School District Accounting Issues

1. School DistrictAccounting Issues

3. Key Issues • GASB 54 • Net Position • Accrued Sick Leave • GASB 63/65 – deferred inflows and outflows • Common errors

4. Susan Barkley Assistant Director, Division of District Support Kentucky Department of Education susan.barkley@education.ky.gov 502-564-3930

5. Resources • Fund balance template – Chart of Accounts page • Entity-wide template, slides – financial audit page • GFOA “blue book”

6. Trial balance

7. Expense allocation worksheet

9. GASB 54Fund balances

10. Nonspendable Stuff not in spendable form, like prepaids

11. Restricted • Funds restricted for expenditure by the grantor, legislation • Examples: • Federal grants • Some donations • SFCC funds

12. Committed • Funds committed to a specific purpose via board action • Must be done by June 30 • Takes board action to commit and to un-commit • Example: what we used to call “board-designated”

13. Assigned • Designations made by management • Can be done after June 30 • Cannot create a negative balance in unassigned • May include POs only in general fund

14. Unassigned • Can be a positive number only in general fund • The only category that can ever be negative

15. Deficits in Other Funds • Audit contract • Only general fund can have a deficit at June 30 • Funds must be transferred from general fund to satisfy deficits in other funds

16. Fund Balance – Fund 2 • Revenue and Expenditure accounts close to 8731 • MUNIS auto closes POs to 8755 at year end and auto reverses that entry upon opening subsequent year • Results in a negative (debit) balance in 8731 – restricted grants and a positive (credit) balance in 8755 – assigned 13th month POs

17. Fund Balance – Fund 2 • To accurately report fund balance at June 30, an adjustment needs to be made to zero those balances: Dr. 8755 – assigned POs, 13th month Cr. 8731 – restricted, grants • Reverse the entry in subsequent year

18. Net Position • Funds 5X are different! • Proprietary funds are full accrual • They do not use fund balance codes • Use net assets (net position) codes ONLY • Invested in capital assets, net of related debt (8711) • Restricted net assets (8739) • Unrestricted net assets (8712) • New edit check to help you in the future

19. Sick Leave issues

20. Sick Leave - Escrow • KRS 157.420 (3) • May escrow up to 50% of max liability • Staff employed on September 15 • Not to be used for any other purpose • Restricted fund balance 8732

21. Sick Leave - Liability • Max liability on entity-wide statements • Recorded as of 6/30/YY • True-up liability annually • 27 service years for KTRS

22. Sick Leave - Payment • KRS 161.155 (10) (a) (b) • Not to exceed 30% of daily salary • Included for KTRS calculation • Maximum 300 days

23. Sick Leave – Calculations to determine liability balance • Maximum liability: • Total liability = daily rate * #of sick days * 30% • Pro-rated for service years: • # years (step) ≥ 27 = total liability amount • OR • # years (step) < 27 = liability/27 * # years (step)

24. To determine maximum escrow • Escrow: • Pro-rated liability * 50%. • Restricted fund balance – sick leave (8732) • Use 9/15/yy data unless not materially different

25. Fund balance set asides for Sick Leave • Amounts set aside (escrow) pursuant to KRS 157.420 = restricted (8732) • Other amounts set aside by board action = committed (8742) • Amounts intended to be used for sick leave payments without board action = assigned (8757)

26. Up to the maximum allowed by law Total sick leave liability - Amount escrowed (8732) Remaining amount that could be set aside for Committed fund balance (8742) and/or Assigned fund balance (8757) NOTE: All fund balance set asides are OPTIONAL

28. SFCC Offers This is an even-numbered year so no escrows will be made at year end

29. Debt Service Fund • For the accumulation of resources • For principal and interest • Required for bond payments • Optional for capital lease payments

30. On-Behalf Payments • Health benefits • Districts reimburse KDE for federally-funded employees • Retirement • Technology • Debt Service • KISTA energy savings capital lease • Guidance available at http://education.ky.gov/districts/FinRept/Pages/On-Behalf-Payments-Information.aspx

31. Budgeting On-Behalf • Optional, but encouraged • Eliminates confusion • Prevents actual variances from being camouflaged

32. GASB Statement 63/65 • Statement of Net Position • Deferred outflows • Deferred inflows

33. Deferred Outflows • Listed after assets, used to be called assets • A consumption of net assets that is applicable to a future reporting period • Example: deferred amounts from debt refunding (debits)

34. Deferred Inflows • Listed after liabilities, used to be called liabilities • An acquisition of assets applicable to a future reporting period • Examples: • Grant revenue received before you are allowed to spend it • “Unavailable revenue” (used to be deferred revenue) – receivables that won’t be collected within availability period • Deferred amounts from debt refundings (credits)

35. Debt issuance Costs • Also required by GASB 65 • Used to be an asset • Now an expense • If material, prior period adjustment in year of adoption

37. Common errors • Failure to comply with GASB 54 • On behalf debt service payments made by the state recorded as 3200 instead of 3900 • On behalf debt service payments made by the feds not recorded as 4900 • Bond principal and interest payments not recorded in fund 400 • Failure to comply with GASB 63 • Failure to comply with clarity standards

38. Proposed audit adjustments • Entries must balance • Can’t make an entry to Fund 2 beginning balance – make entries to revenue/expenditure instead • Fixed asset journal entries must be associated with specific fixed assets (tag numbers)