1. Copyright© Texas Education Agency 2011 1 April 2011 FAR (Financial Accounting and Reporting) Coding System: –Mandatory Account Codes for School Districts, ESCs, and Open Enrollment Charter Schools –Interpreting a General Ledger

2. Copyright© Texas Education Agency 2011 2 FAR Account Codes Overview of Financial Accountability System Resource Guide (FASRG) Basis for FAR (Financial Accounting and Reporting, Module 1 of FASRG) Basic Code Composition –Fund Code (Net Asset Code for nonprofit charters) –Function Code –Object Code –Optional Codes 1 and 2 –Organization Code –Fiscal Year Code –Program Intent Code –Optional Code 3 –Optional Codes 4 and 5

3. Copyright© Texas Education Agency 2011 3 FAR Account Codes Codes for Shared Service Arrangements (SSAs) Codes for Open Enrollment Charter Schools (chartered by a nonprofit organization) (Special Supplement)

4. Copyright© Texas Education Agency 2011 4 FAR Account Codes Learn how to interpret a General Ledger and Payroll Journal

5. Copyright© Texas Education Agency 2011 5 Overview of FASRG Financial Accountability System Resource Guide – Version 14.0 – January 2010 Applies primarily to school districts and ESCs http://www.tea.state.tx.us/index4.aspx?id= 1222http://www.tea.state.tx.us/index4.aspx?id= 1222

6. Copyright© Texas Education Agency 2011 6 FASRG 11 Modules: –Module 1 – Financial Accounting & Reporting (FAR) and FAR Appendices –Module 2 – Budgeting –Module 3 – Purchasing –Module 4 – Auditing –Module 5 – Site-Based Decision Making

7. Copyright© Texas Education Agency 2011 7 FASRG –Module 6 – Accountability –Module 7 – Data Collection & Reporting –Module 8 – Management –Module 9 – State Compensatory Education –Module 10 – Special Supplement – Charter Schools –Module 11 – Special Supplement – Non-profit Charter School Chart of Accounts

8. Copyright© Texas Education Agency 2011 8 Financial Accounting and Reporting (FAR) Module 1 of FASRG Establishes requirements for school districts and ESCs to maintain proper budgeting and financial accounting and reporting systems Also applies to open enrollment charter schools that are chartered by a university or local government (separate supplement for nonprofit charters – See Modules 10 and 11) Ensures uniformity in government accounting Derived from GAAP (Generally Accepted Accounting Principles)

9. Copyright© Texas Education Agency 2011 9 Special Supplement to FAR Nonprofit Charter School Chart of Accounts Establishes requirements for open enrollment charter schools operated by a nonprofit organization/corporation Ensures uniformity in nonprofit accounting Derived from GAAP

10. Copyright© Texas Education Agency 2011 10 Basis for FAR Module 1 of FASRG TEC requires school districts to adopt and install a standard school fiscal accounting system –The Special Supplement requires charter schools to adopt a standard financial accounting structure Accounting documents and records must be audited annually by an independent auditor –TEA Division of Financial Audit staff are responsible for reviewing the independent audits A budget, itemized in detail according to classification and purpose of expenditure, must be prepared annually by each school district, ESC, and charter school and filed through PEIMS (after adopted by the local board) –The budget must contain, at a minimum, the budget for the General Fund, Food Service Fund, and Debt Service Fund. May contain budgets for other funds, such as grant funds, at their discretion

11. Copyright© Texas Education Agency 2011 11 Basis for FAR/Special Supplement Outlines accounting principles and policies adopted by the SBOE which are official rules Constitutes minimum budgeting, accounting, auditing, and reporting requirements for school districts and charter schools

12. Copyright© Texas Education Agency 2011 12 Federal Basis for FAR Standards for Financial Management Systems 34 CFR §80.20 - state and local governments 34 CFR §74.21 – nonprofit organizations State must expend and account for grant funds in accordance with State laws and procedures

13. Copyright© Texas Education Agency 2011 13 Federal Basis for FAR Fiscal control and accounting procedures for States and its subgrantees as well as cost-reimbursement contractors sufficient to: –Permit preparation of reports –Permit tracing of funds to a level of expenditures adequate to establish that funds have not been used in violation of the applicable program statutes and regulations

14. Copyright© Texas Education Agency 2011 14 Federal Basis for FAR Financial management system standards: –Financial reporting – Accurate, current, complete disclosure of financial results –Accounting records – Adequately identify the source and application (use) of funds – awards, obligations, unobligated balances, assets, liabilities, expenditures, and income

15. Copyright© Texas Education Agency 2011 15 Federal Basis for FAR –Internal Control – Maintain effective control and accountability of all cash, property, and other assets and ensure property is used solely for authorized purposes –Budget Control – Compare expenditures to budget –Allowable Cost – Follow applicable federal cost principles, program regulations, and terms of grant in determining reasonableness, allowability, and allocability of costs

16. Copyright© Texas Education Agency 2011 16 Federal Basis for FAR –Source Documentation – Accounting records supported by source documentation –Cash Management – Procedures to minimize time from requesting funds to disbursement of funds (no more than 3 business days) Awarding agency may review adequacy of financial management system prior to award or during the award

17. Copyright© Texas Education Agency 2011 17 Accounting Principles and Policies in FAR Accounting and Reporting Capabilities – Must be able to: –Present fairly and with full disclosure the financial position and results of financial operations of the funds and account groups in accordance with GAAP –Determine and demonstrate compliance with finance-related legal and contractual provisions.

18. Copyright© Texas Education Agency 2011 18 Accounting Principles and Policies in FAR Fund Accounting Systems: –Organized and operated on a fund basis – a self- balancing set of accounts Fund Types: –Governmental Funds: General Fund – all except those required to be accounted for in another fund – local funds Special Revenue Fund – specific revenue sources that are restricted for specific purposes – grants –Others

19. Copyright© Texas Education Agency 2011 19 Basis of Accounting Accounting records reflect revenues and expenditures By fund source/fund code Budgets are the legal authority for expenditures Encumbrance accounting – amount committed to or reserved for a future expenditure Liquidate encumbrances

20. Copyright© Texas Education Agency 2011 20 FAR Account Codes Basic Code Composition –Fund Code (Net Asset Code for nonprofit charters) –Function Code –Object Code –Optional Codes 1 and 2 –Organization Code –Fiscal Year Code –Program Intent Code –Optional Code 3 –Optional Codes 4 and 5

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23. Copyright© Texas Education Agency 2011 23 Fund Code Mandatory 3-digit fund code used for all financial transactions (net asset code for nonprofit charters) –100 – 199 General Fund (Local funds and Foundation School funds) (nonprofit charters use 199 for fundraising proceeds rather than for state funds) –200 – 289 Special Revenue (Federal grants) –290 – 379 Special Revenue (Federal grants to SSAs) –380 – 429 Special Revenue (State funded grants) (nonprofit charters use 420 for FSP) –430 – 459 Special Revenue (State funded grants to SSAs) –460 – 499 Special Revenue (funds from local sources)

24. Copyright© Texas Education Agency 2011 24 Function Code Mandatory 2-digit code that identifies the purpose of the transaction/expenditure – represents a general operations area and groups together related activities – used in educating students Ex: –10 – Instruction and Instructional-Related Services –20 – Instructional and School Leadership –30 – Non-instructional support services for students –40 – General administrative support services

25. Copyright© Texas Education Agency 2011 25 Object Code Mandatory 4-digit code identifying the nature and object of an account – several kinds of object codes Expenditure/Expense Object Codes – always begin with a “6” – expenses are classified by the major object classes according to the types of items purchased or services obtained

26. Copyright© Texas Education Agency 2011 26 Class/Object Codes 6100 – Payroll Costs 6200 – Professional and Contracted Services 6300 – Supplies and Materials 6400 – Other Operating Costs 6500 – Debt Service 6600 – Capital Outlay 6620 – Building Purchase, Construction or Improvements (nonprofit charters use 15XX for 6600 and 6620)

27. Copyright© Texas Education Agency 2011 27 Optional Codes 1 and 2 Optional 2-digit code used to provide special accountability at the local level if there is need to account for information not otherwise provided in the mandatory chart of accounts – local chart of accounts to be used uniformly in accounting system –Ex: optional code to further break down expenditures into more detail beyond class/object code

28. Copyright© Texas Education Agency 2011 28 Organization Code Mandatory 3-digit code that represents a group of employees who are obligated to complete a specific responsibility – 2 types –Campus code –Administrative or other code – ex: superintendent’s office, school board, etc. – mandated for certain functions

29. Copyright© Texas Education Agency 2011 29 Campus Codes 001 – 040 High school campuses 041 – 100 Junior High/Middle School Campuses 101 – 698 Elementary School Campuses 699 - Summer school and intersession 700 – Administrative or Other 998 or 999 – costs not clearly attributable

30. Copyright© Texas Education Agency 2011 30 Fiscal Year Code Mandatory 1-digit code – use last digit of school year Ex: 2007-2008 school year is represented with “8” Should reflect that number for duration of project, even though it may span multiple school years

31. Copyright© Texas Education Agency 2011 31 Program Intent Code Mandatory 2-digit code used to account for cost of instruction and other services directed toward a particular need of a specific set of students – the student group toward which the services are directed

32. Copyright© Texas Education Agency 2011 32 Program Intent Code 11 – Basic Educational Services 21 – Gifted and Talented 22 – Career and Technology 23 – Services to students with disabilities 24 – Accelerated Education (for at-risk students) 25 – Bilingual and Special Language Programs 30 – Title I, Part A Schoolwide Activities 31 – High School Allotment 91 – Athletics

33. Copyright© Texas Education Agency 2011 33 Optional Code 3 Optional 1-digit local code to provide more detailed accountability at the local level if needed for management purposes – not reported through PEIMS – may be used for any purpose school chooses Suggested but not mandatory: –A – PreK –B - K –C – Grade 1

34. Copyright© Texas Education Agency 2011 34 Optional Codes 4 and 5 Optional 2-digit code to provide local coding as desired or needed Example of suggested uses: –Tracking multiple projects within one fund – ex: district receives both Title II D Educational Technology formula funds and discretionary funds – 2 different grant projects under one fund code –Providing instructional costs by grade level –Providing detailed instructional costs by subject area

35. Copyright© Texas Education Agency 2011 35 SSAs Shared Service Arrangement (SSA) – an agreement between two or more entities that provides services for the entities involved - when school districts and/or service centers find it advantageous to share personnel or services In grant application, must identify SSA fiscal agent and member districts Must retain shared services agreement on file for audit purposes

36. Copyright© Texas Education Agency 2011 36 SSAs 3 financial arrangements: –Fiscal agent retains 100% of the funds and provides services to member districts from funds retained –Fiscal agent flows partial funds to member districts and retains partial funds to provide services to member districts –Fiscal agent flows 100% of funds to member districts, except possibly funds to administer SSA SSA fund codes different from regular fund codes

37. Copyright© Texas Education Agency 2011 37 Nonprofit Charter Schools Special Supplement to FAR Same fund codes (except they are called net asset codes and have a couple of exceptions) Same class/object codes, except no 6600 Capital Outlay – for grant application budget and expenditure reporting purposes, they will identify Capital Outlay/Assets on 6600/15XX

38. Copyright© Texas Education Agency 2011 38 Interpreting a General Ledger At a minimum should include: –Complete account code (15 digits minimum, beginning with 3-digit fund code (or net asset code for nonprofit charters) –Type of transaction (i.e., general journal (GJ), check (CK), encumbrance (EN), etc.) –Transaction reference # (check # or PO#) –Transaction date –Vendor name –Brief description of transaction –Budgeted amount (amount appropriated) –Obligated amount (encumbered) –Amount expended –Account balance

39. Copyright© Texas Education Agency 2011 39 Interpreting a Payroll Journal At a minimum should include: –Complete account code (15 digits minimum, beginning with 3- digit fund code (or net asset code for nonprofit charters) –Employee’s full name –Employee’s SSN or Employee Number –Pay period dates –Pay date –Net earnings –Gross salary and other income –Deductions –Check date –Check number