Expenditures

1
Expenditures

• CASBO Training

2
Values and Money

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

3
Why are you here?

• ASBO Certification
• Increase personal knowledge
• Tier 1 Requirement
• Tier 1 annual update.

4
Expenditures

• What are the major categories of expenditures in
  a typical district?
• Salaries Benefits
• Supplies/Equipment
• Services
• Capital Outlay
• Debt Service.

5
What is the proportion of each to the whole
operating budget?

• Salaries Benefits
• Supplies/Equipment
• Services
• Capital Outlay
• Debt Service.

6
Salaries/Benefits

• Salaries
• Contracted wages
• Time sheet pay

7
Benefits Calculations

• FICA 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 employees
• Health - 131, moving to 150 in January
• Dental, Disability Insurance
• Workers Compensation
• Unemployment
• For estimating purposes, total _at_25.
• Will vary slightly by district.

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Salary Essentials

• Approved 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.

9
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 stock
• Fixed asset - Any tangible asset with a life of
  more than two years used in an entity's
  operations.

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Services

• Professional Services
• Property Services
• Other Services.

11
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?

12
Property Services

• Utilities
• Construction Services
• Lawn care
• Cleaning services
• Rental.

13
Other Services

• Transportation
• Insurance
• Advertising.

14
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.

15
Debt Service

• Payment is in three parts
• Principal
• Interest
• Fees
• Debt Schedule

16
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.

17
Accounting Procedures
18
ACCOUNTING

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

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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.

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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.

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Basis of Accounting

• Cash Basis Recognized when cash is received or
  disbursed
• Accrual Basis Measures financial position based
  on economic resources and obligations

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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.

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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.

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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?

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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.

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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?pubi
  d2009325
• State Accounting Systems (ADE, etc.) adapt
  Handbook II R2 for use by local school districts

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Access on APSCN site
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Interest 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

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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

30
Do it Rightor 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.

31
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.

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THE BUDGET UNIT

• Six sections of the budget unit
• 1000-1140-049-000-00 61110 Certified Salary
• 2000-1120-042-000-00 62210 Certified Social
  Security
• 2281-1105-040-987-00 66100 Supplies for
  early childhood
• 2000-2134-005-000-79 65800 Nurses travel
  budget

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What is this budget strip used for?

• 2281-1105-040-987-00 66100

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FUND

• 1000 Teacher Salary Fund
• 2000 Operating Fund
• 3000 Building Fund
• 4000 Debt Service Fund
• 5000 Capital Outlay Fund
• 6000 Federal Funds
• 7000 Activity Funds
• 8000 Food Service Fund
• 9000 Fixed Assets
• 2281-1105-040-987-00 66100

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Source of Fund - SOF

• Federal Funds
• Activity Funds
• Grants
• Categorical Funds
• 223 Professional Development
• 275 ALE
• 276 ELL
• 281 NSLA
• Facilities Funding
• 2281-1105-040-987-00 66100

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Function

• 1000 Instruction
• 2000 Support Services
• 3000 Operation of Non-Instructional Services
• 4000 Facilities acquisition and Construction
• 4610 Building Acquisition and Construction
• 4630 Athletic Building Acquisition and
  Construction
• 5000 Other (debt)
• 2281-1105-040-987-00 66100

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Location

• Normally, it is the last three digits of the
  buildings LEA number. Can be a building number
  designated by the district for non-instructional
  buildings.
• ??-??-040
• 2281-1105-040-987-00 66100

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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

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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

40
Object

• Sometimes called the Account. Tells us what was
  purchased
• 2281-1105-040-987-00 66100
• 61000 Salaries
• 61100
• 61110 Certified Salaries
• 61120 Classified Salaries
• 62000 Benefits
• 62200
• 62210 Certified Social Security
• 62220 Classified Social Security

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Object

• 63000 Purchased Professional and Technical
  Services
• 63370 Architect
• 64000 Purchased Property Services
• 64240 Lawn Care
• 65000 Other Purchased Services
• 65210 Property Insurance
• 65310 Telephone

42
Object

• 66000 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

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The Budget Strip

• 2281-1105-040-987-00 66100

2
281
1105
040
987
00
66100
Object
Fund/Source of Fund
Function
Program
Subject
Location
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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 peoples opinion.
• It really does matter.

45
Management Strategies For Expenditure

• Establish Procedures
• Purchase Order (P.O.) Process
• Receipts/Reimbursements
• Do you have a written purchasing procedure?
• Do you have a written travel reimbursement
  procedure?
• Frequent Monitoring and Reporting
• Ask for reports periodically.
• Report to your Board frequently.

46
Management Strategies For Expenditure

• Learn how to operate Excel
• Track important numbers
• Ending Balance
• Total Revenue
• Total Expenditures
• Property Tax Assessments
• Student ADM
• Be cautious about adding new personnel.

47
Management Strategies For Expenditure

• Control of Organizational Chart of Accounts
  Structure
• A single person should control the chart
• Internal Controls
• Systems of cross checking and balancing to ensure
  the opportunity for theft and fraud are minimized
• Segregation of Duties
• A 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.

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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.

49
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

50
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

51
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.

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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.

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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.

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Final Action

• Consolidation
• Annexation
• Reconstitution
• Other appropriate action

55
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

56
The Legal Fund Balance

• Unrestricted Fund Balance is used to determine
  fiscal distress.
• It is your operating balance minus restricted
  funds.

57
What about balances in restricted funds?

• NSLA
• ELL
• ALE
• Professional Development
• Federal Funds

58
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.

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etc

• Handbook IIR2 also includes instructions on
  recording classification of fixed assets
• Journal Entries.

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etc

• Make your Auditor happy
• Be detail-oriented about your finances.
• Revenue low expenditures high,

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What is your favorite color?


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Key Word for staying in the black in your
district
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Thank you!

• Email me murryg_at_conwayschools.net
• Call me 501-450-4800