ExpendituresCASBO Training

Values and Money

We spend our TIME and our MONEY on what we VALUE.

Why are you here?

ASBO Certification

Increase personal knowledge

Tier 1 Requirement

Tier 1 annual update.

Expenditures

What are the major categories of expenditures in a typical district?Salaries & BenefitsSupplies/EquipmentServicesCapital OutlayDebt Service.

What is the proportion of each to the whole operating budget?

Salaries & Benefits

Supplies/Equipment

Services

Capital Outlay

Debt Service.

Salaries/Benefits

Salaries Contracted wages Time sheet pay

Benefits CalculationsFICA – 6.2% (maximum salary $113,700 in 2013)

Medicare – 1.45%

Teacher Retirement – 14% = 21.65%

Other benefits provided by the district for all certified and/or classified employeesHealth - $131, moving to $150 in JanuaryDental, Disability InsuranceWorker’s CompensationUnemployment

For estimating purposes, total @25%. Will vary slightly by district.

Salary EssentialsApproved Salary Schedules for various groups of

employees

Approved way for paying for extra assignments

Contracts issued in a timely fashion

Educational Increments

Savings from retirees vs. new hires

Severance Issues

Multi-year impact of salary policy

Educational Excellence Trust Fund compliance.

Supplies/Equipment

Difference is important as it relates to accounting and the inventory of fixed assets

Inventory vs. fixed asset Inventory – a detailed list of items in stockFixed asset - Any tangible asset with a life of more

than two years used in an entity's operations.

Services

Professional Services

Property Services

Other Services.

Professional Services

Professional and Consultant Services are exempt from bidding Accounting Engineers Architects Legal Medical Information/Technology Appraisal

Do they give advice or do they supply a product?

Generally, are they licensed or recognized in some way by a certifying professional organization?

Property Services

Utilities

Construction Services

Lawn care

Cleaning services

Rental.

Other Services

Transportation

Insurance

Advertising.

Capital Outlay

Purchases/Construction of a fixed asset of such a significant amount that it is considered unusual and substantial in relation to the overall budget of the district.

Debt Service

Payment is in three partsPrincipalInterestFees

Debt Schedule

Debt Service

Your Fiscal Agent

Taxable vs. Non-Taxable Bonds

Arbitrage - Attempting to profit by exploiting price differences of identical or similar financial instruments on different markets or in different forms.

Accounting Procedures

ACCOUNTING

The definition of accounting is “the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results.”

ACCOUNTING - Why should I care about accounting for money?

It is the right thing to do.

People lose their job quicker over money and sex than anything else.

You have a responsibility to your public.

You have a responsibility to your kids.

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.

Basis of Accounting

Cash Basis – Recognized when cash is received or disbursed

Accrual Basis – Measures financial position based on economic resources and obligations

Cash Basis

Revenue recorded when cash is received

Expenses recorded when cash is paid

Financial condition measured b cash balance

Receivables, payables or accrued items are not recognized.

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.

Accounting for Expenditures

You will spend money.How will you know how much you are spending and

what you spent it for?How can you report that information out to your

Board and to your Public?How can you prepare for the annual visit of your

auditor?

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.

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

Access Access on on APSCN APSCN sitesite

Interest relative to Handbook IIR2 is widespread

Account coding is required to reveal: Athletic expendituresStudent transportationDistrict administrationSchool administrationInstructional facilitators Supervisory aidesSubstitutesProperty Insurance

Act 1006 Requires gathering information on these

expenditures:Student growthDeclining enrollmentSpecial education catastrophic

occurrencesSpecial education servicesTechnology grantsDebt service supplementGeneral facilitiesDistance learningGifted and talented

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.

THE BUDGET UNIT

The 21 digit number that indicates what fund will pay, what kind of expenditure, what cost-center, what type of goods or services the expenditure is.

It provides the detail of the expenditure.

It also provides a way to report and analyze the expenditures of a district and ultimately the state.

THE BUDGET UNIT

Six sections of the budget unit:1000-1140-049-000-00 61110 – Certified Salary2000-1120-042-000-00 62210 – Certified Social

Security2281-1105-040-987-00 66100 – Supplies for early

childhood2000-2134-005-000-79 65800 – Nurse’s travel

budget

What is this budget strip used for?

2281-1105-040-987-00 66100

FUND1000 – Teacher Salary Fund2000 – Operating Fund3000 – Building Fund4000 – Debt Service Fund5000 – Capital Outlay Fund6000 – Federal Funds7000 – Activity Funds8000 – Food Service Fund9000 – Fixed Assets2281-1105-040-987-00 66100

Source of Fund - SOF

Federal FundsActivity FundsGrantsCategorical Funds

223 – Professional Development275 – ALE276 – ELL281 – NSLA

Facilities Funding2281-1105-040-987-00 66100

Function

1000 – Instruction

2000 – Support Services

3000 – Operation of Non-Instructional Services

4000 – Facilities acquisition and Construction4610 – Building Acquisition and Construction4630 – Athletic Building Acquisition and

Construction

5000 – Other (debt)

2281-1105-040-987-00 66100

Location

Normally, it is the last three digits of the building’s LEA number. Can be a building number designated by the district for non-instructional buildings. ??-??-040

2281-1105-040-987-00 66100

Program

Used to further identify the specific use of the funds to be expended.

Districts may use 900-999

Special Ed – 200

Athletics - 115

2281-1105-040-987-00 66100

Subject

Used to provide even more detail on the expenditure.

The State can use both Program and Subject codes at their discretion.

Currently, the State does not use this portion of the budget unit.

2281-1105-040-987-00 66100

ObjectSometimes called the Account. Tells us what was

purchased

2281-1105-040-987-00 6610061000 – Salaries

61100 61110 – Certified Salaries 61120 – Classified Salaries

62000 – Benefits 62200

62210 – Certified Social Security 62220 – Classified Social Security

Object63000 – Purchased Professional and Technical Services

63370 – Architect

64000 – Purchased Property Services 64240 – Lawn Care

65000 – Other Purchased Services 65210 – Property Insurance 65310 – Telephone

Object66000 – Supplies and materials

66100 – General Supplies 66410 – Textbooks

67000 – Property 67100 – Land and improvements 67200 – Buildings

68000 – Other Objects 68830 – Property Tax

69000 – Other 69310 – Transfer to Teacher Salary Fund

The Budget Strip2281-1105-040-987-00 66100

Fund/Source

of Fund

Function

Location

Program

Subject

Object

2281 1105 040 987 00 66100

Determining Which Coding to Use

Accounting is both a science and an art.

I could give you an invoice and we could come up with 10 different ways to code that invoice.

Pay attention to what the Department says to do.

Be honest.

Be consistent.

Ask other people’s opinion.

It really does matter.

Management Strategies For Expenditure

Establish ProceduresPurchase Order (P.O.) ProcessReceipts/ReimbursementsDo you have a written purchasing procedure?Do you have a written travel reimbursement

procedure?

Frequent Monitoring and ReportingAsk for reports periodically.Report to your Board frequently.

Management Strategies For Expenditure

Learn how to operate “Excel”

Track important numbersEnding BalanceTotal RevenueTotal ExpendituresProperty Tax AssessmentsStudent ADM

Be cautious about adding new personnel.

Management Strategies For ExpenditureControl of Organizational Chart of

Accounts StructureA single person should control the chart

Internal ControlsSystems of cross checking and balancing to

ensure the opportunity for theft and fraud are minimized

Segregation of DutiesA key operational control to ensure that one

individual does not participate in more than one key operational function

Security of your unwritten checks and signature stamps.

Targets of “Fiscal Distress” Declining balance to jeopardize fiscal

integrity of a school district Act or violation to jeopardize fiscal

integrity Any other fiscal condition of a school

district deemed to have a material detrimental negative impact on the continuation of educational services by that school district.

Potential “acts or violations”

Material failure to… Properly maintain school facilities Violation of local, state, or federal fire,

health or safety code provisions Violation of local, state, or federal

construction code provisions or law Material state or federal audit exceptions Failure to provide timely and accurate

legally-required financial reports to ADE, Division of Legislative Audit, General Assembly or IRS

Other ways to violate….

Materially… Insufficient funds to cover payroll, salary,

employment benefits or legal tax obligations Failure to meet legally binding minimum

teacher salary schedule obligations Failure to comply with state law governing

purchasing or bid requirements Default on any school district debt

obligations Discrepancies between budgeted and actual

school district expenditures

Other material ways…

Materially…. Failure to comply with audit

requirements of 6-20-301 Failure to comply with any provision of

the Arkansas Code that specifically places a school district in fiscal distress based on noncompliance.

What Happens then? Finding by State Board of Education Publication of notices Limited rights of appeal Submit plan to ADE within 10 days ADE oversight of plan and implementation Required ADE approval of plan ADE technical assistance ADE recommendations/mandated staffing and

fiscal practices.

Other ADE actions…

Replace superintendent Suspend local board authority Transfer authority to new board/superintendent Required reporting requirements ADE monitoring of accounts and operations Training required for district board members

and employees..

Final Action

Consolidation Annexation Reconstitution Other appropriate action

The Legal Fund Balance Restricted Fund Balance

Categoricals, vocational, adult ed., etc. 201 Adult Basic Education

202 Adult General Education

203 Workplace Adult Education 205 Other Adult Education

212 Isolated Funding

223 Professional Development 275 Alternative Learning Environment

276 English Language Learners

281 National School Lunch Act 293 Secondary Workforce Centers

320 Adult Center Support

323 Short-term Adult Skill Training

386 Pulaski County Magnet School 387 M-to-M Revenue 388 Magnet & M-to-M Transportation

391 Public School Facilities Escrow

401 Academic Facilities-Immed Rep 402 Academic Facilities-Catastrophic

403 Academic Facilities-Transitional 404 Academic Facilities-Partnership Bal Sheet 01915 Deposits-Paying Agents(QZAB)

The Legal Fund BalanceUnrestricted Fund Balance is used to

determine fiscal distress. It is your operating balance minus

restricted funds.

What about balances in restricted funds?

NSLA

ELL

ALE

Professional Development

Federal Funds

Spending Requirements for Categorical Funds Act 1220 of 2011

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 reduction in

future NSLA funding.

etc

Handbook IIR2 also includes instructions on recording & classification of fixed assets

Journal Entries.

etc

Make your Auditor happy

Be detail-oriented about your finances.

Revenue low expenditures high,

What is your favorite color?

$ $

Key Word for staying in the black in your district:

Thank you!

Email me – murryg@conwayschools.net

Call me – 501-450-4800