1. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 IASBO Annual Conference April 30, 2015 Kathy Zalewski, CPA Business Manager/CSBO Evanston SD65 847.859-8043 Zalewskik@district65.net

2. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 SD65 - Operating Expenditures 2

3. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Expenditures –General Operating vs. non-operating expenditures Expenditures have been increasing at a higher pace than operating revenues (structural deficit) Expenditures are communicated to the State via an Annual State Budget Form and State/ Federal grant expenditure reports Expenditures are audited annually and communicated to the state and various agencies via an Annual Financial Report (AFR) 3

4. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Salaries & Benefits Salaries and benefits are the largest expenditures for any school district Employees are hired by the Board of Education Salaries and benefits are processed bi-monthly by an in-house or outside payroll department/company Full-time (contractual)/timesheets employees Payroll process includes payroll calculation, balancing payroll with prior payroll and paycheck printing/distribution 4

5. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Supplies & Purchased Services Services performed by non-district personnel Supplies are tangible items under $500 Some items or services are subject to bidding Purchase requisitions are prepared by individual departments Business Office converts requisition to a purchase order (PO) and 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 5

6. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 How Expenditures Are Coded IL Program Accounting Manual (IPAM) for Local Education Agencies (LEAs) – www.isbe.net www.isbe.net Expenditures are coded by: – Fund – Function – Object The account structure may also include location, program, source of funds and fiscal year 6

7. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Definition of Funds Independent accounting entity with a self- balancing set of accounts including its own assets, liabilities and fund balance Within each fund debits must equal credits Operating vs. non-operating funds 7

8. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Account Number Structure How to Read an Account Number: 10 – 5 – 1120 – 01150 - 0001-100 -15 Fund–Type-Function–Object–Location–Program-Fiscal Year

9. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Fund Descriptions #10 - Educational – Largest fund – Instructional expenditures and support costs such as food service, social workers, librarians #20 - Operations and Maintenance – Maintaining, improving or repairing buildings and grounds – Includes custodial/maintenance staff and utilities #30 – Debt Service – Bond principal and interest payments – An example of non-operating fund 9

10. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Funds (cont.) #40 - Transportation Pupil transportation costs for any purpose such as bus purchases, payments to bus transportation vendors, taxi, van and airfare #50 - IMRF/FICA Board’s share of social security and Medicare taxes and IMRF obligations 10

11. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Funds (cont.) #60 – Capital Projects Bond proceeds for construction are placed here Construction project costs, land purchase, technology expenditures #70 - Working Cash Property tax is levied or bonds are sold for this purpose Loans and transfers of interest to other funds that levy taxes The District’s “savings” account 11

12. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Funds (cont.) #80 Tort – Workers’ compensation, unemployment insurance, property insurance – Legal litigation services, risk management expenditures #90 - Fire Prevention & Safety (Life/Safety) – Fire prevention, safety, energy conservation and school security – District only can levy property taxes for this purpose if your architect submits certified plans to ISBE (IL State Board of Education) and receives approved Life Safety amendments 12

13. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Function Definition and Examples Action or purpose for which person or thing is used Instruction (#1000) Teaching of pupils or the interaction between teachers and pupils (includes aides that assist in instructional process) Regular programs, special education, vocational, interscholastic, summer school, gifted, bilingual 13

14. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Functions (cont.) Support Services (#2000) Services which provide administrative, technical and logistical support to facilitate and enhance instruction Transportation, food service, library/media services, social work/psychological services, nursing services, guidance/counselors, improvement of instruction, superintendent and business offices, office of principal, Operations and Maintenance, data processing 14

15. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Functions (cont.) Community Services (#3000) Services provided by a school district for community in part or whole Public forums, child care centers, welfare activities (stipends for school attendance) Non-Programmed Charges (#4000) All payments to other Local Education Agencies (LEA) (e.g., special education tuition) 15

16. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Functions (cont.) Debt Services (#5000) Principal and interest payments Provisions for Contingencies (#6000) Used only for budgeting purposes Other Financing Uses (#8000) Operating transfers to other funds Example: Working Cash Fund interest transferred to Educational Fund 16

17. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Object Definition and Examples Describes service or commodity obtained Salaries (#100) Amounts paid to permanent, temporary or substitute employees on the district’s payroll Types: Regular, temporary and overtime 17

18. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 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 and Medicare Health, dental and life insurance 18

19. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Objects (cont.) Purchased Services (#300) Services rendered by personnel who are not on the District’s payroll Audit, consultants, legal services Telephone and water utilities Supplies & Materials (#400) Items consumable in nature Paper, periodicals, gasoline Natural gas and electricity 19

20. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Objects (cont.) Capital Outlay (#500) – Fixed assets (more permanent in nature) over the capitalization threshold Building improvements, equipment, vehicles Other Objects (#600) – Principal and interest payments – Tuition – Dues & fees – Transfers between funds Interest earned in one fund may be transferred to another fund (some limitations) Reported as other financing use not expenditures 20

21. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Objects (cont.) # 700 Non-Capitalized Equipment – Items that would be classified as capital assets except that they cost less than the capitalization threshold but more than the minimum value established for purposes of calculating per capita cost #800 Termination Benefits – Payments made to terminated or retiring employees as compensation for unused sick or vacation days 21

22. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Coding Expenditures The function and object codes can be as detailed as you want Determine how much detail is necessary and beneficial Example: #4100 General Supplies and #4140 Instructional Materials Is it beneficial or redundant to have multiple supply accounts within each instructional budget (e.g., math)? 22

23. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Development of ISBE Budget Form Need reports that summarize/sub-total all expenditure accounts by fund, function and object Review which areas need your direct input Example: Public vendor contracts Many parts of the budget have formulas that will carry forward totals to the summary pages 23

24. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Budget Form Sections Cover page requiring Board’s signatures Summary of revenue, expenditures, other financing sources/uses and fund balances by fund Estimated cash balances by fund Cannot have negative cash balances Revenue by fund and source Expenditures by fund, function and object 24

25. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Budget Due Dates Budget must be approved by the Board of Education within 90 days of fiscal year end – September 30 th for most school districts Certified copy must be filed with the county clerk within 30 days of adoption per Property Tax Code (35 ILCS 200/18-50) – They are verifying deficit budget summary and reduction plan and public vendor contracts are included. File electronically with ISBE within 30 days of adoption 25

26. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Post Budget on District Website Must be done if your district has a website Annual budget with itemized revenues and expenditures (most use ISBE form) Must inform parents of its posting and provide web address May use any means of communication Consider adding notice to your student handbook that parents receive 26

27. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Deficit Budget Summary Compares the total excess/(deficiency) of direct revenues over direct expenditures with the June 30, 2015 estimated fund balances Funds used in calculation: Educational, Operations and Maintenance, Transportation and Working Cash 27

28. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Deficit Reduction Plan Required if budget is not balanced Revenues and expenditures summaries for four (4) years Narratives regarding background and key assumptions – Foundation levels for general state aid – Equalized assessed valuation and tax rates – Salaries and benefits – Short and long-term borrowing – Educational impact 28

29. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Plan Ahead Budget Reduction Plans Involve your superintendent and Board of Education Needs BOE approval Financial projections will assist you in determining which year you may need to comply Limitation of administrative costs Estimated FY14 actual and compare to FY15 budget Within allowable five (5) percent increase? 29

30. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Part of budget form Report prior year actual activity “All contracts and agreements that pertain to goods and services that were intended to generate additional revenue and other remunerations in excess of $1,000.” List vendor, product/service provided, net revenue, non-monetary remuneration and how distributed and purpose of proceeds 30 Reporting of Public Vendor Contracts of $1,000 or More

31. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Includes without limitation: Vending machine contracts Sports and other attire Class rings Photographic services Contracts need BOE approval What about fundraisers & activity accounts? 31 Public Vendor Contracts (cont.)

32. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Student fundraisers are excluded from reporting as long as the fundraiser benefits student activity accounts (e.g., student clubs) and the Board does not control the spending of the funds Do report vending machine commissions even if being deposited in activity accounts ISBE views this as principals/administrators (i.e., Board of Ed.) control how funds are spent 32 Public Vendors Clarified

33. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Departments use account codes where they have money not where the item should be charged per ISBE Instructional and support service expenditures being misstated in financial system which carries errors forward to the annual financial report (AFR) and ISBE school report card 33 Common Mistakes

34. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 Common Mistakes (Cont.) Charging an employee’s pay to purchased services instead of salary or student activity funds Total salary expenditures will not agree with 941s and W-2 forms Coding capital outlay as supplies The operating expenditures per pupil will be overstated as capital expenditures are backed out of this calculation; this calculation appears in the AFR and school report card

35. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 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

36. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 http://www.iasbo.org http://www.asbointl.org http://www.gfoa.org (Government Finance Officers Assoc.) http://www.gfoa.org http://www.gasb.org (Governmental Accounting Standards Board) http://www.gasb.org IASBO, IASB, IASA publications Legislative updates Contact your colleagues! 36 Other Resources

37. 64 th ILLINOIS ASBO CONFERENCE AND EXHIBITIONS APRIL 29 – MAY 1, 2015 @IllinoisASBO #iasboAC15 37 Questions?