function Classification XXXXcontinued • Support Services 2000 • Student Support Services 2100 • Instructional Staff Support 2200 • General Administrative Support 2300 • School Administration Support 2400 • Business Support 2500 • Operation/Maintenance Services 2600 • Student Transportation 2700 • Central Support 2800 • Other 2900

  23. Function Classification XXXXContinued • Operation of Non-Instructional Services 3000 • Food Service 3100 • Other Enterprise Operations 3200 • Community Service 3300 • Other Non-Instructional Services 3400

  24. Function Classification XXXXContinued • Facilities Acquisition & Construction 4000 • Supervision of Acquis/Constr. 4100 • Site Acquisition 4200 • Site Improvement 4300 • Architect/Engineering Services 4400 • Educational Spec/Development 4500 • Building Acquisition/Construction 4600 • Building Improvement Services 4700 • Other 4800

  25. Function Classification XXXXContinued • Other Uses (Governmental Funds Only) 5000 • LEA Indebtedness 5100 • Fund Transfers 5200 • Payment to other LEA’s(AR) 5300 • Payment to LEA’s outside AR 5400 • Indirect Costs 5500 • Other Non-Programmed Costs 5900

  26. Location/Operational Unit • Assigned by LEA’s to • Identify attendance centers • As designator of budgetary or cost center indicator • As means of segregating costs by building structure • As location code for payroll check distribution

  27. Location Classification XXX • Assigned by local school district to designate specific school units, sites and/or location/centers • Regular school units must use the last three digits of the schools LEA number in this field Example: Fort Smith Public Schools Ballman Elementary School 66-01-001

  28. Program Code • Associated with a plan of activities and procedures designed to accomplish a set of objectives. This enables all expenditures associated with a particular program to be tracked across various functions, funds, locations, etc. • Examples: NSLA salary supplements, athletics, special education, alternative education, gifted and talented, etc.

  29. Object • Describes the service or commodity obtained as a result of a specific expenditure. • Subdivisions of the major categories provide for greater detail and analysis for review and planning purposes.

  30. Object Classification XXXXX • Personal Services-Salaries 61000 • Personal Services-Benefits 62000 • Purchased Professional/Technical Services 63000 • Purchased Property Services 64000 • Other Purchased Services 65000 • Supplies and Materials 66000 • Property-Assets 67000 • Other objects 68000 • Other Uses of Funds 69000

  31. Account Structure Concept Salary Benefits Pur/Serv Mat/Supplies Capital Other Instruction Regular Special Support Services Community Services Facility Acquisition Other ****Each Function & Object is also classified by Fund and Unit

  32. Fund/Function/Object Summary Example

  33. Foundation Aid Tracking • As noted in the discussion on Revenues, the General Assembly has required separate accounting for expenditures made from Foundation Aid to document educational services paid with these funds. Foundation aid accounting in Fund 2000. • See ADE coding guidelines for specific directions. Refer to Commissioner’s Memo’s FIN-09-047, FIN-10-008 and FIN-11-080 for details.

  34. Interest—if not information—relative to Handbook IIR2 is widespread • Account coding is required to reveal: • Athletic expenditures • Student transportation • District administration • School administration • Instructional facilitators • Supervisory aides • Substitutes • Property Insurance

  35. Is Handbook IIR2 really designed to account for these? • Act 1006 requires gathering information on these expenditures: • Student growth • Declining enrollment • Special education catastrophic occurrences • Special education services • Technology grants • Debt service supplement • General facilities • Distance learning • Gifted and talented

  36. Do it Right…or Pay the Price! • Act 1006 provides for ADE to publish rules to identify error rates by local schools in reporting and provides that fines or other penalties may be assessed.

  37. Keys to Sound Budget Management • Systematic Classification of Revenue and Expenditures • Encumbrance of commitments • Control of Account Structure • Frequent Monitoring of Accounts • Periodic Review by Third-Party • Maintenance of Archives from Past

  38. Salary Projections Essentials for Accuracy • Orderly Schedule for Various Groups of Employees • Calculation of Extended Terms for Selected Groups of Employees • Benefit Calculation Health Insurance-District Paid FICA .0765 Employer Retirement Contribution .14 Other Consider T-DROP Impact-- 14% for all

  39. Other Salary Issues • Educational Increments • Savings from Retirees vs. new hires • Early Retirement Incentives • Sick Leave Buyback • Severance Issues • Substitute Payroll • Multi-year impact of salary policy • Educational Excellence Trust Fund compliance

  40. Salary Increases and NSLA funds Act 1590 of 2007 governs the use of NSLA funds for general classroom teacher salaries. • Bonuses only • Conditions prior to use of NSLA • Compliance with ACSIP, Accreditation, etc. • Phase out if included in scheduled salaries • Reports, reports, reports

  41. Spending Requirements for Categorical Funds Act 1220 of 2011 • Effective by June 30, 2012 • At least 85% of NSLA Funds must be spent • Transfer authority among categories is granted • Commissioner may grant waivers • Balance in categorical funds shall not exceed 20% of annual allocation • Provisions for 10% annual reduction required • Failure to comply results in deduction Subject to rules promulgated by State Board of Education

  42. Estimation of Unavoidable Costs • Debt Payments-Principal & Interest • Property Insurance • Utilities • Salaries and Benefits

  43. Required Costs • Facility Operation & Maintenance costs equal to 9% of Foundation Aid • Classified Salary increases if at minimum wage—2012-2013 minimum $8.02 per hr. • Certified Salary schedule: minimum/inc. • Other mandated services

  44. Mandates with Financial Implications • Full Credit for Service in higher education and private schools • Act 2307 of 2005 • Certified staff base salary increase • Act 2130 of 2005-Act 19 (First Extraordinary Session of 2006) Act 272 of 2007 • Certified staff annual experience step • Act 59 of 2003 (2nd Extraordinary Session • Classified staff cost-of-living increase • Act 1138 of 2001, Act 1773 of 2003 • Scheduled teacher preparation periods during the instructional day • Act 1943 of 2005 Teacher Evaluation System Training NEW

  45. Mandates with Financial Implications continued • Requirements for bonus payments in high priority districts • Act 1044 of 2007 • Duty-free lunch 100% of time • Act 1881 of 2005 • Required music and art in elementary grades taught by certified specialists • Act 245 of 2005 • Vision screening standards • Act 1438 of 2005 Certified Physical Education ratios in elementary schools Act 1220 rules

  46. Estimation of Essential but Avoidable Costs—or NOT • Materials and Supplies-$ 500/class $20 per student • Equipment Replacement • Building Repairs • Vehicle Repair and Replacement • New Programs • Additional Staff-Required by mandates • Salary Increases-unless at minimum Required

  47. Purchasing Issues • Bidding Requirements • Commodities • School Buses • Construction • Property Insurance • Sales and Use Tax Payments and Exemptions • Encumbrances • Credit Cards

  48. Expenditure Responsibilities for Leaders/Business Officials • Know areas of responsibility • Inform and supervise others • Be especially vigilant in problem areas • Bidding Requirements • Careful shopping • Travel Expenses • Use available resources—ask questions • Plan ahead and Check behind! Credit Cards