Expenditures

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. Access on APSCN site

28. Interest relative to Handbook IIR2 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 2 281 1105 040 987 00 66100 • 2281-1105-040-987-00 66100 Object Fund/Source of Fund Function Program Subject Location

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