March 10, 2008 The New IPAM and AFR Rules and Regulations Presenters: Illinois State Board of Education Miller Cooper PMA Financial, Inc.

Overview Over past five years, ISBE and various sub-committees have reviewed and considered updates to the Illinois Program Accounting Manual (IPAM). Changes included consistency with Federal accounting manuals, updates to GAAP accounting standards, and changes to various local laws. Changes were provided for review to IASBO, IASA, IASB, etc. During 2006, changes to IPAM and subsequent changes to Accounting Rules were provided to JCAR for review and public comment. Changes were adopted by JCAR effective with FY2009 BUDGET and AFR financial reporting periods.

Illinois Program Accounting Manual Basis for school district accounting, budgeting and reporting Consistency with federal accounting program manuals and account codes IPAM Rules  Found at ISBE’s website – under “RULES CURRENTLY IN EFFECT” IPAM Chart of Accounts/Manual  Found at ISBE’s website – under “SCHOOL BUSINESS SERVICES – PUBLICATIONS”

* Full information is available on ISBE’s website under “Rules & Waivers”. Click on “Rules”

23 Illinois Administrative Code–Section 100 Changes Effective July 1, 2009 Contains updated account code tables  Table A – Classification of Funds  Table B – Balance Sheet Accounts  Table C – Revenue Accounts  Table D – Expenditure Accounts  Table E – Sources/Uses Accounts; Miscellaneous  Table F – Expenditure Object Accounts

RULE CHANGES Rule Changes discussed today are found in 23 Illinois Administrative Code 100. Rules for Code Sections 110 and 125 will be obsolete effective July 1, New requirement for “Accounting, Budgeting, Financial Reporting, and Auditing”  Currently found under “Proposed New Part 100” on the website. IPAM  Currently found under “Amendment to Part 110”  Part 110 is replaced by changes in Part 100 effective July 1, Student Activity Funds  Currently found under “Amendment to Part 125”  Part 125 is merged into Part 100 effective July 1, 2008.

State Reporting Requirements For Account Codes NOTE: The red “x’s” are additional optional account code spaces that ISBE is recognizing in the IPAM account code structure. Account and “Source” are used interchangeably - Salary Type XXX

School District Annual Budget Cover Page Form 50-36

School District Annual Budget Current Budget Provisions  Adopted by September 30 th  Submitted electronically to ISBE  Required to be “BALANCED” within 3 years of the initial “UNBALANCED” budget School Code, Section 17-1 These changes were adopted effective FY2007 financial cycle. FY2008 Budget Forms are available on ISEB website  FY07 and FY08 Budget Documents are stored in archived files by RCDT #’s.  ftp://ftpfinance.isbe.net/SDB/ ftp://ftpfinance.isbe.net/SDB/ New Budget Provisions  Effective FY2009 finance cycle beginning July 1,  New FY2009 Budget and AFR documents will be available on the ISBE website in Spring 2008.

Illinois School District Budget Format Budget Summary  Estimated Fund Balance (at beginning of Fiscal Period)  Receipts / Revenues  Disbursements / Expenditures  Line 18 – Excess of Direct Receipts/Revenues Over (Under) Direct Disbursements/Expenditures  Other Financing Sources (7000) Transfers from Other Funds Sale of Bonds  Other Finances Uses (8000) Transfers to Other Funds  Estimated Fund Balance (at end of Fiscal Period) Summary of Cash Transactions  Estimated Balances on Hand (beginning of Fiscal Period)  Receipts  Disbursements  Estimated Balances on Hand (end of Fiscal Period) Estimated Receipts/Revenues Estimated Disbursements/Expenditures Deficit Budget Information Estimated Limitation of Administrative Costs Reporting of Public Vendor Contracts of $1,000 or More

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School District Annual Budget Budget Summary (Pages 2 & 3) vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv

Major Rule Changes Effective FY2009 Eliminates “Rent Fund” (Currently Fund 80) Creates NEW “TORT IMMUNITY/JUDGEMENT FUND” (New Fund 80) Renames “Bond & Interest Fund” (Fund 30) to “DEBT SERVICE FUND” Renames “Site & Construction Fund/Capital Improvement Fund” (Fund 60) to “CAPITAL PROJECTS FUND”  There is no ISBE threshold requirement for “Capital Projects”.

Major Rule Changes Expands 7000 & 8000 Accounts (Other Finance Sources/Uses) to address pledged transfers for the “Debt Service Fund” and “Capital Projects Fund” Adds (new) 9000 Accounts for resources such as “E-Rate Transactions”, Donated Food Commodities”, “State Textbook Loan Program”, and “QZAB Tax Credits”

Capital Projects Fund or Fund Group Renamed from the “old” Site & Construction Fund. “This fund or fund group is required to account for proceeds resulting from each bond issue, receipts from other long term financing agreements (including impact fee agreements), or construction or maintenance grants used to finance a capital project, capital lease, lease purchase agreement, or if a tax is levied in accordance with Section of the School code.” If you have a capital project with a dedicated funding source, especially anything where debt was used as the funding source, then it should be accounted in this fund. ISBE does not have a requirement as to a “capital projects” threshold dollar amount. Examples:  District A issues $150,000 Debt Certificate for a Repair Project at one of their school buildings. Credit Fund 60 – Capital Projects Fund the $150,000. Expenditures should be accounted for in Fund 60 for the project. When the project is complete, if there are remaining dollars in Fund 60 (Capital Projects) and the District wishes to transfer the remaining dollars back to an operating fund (O&M), then the District would transfer from Fund 60 to Fund 20 via account #7150. The Fund 20 would reflect the transfer in account #8150.  District B receives $600,000 in Impact Fees from their local builder to be used for capital projects at their local school. Credit Fund 60 – Capital Projects Fund the $600,000 Expenditures should be accounted for in Fund 60 for any projects the District would begin using those funds. As a recommendation, during the Fiscal 2008 Audit, District’s should request that Auditors establish the opening fund balances for the Capital Projects Fund. NOTE: Any such transactions for pupil transportation such as leasing of buses must be reflected in the Transportation Fund so State Funding is not impeded.

Debt Service Fund or Fund Group Replaces the “old” Bond & Interest Fund “This fund or fund group is required if taxes are levied to retire bond principal, or to pay bond interest, or if other revenue is pledge to pay principal, interest, or service charges on other long-term debt instruments. “ Revenue may be required to be transferred in from other funds to make long term debt payments. (I.e. – Other Sources/Uses – Account 8430 transfers revenue from one fund to pay for principal on capital leases) The Debt Service Fund will allow for debt service “expenditures” via 5300 accounts. As previously stated, School District should work with their auditors to develop opening fund balance positions in this fund. Example:  District A, that issued a $150,000 Debt Certificate for a Repair Project, and credited Fund 60 with the Proceeds, needs to make the principal payment on the Debt Certificate. The District intends to use operating dollars from the O & M Fund to pay for the Debt Certificates. District transfers dollars from Fund 20 (O&M) to Fund 30 (Debt Service) via account # 8400 (Funds for Principal Payments) and 8500 (Funds for Interest Payments). Fund 30 (Debt Service) would reflect the transfer of dollars in account # 7410 (Transfers from Other Funds to Pay Principal on Capital Leases) and 7510 (Transfers from Other Funds to Pay Interest On Capital Leases). District makes principal and interest payments from Fund 30 (Debt Service) via account #5270 (Interest Payments) and 5370 (Principal Payments)

Tort Immunity and Judgment Fund Replaces old “Rent Fund” New name and purpose for Fund 80! “This fund is required if taxes are levied or bonds are sold for tort immunity or tort judgment purposes.” As previously stated, Districts should review with their auditors the effect of transferring existing balances established for “tort purposes” into the newly created “Tort Immunity Fund”. Example:  Revenues from Tort Levy can be directly accounted for in Fund 80.  Expenditures can be accounted for through account number 2360 – 2372  Balances in Fund 80 should be established with assistance from District’s auditors.

QUESTIONS?

School District Budget Changes Cash Summary (Page 4) Reclassifies: Interfund Loans; Notes and Warrants

School District Budget Changes vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv FundingAcc’t Local1000s Flow-Through2000s State 3000s Federal4000s Estimated Revenues (Pages 5 -10)

Additional Account Codes In Revenue Section Adds “Local” Revenue accounts  Impact Fees (Acct 1930)  TIF Payments (Acct 1960)  Driver Education Fees (Acct 1970)  Vendor Contract Proceeds (Acct 1980)

School District Budget Changes vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv * Renamed “Payments to LEAs and Governmental Units” Estimated Expenditures (Pages ) Functions Acc’t Instruction 1000s Support Services 2000s Community Serv. 3000s **Nonprogram. Chgs. 4000s Debt Serv. 5000s Contingencies 6000s

Additional Accounts Added To Expenditure Functions Instruction (1000 Accounts)  New Accounts Pre-K (Account 1125) Driver Education (Account 1700) Tuition Payments to PRIVATE Entities (Accts within 1900) Support Services (2000 Accounts)  New Accounts Expands 2300 accounts to include Tort Immunity / Judgement Fund expenditures (examples 2360 Tort Immunity Functions, 2362 Workers’ Compensation Payments, 2364 Insurance Payments) Renames 4000 Accounts (Nonprogrammed Charges) to “Payments to Other LEAS and Governmental Units” for payments to LEAS for Tuition and Transfers expenditures.

Expands 5000 Accounts (Debt Service) to identify the Principal and Interest payments on various “Long Term” and “Short Term” debt Reclassifies the Object Dimensions 700 (Transfers) and 800 (Tuition) within the 600 Series (Other Objects) in combination with new function codes.  The existing 700 Object (Transfers) and the 800 Object (Tuition) are combined in a new 600 Object. The new 600 Object will have new function codes to identify – transfers, tutition etc.) Adds other object classes for “Non-Capitalized Equipment” (700) and “Termination Benefits” (800) Additional Accounts Added To Expenditure Functions

Non-Capitalized Equipment Establishes the 700 Expenditure Object Account for purposes of “Non- capitalized Equipment” This replaces the old “Transfers” Object 700. “Items that would be classified as capital assets except that they cost less than the capitalization threshold (that a District has established) but more than the $500 minimum value established for purposes of calculating per capita cost pursuant to Section 18-3 of the School code.” Example:  District purchases 25 new computers for their “tech lab”. The computers are $1, each. The District’s capitalization threshold is $5, The District accounts for each individual computer from an accounting standpoint. The District books the $25, expenditure in the Education Fund (10) in Function 1100 – Regular Program, Object 700 –Non-Capitalized Equipment.  If the District above had a $1, capitalization threshold, then the District would book the expenditure into the 600 Object series.

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School District Annual Budget Deficit Budget Summary (Page 21) “ Operating Funds” Educational O&M Transportation Working Cash

School District Annual Budget Deficit Budget Plan (Pages 22-28)

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School District Annual Budget Administrative Costs (Page 29) -Estimate of FY08 Budgeted Expenditures Compared to FY07 Actual Expenditures

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School District Annual Budget Vendor Contracts (Page 30) -Vendor Contracts of $1,000 or More New Revenue Account 1980

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