School Finance Expenditures for the Novice

1. School Finance Expenditures for the Novice IASBO Annual Conference May 15, 2008 Susan Husselbee, Director of Fiscal Services Niles Township High School District 219 847.626.3974 sushus@niles-hs.k12.il.us

2. Expenditures Incurred Via: • Payroll • Employees are hired by the Board of Education as recommended by Human Resources/Superintendent • Substitute pay & overtime is authorized by the appropriate dept. administrator & forwarded to Payroll in the Business Office • Payroll processes paychecks • Paychecks are distributed to employees

3. Exp. Incurred (cont.) • Purchasing (site based) • Staff member wants to purchase an item • Supervising administrator verifies available budget balance, and that purchase is allowed (e.g., no bidding required) • Purchase requisition is prepared by dept. • Business Office converts requisition to a purchase order (PO) & 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

4. How Expenditures Are Coded • IL Program Accounting Manual (IPAM) for Local Education Agencies (LEAs) • Exp. coded on ISBE AFR & budget by: • Fund • Function • Object • Your acct. structure may also include location, program, source of funds

5. Important – IPAM Changes • Effective July 1, 2008 • Will require changes to your current financial account code structure • Need to familiarize yourself with new FY 09 budget form

6. Definition of Funds • Independent accounting entity with a self-balancing set of accounts including its own assets, liabilities & fund balance • Within each fund • Debits = credits

7. Fund Uses • #10 - Educational • Largest fund • Instructional exp. & support costs such as food service, social workers, librarians

8. Funds Uses (cont.) • #20 - Operations and Maintenance • Maintaining, improving or repairing buildings and grounds • #30 – Debt Service • Formerly “Bond and Interest” • Bond principal and interest payments

9. Funds Uses (cont.) • #40 - Transportation • Pupil transportation costs such as bus purchases & payments to bus transportation vendors • #50 - IMRF/FICA • District’s share of social security and Medicare taxes and Board share of IMRF obligations

10. Fund Uses (cont.) • #60 – Capital Projects • Formerly “Site and Construction” • Bond proceeds for construction are placed here • Construction project costs, land purchase • #70 - Working Cash • Property tax is levied or bonds sold for this purpose • Loans and transfers of interest to other funds • The District’s “savings” account

11. Fund Uses (cont.) • #80 Rent • Discontinued for FY 08 • Tax is levied to pay rent for state-owned school buildings • #80 Tort/liability • Formerly combined with Ed. Fund for ISBE reports • Workers’ comp, unemployment insurance, property insurance • Legal services, risk management exp.

12. Fund Uses (cont.) • #90 - Fire Prevention & Safety (Life/Safety) • In order for the county to levy property taxes for this purpose, your architects must certify plans that are submitted to the Regional Office of Education (ROE) & ISBE (IL State Board of Education)

13. Definition and Examples of Functions • Action or purpose for which person or thing is used • Instruction (#1000) • Teaching of pupils or the interaction between teacher and pupils (includes aides that assist in instructional process) • Regular programs, special education, vocational, interscholastic, summer school, gifted, bilingual

14. Function Examples (cont.) • Support services (#2000) • Services which provide administrative, technical & logistical support to facilitate & enhance instruction • Transportation, food service, library/media services, social work/psychological services, nursing services, guidance/counselors, improvement of instruction, superintendent & business offices, office of principal, O & M, data processing

15. Function Examples (cont.) • Community services (#3000) • Services provided by LEA for community in part or whole • Public forums, child care centers, welfare activities (stipends for school attendance) • Nonprogrammed charges (#4000) • All payments to other LEAs (e.g., special education tuition)

16. Function Examples (cont.) • Debt services (#5000) • Principal & interest payments • Provisions for contingencies (#6000) • Used only for budgeting purposes • Actual exp. recorded in proper account • Other financing uses (#8000) • Operating transfers to other funds • Example: Working Cash Fund interest transferred to Educational Fund

17. FY 08 Function Code Highlights • Tort Fund • Most exp. fall within #2300 • #2363 – unemployment • #2364 – insurance (regular or self-insurance) • #2369 – legal services • #4200 – Payments to other governmental units (in-state) for tuition

18. Definition and Examples of Objects • Describes service or commodity obtained • Salaries (#100) • Amounts paid to permanent, temporary or substitute employees on the district’s payroll • Types: Regular, temporary & overtime

19. 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 & Medicare • Health, dental & life insurance

20. Objects (cont.) • Purchased services (#300) • Services rendered by personnel who are not on the District’s payroll • Audit & legal services • Telephone & water utilities • Supplies & materials (#400) • Items consumable in nature • Paper, periodicals, gasoline • Natural gas & electricity

21. Objects (cont.) • Capital outlay (#500) • Fixed assets (more permanent in nature) • Building improvements, equipment, vehicles • Other objects (#600) • Principal & interest payments • Dues & fees • New #660 Transfers between funds • Formerly #700 • Interest earned in one fund may be transferred to another fund (some limitations) • Reported as other financing use not exp.

22. Objects (cont.) • New #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 $500 minimum value established for purposes of calculating per capita cost

23. Objects (cont). • New #800 Termination benefits • Formerly tuition paid to other educational agencies • Payments made to terminated or retiring employees as compensation for unused sick or vacation days • Formerly recorded as salaries as object #100

24. How to Code Expenditures • Think of how the exp. best fits within your account structure (fund, function, object, location, program) • Examples • Bus trips (40-2550-331) • Elem. ed. class supplies (10-1110-410) • New plumbing system (20-2540-520) • Paid bond principal that has taxies levied (30-5140-610)

25. How to Code Exp. (cont.) • The function & object codes can be as detailed as you want • Determine how much detail is necessary & beneficial • Example: #41000 General Supplies and #41400 Instructional Materials • Is it beneficial or redundant to have multiple supply accounts within each instructional budget (e.g., math)?

26. Development of ISBE Budget Form • Need reports that summarize/sub-total all exp. accounts by fund, function & object • Review which areas need your direct input • Many parts of the budget have formulas that will carry forward totals to the summary pages

27. Budget Form Sections • Cover page requiring BOE signatures • Summary of revenue, exp., other financing sources/uses & fund balances by fund • Estimated cash balances by fund • Can’t have negative cash balances • Revenue by fund and source • Exp. by fund, function & object

28. Budget Due Dates • Budget must be BOE approved within 90 days of fiscal year end • For most school districts, this will be by Sept. 30 • Certified copy (including revenues) must be filed with the county clerk within 30 days of adoption per Property Tax Code (35 ILCS 200/18-50) • File electronically with ISBE within 30 days of adoption

29. Post Budget on District Website • Must be done if your district has a website • Annual budget with itemized receipts & exp. (most use ISBE form) • Must inform parents of its posting & provide web address • May use any means of communication • Consider adding notice to your student handbook or website

30. Deficit Budget Summary • Compares the total excess/(deficiency) of direct revenues over direct expenditures with the June 30, 2009 estimated fund balances • Funds used in calculation: • Educational, O & M, Transportation & Working Cash

31. Deficit Reduction Plan • Rev. & exp. summaries for 4 yrs. • Narratives & assumptions • Foundation levels for general state aid • Equalized assessed valuation & tax rates • Employee salaries & benefits • Short & long-term borrowing • Educational impact

32. Plan Ahead • Budget Reduction Plans • Involve your superintendent & Board of Education • Needs BOE approval • Financial projections will assist you in determining which year you may need to comply • Limitation of administrative costs • Est. FY 08 actual & compare to FY 09 budget

33. Reporting of Public Vendor Contracts of $1,000 or More • Part of budget form • Report prior yr. actual activity • “All contracts & agreements that pertain to goods & services that were intended to generate additional revenue & other remunerations in excess of $1,000.”

34. Public Vendor Contracts (cont.) • Includes without limitation: • Vending machine contracts • Sports & other attire • Class rings • Photographic services • Contracts need BOE approval • What about fundraisers & activity accounts?

35. Common Mistakes • Dept. use account codes where they have money not where the item should be charged per ISBE • Instructional & support service exp. being misstated in financial system which carries errors forward to the annual financial report (AFR) & ISBE school report card

36. Common Mistakes (cont.) • Charging an employee’s pay to purchased service instead of salary • Total salary exp. won’t agree with 941s & W-2s • Coding capital outlay as supplies • The operating exp. per pupil will be overstated as capital is backed out of this calculation. This calculation appears in the AFR & school report card.

37. 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

38. Other Resources • http://www.iasbo.org • http://www.asbointl.org (internat’l) • http://www.gfoa.org (Government Finance Officers Assoc.) • http://www.gasb.org (Governmental Accounting Standards Board) • IASBO, IASB, IASA publications • Legislative updates • Contact your colleagues!

39. Questions?