School District Expenditures

SF101B Introduction to School Finance

Benny L. GoodenBenny L. Gooden

ASBOASBO

July 9, 2012July 9, 2012

Why are you/we here? ASBO CertificationASBO Certification

Increase personal knowledgeIncrease personal knowledge

Tier 1 Requirement—ExpendituresTier 1 Requirement—Expenditures

Tier 1 annual updateTier 1 annual update

To make the day completeTo make the day complete

Summer heat causes deliriumSummer heat causes delirium

Bad economy prevents excessive shoppingBad economy prevents excessive shopping

Evolution of Account Classifications Handbook II, Handbook II, Financial Accounting Financial Accounting

for Local and State School for Local and State School Systems: Standard Receipt and Systems: Standard Receipt and Expenditure Accounts, Expenditure Accounts, 19571957

Handbook II Revised, Handbook II Revised, Financial Financial Accounting: Classification and Accounting: Classification and Standard Terminology for Local Standard Terminology for Local and State School Systems, and State School Systems, 19731973

Account Classification Standards-Present Edition Handbook II R2- 1990 Reflects changes and Handbook II R2- 1990 Reflects changes and

clarifications in generally accepted accounting clarifications in generally accepted accounting principles (GAAP)principles (GAAP)

Financial Accounting for Local and State Financial Accounting for Local and State School Systems. 2003 Edition (NCES)School Systems. 2003 Edition (NCES)

NCES Revised Edition published June, 2009. NCES Revised Edition published June, 2009. http://nces.ed.gov/ppubsearch/pubsinfo.asp?http://nces.ed.gov/ppubsearch/pubsinfo.asp?

pubid2009325pubid2009325 State Accounting Systems (ADE, etc.) adapt State Accounting Systems (ADE, etc.) adapt

Handbook II R2 for use by local school districtsHandbook II R2 for use by local school districts

Note: Account structures and codes are changed Note: Account structures and codes are changed with relative frequency—check latest ADE with relative frequency—check latest ADE guidelines.guidelines.

Access Access on on APSCN APSCN sitesite

Legal Authority for School District Revenue in Arkansas Constitution of Arkansas Constitution of Arkansas (1874 as (1874 as

Amended)Amended)

Article 14Article 14

§ 1. Free school system§ 1. Free school system

§ 2. School fund—use –Purposes§ 2. School fund—use –Purposes

§ 3. School tax—Budget—Approval § 3. School tax—Budget—Approval of tax rate of tax rate

Amendments 11, 40 & 74Amendments 11, 40 & 74

§ 4. Supervision of schools§ 4. Supervision of schools

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.§ 6-13-620 A.C.A.

Revised Revised 20092009

Statutory Guidelines..continued

Board disbursing officer Board disbursing officer § 6-13-618§ 6-13-618

Best Financial Practices Best Financial Practices § 6-15-2301§ 6-15-2301

Classified School Employee Classified School Employee Minimum Salary Act Minimum Salary Act § 6-17-2203§ 6-17-2203

Teacher compensation guidelines Teacher compensation guidelines § 6-§ 6-17-2104 and § 6-17-240317-2104 and § 6-17-2403

Independent Audit deadlines Independent Audit deadlines § 6-20-§ 6-20-18011801• Training Requirements § 6-20-

1805

Selected

Basis of Accounting

Establishes point-in-time when revenues Establishes point-in-time when revenues or expenditures and related assets and or expenditures and related assets and liabilities are recognized in district liabilities are recognized in district accounts and reported in financial accounts and reported in financial statementsstatements

Determines timing with which the Determines timing with which the accounting system recognizes accounting system recognizes transactionstransactions

Basis of Accounting-Options Cash Basis- Recognized when cash Cash Basis- Recognized when cash

is received or disbursedis received or disbursed

Accrual Basis- Measures financial Accrual Basis- Measures financial position based on economic position based on economic resources and obligationsresources and obligations

Single Entry/Double Entry Single Entry/Double Entry AccountingAccounting

Cash Basis

Revenue recorded when cash is Revenue recorded when cash is receivedreceived

Expenses recorded when cash is Expenses recorded when cash is paidpaid

Financial condition measured by Financial condition measured by cash balancecash balance

Receivables, payables or accrued Receivables, payables or accrued items are not recognizeditems are not recognized

Accrual Basis

Revenues are recognized when Revenues are recognized when earnedearned—regardless of when —regardless of when receivedreceived

Expenses are recognized when Expenses are recognized when incurredincurred—regardless of when paid—regardless of when paid

Economic status reflects resources Economic status reflects resources and obligations—regardless of and obligations—regardless of cash flow timingcash flow timing

Single-Entry/Double EntryAccounting Involves choosing method of recording Involves choosing method of recording

transactionstransactions Many school districts use a combination Many school districts use a combination

of single/double-entry recordsof single/double-entry records Single-entry records can be converted Single-entry records can be converted

to double entry in the preparation of a to double entry in the preparation of a balance sheetbalance sheet

Electronic systems imbed these Electronic systems imbed these qualities into their program features.qualities into their program features.

Double Entry Accounting

Provides for Equality of Provides for Equality of DebitsDebits and and CreditsCredits

Maintains balance between Maintains balance between assetsassets and and liabilitiesliabilities

BalancesBalances reserves reserves and and fund equitiesfund equities Provides date specific financial statusProvides date specific financial status Provides checks and balances in systemProvides checks and balances in system Documents financial Documents financial positionposition of district of district

Good Expenditure Planning begins with

Now Required by Now Required by Law!Law!

With a penalty clause!With a penalty clause!

Classification of Account Revenues and Expenditures FundFund XX Source of FundsSource of Funds XXXXXX FunctionFunction XXXXXXXX Location/Operational UnitLocation/Operational Unit XXXXXX Program XXXProgram XXX Subject/ProjectSubject/Project XXXX ObjectObject XXXXXXXXXX

The Budget Strip-in practice

2281-1105-040-987-00 661002281-1105-040-987-00 66100

Fund/Source

of Funds

Function

Location

Program

Subject

Object

Fund/Source of Funds/Project Fiscal and accounting entity with a self-Fiscal and accounting entity with a self-

balancing set of accounts recording cash and balancing set of accounts recording cash and other financial resources.other financial resources. Funds Funds are are established to account for financing or established to account for financing or specific activities of the district’s operations.specific activities of the district’s operations.

Source of funds codes are required for a Source of funds codes are required for a number of categories—ADE provides number of categories—ADE provides

Revenues may be segregated by source or Revenues may be segregated by source or further classified using the program code.further classified using the program code.

Expenditures may be segregated by purposeExpenditures may be segregated by purpose

Fund Classifications X11 Teacher Salary FundTeacher Salary Fund22 Operating FundOperating Fund33 Building/Capital Projects FundBuilding/Capital Projects Fund44 Debt Service FundDebt Service Fund55 Capital Outlay/Dedicated M & O FundCapital Outlay/Dedicated M & O Fund66 Federal Grants FundFederal Grants Fund77 Activity FundActivity Fund88 Food Service FundFood Service Fund99 Fixed Asset FundFixed Asset Fund

Function

Describes the activity being Describes the activity being performed when a service is provided performed when a service is provided or a material object is received. or a material object is received. Functions of a school district are Functions of a school district are classified into classified into five broad categories. five broad categories.

Functions and subfunctions consist of Functions and subfunctions consist of activities which have somewhat the activities which have somewhat the same general operational objectives.same general operational objectives.

Function Classification XXXX Instruction Instruction 10001000

Regular Programs Regular Programs 11001100 Special EducationSpecial Education 12001200 Workforce EducationWorkforce Education 13001300 Adult/Contin. EducationAdult/Contin. Education 14001400 Compensatory EducationCompensatory Education 15001500 Other InstructionOther Instruction 19001900

Function Classification XXXXcontinued Support Services Support Services 20002000

Student Support ServicesStudent Support Services 21002100 Instructional Staff SupportInstructional Staff Support 22002200 General Administrative SupportGeneral Administrative Support 23002300 School Administration SupportSchool Administration Support 24002400 Business SupportBusiness Support 25002500 Operation/Maintenance ServicesOperation/Maintenance Services 26002600 Student TransportationStudent Transportation 27002700 Central SupportCentral Support 28002800 Other Other 29002900

Function Classification XXXXContinued Operation of Non-Instructional Operation of Non-Instructional

ServicesServices 30003000 Food ServiceFood Service 31003100 Other Enterprise OperationsOther Enterprise Operations

32003200 Community ServiceCommunity Service 33003300 Other Non-Instructional ServicesOther Non-Instructional Services

34003400

Function Classification XXXXContinued Facilities Acquisition & ConstructionFacilities Acquisition & Construction40004000

Supervision of Acquis/Constr. Supervision of Acquis/Constr. 41004100 Site AcquisitionSite Acquisition 42004200 Site ImprovementSite Improvement 43004300 Architect/Engineering ServicesArchitect/Engineering Services44004400 Educational Spec/DevelopmentEducational Spec/Development 45004500 Building Acquisition/ConstructionBuilding Acquisition/Construction 46004600 Building Improvement ServicesBuilding Improvement Services 47004700 OtherOther 48004800

Function Classification XXXXContinued Other Uses (Governmental Funds Only)Other Uses (Governmental Funds Only)

50005000 LEA IndebtednessLEA Indebtedness 51005100 Fund TransfersFund Transfers 52005200 Payment to other LEA’s(AR)Payment to other LEA’s(AR) 53005300 Payment to LEA’s outside ARPayment to LEA’s outside AR 54005400 Indirect CostsIndirect Costs 55005500 Other Non-Programmed CostsOther Non-Programmed Costs 59005900

Location/Operational Unit

Assigned by LEA’s toAssigned by LEA’s to Identify attendance centersIdentify attendance centers As designator of budgetary or As designator of budgetary or

cost center indicatorcost center indicator As means of segregating costs As means of segregating costs

by building structureby building structure As location code for payroll As location code for payroll

check distributioncheck distribution

Location Classification XXX Assigned by local school district to Assigned by local school district to

designate specific school units, sites and/or designate specific school units, sites and/or location/centerslocation/centers

Regular school units must use the last Regular school units must use the last three digits of the schools LEA number in three digits of the schools LEA number in this fieldthis field

Example: Fort Smith Public Schools Example: Fort Smith Public Schools

Ballman Elementary School 66-01-Ballman Elementary School 66-01-001001

Program Code

Associated with a plan of activities and Associated with a plan of activities and procedures designed to accomplish a procedures designed to accomplish a set of objectives. This enables all set of objectives. This enables all expenditures associated with a expenditures associated with a particular program to be tracked across particular program to be tracked across various functions, funds, locations, etc.various functions, funds, locations, etc.

Examples: NSLA salary supplements, Examples: NSLA salary supplements, athletics, special education, alternative athletics, special education, alternative education, gifted and talented, etc. education, gifted and talented, etc.

Object

Describes the service or Describes the service or commodity obtained as a result of commodity obtained as a result of a specific expenditure.a specific expenditure.

Subdivisions of the major Subdivisions of the major categories provide for greater categories provide for greater detail and analysis for review and detail and analysis for review and planning purposes.planning purposes.

Object ClassificationXXXXX Personal Services-SalariesPersonal Services-Salaries 6100061000 Personal Services-BenefitsPersonal Services-Benefits 6200062000 Purchased Professional/Technical ServicesPurchased Professional/Technical Services

6300063000 Purchased Property ServicesPurchased Property Services 6400064000 Other Purchased ServicesOther Purchased Services 6500065000 Supplies and MaterialsSupplies and Materials 6600066000 Property-AssetsProperty-Assets 6700067000 Other objectsOther objects 6800068000 Other Uses of FundsOther Uses of Funds 6900069000

Account Structure Concept

InstructionInstruction

RegularRegular

Special Special

Support ServicesSupport Services

Community ServicesCommunity Services

Facility AcquisitionFacility Acquisition

OtherOther

****Each Function & Object is also classified by Fund and ****Each Function & Object is also classified by Fund and UnitUnit

Salary Benefits Pur/Serv Mat/Supplies Capital Salary Benefits Pur/Serv Mat/Supplies Capital OtherOther

Fund/Function/Object Summary Example

Foundation Aid Tracking As noted in the discussion on Revenues, the As noted in the discussion on Revenues, the

General Assembly has required separate General Assembly has required separate accounting for expenditures made from accounting for expenditures made from Foundation Aid to document educational Foundation Aid to document educational services paid with these funds. Foundation services paid with these funds. Foundation aid accounting in Fund 2000. aid accounting in Fund 2000.

See ADE coding guidelines for specific See ADE coding guidelines for specific directions. Refer to Commissioner’s Memo’s directions. Refer to Commissioner’s Memo’s FIN-09-047, FIN-10-008 and FIN-11-080 for FIN-09-047, FIN-10-008 and FIN-11-080 for details.details.

Interest—if not information—relative to Handbook IIR2 is widespread Account coding is required to reveal: Account coding is required to reveal:

Athletic expendituresAthletic expenditures Student transportationStudent transportation District administrationDistrict administration School administrationSchool administration Instructional facilitators Instructional facilitators Supervisory aidesSupervisory aides SubstitutesSubstitutes Property InsuranceProperty Insurance

Is Handbook IIR2 really designed to account for these? Act 1006 requires gathering information on Act 1006 requires gathering information on

these expenditures:these expenditures: Student growthStudent growth Declining enrollmentDeclining enrollment Special education catastrophic Special education catastrophic

occurrencesoccurrences Special education servicesSpecial education services Technology grantsTechnology grants Debt service supplementDebt service supplement General facilitiesGeneral facilities Distance learningDistance learning Gifted and talentedGifted and talented

Do it Right…or Pay the Price! Act 1006 provides for ADE to Act 1006 provides for ADE to

publish rules to identify error rates publish rules to identify error rates by local schools in reporting and by local schools in reporting and provides that fines or other provides that fines or other penalties may be assessed. penalties may be assessed.

Keys to Sound Budget Management Systematic Classification of Systematic Classification of

Revenue and ExpendituresRevenue and Expenditures Encumbrance of commitmentsEncumbrance of commitments Control of Account StructureControl of Account Structure Frequent Monitoring of AccountsFrequent Monitoring of Accounts Periodic Review by Third-PartyPeriodic Review by Third-Party Maintenance of Archives from PastMaintenance of Archives from Past

Salary ProjectionsEssentials for Accuracy Orderly Schedule for Various Groups of Orderly Schedule for Various Groups of

EmployeesEmployees Calculation of Extended Terms for Selected Calculation of Extended Terms for Selected

Groups of EmployeesGroups of Employees Benefit CalculationBenefit Calculation Health Insurance-Health Insurance-

District PaidDistrict Paid FICA .0765FICA .0765

Employer Retirement ContributionEmployer Retirement Contribution .14.14OtherOther Consider T-DROP Consider T-DROP

Impact-- 14% for allImpact-- 14% for all

Other Salary Issues

Educational IncrementsEducational Increments Savings from Retirees vs. new hiresSavings from Retirees vs. new hires Early Retirement IncentivesEarly Retirement Incentives Sick Leave BuybackSick Leave Buyback Severance IssuesSeverance Issues Substitute PayrollSubstitute Payroll Multi-year impact of salary policyMulti-year impact of salary policy Educational Excellence Trust Fund Educational Excellence Trust Fund

compliancecompliance

Salary Increases and NSLA fundsAct 1590 of 2007 governs the use of Act 1590 of 2007 governs the use of NSLA funds for general classroom NSLA funds for general classroom teacher salaries.teacher salaries.•Bonuses onlyBonuses only

•Conditions prior to use of NSLAConditions prior to use of NSLA

•Compliance with ACSIP, Accreditation, etc. Compliance with ACSIP, Accreditation, etc.

•Phase out if included in scheduled salariesPhase out if included in scheduled salaries

•Reports, reports, reportsReports, reports, reports

Spending Requirements for Categorical Funds Act 1220 of 2011

Effective by June 30, 2012Effective by June 30, 2012 At least 85% of NSLA Funds must be At least 85% of NSLA Funds must be

spentspent Transfer authority among categories Transfer authority among categories

is grantedis granted Commissioner may grant waiversCommissioner may grant waivers Balance in categorical funds shall not Balance in categorical funds shall not

exceed 20% of annual allocationexceed 20% of annual allocation Provisions for 10% annual reduction Provisions for 10% annual reduction

requiredrequired Failure to comply results in deductionFailure to comply results in deductionSubject to rules promulgated by State Board of Subject to rules promulgated by State Board of

EducationEducation

Estimation of Unavoidable Costs Debt Payments-Principal & InterestDebt Payments-Principal & Interest

Property InsuranceProperty Insurance

UtilitiesUtilities

Salaries and BenefitsSalaries and Benefits

Required Costs

Facility Operation & Maintenance Facility Operation & Maintenance costs equal to 9% of Foundation Aidcosts equal to 9% of Foundation Aid

Classified Salary increases if at Classified Salary increases if at minimum wage—2012-2013 minimum wage—2012-2013 minimum minimum $8.02 per hr.$8.02 per hr.

Certified Salary schedule: Certified Salary schedule: minimum/inc.minimum/inc.

Other mandated servicesOther mandated services

Mandates with Financial Implications Full Credit for Service in higher education and Full Credit for Service in higher education and

private schoolsprivate schools Act 2307 of 2005Act 2307 of 2005

Certified staff base salary increaseCertified staff base salary increase Act 2130 of 2005-Act 19 (First Extraordinary Act 2130 of 2005-Act 19 (First Extraordinary

Session of 2006) Act 272 of 2007Session of 2006) Act 272 of 2007 Certified staff annual experience step Certified staff annual experience step

Act 59 of 2003 (2Act 59 of 2003 (2ndnd Extraordinary Session Extraordinary Session Classified staff cost-of-living increaseClassified staff cost-of-living increase

Act 1138 of 2001, Act 1773 of 2003Act 1138 of 2001, Act 1773 of 2003 Scheduled teacher preparation periods Scheduled teacher preparation periods duringduring the the

instructional dayinstructional day Act 1943 of 2005Act 1943 of 2005 Teacher Evaluation

System Training NEW

Mandates with Financial Implications

continued Requirements for bonus payments in high Requirements for bonus payments in high priority districtspriority districts

Act 1044 of 2007Act 1044 of 2007 Duty-free lunch 100% of timeDuty-free lunch 100% of time

Act 1881 of 2005Act 1881 of 2005 Required music and art in elementary Required music and art in elementary

grades taught by certified specialistsgrades taught by certified specialistsAct 245 of 2005Act 245 of 2005

Vision screening standardsVision screening standardsAct 1438 of 2005Act 1438 of 2005

Certified Physical Education ratios in Certified Physical Education ratios in elementary schools elementary schools Act 1220 rulesAct 1220 rules

Estimation of Essential but Avoidable Costs—or NOTNOT Materials and Supplies-$ 500/classMaterials and Supplies-$ 500/class

$20 per student $20 per student Equipment ReplacementEquipment Replacement Building RepairsBuilding Repairs Vehicle Repair and ReplacementVehicle Repair and Replacement New ProgramsNew Programs Additional Staff-Required by mandatesAdditional Staff-Required by mandates Salary Increases-unless at minimumSalary Increases-unless at minimum

RequireRequiredd

Purchasing Issues

Bidding RequirementsBidding RequirementsCommoditiesCommoditiesSchool BusesSchool BusesConstructionConstructionProperty InsuranceProperty Insurance

Sales and Use Tax Payments and Sales and Use Tax Payments and ExemptionsExemptions

EncumbrancesEncumbrances Credit CardsCredit Cards

Expenditure Responsibilities for Leaders/Business Officials

Know areas of responsibilityKnow areas of responsibility Inform and supervise others Inform and supervise others Be especially vigilant in problem Be especially vigilant in problem

areasareasBidding RequirementsBidding RequirementsCareful shoppingCareful shoppingTravel ExpensesTravel Expenses

Use available resources—ask Use available resources—ask questionsquestions

Plan ahead and Check behind!Plan ahead and Check behind!

Credit Cards

Specific Issues Relative to School Buildings Engineer required if over $ 25,000Engineer required if over $ 25,000 Architect required if over $ 100,000Architect required if over $ 100,000 Less than $10,000 by solicitationLess than $10,000 by solicitation $ 10,000-$50,000 advertised one time$ 10,000-$50,000 advertised one time Over $50,000 advertised two timesOver $50,000 advertised two times Bid Bond of 5% if over $ 20,000Bid Bond of 5% if over $ 20,000 Performance Bond if over $ 20,000Performance Bond if over $ 20,000 Contractor’s License if over $ 20,000Contractor’s License if over $ 20,000

Federal Project Expenditures Review Specific Requirements of Review Specific Requirements of

Categorical Project FundsCategorical Project Funds Maintain time records for prorated Maintain time records for prorated

employeesemployees Maintain Adequate Documentation for AuditMaintain Adequate Documentation for Audit Monitor Timelines for Obligation of FundsMonitor Timelines for Obligation of Funds Reconcile Federal Reporting with General Reconcile Federal Reporting with General

LedgerLedger Include program expenditures in required Include program expenditures in required

ACSIP formatACSIP format

Other Federal Issues

Indirect Cost RulesIndirect Cost Rules

Maintenance of Effort RulesMaintenance of Effort Rules

Federal Education Jobs FundFederal Education Jobs Fund

ARRA FundsARRA Funds

Classify Fixed Assets

Maintain Definition of “Supplies” and Maintain Definition of “Supplies” and “Equipment” in accordance with “Equipment” in accordance with Handbook IIR2 guidelinesHandbook IIR2 guidelines

Record expenditures correctly Record expenditures correctly classifiedclassified

Add fixed assets to Fixed Asset Fund Add fixed assets to Fixed Asset Fund with proper accounting and controlswith proper accounting and controls

Regularly verify inventory/locationRegularly verify inventory/location

Importance of Integrity in Data Classification and Reporting Legal Certification by OfficialsLegal Certification by Officials Public Disclosure by Local Districts Public Disclosure by Local Districts

and ADE Reports-Web Site and ADE Reports-Web Site requirementsrequirements

Comparisons to Other Districts/StatesComparisons to Other Districts/States Sound Data for Decisions by Sound Data for Decisions by

LegislatorsLegislators Facts vs. Faulty InformationFacts vs. Faulty Information

Reporting Requirements

Vendor/Beverage Contract ProceedsVendor/Beverage Contract Proceeds

Athletic ExpendituresAthletic Expenditures

Employee ContractsEmployee Contracts

AnythingAnything anyone wants to know anyone wants to know

FISCAL DISTRESS FISCAL DISTRESS

The rocky financial road to state The rocky financial road to state takeover of local schoolstakeover of local schools

IndicatorsIndicators

And And

ConsequencesConsequences

The rocky financial road to state The rocky financial road to state takeover of local schoolstakeover of local schools

IndicatorsIndicators

And And

ConsequencesConsequences

Targets of “Fiscal Distress”

Declining balance to jeopardize Declining balance to jeopardize fiscal integrity of a school districtfiscal integrity of a school district

Act or violation to jeopardize fiscal Act or violation to jeopardize fiscal integrityintegrity

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

Potential “acts or violations”

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

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

construction code provisions or lawconstruction code provisions or law Material state or federal audit Material state or federal audit

exceptionsexceptions Failure to provide timely and accurate Failure to provide timely and accurate

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

Other ways to violate….

Materially…Materially… Insufficient funds to cover payroll, Insufficient funds to cover payroll,

salary, employment benefits or legal salary, employment benefits or legal tax obligationstax obligations

Failure to meet legally binding Failure to meet legally binding minimum teacher salary schedule minimum teacher salary schedule obligationsobligations

Failure to comply with state law Failure to comply with state law governing purchasing or bid governing purchasing or bid requirementsrequirements

Default on any school district debt Default on any school district debt obligationsobligations

Discrepancies between budgeted and Discrepancies between budgeted and actual school district expendituresactual school district expenditures

Other material ways…

Materially….Materially…. Failure to comply with audit Failure to comply with audit

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

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

What Happens then? Finding by State Board of Finding by State Board of

EducationEducation Publication of noticesPublication of notices Limited rights of appealLimited rights of appeal Submit plan to ADE within 10 daysSubmit plan to ADE within 10 days ADE oversight of plan and ADE oversight of plan and

implementationimplementation Required ADE approval of planRequired ADE approval of plan ADE technical assistanceADE technical assistance ADE recommendations/mandated ADE recommendations/mandated

staffing and fiscal practicesstaffing and fiscal practices

Other ADE actions…

Replace superintendentReplace superintendent Suspend local board authoritySuspend local board authority Transfer authority to new Transfer authority to new

board/superintendentboard/superintendent Required reporting requirementsRequired reporting requirements ADE monitoring of accounts and ADE monitoring of accounts and

operationsoperations Training required for district board Training required for district board

members and employeesmembers and employees

Final Action

ConsolidationConsolidation Annexation Annexation ReconstitutionReconstitution Other appropriate actionOther appropriate action

Certification or Report?Tomato or Tomato? Rose or

Thorn?ADE requires numerous “reports,” ADE requires numerous “reports,” “data certifications” and “data certifications” and “assurances of compliance” with “assurances of compliance” with regard to information maintained by regard to information maintained by local schools and relative to various local schools and relative to various mandates, rules, statutes, etc. mandates, rules, statutes, etc.

Great care must be taken to be Great care must be taken to be certain that any document attested certain that any document attested to be accurate correctly represents to be accurate correctly represents factual data or school activity. factual data or school activity.

ADE Annual Financial Report and Budget – Fiscal XXXX

Required Certification

X 9X 9

AdditionalAdditionalVerificationVerificationAnd And AssuranceAssurance

Due Due October October

1515

More……More……

And And more……more……

Even Even More…More…

Yet More…..Yet More…..

EnoughEnough!!

PenaltPenaltyy

What?What???

The Legal Fund Balance: What is it? Reported fund balance includes:Reported fund balance includes:

CashCash

Revenues receivable (36% pullback)Revenues receivable (36% pullback)

Taxes collected but not distributedTaxes collected but not distributed

Accrued Expenditures (encumbrances)Accrued Expenditures (encumbrances)

InventoriesInventories

Designated reservesDesignated reserves

Debt ServiceDebt Service

Things are seldom what they seem.Things are seldom what they seem.

Ending Ending SoonSoon

What about balances in targeted/restricted funds? NSLANSLA ELLELL ALEALE Professional DevelopmentProfessional Development Federal FundsFederal Funds

The fact that allocations are static makes The fact that allocations are static makes fund balances mandatory to ensure fund balances mandatory to ensure program continuity. Controlled by Act program continuity. Controlled by Act 1220 of 2011.1220 of 2011.

What about Rules?

Many Acts provide…”The Department of Many Acts provide…”The Department of Education shall promulgate rules … to Education shall promulgate rules … to implement the provisions of this Act…”implement the provisions of this Act…”

These rules are subject to the These rules are subject to the Administrative Procedures Act and Administrative Procedures Act and require notice, hearing, comments, final require notice, hearing, comments, final adoption and Legislative review.adoption and Legislative review.

READ THEM CAREFULLY!READ THEM CAREFULLY!

Ethics Issues

Conflicts of Interest involving Conflicts of Interest involving Board Members and School Board Members and School EmployeesEmployees

EmploymentEmployment ContractsContracts PurchasingPurchasing Approval by ADEApproval by ADEAct 1599 of 2003 as Act 1599 of 2003 as

amended by Act 1381amended by Act 1381

More Ethics Issues

Certified personnel are subject to the Certified personnel are subject to the Ethics Rules for Educators and may be Ethics Rules for Educators and may be recommended for sanction by the recommended for sanction by the Professional Licensure Standards Board.Professional Licensure Standards Board. Using resources improperlyUsing resources improperly Using position for personal gainUsing position for personal gain ………… …………

The BIG Question?

The Best The Best Expenditure Expenditure

Estimate is one Estimate is one based on past based on past

experience and experience and upon Reasonable upon Reasonable

Projections!Projections!