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School Finance Expenditures for the Novice

IASBO Annual ConferenceMay 15, 2008

Susan Husselbee, Director of Fiscal ServicesNiles Township High School District 219847.626.3974sushus@niles-hs.k12.il.us

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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

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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

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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

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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

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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

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Fund Uses #10 - Educational

Largest fund Instructional exp. & support costs such

as food service, social workers, librarians

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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

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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

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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

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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.

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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)

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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

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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

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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)

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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

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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

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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

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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

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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

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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.

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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

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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

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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)

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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)?

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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

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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

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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

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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

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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

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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

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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

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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.”

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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?

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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

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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.

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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

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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!

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Questions?