1. Expenditures CASBO Training

2. Values and Money  We spend our TIME and our MONEY on what we VALUE.

3. Why are you here? ASBO Certification Increase personal knowledge Tier 1 Requirement Tier 1 annual update.

4. Expenditures What are the major categories of expenditures in a typical district? Salaries & Benefits Supplies/Equipment Services Capital Outlay Debt Service.

5. What is the proportion of each to the whole operating budget? Salaries & Benefits Supplies/Equipment Services Capital Outlay Debt Service.

6. Salaries/Benefits Salaries Contracted wages Time sheet pay

7. Benefits Calculations FICA – 6.2% (maximum salary $113,700 in 2013) Medicare – 1.45% Teacher Retirement – 14% = 21.65% Other benefits provided by the district for all certified and/or classified employees Health - $131, moving to $150 in January Dental, Disability Insurance Worker’s Compensation Unemployment For estimating purposes, total @25%. Will vary slightly by district.

8. Salary Essentials Approved Salary Schedules for various groups of employees Approved way for paying for extra assignments Contracts issued in a timely fashion Educational Increments Savings from retirees vs. new hires Severance Issues Multi-year impact of salary policy Educational Excellence Trust Fund compliance.

9. Supplies/Equipment Difference is important as it relates to accounting and the inventory of fixed assets Inventory vs. fixed asset Inventory – a detailed list of items in stock Fixed asset - Any tangible asset with a life of more than two years used in an entity's operations.

10. Services Professional Services Property Services Other Services.

11. Professional Services  Professional and Consultant Services are exempt from bidding  Accounting  Engineers  Architects  Legal  Medical  Information/Technology  Appraisal  Do they give advice or do they supply a product?  Generally, are they licensed or recognized in some way by a certifying professional organization?

12. Property Services Utilities Construction Services Lawn care Cleaning services Rental.

13. Other Services Transportation Insurance Advertising.

14. Capital Outlay Purchases/Construction of a fixed asset of such a significant amount that it is considered unusual and substantial in relation to the overall budget of the district.

15. Debt Service  Payment is in three parts  Principal  Interest  Fees  Debt Schedule

16. Debt Service  Your Fiscal Agent  Taxable vs. Non-Taxable Bonds  Arbitrage - Attempting to profit by exploiting price differences of identical or similar financial instruments on different markets or in different forms.

17. Accounting Procedures

18. ACCOUNTING The definition of accounting is “the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results.”

19. ACCOUNTING - Why should I care about accounting for money?  It is the right thing to do.  People lose their job quicker over money and sex than anything else.  You have a responsibility to your public.  You have a responsibility to your kids.

20. Basis of Accounting Establishes point-in-time when revenues or expenditures and related assets and liabilities are recognized in district accounts and reported in financial statements Determines timing with which the accounting system recognizes transactions.

21. Basis of Accounting Cash Basis – Recognized when cash is received or disbursed Accrual Basis – Measures financial position based on economic resources and obligations

22. Cash Basis Revenue recorded when cash is received Expenses recorded when cash is paid Financial condition measured b cash balance Receivables, payables or accrued items are not recognized.

23. Accrual Basis Revenues are recognized when earned – regardless of when received Expenses are recognized when incurred – regardless of when paid Economic status reflects resources and obligations – regardless of cash flow timing.

24. Accounting for Expenditures You will spend money. How will you know how much you are spending and what you spent it for? How can you report that information out to your Board and to your Public? How can you prepare for the annual visit of your auditor?

25. Evolution of Account Classifications Handbook II, Financial Accounting for Local and State School Systems: Standard Receipt and Expenditure Accounts, 1957 Handbook II Revised, Financial Accounting: Classification and Standard Terminology for Local and State School Systems, 1973.

26. Account Classification Standards-Present Edition Handbook II R2- 1990 Reflects changes and clarifications in generally accepted accounting principles (GAAP) Financial Accounting for Local and State School Systems. 2003 Edition (NCES) NCES Revised Edition published June, 2009. http://nces.ed.gov/ppubsearch/pubsinfo.asp?pubid2009325 State Accounting Systems (ADE, etc.) adapt Handbook II R2 for use by local school districts

27. Accesson APSCN site

28. Interest relative to Handbook IIR 2 is widespread Account coding is required to reveal: Athletic expenditures Student transportation District administration School administration Instructional facilitators Supervisory aides Substitutes Property Insurance

29. Act 1006 Requires gathering information on these expenditures: Student growth Declining enrollment Special education catastrophic occurrences Special education services Technology grants Debt service supplement General facilities Distance learning Gifted and talented

30. Do it Right…or Pay the Price! Act 1006 provides for ADE to publish rules to identify error rates by local schools in reporting and provides that fines or other penalties may be assessed.

31. THE BUDGET UNIT The 21 digit number that indicates what fund will pay, what kind of expenditure, what cost-center, what type of goods or services the expenditure is. It provides the detail of the expenditure. It also provides a way to report and analyze the expenditures of a district and ultimately the state.

32. THE BUDGET UNIT Six sections of the budget unit: 1000-1140-049-000-00 61110 – Certified Salary 2000-1120-042-000-00 62210 – Certified Social Security 2281-1105-040-987-00 66100 – Supplies for early childhood 2000-2134-005-000-79 65800 – Nurse’s travel budget

33. What is this budget strip used for? 2281-1105-040-987-00 66100

34. FUND 1000 – Teacher Salary Fund 2000 – Operating Fund 3000 – Building Fund 4000 – Debt Service Fund 5000 – Capital Outlay Fund 6000 – Federal Funds 7000 – Activity Funds 8000 – Food Service Fund 9000 – Fixed Assets 2281-1105-040-987-00 66100

35. Source of Fund - SOF Federal Funds Activity Funds Grants Categorical Funds 223 – Professional Development 275 – ALE 276 – ELL 281 – NSLA Facilities Funding 2281-1105-040-987-00 66100

36. Function 1000 – Instruction 2000 – Support Services 3000 – Operation of Non-Instructional Services 4000 – Facilities acquisition and Construction 4610 – Building Acquisition and Construction 4630 – Athletic Building Acquisition and Construction 5000 – Other (debt) 2281-1105-040-987-00 66100

37. Location Normally, it is the last three digits of the building’s LEA number. Can be a building number designated by the district for non-instructional buildings. ??-??-040 2281-1105-040-987-00 66100

38. Program Used to further identify the specific use of the funds to be expended. Districts may use 900-999 Special Ed – 200 Athletics - 115 2281-1105-040-987-00 66100

39. Subject Used to provide even more detail on the expenditure. The State can use both Program and Subject codes at their discretion. Currently, the State does not use this portion of the budget unit. 2281-1105-040-987-00 66100

40. Object Sometimes called the Account. Tells us what was purchased 2281-1105-040-987-00 66100 61000 – Salaries 61100 61110 – Certified Salaries 61120 – Classified Salaries 62000 – Benefits 62200 62210 – Certified Social Security 62220 – Classified Social Security

41. Object 63000 – Purchased Professional and Technical Services 63370 – Architect 64000 – Purchased Property Services 64240 – Lawn Care 65000 – Other Purchased Services 65210 – Property Insurance 65310 – Telephone

42. Object 66000 – Supplies and materials 66100 – General Supplies 66410 – Textbooks 67000 – Property 67100 – Land and improvements 67200 – Buildings 68000 – Other Objects 68830 – Property Tax 69000 – Other 69310 – Transfer to Teacher Salary Fund

43. The Budget Strip 2281-1105-040-987-00 66100 Fund/Source of Fund Function Location Program Subject Object 2 2811105 0409870066100

44. Determining Which Coding to Use Accounting is both a science and an art. I could give you an invoice and we could come up with 10 different ways to code that invoice. Pay attention to what the Department says to do. Be honest. Be consistent. Ask other people’s opinion. It really does matter.

45. Management Strategies For Expenditure Establish Procedures Purchase Order (P.O.) Process Receipts/Reimbursements Do you have a written purchasing procedure? Do you have a written travel reimbursement procedure? Frequent Monitoring and Reporting Ask for reports periodically. Report to your Board frequently.

46. Management Strategies For Expenditure Learn how to operate “Excel” Track important numbers Ending Balance Total Revenue Total Expenditures Property Tax Assessments Student ADM Be cautious about adding new personnel.

47. Management Strategies For Expenditure Control of Organizational Chart of Accounts Structure A single person should control the chart Internal Controls Systems of cross checking and balancing to ensure the opportunity for theft and fraud are minimized Segregation of Duties A key operational control to ensure that one individual does not participate in more than one key operational function Security of your unwritten checks and signature stamps.

48. Targets of “Fiscal Distress” Declining balance to jeopardize fiscal integrity of a school district Act or violation to jeopardize fiscal integrity Any other fiscal condition of a school district deemed to have a material detrimental negative impact on the continuation of educational services by that school district.

49. Potential “acts or violations” Material failure to…  Properly maintain school facilities  Violation of local, state, or federal fire, health or safety code provisions  Violation of local, state, or federal construction code provisions or law  Material state or federal audit exceptions  Failure to provide timely and accurate legally- required financial reports to ADE, Division of Legislative Audit, General Assembly or IRS

50. Other ways to violate…. Materially…  Insufficient funds to cover payroll, salary, employment benefits or legal tax obligations  Failure to meet legally binding minimum teacher salary schedule obligations  Failure to comply with state law governing purchasing or bid requirements  Default on any school district debt obligations  Discrepancies between budgeted and actual school district expenditures

51. Other material ways… Materially….  Failure to comply with audit requirements of 6-20-301  Failure to comply with any provision of the Arkansas Code that specifically places a school district in fiscal distress based on noncompliance.

52. What Happens then? Finding by State Board of Education Publication of notices Limited rights of appeal Submit plan to ADE within 10 days ADE oversight of plan and implementation Required ADE approval of plan ADE technical assistance ADE recommendations/mandated staffing and fiscal practices.

53. Other ADE actions… Replace superintendent Suspend local board authority Transfer authority to new board/superintendent Required reporting requirements ADE monitoring of accounts and operations. Training required for district board members and employees.

54. Final Action Consolidation Annexation Reconstitution Other appropriate action

55. The Legal Fund Balance Restricted Fund Balance Categoricals, vocational, adult ed., etc. 201 Adult Basic Education 202 Adult General Education 203 Workplace Adult Education 205 Other Adult Education 212 Isolated Funding 223 Professional Development 275 Alternative Learning Environment 276 English Language Learners 281 National School Lunch Act 293 Secondary Workforce Centers 320 Adult Center Support 323 Short-term Adult Skill Training 386 Pulaski County Magnet School 387 M-to-M Revenue 388 Magnet & M-to-M Transportation 391 Public School Facilities Escrow 401 Academic Facilities-Immed Rep 402 Academic Facilities-Catastrophic 403 Academic Facilities-Transitional 404 Academic Facilities-Partnership Bal Sheet 01915 Deposits-Paying Agents(QZAB)

56. The Legal Fund Balance Unrestricted Fund Balance is used to determine fiscal distress. It is your operating balance minus restricted funds.

57. What about balances in restricted funds? NSLA ELL ALE Professional Development Federal Funds

58. Spending Requirements for Categorical Funds Act 1220 of 2011 At least 85% of NSLA Funds must be spent Transfer authority among categories is granted Commissioner may grant waivers Balance in categorical funds shall not exceed 20% of annual allocation Provisions for 10% annual reduction required Failure to comply results in reduction in future NSLA funding.

59. etc Handbook IIR 2 also includes instructions on recording & classification of fixed assets Journal Entries.

60. etc Make your Auditor happy Be detail-oriented about your finances. Revenue low expenditures high,

61. What is your favorite color? $$

62. Key Word for staying in the black in your district:

63. Thank you! Email me – murryg@conwayschools.net Call me – 501-450-4800