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School Finance Expenditures for the Novice

IASBO Annual ConferenceMay 17, 2007

Susan Husselbee, Director of Fiscal ServicesNiles Township High School District #219847.626.3974sushus@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 District’s 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 District’s “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 district’s 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 District’s 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 it’s 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 employee’s pay to purchased service instead of salary Total salary exp. won’t 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 (internat’l) 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?