School Finance Expenditures for the Novice

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School Finance Expenditures for the Novice

• IASBO Annual Conference
• May 17, 2007
• Susan Husselbee, Director of Fiscal Services
• Niles Township High School District 219
• 847.626.3974
• sushus_at_niles-hs.k12.il.us

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Ways Expenditures Are Incurred

• Payroll
• Employees are hired by the Board of Education as
  recommended by Human Resources/Superintendent
• Substitute pay overtime is authorized by the
  appropriate dept. administrator forwarded to
  Payroll in the Business Office
• Payroll processes paychecks
• Paychecks are distributed to employees

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Ways Exp. Are Incurred (cont.)

• Purchasing (site based)
• Staff member wants to purchase an item
• Supervising administrator verifies available
  budget balance, and that purchase is allowed
  (e.g., no bidding required)
• Purchase requisition is prepared by dept.
• Business Office converts requisition to a
  purchase order (PO) sends PO to vendor
• After invoice is received and Accounts Payable is
  notified of goods being received, checks are
  processed
• Checks are held pending Board of Education
  approval, then mailed to vendor

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How Expenditures Are Coded

• IL Program Accounting Manual (IPAM) for Local
  Education Agencies (LEAs)
• http//www.isbe.net/sfms/pdf/ipam.pdf
• Exp. coded on ISBE AFR budget by
• Fund
• Function
• Object
• Your acct. structure may also include location,
  program, source of funds

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Definition of Funds

• Independent accounting entity with a
  self-balancing set of accounts including its own
  assets, liabilities fund balance
• Within each fund
• Debits credits

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Fund Uses

• 10 - Educational
• Largest fund
• Instructional exp. support costs such as food
  service, social workers, librarians
• Tort/liability (11)
• Combined with Ed. Fund for ISBE reports
• Workers comp, unemployment insurance, property
  insurance
• Legal services, risk management exp.

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Funds Uses (cont.)

• 20 - Operations and Maintenance
• Maintaining, improving or repairing buildings and
  grounds
• 30 - Bond and Interest
• Bond principal and interest payments
• Must maintain separate bond and interest fund for
  each bond issue

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Funds Uses (cont.)

• 40 - Transportation
• Pupil transportation costs such as bus purchases
  payments to bus transportation vendors
• 50 - IMRF/FICA
• Districts share of social security and Medicare
  taxes and Board share of IMRF obligations

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Fund Uses (cont.)

• 60 - Site and Construction
• Bond proceeds for construction are placed here
• Construction project costs, land purchase
• 70 - Working Cash
• Property tax is levied or bonds sold for this
  purpose
• Loans and transfers of interest to other funds
• The Districts savings account

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Fund Uses (cont.)

• 80 - Rent
• Not used much
• Tax is levied to pay rent for state-owned school
  buildings
• 90 - Fire Prevention Safety (Life/Safety)
• In order for the county to levy property taxes
  for this purpose, your architects must certify
  plans that are submitted to the Regional Office
  of Education (ROE) ISBE (IL State Board of
  Education)

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Definition and Examples of Functions

• Action or purpose for which person or thing is
  used
• Instruction (1000)
• Teaching of pupils or the interaction between
  teacher and pupils (includes aides that assist in
  instructional process)
• Regular programs, special education, vocational,
  interscholastic, summer school, gifted, bilingual

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Function Examples (cont.)

• Support services (2000)
• Services which provide administrative, technical
  logistical support to facilitate enhance
  instruction
• Transportation, food service, library/media
  services, social work/psychological services,
  nursing services, guidance/counselors,
  improvement of instruction, superintendent
  business offices, office of principal, O M,
  data processing

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Function Examples (cont.)

• Community services (3000)
• Services provided by LEA for community in part or
  whole
• Public forums, child care centers, welfare
  activities (stipends for school attendance)
• Nonprogrammed charges (4000)
• All payments to other LEAs (e.g., special
  education tuition)

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Function Examples (cont.)

• Debt services (5000)
• Principal interest payments
• Provisions for contingencies (6000)
• Used only for budgeting purposes
• Actual exp. recorded in proper account
• Other financing uses (8000)
• Operating transfers to other funds
• Example Working Cash Fund interest transferred
  to Educational Fund

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Definition and Examples of Objects

• Describes service or commodity obtained
• Salaries (100)
• Amounts paid to permanent, temporary or
  substitute employees on the districts payroll
• Types Regular, temporary overtime

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Objects (cont.)

• Employee benefits (200)
• Amounts paid by the district on behalf of the
  employee
• Not paid directly to the employee or included in
  gross salary
• Payroll related benefits
• TRS, IMRF, FICA Medicare
• Health, dental life insurance

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Objects (cont.)

• Purchased services (300)
• Services rendered by personnel who are not on the
  Districts payroll
• Audit legal services
• Telephone water utilities
• Supplies materials (400)
• Items consumable in nature
• Paper, periodicals, gasoline
• Natural gas electricity

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Objects (cont.)

• Capital outlay (500)
• Fixed assets (more permanent in nature)
• Building improvements, equipment, vehicles
• Other objects (600)
• Principal interest payments
• Dues fees
• Transfers (700)
• Interest earned in one fund may be transferred to
  another fund (some limitations)
• Reported as other financing use not exp.
• Tuition (800)
• Paid to other educational agencies

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How to Code Expenditures

• Think of how the exp. best fits within your
  account structure (fund, function, object,
  location, program)
• Examples
• Bus trips (40-2550-331)
• Elem. ed. class supplies (10-1110-410)
• New plumbing system (20-2540-520)
• Paid bond principal that has taxies levied
  (30-5140-610)

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How to Code Exp. (cont.)

• The function object codes can be as detailed as
  you want
• Determine how much detail is necessary
  beneficial
• Example 41000 General Supplies and 41400
  Instructional Materials
• Is it beneficial or redundant to have multiple
  supply accounts within each instructional budget
  (e.g., math)?

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Development of ISBE Budget Form

• Familiarize your self with the form
• Need to have reports that summarize all the exp.
  accounts by fund, function object
• Review which areas need your direct input
• Many parts of the budget have formulas that will
  carry forward totals to the summary pages

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Budget Form Sections

• Cover page requiring BOE signatures
• Summary of revenue, exp., other financing
  sources/uses fund balances by fund
• Estimated cash balances by fund
• Revenue by fund and source
• Exp. by fund, function object
• Est. limitation of admin. costs

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Budget Due Dates

• Budget must be BOE approved within 90 days of
  fiscal year end
• For most school districts, this will be by Sept.
  30
• Certified copy (including revenues) must be filed
  with the county clerk within 30 days of adoption
  per Property Tax Code (35 ILCS 200/18-50)
• File electronically with ISBE within 30 days of
  adoption

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Post Budget on District Website

• Must be done if your district has a website
• Annual budget with itemized receipts exp. (most
  use ISBE form)
• Must inform parents of its posting provide web
  address
• May use any means of communication
• Consider adding notice to your student handbook
  or website

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Deficit Budget Summary

• Was new for FY 2007
• Compares the total excess/(deficiency) of direct
  revenues over direct expenditures with the June
  30, 2007 estimated fund balances
• Funds used in calculation
• Ed. Tort, O M, Transportation Working Cash

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Deficit Budget Summary (cont.)

• If page 21 indicates that the budget is not
  balanced, you need to file a deficit reduction
  plan for FY 2007 FY 2010.
• The plan shows the summaries of revenue by source
  (local, state, federal) and exp. by function
  (instruction, support service)

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Deficit Budget Summary (cont.)

• Need to include narratives assumptions
• Foundation levels for general state aid
• Equalized assessed valuation tax rates
• Employee salaries benefits
• Short long-term borrowing
• Educational impact
• Other assumptions

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Deficit Budget Summary (cont.)

• Preparing this takes time and will involve your
  superintendent board of education (BOE)
• Since its part of the form that the BOE signs,
  it will need their approval.
• Financial projections will assist you in
  determining which year you may need to comply
• Plan ahead!

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Reporting of Public Vendor Contracts of 1,000 or
More

• Also new for FY 2007
• Public Act (PA) 94-0714 requires school
  districts to file this report as an attachment to
  their budget.
• All contracts agreements that pertain to goods
  services that were intended to generate
  additional revenue other remunerations in
  excess of 1,000.

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Public Vendor Contracts (cont.)

• Includes without limitation
• Vending machine contracts
• Sports other attire
• Class rings
• Photographic services
• Contracts need BOE approval
• What about fundraisers activity accounts?

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Public Vendor Contracts (cont.)

• Report the following
• Vendor name
• Product or service provided
• Net revenue
• Non-monetary remuneration
• Purpose of proceeds
• Distribution method recipient of non-monetary
  remunerations distributed

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Common Mistakes

• Dept. use account codes where they have money not
  where the item should be charged per ISBE
• Instructional support service exp. being
  misstated in financial system which carries
  errors forward to the annual financial report
  (AFR) ISBE school report card

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Common Mistakes (cont.)

• Charging an employees pay to purchased service
  instead of salary
• Total salary exp. wont agree with 941s W-2s
• Coding capital outlay as supplies
• The operating exp. per pupil will be overstated
  as capital is backed out of this calculation.
  This calculation appears in the AFR school
  report card.

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Other Comments

• Local Government Prompt Payment Act
• 50 ILCS 505/1-9
• Approved bills shall be paid within 30 days, not
  10 as some vendors require
• See if your financial system can lock out certain
  object codes from certain Business Office
  functions
• Allows Payroll to input only salary codes
• Allows Purchasing to input only non-salary codes
• Reviewing/changing account codes takes time due
  to the large volume of accounts utilized by
  districts

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Other Resources

• http//www.iasbo.org
• http//www.asbointl.org (internatl)
• http//www.gfoa.org (Government Finance Officers
  Assoc.)
• http//www.gasb.org (Governmental Accounting
  Standards Board)
• IASBO, IASB, IASA publications
• Legislative updates
• Contact your colleagues!

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Questions?