Tier I Annual Update

2012-2013

CASBO Class SM401A

A.C.A. §6-20-2204 Required Tier 1 Training

• Superintendent, Education Service Cooperative Director, Open-enrollment Public Charter School Director, General Business Manager.

• 12 hours of initial training.• 4 hours of annual update training.

A.C.A. §6-20-2204 Required Tier 1 Training (Cont’d)

• ADE has approved the following AASBO courses for the 12 hours of initial training:– SF101A, Revenues– SF101B, Expenditures– SM102, Ethics and Audit Compliance– PS101, Introduction to Purchasing– SM401A, School Management Issues & Updates– SF401A, School Finance Issues & Updates

A.C.A. §6-20-2204 Required Tier 1 Training (Cont’d)

• If employed by July 1, Tier 1 training must be completed by December 31 of the same calendar year.

• If employed after July 1, Tier 1 training must be completed by December 31 of the following calendar year.

• Failure to complete the required training by December 31 shall constitute an accreditation citation.

A.C.A. §6-20-2204 Required Tier 1 Training (Cont’d)

• If a person fails to obtain the required training by December 31 and fails to cure the deficiency by March 1 of the following calendar year without filing a request for an extension as determined from the records of ADE, that person shall be unable to continue in his or her position.

A.C.A. §6-20-2204 Required Tier 2 Training

• Four hours of annual training for employees who are involved in the process of recording and/or reporting of financial transactions but:– Do not make decisions about selecting codes, or– Have a limited number of codes that they can use

• School district trainers are required to attend Tier 1 training.

• Training materials should be based on Tier 1 material and focused on the specific needs of school district employees.

A.C.A. §6-20-2204 Required Tier 2 Training (Cont’d)

• Maintain annual files and records indicating all employees who are required to have Tier 2 Training and those who have completed Tier 2 training in the district office.

• Provide ADE with assurance statement regarding the completion of Tier 2 training by the required individuals. (This is pulled in State Reporting Cycle 7 – June 15)

A.C.A. §§ 6-20-2204 & 6-20-2205 Sanctions-Tier 1 & 2

• Standards citation - Tier 1 only, school districts and open-enrollment charter schools

• Admonishment - Tier 1 only, education service cooperatives

• Fiscal distress - Tier 1&2, school districts and open-enrollment charter schools

• Sanction - Tier 1 & 2, education service cooperatives

PURCHASING

State Buying Authority

• Office of State Purchasing (OSP) has authority over the procurement practices of State Agencies only.

• Public Schools are allowed by law to purchase off the Statewide contracts, but are not mandated to do so.

• Utilizing state purchasing is a way for school districts, charters, and coops to make sure the cost is fair and reasonable.

Cooperative Purchasing – A.C.A. §19-11-249

Any public procurement unit may either participate in, sponsor, conduct, or administer a cooperative purchasing agreement for the acquisition of any commodities or services with one (1) or more public procurement units or external procurement activities in accordance with an agreement entered into between the participants. Such cooperative purchasing may include, but is not limited to, joint or multiparty contracts between public procurement units and open-ended state public procurement unit contracts which are made available to local public procurement units.

What does this mean?

That Arkansas governmental entities may utilize a purchasing agreement established by another governmental entity or established cooperative that has issued, reviewed and awarded a contract to a supplier where all the procurement laws of Arkansas were followed.

See Taps and TCPN; §19-11-249 controls over usual bid requirements of § 6-21-304, A.G. Op. 2006-042

Schools & Cooperatives• If a school is approached by a vendor who has a

contract with a Cooperative Entity (such as US Communities, TIPS/TAPS, NJPA, NIPA, etc.) their administration should review the contract to see if it meets their school district’s procurement requirements and is a good value purchase.

• Must meet the state’s bid requirements for OSP to include as approved.

• If it has been bid, then it meets threshold.

How do I know if a particular contract meets these requirements?

If a cooperative agreement is on the Office of State Procurement Contract Website, it has been through that review. http://www.arkansas.gov/dfa/procurement/pro_contracts.html#coop

If it is not on the OSP website, the buying entity must review the solicitation documentation used by the originating entity/cooperative to ensure compliance with Arkansas laws.

Benefits of using a Cooperative Contract

• Convenience• Obtain advantages of volume purchases• Combines qualities so that each entity will

obtain the best value• Reduces administrative costs of purchasing

School District Buying Authority

• School districts function under separate purchasing laws from State Agencies.

• The laws are found in A.C.A. §§ 6-21-301 thru 6-21-306 and give authority to the respective school boards.

Procurement

• A.C.A. 6-21-303 requires the school board to develop policies to outline the method for soliciting bids and allows the board to adopt other rules governing procurement.

• School boards may wish to develop rules that allow certain types of commodities and services to be bid for multiple years. (copiers, maintenance, custodial, substitutes, banking)– Include procedures for terminating and/or maybe an annual

renewal process. – Include a clause that allows termination if future school

board fails to budget funds to pay the contract.

Procurement (Cont’d)

• Bid threshold for purchase of commodities is $10,000.– Per 6-21-301 Commodities means: “all supplies, goods,

material, equipment, machinery, facilities, personal property, and services, other than personal and professional services, purchased for or on behalf of the school district.”

– Per 19-11-801(b), “competitive bidding shall not be used for the procurement of legal, financial advisory, architectural, engineering, construction management, and land surveying professional consultant services.

– Per 19-11-801(c) may elect to not use competitive bidding for other professional services not listed in (b) with a 2/3 vote of board.

Procurement (Cont’d)

• All bids may be rejected and a contract negotiated.

• All bidders must have reasonable opportunity to negotiate

• Items MUST NOT be split between purchase orders to make the purchase under $10,000.

Procurement (Cont’d)

• Bid Solicitation Exemptions (6-21-305):– Emergency

• With written statement from superintendent– Commodities available only from federal government– Utility services regulated by state or federal agency– Used equipment and machinery (school buses +2 years to

be considered used)– Single source

• With written statement from purchasing officialSee Appendices for copy of FIN-09-071, April 28, 2009

BIDS

• Do not write specifications to eliminate or restrict competition or include name or identity of any specific vendor.

• Notify in writing all prospective bidders who have asked to be notified of bids

• Provide an adequate time for a response• Include a response form to be notarized by the agent

of the bidder• The wording for the form is found in A.C.A. §6-21-

304(a)(4)(A)

School Buses

• The school board has jurisdiction over the purchase of Types, A, B, C, and D school buses. (A.C.A. 6-21-304)

• The Academic Facilities and Transportation Commission, with the assistance of an advisory committee, shall provide minimum specifications for buses.

School Buses (Cont’d)

• School Board may request the State Procurement Director to take bids on their behalf.

• If the district solicits the bids they must provide the OSP:

1. A copy of the bid Specs2. List of bidders3. Any correspondence4. Bid tabulation5. Copy of bid award

School Buses (Cont’d)

• A School bus is considered “used” 2 years after the date on the manufacturer’s certificate of origin.– If the body of the school bus is installed by other than

the manufacturer of the chassis, the bus becomes used 2 years after the date of issuance on the certificate of origin issued by the entity that installed the body on the chassis.

• Purchases of used school buses are not subject to approval by the OSP nor bidding procedures prescribed by law.

ETHICS

Ethics-School Board Members• A.C.A. §6-24-105 states that: “it is a breach of the

ethical standards of this chapter for a board member to contract with the public educational entity the member serves if the board member has knowledge that he or she is directly or indirectly interested in the contract.”

• A public educational entity may not initially employ a board member’s family member during the member’s tenure of service for compensation in excess of $5,000 unless the Commissioner of Education issues a letter of exemption approving the contract based on unusual and limited circumstances.

Ethics-School Board Members (Cont’d)

• Any family member employed before the board member’s tenure may continue in employment but may not be promoted if compensation will increase more than $2,500.

• Family members may be employed as a substitute teacher, cafeteria worker, or bus driver for no more than 30 days per fiscal year.

• Non-employment contracts with a board member or family member of a board member are prohibited if the total transactions or contracts will total $5,000 or more during a fiscal year—unless the Commissioner of Education issues a letter of exemption based on unusual and limited circumstances.

Ethics-Administrators

• A.C.A. §6-24-106 states: “it is a breach of ethical standards of this chapter for an administrator to contract with the public educational entity employing him or her if the administrator has knowledge that he or she is directly or indirectly interested in the contract.”

• Family members of an administrator may be employed by the educational entity that the administrator serves without approval from the Commissioner of Education. (but cannot be initially employed as a disbursing officer without approval from the Commissioner)

Ethics-Administrators (Cont’d)

• To contract with other public educational entities, an administrator shall first get approval from the board employing the administrator and then shall get approval from the Commissioner.

• Rules Governing Ethical Guidelines and Prohibitions for Educational Administrators, Employees, Board Members, and other Parties included in Appendices

Ethics-Employees

• A.C.A. §6-24-107 states: “it is a breach of the ethical standards of this chapter for an employee to contract with the public educational entity employing him or her if the employee has knowledge that he or she is directly interested in the contract.”

• If the total transactions or contracts with an employee total $5,000 or more for a fiscal year, the contract(s) must be approved by the Commissioner.

Ethics-School Board Approval

• A school board’s approval of a contract under A.C.A. §6-24-101 et seq. must be documented by a written resolution adopted after discussion in an open meeting. – Must state the unusual and limited circumstances that

make the contract necessary.

Ethics-Approval by Commissioner

• To seek Commissioner’s approval of a contract, an educational entity must send the resolution, along with any other relevant data, to the Commissioner via certified mail.

• The Commissioner, after reviewing the resolution and other data, will approve or disapprove the contract within 20 days of receipt of the resolution.

Ethics-Approval by Commissioner (Cont’d)

• If the Commissioner requests additional information in order to rule on a request, the Commissioner will approve or disapprove the contract within 20 days of receipt of the additional information.

• If the Commissioner does not respond within the specified number of days, the request is deemed to have been approved by the Commissioner.

• No approval may be granted for more than two consecutive fiscal years.

Ethics-Approval by Commissioner (Cont’d)

• A.C.A. §6-24-105(b)(1)(ii) provides that the determination of “unusual and limited circumstances” shall be at the sole discretion of the Commissioner. Because of this, the Commissioner looks at each request on a case-by-case basis.

• If you have questions or need assistance with a request for an exemption, please call the ADE Attorney’s Office at 501-682-4227.

Ethics – for Arkansas Educators• Allegation – Any written and signed statement by any

person with the Arkansas Department of Education local school board, Arkansas State Board of Education, or public school superintendent of this state and subsequently filed with the Professional Licensure Standards Board (PLSB) claiming that an educator has breached one or more of the Standards of Professional Conduct as set forth in Rule. An allegation may also include4 a finding made in an audit report forwarded to ADE by the Arkansas Legislative Joint Auditing Committee pursuant to A.C.A,. 6-117-426.

Ethics for Arkansas Educators (Cont’d)

• Standard of Professional Conduct:– Standard 1: An educator maintains a professional relationship

with each student, both in and outside the classroom– Standard 2: An educator maintains competence regarding skills,

knowledge, and dispositions relating to his/her organizational position, subject matter, and/or pedagogical practice.

– Standard 3: An educator honestly fulfills reporting obligations associated with professional practices.

– Standard 4: An educator entrusted with public funds and property honors that trust with honest, responsible stewardship.

Ethics for Arkansas Educators (Cont’d)

• Standards of Professional Conduct – cont’d– Standard 5: An educator maintains integrity regarding the

acceptance of any gratuity, gift, compensation or favor that might impair or appear to influence professional decisions or actions and shall refrain from using the educator’s position for personal gain.

– Standard 6: An educator keeps in confidence secure standardized test material as well as information about students and colleagues obtained in the course of professional service unless disclosure serves a professional purpose or is allowed or required by law.

Ethics for Arkansas Educators (Cont’d)

• Standards of Professional Conduct – cont’d:– Standard 7: An educator refrains from using, possessing and/or

being under the influence of alcohol, tobacco, or unauthorized drugs while on school premises or at school sponsored activities involving students.

• Ethical Violation is one involving acts or omissions on the part of an educator, when the educator knew, or reasonably should have known, that such acts or omissions were in violation of the Standards of Professional Conduct as set forth in Rule.– An ethical violation does not include a reasonable mistake made

in good faith, or acts or omissions undertaken in reasonable reliance upon the advice of a supervisor.

AUDITS

Audit Findings for 2010-2011

• Findings based on 97% of audits having been reviewed by ADE (262 of 272).– 65 had no findings (25%)

Audit Findings for 2010-2011 (Cont’d)

• Findings in Rank Order:– Segregation of duties /Internal Control– Exceeded Budget /Unallowable Cost– Misstatements missed by internal controls– Davis-Bacon– Federal cost principals (time certifications)– Fixed assets not recorded in inventory

Audit Findings for 2010-2011 (Cont’d)

• Findings in Rank Order-cont’d: – Buy American– Incorrect employee payroll– Bank Reconciliations (accuracy/timeliness)– Misappropriation of funds– Child Nutrition inaccurate record keeping – 40% Pullback Errors– Conflict of Interest– Failure to get bid or performance bond

Audit Findings for 2010-2011 (Cont’d)

• Other findings included:– Failure to record Accounts Payable or Accounts

Receivable – Failure to record interest earned on CD.– Salary schedules not reflecting actual pay

practices.– Personnel contracts not handled properly and in a

timely manner– Uninsured and uncollateralized bank balances

Audit Findings for 2010-2011 (Cont’d)

• Other findings included:– District did not contact applicable private schools

for possible participation in federal programs.– Failure to provide a performance bond on a

construction contract– Failure to comply with debarment procedures for

federal funds.– District had Activity Accounts with deficit balances

BUDGETS

COMMON 2011-12 BUDGET ERRORS

• Not budgeting Property Tax Revenue to 11120 and 11125.

• Improper accounting of debt including QZABs and QSCBs from proceeds to payoff.

Districts are responsible for budgeting to the proper codes as listed in the Arkansas Financial

Handbook

• Budgeting revenue to equal expenditures in the ACSIP plan when part of the revenue is already in the carryover balance.

Cash on-hand or Carry-forward balance is NOT Revenue in the current year.

If it cannot be receipted to CASH (increase to Cash (DR) and an increase to Revenue (CR) It is NOT Revenue.

BUDGET MISCONCEPTIONS

BUDGET MISCONCEPTIONS• YES, the budget can be adjusted in APSCN AFTER the

cycle 1 budget submission. The cycle 1 budget submission remains the “official budget”

submitted to the ADE.

• Isolated Funding cannot be used to meet the 9% Maintenance and Operation rule. Requirement is determined by using 9% of FOUNDATION FUNDING ONLY

2012-13 BUDGET & FINANCIAL REVIEWS

• GT Requirement

• 9% M & O Requirement

• Debt (proper coding)

• Food Service

• Revenues

• Expenditures

• Fund Balances

• Categorical Funds

• Capital Expenses

• Taxes

• Athletics

POSTINGS to WEB

LICENSED SALARY SCHEDULES AND PERSONNEL POLICIES - A.C.A. §6-17-201

• Licensed Salary Schedules and Personnel Policies shall be posted to the district’s website no later than September 15 (but as early as possible) and are to include:

• Benefits• Compensation• Designation of workdays• Holidays & non-instructional

Days• The annual calendar• Methods of evaluation• Extra duties

• Leave• Grievance• Dismissal or non-renewal• Reduction in force• Assignment of teacher aides

CLASSIFIED SALARY SCHEDULES AND PERSONNEL POLICIES – A.C.A. §6-17-2301

• Classified Salary Schedules and Personnel Policies shall be posted to the district’s website no later than September 15 (but as early as possible) and are to include:

• Salary schedule, fringe benefits and other compensation issues

• Annual school calendar, incl. work days & holidays

• Evaluation procedures• Leave• Grievance procedures

• Termination, Non-renewal, or Suspension

• Reduction in Force• Assignments

NOTIFICATION TO ADE OF COMPLIANCE

• The district is to notify the ADE of the website location of their posted licensed and classified salary schedules and personnel policies no later than September 15 (earlier, if possible).

• Send website address, providing a direct link to the salary schedules and polices, by email to: ADEFinna@arkansas.gov no later than September 15 (earlier, if possible)

• If the district revises it’s salary schedule during the school year, email a copy of the revised schedule to: ADEFinna@arkansas.gov

REQUIRED WEBSITE POSTINGSA.C.A. § 6-11-129

Required Financial Reports to be posted to district website:• Local and state revenue sources• Administrator & teacher salary; and benefit

expenditures• School district balances, including legal balances and

building fund balance• Minutes of regular and special meetings of school board• District budgets for current year, posted by October 15.• Financial listing of monthly expenses• Salary schedules of all employees

REQUIRED WEBSITE POSTINGS (Cont’d)

• Current contract information for all district employees minus SS#, telephone, addresses, and signatures (may be in a list format instead of individual contracts)

• The annual school district statistical report

All this information and data shall be available and easily accessible on the district’s website for the previous two years and the projected budgeted information for the current school year.

MORE REQUIRED WEBSITE POSTINGS A.C.A. § 6-15-2202

• ACSIP School Improvement Plan• Uses of NSLA funding – current and previous year• Annual District/School Report Card• School Improvement status of each school• Supplemental services available• District status on any type of distress• Distress Plans• Parent Involvement Plan and Policy• Teacher qualification for all schools

Compliance is required for accreditation. Data must be easily accessible, in parent friendly language and shall be the actual data for two years.

Duplicate Enrollment Audits

DUPLICATE ENROLLMENT AUDITS• Duplicate enrollment audits begin after the data from cycles 3, 5, 6,

& 7 are loaded into the data warehouse.• Notification that the website is open will be by Commissioner’s

Memo and posting to the FMS and SMS listservs. Instructions will be attached to the Commissioner’s Memo.

• The person entering the data must have a Triand ID, password, and security setting for “district access”

• Contact Sarah Cox at 501-682-5660 or sarah.cox@arkansas.gov for help with Triand ID and/or security settings.

• Contact Danita Hyrkas for any other questions 501-682-5059 or email danita.hyrkas@arkansas.gov.

Reconfiguring or Changing LEA Numbers

LEA RECONFIGURATIONS

•COMMITTEE REVIEWS:EnrollmentPrior changesRequested change

LEA RECONFIGURATIONS

• If it is determined that the school will change status or if enrollment increases 50% or more, the ADE may assign a new LEA number to the school.

LEA RECONFIGURATIONS

• Changes that must be made in District databases– SMS Changes

Update student demographicsBuilding tableConfigurationsScheduling students

LEA RECONFIGURATIONS

– FMS ChangesShipping table Location in the organization chartEmployee budget unitUpdate Job Assignment screen for non-

teaching personnelCHANGES MUST NOT BE MADE UNTIL AFTER FISCAL YEAR-END CLOSE

Special Education

Special Education

• FY 2012-13 Budget Data–Budget to provide only Special Ed (SPED) instruction and

related services for students with disabilities.– Budget Data for each district’s MYSPED is pulled from Cycle 1 –

September 30, 2012– SPED Budget Signature Sheets are due 10-1-12 – Equipment, Bus, and/or Construction/Renovation Project

Requests due 10-1-12– Budget Checklist must be completed by October 1, 2012

Special Education

• FY 2011-12 Annual Financial Report (AFR)–Expenditures must provide Special Ed (SPED) instruction

and related services for students with disabilities– AFR Data for each district’s MYSPED is pulled from Cycle 9 –

August 31, 2012– Report of Equipment, buses, and/or Construction/Renovation

Project completed are due 10-1-12– AFR Checklists must be completed by October 1, 2012

• Required to include Excess Cost calculation • Location codes must be used to separate expenditures by

elementary and secondary levels.

Special Education

• To meet Maintenance of Effort:• The total expenditures for 2011-12 must equal or

exceed the total expenditures for 2010-2011.– The exception is if the district qualified for federal

exemptions to MOE as allowed by 34CFR 300.204.• NOTE: If the amount on the MySPED is positive, the

district met MOE. If negative, the district must provide on the AFR checklist the allowable federal exception(s) and justify the negative amount.

Special Education

• To meet Maintenance of Effort (cont’d)• The Budget for 2012-13 must show a total budget that

equals or exceeds total expenditures for 2011-12– Unless district qualifies for federal exemption

• If amount on the 2012-13 State/Local Budget in MySPED is positive, the district met MOE. If negative, must provide on the Budget Checklist the allowable federal exception(s) and justify the negative amount.

Special Education

• Exemptions to Reduce MOE as allowed:– Departure of personnel– Decrease in enrollment of children with disabilities– Departure of an exceptionally costly child, or– Termination of costly expenditures

• Budget 100% of Title VI-B funds–Reserves from previous year and–Total Allocation for current year.

Special Education

10% Budget/Expenditure Variance• EDGAR 80.30 (c) allows budget changes up to 10% of

the total approved budget (Title VI-B) without ADE approval.

• Changes after Cycle 1 submission requires submitting an amendment and a Cognos Report Budget showing the revision to Special Ed Grants section to change the MySPED budget

Special Education• Equipment Request Forms

– Obtain prior approval to purchase equipment, buses or renovation/construction

–Equipment on list must match amount shown in Capital Outlay object code 67000 column for each function code, and

– The total amount of the object code 67000 column on the district’s budget.

– Bus requests must include copy of specification and certify bus is for SPED students or students with IEPs that require specialized transportation.

– Construction/Renovation - provide assurance the project does NOT create a Least Restrictive Environment

– Building specifications and drawing must be provided.

Special EducationCEIS – Coordinated Early Intervening Services• Allows districts to use Title VI-B funds for services to non-special

education students that provides interventions to becoming special education students.

• Cannot exceed maximum amount posted on MySPED• Function codes 1297 and 2213 may be used for Voluntary CEIS

and Program code 265 must be used• Voluntary EEIS funds may be carried over to the next year

PSPS – Private School Proportionate Share • Proportionate share of Part B funds are required for PSPS

– Service eligible private or home school students– Required amount on MySPED and must be budgeted to PSPS– Function codes 1218, 1228, 2158 and 2168 may be used – Code to

Program 268. A write up from Special Ed which includes information from this section is in the Appendices

Categorical and NSLA Funding

Categorical Funds

• Categorical Funds (NSLA, ALE, ELL, Prof Dev)– The required Source of Fund code must be used for all

revenue and expenditures related to Categorical Funds. – Categorical Funds cannot end the year with a negative

balance.– Transfers are allowed between categorical funds but only

from Categorical Operating Fund (Fund 2) to Categorical Operating Fund (Fund 2). For example, a transfer should not be made from NSLA Operating Fund (Fund 2) to ALE Salary Fund (Fund 1).

– All NSLA expenditures must include one of the required program codes

– The planned and budgeted use of Categorical Funds shall be included in the ACSIP.

The Rule on Special Needs (Categorical Funding) is in the Appendices

CATEGORICAL FUNDS A.C.A. § 6-20-2305

Funding for 2012-13ALE: $4,228 Multiplied by the number of identified ALE

students enrolled in previous school year.

PD: $ 52 (current estimated funding is $43.39)ELL: $ 305 For each identified ELL studentNSLA: $1,549* free and reduced percentage of 90% or greater

$1,033* free and reduced percentage of 70-89%$ 517* free and reduced percentage below 70% *These rates do not account for

adjustments due to transition.

Categorical Funds Balance Requirements Per Act 1220 of 2011Commissioner’s Memo FIN-12-095

• A.C.A. §6-20-2305(e)(2) On June 30, 2012, and on June 30 of each school year thereafter, if the total aggregate balance of all state categorical fund sources exceeds twenty percent (20%) of the school district’s total aggregate annual state categorical fund allocations for the current school year, the school district shall reduce the total balance by at least ten percent (10%) each school year until the school district’s June 30 balance of aggregate annual categorical fund sources is twenty person (20%) or less of the total aggregate annual state categorical fund allocations for the current school year.

Commissioner’s Memo FIN-12-095 included in Appendices

Categorical Funds Balance Requirements Per Act 1220 of 2011Commissioner’s Memo FIN-12-095

• Total Aggregate Categorical Funding is the total of the current year funding for English Language Learners (ELL), Alternative Learning Environments (ALE), National School Lunch state funding (NSLA), including transitional and growth funds, and Professional Development (PD).

Categorical Funds Balance Requirements Per Act 1220 of 2011

Commissioner’s Memo FIN-12-095line

1 June 30, 2011 Total Balance for Aggregate Categorical Funds 200,000

2 2011-2012 Aggregate Categorical Funding 250,000

3 2011-2012 Aggregate Categorical Expenditures 225,000

4 2011-2012 Current Year Aggregate Categorical funds remaining 25,000

5 June 30, 2012 Aggregate Categorical Funds Balance (lines 1 + 4) 225,000

June 30, 2012 Targeted Aggregate Categorical Balance (line 2 * 20%) 50,000

Since Line 5 exceeds the Targeted Balance, calculate the 10% required reduction

6 Required 10% annual reduction in Aggregate Categorical balance

(line5 * 10%) 22,500

7 June 30, 2013 Required Aggregate Categorical balance (lines 5 - 6) 202,500

In order to meet the Required 10% reduction, the district must spend the full funding amount plus the 10% reduction

8 2012-2013 Aggregate Categorical Funding 265,000

9 10% reduction in prior year ending balance (line 6) 22,500

2012-2013 Total Aggregate Categorical Funds expenditures (line(8 + 9)) 287,500

10 June 30, 2013 Aggregate Categorical Balance (lines ((5 + 8)-10)   202,500

Example:

CATEGORICAL FUNDS A.C.A. § 6-20-2305

ALE, ELL, PD, and NSLA:• As of June 30, 2012, if the total categorical fund balance

exceeds 20% of current allocations, the school district shall reduce the total balance by 10% each year until the aggregate balance is at or less than 20% of current allocations.

• Funds received from any categorical fund source may be transferred to another categorical fund source.

• The ADE is required to monitor district compliance

NSLA Funding Changes A.C.A. § 6-20-2305

NSLA Funds• By June 30 (starting in 2012), a school district

shall spend a minimum of 85% of its annual NSLA allocation.

• A district with an NSLA balance in excess of 15% of the current allotment shall reduce its total NSLA balance by at least 10% each year so that by June 30, 2022, a district has a balance of no more than 15% of current allocation.

NSLA Funding Changes (Cont’d)

A.C.A. § 6-20-2305NSLA • Districts can ask for a one-year waiver from the ADE in

"unusual and limited circumstances."• Sanctions exist for failure to comply (withhold from

next year's allocation.)• The ADE may redistribute amounts withheld to other

districts.

NSLA Balance RequirementsPer Act 1220 of 2011 and Commissioner’s

Memo FIN-12-094

• A.C.A. §6-20-2305(b)(4)(F)(ii): A school district that on June 30, 2012, has a national school lunch state categorical funding balance in excess of fifteen percent (15%) of the school district’s current year annual national school lunch state categorical funding allocation shall reduce its national school lunch state categorical funding balance by at least ten percent (10%) each school year so that by June 30, 2022, and by June 30 of each year thereafter, the school district has a balance of no more than fifteen percent (15%) of the school district’s current year annual national school lunch state categorical funding allocation.

FIN-12-094 is included in the Appendices

 

NSLA Balance RequirementsPer Act 1220 of 2011

line

1 June 30, 2011 NSLA Balance 20,000

2 2011-2012 NSLA Funding 100,000

3 2011-2012 NSLA Required Expenditures (85%) 85,000

4 2011-2012 NSLA funds remaining 15,000

5 June 30, 2012 NSLA Balance (lines 1 + 4) 35,000

June 30, 2012 Targeted NSLA Balance (lines 2 * 15%) 15,000

If Line 5 exceeds the Targeted Balance, calculate the 10% required reduction

6 10% annual reduction in NSLA balance (line 5 * 10%) 3,500

7 June 30, 2013 Required NSLA balance (lines 5 - 6) 31,500

In order to meet the Required 10% reduction, the district must spend the

full funding amount plus the 10% reduction

8 2012-2013 NSLA Funding 400,000

9 10% reduction in prior end ending balance (line 6) 3,500

10 2012-2013 Total NSLA Expenditures 403,500

11 June 30, 2013 NSLA Balance (lines ((5 + 8)-10)   31,500

Example:

National School LunchCategorical Funding:

2012-2013 Changes

Compliments of Mark White, ADE Attorney

Child Nutrition

• Provision 2 Schools

• Reduced-Price Students

Photo Courtesy of ADE CNU

Curriculum / Instruction

• Early Intervention in 3-12

• Ark. Advanced Initiative for Math & Science

• Interim Building-Level Assessments

Curriculum / Instruction

• Longer School Day / Longer School Year

• Summer Programs

• Teach for America Professional Development

College and Career

• College and Career Coaches

• ACT for 11th Grade

• College Remediation

• CCRPP

Photo Courtesy of Brandon Rush

Budget & Balances

• ACSIP and APSCN Must Agree• NSL Min. Expenditures (85%)• NSL Max. Fund Balance (15%)• Fund Transfers• Waiver

Budget & Balances

June 30, 2011 Balance $20,000

2011-2012 Allocation $100,000

Total Available $120,000

Min. Expenditure (85%) ($85,000)

Max. Balance (15%) $15,000

June 30, 2012 Balance $35,000

Min. Reduction (10%) $3,500

Budget & Balances

June 30, 2012 Balance $35,000

+ 2012-2013 Funding $100,000

=Funds Available $135,000

- Max. Balance ($31,500)

Min. Expenditures $103,500

Budget & Balances

• Max. Balance of 20%

• No Minimum Expenditure

• No Waiver Available

Combined Categorical Fund Balances

Fiscal Distress

Fiscal Distress

• Arkansas Code Annotated 6-20-1901 thru 6-20-1911• Indicators of Fiscal Distress

– A declining balance determined to jeopardize the fiscal integrity of a school district. • However, capital outlay expenditures for academic

facilities from a school district balance shall not be used to put the school district in fiscal distress.

Fiscal Distress

• Indicators of Fiscal Distress, cont’d:– Any act or violation determined to jeopardize the

fiscal integrity of a school district, including but not limited to:• Material failure to properly maintain school

facilities.• Material violation of local, state, or federal fire,

health, or safety code provisions or law.• Material violation of local, state, or federal

construction code provisions or law.

Fiscal Distress

• Indicators of Fiscal Distress, cont’d:• Material state or federal audit exceptions or

violations.• Material failure to provide timely and accurate

legally required financial reports to the department, the Division of Legislative Audit, the General Assembly, or the Internal Revenue Service.

• Insufficient funds to cover payroll, salary, employment benefits, or legal tax obligations.

Fiscal Distress• Indicators of Fiscal Distress, cont’d:

• Material failure to meet legally binding minimum teacher salary schedule obligations.

• Material failure to comply with state law governing purchasing or bid requirements.

• Material default on any school district debt obligation.

• Material discrepancies between budgeted and actual school district expenditures.

Loans and Bonds

Types of Debt

• Short-term• State Revolving Loan Program• Commercial Bonds

Applicable Law

• AR Code Ann. §§ 6-20-401 et seq. – Short-term

• AR Code Ann. §§ 6-20-801 et seq.– State revolving loan program

• AR Code Ann. §§ 6-20-1201 et seq.– Commercial bonds

http://www.arkleg.state.ar.us

Applicable Rules

• Arkansas Department of Education Rules Governing Loan and Bond Applications – February 24, 2012

• Arkansas Department of Education Rules and Regulations Governing the Allocation of Qualified Zone Academy Bonds - November 2000

http://www.arkansased.org/rules/rules.html

Short-Term Debt A.C.A. § 6-20-401 et seq.

Installment contracts, lease purchase agreements, and postdated warrants:– State Board approval not required but must be

registered with ADE– No statutory maximum loan amount– The amount borrowed may include issuance costs– May be refinanced if it results in net savings and

other requirements are met

Short-Term Debt A.C.A. § 6-20-401 et seq.

Installment contracts, lease-purchase agreements, and postdated warrants:See A.C.A. § 6-20-402 for complete list of eligible purposes

• Purchase of school buses, equipment, school sites • Energy conservation measures• Construction, repair, renovation of school facilities• Professional development and training of teachers

under QZABsMaximum term 10 years from the date of issuance, except:

• Energy conservation measures may be financed up to 20 years

State Revolving Loan ProgramA.C.A. § 6-20-801 et seq.

• State revolving loan program– State board approval of application required– The maximum amount of money a district may have

outstanding is $500,000– Maximum term ten years– Current interest rate 4.95% - no other fees charged

State Revolving Loan Program A.C.A. § 6-20-801 et seq.

• See § 6-20-802 for complete list of eligible purposes– Purchase of new or used school buses– Construction or renovation of school facilities– Purchase of buildings, school sites, or equipment– Energy conservation measures

BondsA.C.A. § 6-20-1201 et seq.

• State board approval required– Bonds issued for new construction– Bonds issued to restructure debt– Second lien bonds

• State board approval not required– Rate reduction refunding bonds meeting required

savings minimum with no extension of maturity date

Bonds – A.C.A. § 6-20-1201 et seq.

• A school district may issue negotiable bonds to:– Build, add to, equip, or repair schools buildings– Purchase sites, school buses– Provide professional development and training of

teachers under the QZAB program– Pay off outstanding postdated warrants, installment

contracts, lease purchase agreements, revolving loans, and bonds as provided by law

• School bonds are secured by debt service millage

Bonds – A.C.A. § 6-20-1201 et seq.

Second-lien commercial bonds• Repaid with surplus revenue from existing debt service mills

– Surplus revenue could be generated if assessment has increased to point that revenue from debt service mills exceeds the amount needed to make bond payments for existing debt.

• The maturity of second lien bonds cannot extend beyond the maturity date of the debt issuance with the first lien– Example: 6 mills are pledged to a bond that matures in

2021. Assessment has increased so a surplus exists and second lien bonds may be issued. Second lien bonds must mature in 2021 or earlier.

Bonds – A.C.A. § 6-20-1201 et seq.

Second-lien commercial bonds – Con’t• Voter Approval not required, but state board approval required• All second-lien bonds issued by school districts shall:

– Have semiannual interest payments– First interest payment due within eight (8) months of the

issuance of the second-lien bond.– Have repayment schedules that are either:

» Equalized payments in which the annual payments are substantially equal in amount; or

» Decelerated payments in which the annual payments decrease over the life of the schedule.

Important Issues to Consider• Post-issuance compliance as required by the IRS is

growing in importance.– Designate a responsible person as the authority on

district bond issues – record-keeping and retention, proper and timely use of bond proceeds, investments and arbitrage compliance, etc.

•Bond documents should be monitored closely by the designated responsible person.

•The designated responsible person should report to

the full board at least annually concerning the outstanding bond.

Important Issues to Consider (Cont’d)

• Post-issuance compliance as required by the IRS is growing in importance. (Cont’d)– IRS has increased efforts for auditing post-

issuance compliance of tax-exempt obligations (school bonds).

– Speak with fiscal agent prior to issuing bonds about post-issuance compliance requirements.

Self-Insured Fidelity Bond Program

Authority and Purpose

• Arkansas Code Annotated § 21-2-701 et seq.• The Arkansas Fidelity Bond Trust Fund, administered by the

Arkansas Governmental Bonding Board, shall provide coverage for actual losses sustained by the Participating Governmental Entities through fraudulent or dishonest act or acts committed by Employees or Officials of the Participating Governmental Entities during the Bond Period.

• Arkansas school districts (this includes open-enrollment charter schools and education service cooperatives) are covered under this bond

• LIMIT OF COVERAGE: $250,000 Per Occurrence • DEDUCTIBLE: $1,000 Per Occurrence

Additional Information• The Self-Insured Fidelity Bond Program, administered by

the Arkansas Governmental Bonding Board, has been renewed for the January 1 -December 31, 2012 policy year.

• A Certificate of Coverage is your evidence of coverage. Present the certificate when asked for proof of Fidelity Bond coverage. A certificate and a copy of the bond policy may be obtained by contacting the Risk Management Division at (501) 371-2690 or via email (preferred method): insurance.risk.management@arkansas.gov

• All Proof of Loss notices must be submitted to the Arkansas Governmental Bonding Board by the Division of Legislative Audit.

Contact Information

Risk Management DivisionArkansas Insurance Department1200 West Third StreetLittle Rock, AR 72201-1904Phone: 501-371-2690Fax: 501-371-2842Email: insurance.risk.management@arkansas.gov

Web Site: www.insurance.arkansas.gov/Risk/divpage

ADE contact: Cindy Hollowell (501) 682-4484

General Business Manager

General Business Manager Qualifications

• Applies to all school districts, open-enrollment charter schools, and education service cooperatives.

• A Chief Financial Officer or Business Manager or however titled:– Operates under the direction of superintendent– Meets minimum qualifications in ADE rule– Responsible for fiscal operations of entire entity– Person other than superintendent or charter/co-

op director

General Business Manager Qualifications (Cont’d)

• Must meet qualifications of a Certified Arkansas School Business Official (CASBO) based on the requirements established by the Arkansas Association of School Business Officials (AASBO) or be enrolled in the CASBO required courses of study.– 10 required courses and five electives– See AAEA website under AASBO

General Business Manager Qualifications (Cont’d)

• Must complete at least 5 CASBO courses per year and must complete the 15 courses required within 3 years.

• Must renew certificate by completing at least 2 upper level CASBO courses per year after the date of certification.

• GBM failing to complete certification cannot function in that role until certification requirements are met. District/charter/co-op must appoint another person to the position and that person must meet qualifications.

School District Treasurer

School District Treasurer• A.C.A. 6-13-701 authorizes a district or charter school

to appoint a treasurer.• Must be appointed at a regular board meeting.• Must execute a Certificate of Appointment which

must be filed with the County Clerk, the County Treasurer, and the Director of the Department of Finance and Administration.

• Serves until board appoints a new treasurer and files a new Certification of Appointment.

School District Treasurer (Cont’d)

• Duties are outlined in A.C.A. 6-13-701(e):– Receive and disburse funds. Issue receipts for

funds received and maintain a duplicate.– Record all transactions in APSCN.– Provide monthly statement of financial condition

to board.– Submit annual statement of finances to board in

July each year.– Make required financial reports to ADE.

School District Treasurer (Cont’d)

• Duties are outlined in A.C.A. 6-13-701(e)-cont’d:– Must not have an interest, directly or indirectly, in

any contract made by the district or charter school board.

– Make financial records available for inspection by any district taxpayer.

– Perform all duties imposed by law upon school district treasurers and be subject to all regulations.

School District Treasurer (Cont’d)

• Disbursement of funds shall be made by treasurer only upon:– Checks or warrants signed by disbursing officer of

district or charter school board and superintendent or charter school director; or

– Electronic transfer of funds if electronic transfer is:• Initiated by the district or charter school; and• Authorized in writing by both the board disbursing

officer and superintendent or charter school director.

School District Treasurer (Cont’d)• Treasurer shall have on hand as evidence of authority

for disbursement approved:– Invoices;– Payrolls that conform with written contracts on file;

and– Other appropriate documentation that indicates

authority for disbursement.

School District Treasurer (Cont’d)

• Fraudulent use of district/charter school funds by a treasurer is a Class C felony.

• Upon conviction, restitution to be made by treasurer is double the amount taken.

Sample “Certificate of Appointment” is included in the Appendices

Child Nutrition

Child Nutrition Charge Polices• Bad debts are a non-allowable expenditure in the National

School Lunch Program and After School Snack and Breakfast Programs according to Cost Principles in OMB Circular A-87.

• USDA regulations do not require districts to provide meal when students who are ineligible for free meals do not have money to pay for meal. (However not feeding a child because they can’t pay may not be an acceptable option for a district.)– Districts should adopt a written policy to address this problem.– Policy may differ depending on grade level.

Child Nutrition Charge Polices (Cont’d)– Policy must be communicated to both parents and students

at the beginning of the year.– Policy should have special provisions for handling pre-

primary, young primary, and disabled students.• Parent notification system regarding non-payment

must be implemented in a way that does not embarrass the child.

Child Nutrition Charge Polices (Cont’d)

• District decision whether to:– Extend credit to students

• Food Service Fund cannot absorb loss for failure to pay.• With or without credit limit.

– Provide an alternate meal• Not reimbursable so cost must be absorbed by district.• Not defined in federal regulations but regulations do

state that schools must provide nutritious and well balanced meals to all the children they serve. (Title 7 CFR Part 210.10(a)(1))

– Deny meal.

Tier I Annual Update

2012-2013

CASBO Class SF401A

Accounting and Reporting

Concepts of the Arkansas Uniform Accounting and Reporting System

• Standard Chart of Accounts– Where do funds come from?

• Fund Codes• Source of Fund Codes

•Revenue Codes– Where do funds go?

• Function Codes•Location Codes

•Program Codes•Subject Codes

•Object Codes

What Funds Are On Hand• Balance Sheet Accounts

– Assets»Cash» Investments» Receivables

» Inventory– Liabilities

» Accounts Payable» Payroll Deductions and Withholding» Deferred Revenue

» Notes Payable» Bonds Payable

– Equity (Reserves & Fund Balances)

Reasons for “Standard” Chart of Accounts

– Provides consistent method of reporting financial information across fiscal years

– Aids with the budgeting process– Allows for valid comparison of financial information

between entities• Schools• Districts• States

– Improves the value of statewide financial information used by policy makers and other public education stakeholders

Where is the Standard Chart of Accounts Located?

– Where is the Standard Chart of Accounts Located?

–APSCN Web Page at www.k12.ar.us»FMS>Financial Management

System>Accounting Documentation»Described as “Arkansas Financial

Accounting Handbook 2011-2012”

Financial Coding Decision Process

• Funds Received – Which Fund? • Teacher Salary Fund (Fund 1)-No receipts are

entered in this fund. Expenditures and Transfers-in only.

• Operating Fund (Fund 2)-Receipts not belonging to one of the special purpose funds.

• Building Fund (Fund 3)-Receipts pertaining to Specific building projects.

Financial Coding Decision Process (Cont’d)

• Funds Received (Cont’d)–Which Fund? (Cont’d)• Debt Service Fund (Fund 4)-Tax receipts from debt

service mills and state debt service funding supplement.(Recording revenue in Debt Service Fund is optional. Use of Operating Fund also allowed for these receipts.)

• Capital Outlay/Dedicated Maintenance & Operation Fund (Fund 5)-Tax receipts from mills voted specifically for capital outlay and dedicated maintenance and operations purposes.

Which Fund? (Cont’d)

• Federal Grants Fund (Fund 6)-Receipts directly from Federal Government or from Federal Government that pass through the state. Restricted to federally sponsored programs.

• Activity Fund (Fund 7)-Receipts used to support co-curricular and extra-curricular student and district activities. – Co-curricular generally are school-related activities outside

the regular classroom that directly add value to the formal or stated curriculum. Involve wide range of student clubs and organizations.

– Extra-curricular activities encompass a wide variety of other district-directed activities such as organized sports and non-academic interscholastic competitions.

Which Fund? (Cont’d)

– Student Activity Funds - Students not only participate in the activities of the organization, but also are involved in managing and directing the organization’s activities:

»Art Club» Drama Club

» Student Council– District Activity Funds – Used to support district’s co-curricular

and extra-curricular activities and are administered by the school district. District determines how district activity funds are spent and the district programs that receive support:

» Athletics»School Plays

»Music Concerts»Book Fair

Which Fund? (Cont’d)

•Food Service Fund (Fund 8)-Receipts pertaining to the school Food Service Program . Includes revenue from students and adults for the sale of breakfasts and lunches as well as Federal reimbursements from the United States Department of Agriculture.

•Fixed Asset Fund (Fund 9)-No receipts should be entered to this fund. Can be used to record district’s fixed assets or Long-Term Debt (Optional).

Teacher Salary Expenditures – Fund 1

Salaries paid to personnel whose job requires a teacher license (certified personnel) must be paid from the Teacher Salary Fund.

• Teachers• Counselors• Librarians• School Administrators• District Administrators• All other licensed personnel with a 4-digit job code• Substitutes for those paid from the Teacher Salary

Fund

Operating Fund Expenditures – Fund 2

Used to record the receipts and expenditures for current operating expenses other than those that relate to the purposes set out for the other funds listed. Examples:• Personnel benefits not paid from Salary Fund (unless paid

from Salary Fund as approved by majority of certified personnel).

• Salaries and benefits of classified personnel not paid from the Building Fund, Federal Fund, the Activity Fund or the Food Service Fund.

• All purchased services, supplies, capital outlay and other expenditures not paid from the Building Fund, Debt Service Fund, Capital Outlay Fund, Federal Fund, Activity Fund or Food Service Fund.

Building Fund Expenditures – Fund 3

Used for major facilities construction and renovation projects.

Required for any project funded with state Academic Facilities Partnership Program funds.

If part of the legal fund balance is being retained for future construction/renovation projects, it should be transferred to the Building Fund.

School Board approval should be obtained whenever funds are transferred to or from the Building Fund.

Debt Service Fund Expenditures – Fund 4

Interest paid on bonded debt Principal paid on bonded debt Fees pertaining to bonded debt

Capital Outlay Fund Expenditures – Fund 5

Dedicated Maintenance and Operations Expenditures that conform to the reasons stated on the ballot

when the Capital Outlay/Dedicated M&O millage was approved by voters.

Cannot end the year with a negative balance in this fund.• Tax receipts should be allocated to this fund when

received.• Pullback applies to this fund (36% 2011-2012; 32% 2012-

2013)• Balances carryover each year.• Except for interest earnings, no other funds should be

transferred to or deposited into this fund.

Federal Fund Expenditures – Fund 6

– Restricted Aid Direct from Federal Government• Elementary/Secondary Education Programs (revenue codes

43110-43192)• Indian Education Programs (revenue code 43610)• Desegregation Programs (revenue codes 43710 & 43720)• Other (revenue codes 43910-43976)

– Restricted Aid from the Federal Government through the State• Elementary/Secondary Education Act (ESEA) (revenue codes

45110-45326)• Adult Education (revenue codes 45410-45590)• Special Education (revenue codes 45612-45670)• Other (revenue codes 45910-45999)

Activity Fund Expenditures – Fund 7

Student Activity Fund• Expenditures from revenue other than local taxes, state, and federal

government. – Fund raising activities

• Expenditures approved by Student Organization and its sponsor.– Supplies and equipment used by organization– Travel/Transportation expenses for organization– Items purchased for resale/fund-raising activities– Cash donations or purchases to benefit school or program

District Activity Fund• Expenditures from revenue other than local taxes, state and federal

government:– Gate Receipts --Vending Machines --Fees

• Expenditures approved by school board or in compliance with board policy:– Field Trips --Athletics --Band Uniforms --Book Fairs

Food Service Fund Expenditures – Fund 8

Direct cost of operating food service program• Food purchases• Kitchen/Cafeteria labor• Administrative personnel who supervise

food service staff• Supplies and equipment

Required Source of Funds

• Examples:– Isolated Funding (212)– Student Growth Funding (217)– Declining Enrollment Funding (218)– Supplemental Transportation (222)– Professional Development (223)– Alternative Learning Environment (275)– English Language Learners (276)– National School Lunch Act-State (281)

SOF – Source of Funds• Allows matching of expenditures to specific revenue

sources.• A three-digit number that when attached to the one-digit

fund number, establishes a unique sub-fund containing separate balance sheet accounts (assets, liabilities, equity)

• Allows expenditures from specific revenue sources to be tracked (growth funding, declining enrollment funding, etc.).

• Required for all restricted funds (federal, categorical/special needs, state facilities funding, etc.).

• Allows fund balances pertaining to specific revenue sources to carry forward to next fiscal year

SOF – Source of Funds - (Cont’d)

• Table II of the Accounting Manual provides a listing of all Source of Fund codes.

• Source of Fund codes marked with an asterisk (*) must be used for the specified revenue as well as the expenditures from that revenue (no transfers in or out).

• Source of Fund codes 002-099 are reserved for district/co-op use and are therefore defined by the district or co-op

Function

Four-digit code that describes the activity being performed when a good or service is received.•Function codes are grouped into five broad categories:– Instruction (1000-1999)–Support Services (2000-2999)–Operation of Non-Instructional Services (3000-3999)–Facilities Acquisition and Construction (4000-4999)–Other Uses (5000-5999)

»Debt Service»Fund Transfers

»Indirect Costs

Location

• The three-digit number that identifies the campus or other cost center where the goods and services are being used. The number for school campuses matches the ADE assigned LEA number.

Program• A three-digit number pertaining to a plan of activities

and procedures designed to accomplish a predetermined objective or set of objectives.

• Required Program Codes include:– All NSLA Expenditures -- Special Education

– Pre-School -- Gifted & Talented– Extracurricular/Athletics -- Alternative Ed– Recruitment/Retention -- State Academic

Facilities Incentives Projects

– Teachers in Special Settings

Subject Area

– Final two-digits of Budget Unit– Not currently required by state– Can be used to identify:

• Courses (math, science, social studies, etc.)• Sports (football, basketball, track, etc.)• Person responsible for budget

Expenditure Budget Unit

Fund 2 Source of Fund 275 Function 1140 Location 041 Program 438 Subject Area 00 Example: 2 275 1140 041 438 00

Object

• A five-digit number that describes the type of expenditure-Examples:– Salary– Employee Benefit– Purchased Service– Supplies and Materials– Capital Outlay

Coding for Foundation Funding• Commissioner’s Memo FIN-09-047, January 29, 2009, and FIN-

10-008, July 22, 2011, contained financial coding requirements for 2009-2010 for revenues and expenditures specific to foundation funding. – Required all revenue pertaining to foundation funding, and all

expenditures paid with that revenue to be coded to funds 1000, 1100-1199, 2000 and 2100-2199.

– In response to a motion passed by the House and Senate Joint Education Committee on December 24, 2008, to determine and implement coding changes required in order to better compare school district expenditures with the components of the Adequacy Funding Matrix.

FIN-09-047 and FIN-10-008 are included in the Appendices

Coding for Foundation Funding (Cont’d)

• The coding requirement for 2012-2013 (same as FY 12)– All property tax, state foundation funding and miscellaneous

funds will be receipted in Fund 2001.– An amount exactly equal to the foundation funding amount

will be transferred from Fund 2001 to Fund 2000.– No revenue will be posted in Funds 1000, 1100-1199, 2000

and 2100-2199.

Coding for Foundation Funding (Cont’d)

• The amount to be transferred from Fund 2001 to Fund 2000 for next year will be $6,267 times the 2011-2012 3QTR ADM.

A copy of the Adequacy Funding Matrix is included in the AppendicesRefer to FIN-11-080 for example Journal Entry recording transfer included in the Appendices

9% Maintenance & Operation• A.C.A §6-21-808(d)(1)(A) requires districts to expend 9% of

foundation funding exclusively to payment of utilities, and costs of custodial, maintenance, repair, and renovation activities, including related personnel costs.

• 9 percent of foundation funding multiplied by the prior year 3 Quarter ADM

• Code as follows: Fund = 2000 or 2100-2199 Function = 2600 through 2699 Objects = 61000 – 65199 and 65300 – 69999 • If the 9% Requirement is not met, an amount equal to the

variance must be moved to SOF 391 in the same fiscal year.

FIN-12-022 on 9% Requirement included in Appendices

Gifted and Talented

• A.C.A §6-20-2208(c)(6) requires districts to expend state and local revenues on gifted and talented programs in an amount equal to 15% of the foundation funding amount multiplied by 5% of the district’s prior year 3 quarter ADM.

• The District’s budget for GT should have an amount equal to this requirement.

• A Commissioner’s memo is posted each year with the required amounts listed in an spreadsheet for each district

• Classroom expenditures must be coded to Function 1910 and Program Code 270. The GT Coordinator, Function 2291 should also be coded to Program Code 270.

FIN-12-054 is the latest CM and is included in the Appendices

Student Growth Funding/Declining Enrollment Funding

Overview

• A.C.A. §§ 6-20-2303 (22) and 6-20-2305 (c) (2) ADE Rules Governing the Calculation Methods for Declining

Enrollment and Student Growth Funding for Public School Districts

One-fourth of current year per student foundation funding x any increase in each of:o CY Qtr 1 ADM over PY 3-Qtr ADMo CY Qtr 2 ADM over PY 3-Qtr ADMo CY Qtr 3 ADM over PY 3-Qtr ADMo CY Qtr 4 ADM over PY 3-Qtr ADM

Timeline By January 31

Estimated SGF is calculated using actual CY Qtr 1 ADM & estimates of CY Qtrs 2, 3, & 4 ADM

60% of estimated SGF is disbursed By April 30

Remaining 40% of estimated SGF is disbursed

By July 31 Actual SGF is calculated by ADE using actual ADM from cycle 7 for all 4

quarters By August 31

Any SGF plus ISN or DEF due to districts is distributed and any over-funded SGF plus ISN or DEF paid to districts is recouped by ADE

By June 30 Districts should calculate actual SGF and make appropriate journal entries for

accrual of the adjustment to actual SGF funding

Considerations

An eligible district cannot receive both DEF and SGF An eligible district cannot receive both DEF and ISN An eligible district can receive both SGF and ISN

DEFSGF + ISN

If DEF > (SGF + ISN), district receives DEF If (SGF + ISN) > DEF, district receives SGF + ISN

Important Notes

SGF is initially disbursed based on an estimate of current year quarterly ADM (see Rules for details on calculating estimate)

Estimated current year quarterly ADM is provided on the second and third state aid notices

SGF is unrestricted funding Revenue & expenditures from SGF revenue sources are

tracked

Important Notes

Actual SGF is not calculated by ADE until July 31 and the adjustment from estimated to actual is not disbursed by ADE until August 31 – after the fiscal year has ended

Districts are required to calculate actual SGF and make appropriate journal entries to record actual SGF by June 30 of the current fiscal year – including any effect on DEF or ISN – and the appropriate journal entries to record adjustment to actual by August 31

Districts may be required to repay an entire amount received for an affected funding category (SGF, DEF, or ISN) due to the difference between actual SGF calculated and estimated SGF disbursed

Coding Instructions

• Repaying SGF to ADE

SOF Revenue Debit Credit

PY Period 13 Journal Entry(By June 30 – see Timeline)

2217 31450 $$

2217 04110 $$

CY Period 1 Reverse Journal Entry(By August 31 – see Timeline)

2217 04110 $$

2217 31450 $$Check payable to ADE charged to (By August 31 –see Timeline)

2217 31450

Coding Instructions

• Repaying DEF to ADE

SOF Revenue Debit Credit

PY Period 13 Journal Entry(By June 30 – see Timeline)

2218 31460 $$

2218 04110 $$

CY Period 1 Reverse Journal Entry(By August 31 – see Timeline)

2218 04110 $$

2218 31460 $$Check payable to ADE charged to (By August 31 –see Timeline)

2218 31460

Coding Instructions

• Receiving SGF from ADE

SOF Revenue Debit Credit

PY Period 13 Journal Entry(By June 30 – see Timeline)

2217 01410 $$ 2217 31450 $$

CY Period 1 Reverse Journal Entry(By August 31 – see Timeline)

2217 31450 $$

2217 01410 $$Receipt funds from ADE to (By August 31 –see Timeline)

2217 31450

Coding Instructions

• Receiving DEF from ADE

SOF Revenue Debit Credit

PY Period 13 Journal Entry(By June 30 – see Timeline)

2218 01410 $$

2218 31460 $$

CY Period 1 Reverse Journal Entry(By August 31 – see Timeline)

2218 31460 $$

2218 01410 $$Receipt funds from ADE to (By August 31 –see Timeline)

2218 31460

Supplemental Transportation

Legal Authority

• Act 1075 of 2011 – See CM FIN-12-086 in Appendices– Section 1, Item No. 53

• Appropriation $500,000– Section 32

• Special Language• ADE Rules Governing the Distribution of

Supplemental Transportation Funds included in Appendices

Details• Commissioner’s Memo # FIN-12-086 (dated March 16, 2012)

– Data– Calculations– Funding amounts per each eligible district

• 44 eligible districts• Source of Fund Code 222• Revenue Code 31400• Restricted revenue

– To be used for transportation needs of the district

Miscellaneous Funds

Definition and Calculation

• A.C.A. § 6-20-2303 (11)• A.C.A. § 6-20-2503 (a)(3)• ADE Rules Governing the Calculation of Miscellaneous

Funds (Included in Appendices)• Details of calculation of Miscellaneous Funds published

under “Other Reports” section at bottom of page: http://arkansased.org/about/reports.html

Data

• Miscellaneous Funds categories and revenue codes:Category Revenue CodesFederal Forest Reserves 42100*Federal Grazing Rights 42400Federal Mineral Rights 42300Severance Taxes 21200Federal Impact Aid 42500Federal Flood Control 42200Wildlife Refuge Funds 41200

12800**12100

280004130048000

***Local Sales & Use Taxes11200

Payment In Lieu of Taxes

* Not currently received by any AR districts

** Revenue code 12100 was changed to 12800 in FY07.

*** Sales and use taxes for capital improvements dedicated to education only.

Calculation

• Calculated pursuant to statutory definition.• Same calculation of Miscellaneous Funds used in State

Foundation/Foundation Funding and Bonded Debt Assistance.

• Calculation begins with average of Miscellaneous Funds collected in the five school years immediately preceding the previous school year(ex: FY12 funding uses five-year average of Miscellaneous Funds received in FY06 – FY10)

Calculation (Cont’d)

• The five-year average is multiplied by the ratio of the uniform rate of tax (URT) to the district’s total millage rate in effect as of January 1 of the fiscal year prior to the current funding year.

• If a district did not receive a category of Miscellaneous Funds during the most recent school year used in the five-year average, then previous collections from that category of Miscellaneous Funds shall not be included in the five-year average.

Calculation (Cont’d)

• For the purpose of calculation the amount of Miscellaneous Funds of a school district, a school year is the period beginning on July 1 of a calendar year and ending on June 30 of the next calendar year.

Additional Information

• In FY12, out of 239 school districts in the state, 50 school districts had an amount of calculated Miscellaneous Funds of $0 and the remaining 189 districts ranged from a low of $6 to a high of nearly $970K.

• State Foundation/Foundation Funding:Total foundation funding per district = calculated Miscellaneous Funds + net revenues + State Foundation Funding aid + URT adjustment

Important Notes

• The calculated Miscellaneous Funds amount used in funding calculations may be higher or lower than the actual Miscellaneous Funds received in a single year.

• The actual Miscellaneous Funds received will always be higher than the calculated Miscellaneous Funds amount used in funding calculations when comparing the same five-year period.

Important Notes (Cont’d)

• It is important to review Miscellaneous Funds to ensure that accurate data is used to calculate funding. Common errors:– Ad valorem taxes miscoded as miscellaneous funds or

miscellaneous funds miscoded as ad valorem taxes– Revenue erroneously coded to local sales and use tax

dedicated to education (11200) or grazing rights (42400-42499)

– One category of miscellaneous funds erroneously coded to another (forest reserve coded as flood control)

Important Notes (Cont’d)

• As Miscellaneous Funds are not always received by school districts in a level dollar amount or frequency, look for large variances between actual Miscellaneous Funds received and the calculated amount used for the funding year in preparation for impact on the Foundation Funding and Bonded Debt Assistance formulas.

Indirect Cost Rate

Indirect Cost Rates• Commissioner’s Memo FIN-12-060, April 24, 2012, provided

Indirect Cost rates and information for 2011-2012.• Indirect cost rate is a device for determining in a reasonable

manner the proportion of indirect cost each program should bear.• Indirect costs are those costs that are not readily identified with

the activities funded by the federal grant or contract but are nevertheless incurred for the joint benefit of those activities and other activities and programs of the organization.

• Direct costs are those that can be identified specifically with a particular cost objective.

FIN-12-060 is included in Appendices

Indirect Cost Rates (Cont’d)

• The Indirect Cost rate is calculated by dividing Indirect Costs, plus carry forward adjustment, by Direct Costs. All funding sources are used.

• Excluded costs are those that generally are one-time in nature or tend to distort normal annual operating expenses.

• Unallowable costs are those costs that are unacceptable as applied to federal grants and contracts whether applied directly to a grant or indirectly through the indirect cost rate.

Indirect Cost Rate- (Cont’d)

• Expenditures from the second preceding fiscal year are to be used for the indirect cost allocation plan. For example, expenditures for fiscal year 2009-2010 must be used to compute the indirect cost rate for fiscal year 2011-2012.

• Carry forward adjusts the calculated indirect cost rate to be applied in the current fiscal year by the difference between the anticipated indirect cost totals in the second preceding fiscal year and the actual indirect cost totals realized in the second preceding fiscal year.

Indirect Cost Rate (Cont’d)

• If a district can identify and isolate the first $25,000 of a purchased service contract then it can include the first $25,000 of that contract in total expenditures before applying the indirect cost rate. If a district is unable to identify and isolate the first $25,000 of a purchased service contract, then that contract must be excluded from total expenditures before applying the indirect cost rate. The indirect cost rate can only be applied to the first $25,000 of each purchased service contract.

Basic Formula

• Indirect Cost Rate =

Carry-forward• A fixed rate with carry-forward provision is an indirect cost rate

computed and fixed for a specified future school year based on an estimate of that school year’s level of operations. However, when the actual costs of that school year are known, the difference between the estimated costs and the actual costs is “carried forward” as an adjustment to the rate established in a future school year.

• Positive carry-forward adjusts for an under-recovery of expenses• Negative carry-forward adjusts for an over-recovery of expenses

• Carry-forward =

Actual indirect costs – indirect costs used in calculation 2 years ago

Data Cycle

• FY08 actual expenditures - FY10 calculated rates

• FY09 actual expenditures + FY07 carry-forward -FY11 calculated rates

• FY10 actual expenditures + FY08 carry-forward - FY12 calculated rates

• FY11 actual expenditures + FY09 carry-forward -FY13 calculated rates

Data Used in RatesFunction Group Codes Function Group Description

Unrestricted Direct/Indirect

Restricted Direct/Indirect

1000 Instruction Direct Direct2100 Support Services-Students Direct Direct2200 Support Services-Instr. Staff Direct Direct

All 2300 except 2321, 2323, 2324, 2325

2321, 2323, 2324, 2325 General Administration Indirect Direct2400 School Administration Direct Direct

All 2500except 2540-2549

2540-2549 Business Indirect Direct2600 Operation/Maintenance Indirect Direct2700 Transportation Direct Direct2900 Other Support Services Indirect Indirect3100 Food Services Direct Direct3200 Enterprise Operations Direct Direct3300 Comm. Services Operations Direct Direct3400 Other Non-Instr. Services Direct Direct

General Administration Indirect Indirect

Business Indirect Indirect

Other Sources

• Cost Allocation Guide for State and Local Governmentshttp://www2.ed.gov/about/offices/list/ocfo/fipao/guideigcwebsite.pdf

• Office of Management and Budget (OMB) Circular A-87http://www.whitehouse.gov/omb/circulars_a087_2004/

• Arkansas Financial Accounting Handbookhttp://www.apscn.org/fms/fms.htm

Pullback

Pullback (Optional)• Beginning with 2011-2012 school year:

– 40% will be reduced to 36% and another 4% per year until it is completely eliminated.

– FY 2011-2012 percentage is 36%. ADE Assessment 36% PullBack Report for 2011 Total valuations for Taxes Payable in 2012 is in the Appendices

– Property tax revenue collected January through June 30 shall be recorded as revenue to code 11120 – Property Taxes or 11125 – Property Tax Relief in the year collected (no deferral).

– If actual collections by June 30 are less than the calculated Pullback amount, the difference MAY be accrued at June 30 (accrual allowed, but not required).

Pullback - Cash Basis (Optional)

• 2011-2012 school year (Con’t)– Any district may convert to cash basis for recognizing

revenue from property taxes beginning with the 2011-2012 school year.

– Cash basis will include funds on hand at the County Treasurer’s Office at June 30 that are apportioned for the school district (or that are in transit).

– Once converted to cash basis the district cannot choose to accrue Pullback in subsequent years.

Pullback - Accrual Basis (Optional)

• 2011-2012 School Year:– Multiply the 2011 assessments (for taxes payable in

2012) times the greater of voted mills, other than debt service, or the 25 mills uniform rate of tax.

– Multiply above result by 36% to determine the “Calculated 36% Pullback”. (ADE includes calculated amount in a Commissioner’s Memo.)

– In Period 1 of 2012-2013 the district should post a journal entry that reverses the amount accrued in 2011-2012. (No Deferral Allowed)

2012-2013 PULLBACK (A.C.A. §6-20-401)

Beginning with 2012-2013 school year:• Pullback is reduced to 32% and another 4% per

year until it is completely eliminated.• If actual collections by June 30 are less than the

calculated Pullback amount, and the district accrued in the previous year, the difference may be accrued at June 30.

• Property tax revenue collected by June 30 shall be recorded as revenue in the year collected.

(No Deferral Allowed)

Property Taxes Account Codes10000 Revenue from Local Sources

11000 Taxes. Compulsory charges levied by a governmental entity for the purpose of financing services for the common benefit.

11100 Property Taxes. Taxes levied as a result of a vote by the electorate of a millage rate on personal property, real estate and utilities.

11110 Property Taxes - Taxes received from the general levy July through December 11115 Property Tax Relief – Relief Taxes received July through

December. (May be receipted to 11110 Property)11120 Property Taxes – Taxes received from the general levy January

through June11125 Property Tax Relief - Relief Taxes received January through

June. (May be receipted to 11120 Property)

Property Taxes Account Codes (Cont’d)

11140 Property Taxes - Delinquent. Taxes received during the current year from the general levy for prior years.

11150 Excess Commission. Amounts received from commissions in excess of the treasurer’s salary for the cost of operating the treasurer’s office.

11160 Land Redemption (Include State Land Sales). Amounts received from the sale of land on which delinquent taxes have not been paid.

How – To Help Ensure Accurate Coding

• Typically, taxes collected by the County during a month are distributed to school districts the following month. Therefore, to reconcile school district receipts for a calendar year to county collections for the same year, the month of January needs to be considered.

• Other than Property Tax Relief, the school district receipts from February 2011 through January 2012 should compare with County Collections for the 2011 calendar year.

• School district receipts of Property Tax Relief January – December, 2011 should agree, or come close to agreeing with what the County received for 2011.

Ad Valorem Tax Revenue Data

What – Data is Reported

• A.C.A. § 6-20-2303 (17)• Total ad valorem tax revenue collected and disbursed at the

county level to each school district during the preceding calendar year

• Includes current taxes, delinquent taxes (including penalties and interest), homestead tax credit, excess commissions, interest earned on tax funds held in trust, and state land redemptions

• Costs and commissions authorized by law relating to the collection of ad valorem taxes are subtracted

Who – Reports the Data

• Pursuant to Act 633 of 2011, beginning with 2011-12 school year– Ad valorem data is reported by the county treasurers– This treasurer’s report replaces the “template” previously

used by the designated county “preparer of the tax books”

When – Data is Due

• Revenue data is reported to ADE by the county treasurers on or before January 31 each year– A.C.A. § 26-80-101 (b)(4)(A)(ii)

• Penalty imposed for failure to report revenue data– County reappraisal funding withheld– A.C.A. § 26-80-101 (b)(4)(A)(iii) – (vi)

• ADE provides time period for district review of reported data and accepts revisions from county treasurers

Where - Data Goes

• County treasurer reports revenue to:(see A.C.A. § 26-80-101 (b)(4)(A)(ii))– ADE– State Treasurer– School District Superintendent

• ADE publishes county reported data to http://arkansased.org/about/reports.html under “Other Reports” section

• ADE publishes URT funding adjustment calculations as attachment to a Commissioner’s Memo

Commissioner’s Memo FIN-12-082 is included in the Appendices

Why – Accurate Data is Important

• District Foundation Funding amount – A.C.A. § 6-20-2305 (a)(2)– Equals per student foundation funding times district prior year 3-Qtr ADM

• District Foundation Funding sources:– Net Revenues from ad valorem taxes

• A.C.A. § 6-20-2303 (13)– Calculated Miscellaneous Funds

• A.C.A. § 6-20-2303 (11)– State Foundation Funding Aid

• A.C.A. § 6-20-2303 (21)– URT Adjustment

• A.C.A. § 6-20-2305 (a)(4)

Why – Accurate Data is Important

• Net Revenues– Initially estimated as 98% * URT * assessment– Finally calculated using county reported actual

revenues from the URT• URT Adjustment

– Funding adjustment to bring district up or down to statutory foundation funding total

How – To Help Ensure Accurate Funding

• County reports vs. District records– Resolve discrepancies with county treasurer– County treasurer may submit revised report to ADE by indicated

deadline• ADE reports vs. District records

– May be helpful to compare state aid notice to district records– Compare current state aid notice, noting unusual changes

• To prior year state aid notice of same date (July 2011 to July 2010)

• To current year state aid notice last received (February 2012 to July 2011)

Athletics

ATHLETICS

• Commissioner’s Memo FIN-12-073 (See Appendices), provides a copy of the amended and approved new Rules Governing Athletic Revenue & Expenditures.

• Changes method for allocating a portion of the cost of facilities, facilities maintenance, property insurance, utilities, and salary and benefits for employees providing janitorial or maintenance services to athletics (program code 115).

• Refer to “Athletic Coding Basic Steps” by Kathy Hanlon, which is included in the Appendices

ATHLETICS (Cont’d)

–The new method is based on adjusted square footage of athletic buildings as a percentage of total square footage of all buildings• Required PE Square Footage: obtain from the School

Facility Manual – Facilities website – after entering the prior three-quarter average (ADM) for each building by grade (http://arkansasfacilities.arkansas.gov

• Adjusted Square Footage: The total square footage of all athletic buildings (from the most current property insurance statement) , minus the square footage for PE.• )

ATHLETICS (Cont’d)

• The adjusted athletic square footage is divided by the total square footage of all buildings to determine the athletic expenditure allocation percentage.

• Carry the percentage to five decimal places.• Apply percentage to total cost of property insurance,

utilities, and all other maintenance costs to determine the amount applicable to athletics.

• Record amount by journal entry prior to year-end final close using program code 115.

IF the adjusted athletic square footage should calculate negative, do not make ‘negative’ athletic expenditure allocation.

ATHLETICS (Cont’d)

COMMENT: Since this is a new procedure, there are going to be “gray” areas related to athletic square footage in a multi-purpose building. The district should use sound judgment in determining the amount of athletic square footage and document the calculations used. Example: An old gym that is used only two periods a day for high school basketball practice. If the district is on a seven-period day, 2/7ths of the square footage should be counted as athletic square footage. 3.01.2 of the Rule: “If only a portion of a multi-function building is used for an interschool athletic program, only the square footage of the portion of the building used for or by an interschool athletic program shall be included in the calcu- lation of adjusted square Footage of athletic buildings.”

ATHLETICS (Cont’d)

• Charge construction or renovations of athletic building to athletics program code 115, MINUS construction and renovation costs of square footage required for physical education courses.– Program Requirements are published by the Division of

Public School Academic Facilities & Transportation• Coaching stipends and related benefits must be charged to

athletics.• Prep periods in excess of one-period must be allocated to

athletics unless the additional prep time is clearly documented to pertain to non-athletic duties.

ATHLETICS (Cont’d)

• Annual Athletic Report to ADE – A.C.A. §6-20-2003• District must obtain approval of the report of prior year

athletic expenditures by the local school board at a legally held meeting prior to submitting to the ADE by September 15 each year. – The content is from Cycle 1 for current year budget and

Cycle 9 for the prior year actual expenditures and consists of state funds only.

• The report must be posted on the district’s website for a minimum of three years.

• Gate receipts MUST be posted in the Activity Fund (Fund 7).

Allocation of Property Insurance

Total District Cost of Property Insurance X Allocation Percentage = Property Insurance to Charge to Athletics

AT THIS TIME DISTRICTS ARE NOT REQUIRED TO CHARGE THIS TO THE CAMPUS LEVEL.

Example Journal Entry:

DR 2000 26XX 000 115 00 65210 $ x.xx (Property Insurance) CR 2000 26XX 000 000 00 65210 $ x.xx (Property Insurance)

Allocation of Utilities

Total District Cost of Utilities x Allocation Percentage =Utilities to Charge to Athletics

AT THIS TIME DISTRICTS ARE NOT REQUIRED TO CHARGE THIS TO THE CAMPUS LEVEL.

Example Journal Entry:

DR 2000 26XX 000 115 00 64110 $ x.xx (Water & Sewer) 66210 $ x.xx (Natural Gas) 66220 $ x.xx (Electricity)

CR 2000 26XX 000 000 00 64110 $ x.xx (Water & Sewer) 66210 $ x.xx (Natural Gas)

. 66220 $ x.xx (Electricity)

Allocation of All Other Maintenance

Total District Charges to Operating Fund Function 26* Less Property Insurance and Utilities x Allocation Percentage = Maintenance to Charge to Athletics

AT THIS TIME DISTRICTS ARE NOT REQUIRED TO CHARGE THIS TO THE CAMPUS LEVEL.

Example Journal Entry:

DR 2000 26XX 000 115 00 68999 $ x.xx (Allocated Charges) CR 2000 26XX 000 000 00 68999 $ x.xx (Allocated Charges)

Account number 68999 “Allocated Charges” is recommended. The other option is to debit and credit each separate account in function 26*. Caution: This calculation should result in the TOTAL athletic portion of maintenance expenditures (other than property insurance and utilities). If other maintenance expenditures have been charged directly to athletics, subtract those amounts before entering journal entry.

Allocation of Student Transportation

–Transportation Rate for 2011-2012 is $3.45 –or $1.92 if there is no cost for the driver, e.g.:

• Volunteer Driver• Coaches drive and compensated by a coaching

stipend• If Bus Driver Salaries/Benefits are charged directly to

athletics on a per trip basis, use the $1.92 • Documentation required whenever the $1.92 rate is

used• Commissioner’s Memo: FIN-12-077 Included in

Appendices

Allocation of Student Transportation (Cont’d)

• For allocating 2011-2012 athletic bus transportation costs, the statewide transportation cost per mile for 2010-2011 is used. Expenditures charged to functions 2700-2798 were divided by annual transportation route miles per Cycle 6 of 2010-2011. The daily route miles reported by districts in Cycle 6 were multiplied by 178 days to determine annual miles. If a district failed to report any route miles in Cycle 6, that district's expenditures were not included in calculating the state's average cost per mile.

The average statewide transportation cost per mile for 2011-2012 is $3.45 (or $1.92 if there is no cost for the driver).

• In order to record the allocation of student transportation costs to athletics, it is recommended that object code 68999 be used and defined as “Allocated Charges.” The journal entry would be:

DEBIT 2000 2700 000 115 00..........68999 CREDIT 2000 2700 000 000 00..........68999

Athletic Problem Areas (Cont’d)

–Facilities Construction/Renovation• Facility used exclusively for athletics

– Charge 100% of the cost to a budget unit containing program code 115

• Multi-purpose buildings– Determine total cost of building or renovation

based on information from:– Architect– General Contractor– Construction Manager

Athletic Problem Areas – (Cont’d)

• Multi-purpose buildings (Con’t)– Construction Manager– Estimate total hours the building will be used

during a complete school year.– Estimate total hours the building will be used for

athletics during a complete school year.– Divide total athletic hours by total hours and

multiply the result times the total cost to arrive at the amount pertaining to athletics.

– The amount pertaining to athletics must be charged to a budget unit containing program code 115.

Athletic Problem Areas (Cont’d)

– Salaries and benefits of coaches• 100% of any stipend paid exclusively for athletics

must be charged to a budget unit containing program code 115.

• 100% of the pay for days above the base teacher contract must be charged to a budget unit containing program code 115.

Athletic Problem Areas (Cont’d)

–Salaries and benefits of coaches (Con’t)• If the coach is assigned to classes that are especially for

students participating in athletics, part of the base teacher contract pay (per teacher salary schedule) must be charged to athletics:–Divide total class periods pertaining to athletics,

including any preparation period(s) in excess of one, by total class periods during the school day.

–The factor obtained above should be multiplied by the teacher contract amount to obtain the amount pertaining to athletics.

Athletic Problem Areas (Cont’d)

–Salaries and benefits of coaches (Cont'd)• If the coach is assigned to classes that are especially for students

participating in athletics, part of the base teacher contract pay (per teacher salary schedule) must be charged to athletics: (Cont'd)

–This amount must be charged to a budget unit containing program code 115.

–APSCN has an Excel spreadsheet that can be saved to your computer to assist in calculations www.apscn.org > FMS > FMS Training documentation > Forms > Salary Allocation Form

Athletic Audits• Act 255 of 2007 requires Legislative audit to conduct

annual reviews of the Athletic expenditures reported to ADE at least once every five years.

• Legislative Audit identifies districts with 10% or more variance.

• Non-compliance can result in being identified as a district in fiscal distress in accordance with ACA § 6-20-1901 et seq.

• See appendix for the Rules Governing Athletic Revenues and Expenditures for Public School Districts, Section 9.00

Athletic Audit 2010-2011• 46 districts selected for testing in Western and

Southwestern Arkansas• Review adjustments total - $1.6 million• Athletic expenditures for 20 districts with adjustments

greater than 10% ranging from $9,553 to $777,916• 12 districts improperly allocated salary and benefits• 37 districts improperly allocated maintenance expenditures• 10 district improperly allocated travel related expenditures• 9 districts did not code athletic related construction

properly

Athletic Audit 2009-2010

• 45 districts selected for testing in Northeastern Arkansas• Review adjustments total - $0.3 million• Athletic expenditures for 15 districts with adjustments

greater than 10% ranging from $9,443 to $292,591• 11 districts improperly allocated salary and benefits• 15 districts improperly allocated maintenance expenditures• 17 district improperly allocated travel related expenditures• 8 districts did not code athletic related construction properly

Athletic Audit 2008-2009

• 48 districts selected for testing in Southeastern Arkansas• Review adjustments total - $3.4 million• Athletic expenditures for 23 districts with adjustments

greater than 10% ranging from $7,759 to $2.0 million• 27 districts improperly allocated salary and benefits• 38 districts improperly allocated maintenance expenditures• 26 district improperly allocated travel related expenditures• 9 districts did not code athletic related construction

properly

Athletic Audit 2007-2008

• 51 districts selected for testing in Northwestern Arkansas• Review adjustments total - $3.3 million• Athletic expenditures for 14 districts with adjustments

greater than 10% ranging from $11,694 to $457,191• 16 districts improperly allocated salary and benefits• 18 districts improperly allocated maintenance

expenditures• 15 district improperly allocated travel related expenditures• 4 districts did not code athletic related construction

properly (the commissioner’s memo on construction did not come out until late FY 2008)

Rules on Accounting and Reporting

Rules Governing the Arkansas Financial Accounting and Reporting System

8.0 Department Review of LEA Financial Records 8.01 By February 15 of each year, the Financial Accountability Unit of the Department shall review the LEAs’ most currently submitted AFR, AFB, FTEs, and Average Salaries to determine if the financial records are deficient. Any error related to the coding and reporting of financial information that causes a material misstatement of financial information will be cause for determining a deficiency. A material misstatement occurs whenever the submitted data has more than a ten percent variance or when the Department has sent written notification to an LEA regarding specific errors discovered in the financial records. Rules on Ark. Financial Accounting and Reporting

System & Annual Training Requirements included in Appendices

Rules Governing the Arkansas Financial Accounting and Reporting System

8.03 The Department shall notify in writing, via certified mail, the superintendent or director of the LEA whose financial records are found to be deficient.8.07 The SBE may require the superintendent or director and board members to explain and/or appear before the SBE to explain why the district is not complying with state laws or rules.

Rules Governing the Arkansas Financial Accounting and Reporting System

• 11.01 Any school district that does not comply with and meet the requirements of these rules, shall, after receiving notice as required by law, be identified by the Department as being in fiscal distress.

Fiscal Distress

• Indicators of Fiscal Distress, cont’d:• Material failure to comply with audit requirements.• Material failure to comply with any provision of the

Arkansas Code that specifically places a school district in fiscal distress based on non-compliance.

–Any other fiscal condition of a school district deemed to have a detrimental negative impact on the continuation of educational services by that school district.

Federal Programs

Federal Education Jobs Fund

• Commissioner’s Memo FIN-11-032, December 1, 2010, provides information and allocation amounts.

• For school-level employee compensation and benefits and other expenses, such as support services necessary to:– Retain existing employees– Recall or rehire former employees– Hire new employees– Implement salary increases and/or bonuses

Federal Education Jobs Fund (Cont’d)

• Cannot be used for: – General administrative expenses (including operation of

superintendent’s office)– LEAs board of education– Salaries and benefits of district-level administrative

employees• Must be coded to Fund/Source of Fund 6519 and

Program Code 056.

ARRA JOBS Funds

• $92,464,608 Total Funds Allocated– $5,813,718 Funds Remaining– Funds must be obligated by September 30,

2012– When notified that plans are open, spend the

funds.– No reimbursement of expenditures unless the

Plan is entered into the ARRA Cognos program.

ARRA State Fiscal Stabilization Fund

• This ARRA Fund is Closed– $341,091,157 in total awarded funds– $630,680 remaining funds– Less than 1/10 of 1% unspent - (.18%)– If district has any activity remaining in SFSF,

contact Patty Martin at 501-682-1114.

ARRA IDEA Funds

• $112,177,929 Total Funds Allocated– $610,906 Funds Remaining– Most expenditures have been moved from school

bus purchases to other allowable expenditures– Plans will be opened for these districts to change

the program code– The opening of the plans will be announced via

the FMS and SMS listservs.

ARRA Title I Funds

• $106,471,468 Total Funds Allocated– $550,932 Funds Remaining– That is about ½ of 1%

Clarification of Changes to Federal Grants Budgets and Program

• Education Department General Administrative Regulations (EDGAR) 34 CFR Part 80:30

• District’s may re-budget within the approved direct cost budget to meet unanticipated requirements.

• District’s may make limited program changes to the approved project.

• However, these changes may require prior written approval of the ADE.

Federal Grants Budgets • District shall obtain prior written approval of the ADE whenever

any of the following changes are anticipated under a non-construction award:– Any revision which would result in the need for additional

funding– Unless waived by the ADE, cumulative transfers among the

cost categories, or among separately budgeted programs, projects, functions, or activities which exceed ten percent of the current TOTAL APPROVED budget.

This means budget changes ARE ALLOWED up to 10% of the total approved budget WITHOUT ADE approval

See Commissioner’s Memo FIN-12-107 included in the Appendices– Transfer of funds allotted for training allowances

Federal Grants Budgets (Cont’d)

• District shall obtain prior approval of the ADE whenever any of the following changes is anticipated under construction projects:– Any revision which would result in the need for additional

funding– Before making any fund or budget transfers from non-

construction to construction or vice versa when the funding is for both construction and non-construction activities.

Federal Grants Programs

• District shall obtain prior approval of the ADE whenever any of the following changes to the Program is anticipated:– Revision to scope or objectives (regardless of whether

there is an associated budget).– Need to extend the period of availability of funds– Any changes in key persons in cases where specified in the

application or grant award.– Under non-construction projects, contracting out,

subgranting or otherwise obtaining services of 3rd party to perform the activities central to the purpose of the award.

Other Federal Grants Approval Requirements

• Requests for budget revisions must be in writing, in the same format the district used in its application and include a narrative of justification.

Maintenance of Effort

Maintenance of Effort (MOE)

• Commissioner’s Memo FIN-12-078, February 8, 2012, provides information regarding the MOE requirement of programs authorized by the Federal Elementary and Secondary Education Act.– Purpose is to ensure that federal funds are not used to

replace state and local funds.– Requires LEAs to maintain at least 90% of their level of

expenditures for programs from state and local funds from one year to the next.

FIN-12-078 is included in the Appendices

Maintenance of Effort (MOE) (Cont’d)

• Special Education (IDEA) has a 100% requirement on MOE. Exceptions include:– Voluntary departure, by retirement or otherwise, or

departure for just cause, of special education personnel.– A decrease in the enrollment of identified children with

disabilities.– The termination of the obligation to provide special

education program to a particular child because the child has left the district, reached the age at which the LEA obligation has ended, or no longer needs special education services.

– Termination of long-term costly expenditures, such as construction.

Maintenance of Effort (MOE) (Cont’d)

• Expenditures do not include:– Community Services– Capital Outlay– Debt Service– Expenses incurred as a result of a presidentially declared

disaster– Expenditures from funds provided by federal government

Maintenance of Effort (MOE)-(Cont’d)

• MOE can be met based on either aggregate or per student expenditures.

• ARRA SFSF and Federal Jobs Funds may be counted as state and local funds for purposes of meeting MOE.– But when ARRA SFSF and Jobs Funds are gone, state and local

funds must replace them.

Maintenance of Effort (MOE)-(Cont’d)• Failure to meet MOE requires loss of federal funds of

an amount equal to the decline in MOE.– May seek waiver by demonstrating that the decline

was the result of:• Exceptional or uncontrollable event; or• Drastic decline in financial resources.

Non-Recurring Bonuses

Nonrecurring Bonuses

• Ark. Code Ann. §6-20-412 provides information related to nonrecurring salaries paid to licensed personnel From revenues “not considered to be recurring sources of revenue.”

• Federal Jobs Fund• Fund balances• Proceeds from sale of property

Nonrecurring Bonuses (Cont’d)

• Divided equally among licensed personnel employed by the school district at the time approved by the board of directors of the school district unless:– The school board and a majority of teachers agree to a

different distribution.• “Equal” means an equal dollar amount.

– Not equal percentage– Not prorated based on days contracted or worked– Not prorated based on full-time or part-time status

Nonrecurring Bonuses (Cont’d)

• Act 989 of 2011 amended §6-20-412– Changed requirement that it be paid to licensed

personnel employed by the school district at the “time of payment” to employed by the school district at the time “approved by the board of directors of the school district.”

– Removed requirement that a report be submitted to ADE and Legislative Audit.

Sales Tax Exemptions

Sales Tax Exemptions

• School buses sold to Arkansas school districts. (A.C.A. 26-52-410(b)

• Sale of school buses that will be used exclusively by purchaser to provide school bus service for an Arkansas school district. (A.C.A. 26-52-410(c).

• Sales of motor vehicles to public school districts in Arkansas. (A.C.A. 26-52-410(a))

• Sales of food in public school cafeteria and lunchrooms. (A.C.A. 26-52-410(3))

Sales Tax Exemptions (Cont’d)

• Sales of textbooks, library books, or other items purchased by the State of Arkansas to be distributed free of any charge to public schools of Arkansas. (A.C.A. 6-21-411)

• Sales of tickets for admissions to athletic events and interscholastic activities at public and private schools in Arkansas.(A.C.A. 26-52-412(a))

• Sales of sheet music, electronic software, maps, globes, charts, videotapes, DVDs, films and cassettes for use as instructional materials. (A.C.A. 26-52-437)

Sales Tax Exemptions (Cont’d)

• Sales of digital resources when purchased as instructional materials for Arkansas public schools. (Act 288 of 2011)

“Digital resources” yet to be defined. (As of April 26, 2012, Arkansas Department of Finance & Administration considered I-Pads as computer hardware, and therefore taxable. However, they are reviewing this issue)

SEE GR-35-69 Exemptions from Tax – Schools included in Appendices from the Dept. of Finance & Administration

Resources• ADE Web Site - http://arkansased.org

– Commissioner Memos– Rules– Publications and Reports

• APSCN Web Site – http://www.apscn.org – FMS Listserv – http://list.k12.ar.us/mailman/listinfo/fms

SMS Listserv – http://list.k12.ar.us/mailman/listinfo/sms • APSCN Field Support

– On-site, phone, email support M-F, 8:00 a.m.-4:30 p.m. or 7:30 a.m.-4:00 p.m. – APSCN Main Number – 501-682-4887

– Emergency after-hours support -DIS Call Center (800-435-7989)

Other Resources

• ADE Data Center - http://adedata.arkansas.gov • Special Education - http://arksped.k12.ar.us/• Child Nutrition - http://cnn.k12.ar.us• Academic Facilities and Transportation

– http://www.arkansasfacilities.com/• Arkansas Division of Legislative Audit

– http://www.legaudit.state.ar.us/

ADE Contacts

• Question regarding Financial Coding– Kathleen Crain – 501-682-1297– Kathleen.Crain@Arkansas.gov

• Questions regarding Transportation expenditure of funds– Mike Simmons - 501-682-4261– Mike.Simmons@Arkansas.gov

• Questions regarding Funding and Loans and Bonds– Cindy Hedrick Hollowell - 501-682-4484– Cindy.Hedrick@Arkansas.gov

• Questions regarding Fiscal Distress– Hazel Burnett - 501-683-5288– Hazel.Burnett@Arkansas.gov

ADE Contacts

• Questions regarding Financial Audits, Budgets, Duplicate Enrollments, Property Assessments and Millage:– Danita Hyrkas – 501-682-5059– Danita.Hyrkas@Arkansas.gov

• Questions Regarding Federal Program– Annette Pearson or Kim Bajorek– 501-683-1243, 501-683-6530, respectively

Annette.Carlton-Pearson@Arkansas.gov– Kim.Bajorek@Arkansas.gov

APPENDICES LIST1. Commissioner’s Memo FIN-09-071- Purchasing & Bidding Requirements2. Rules and Regs Governing Ethical Guidelines and Prohibitions for

Educational, Administrators, Employees, Board Members, and Other Parties

3. Special Education Information –Special Ed. Information in this presentation was based on this document by Donald Watkins, ADE Special Education

4. Rules Governing Distribution of Student Special Needs Funding and the Determination of Allowable Expenditures of Those Funds

5. Commissioner’s Memo FIN-12-095 – Aggregate Categorical Funds Balance6. Commissioner’s Memo FIN-12-094 - NSLA Fund Balances , Per Act 2207. Commissioner’s Memo FIN-09-047 – Coding Requirements 8. Commissioner’s Memo FIN-10-008 – Title I Allocations9. Adequacy Funding Matrix

APPENDICES LIST (cont’d)

10. Commissioner’s Memo FIN-11-080 – Coding Requirements for 2011-1211. Commissioner’s Memo FIN-12-022 – 9% M & O Requirement12. Commissioner’s Memo FIN-12-054 – 2011-2012 Expenditure Requirement

for Gifted and Talented Programs13. Commissioner’s Memo FIN-12-086 – Re: Supplemental Trans. Funds14. Rules Governing the Distribution of Supplemental Transportation Funds15. Rules Governing Calculation of Miscellaneous Funds16. Commissioner’s Memo FIN-12-060– Indirect Cost Rates for 2011-201217. Assessment and 36% Pullback Report Calendar Year 2011 Total Valuations

for Taxes Payable in 201218. Commissioner’s Memo FiN-12-082 – URT Calculations for FY2011-2012

APPENDICES LIST (cont’d)

19. Commissioner’s Memo FIN-12-073 - Re Amended Athletic Expenditure Rules

20. Athletic Coding Basic Steps – By: Kathy Hanlon, Rogers School District21. Commissioner’s Memo FIN-12-077 – FY12 transportation Rates for Athletics22. Rules Governing Athletic Revenues and Expenditures for Public Schools23. Rules Governing the Arkansas Financial Accounting and Reporting System

and Annual Training Requirements24. Commissioner’s Memo FIN-12-107 – 10% Variance on Federal Funds25. Commissioner’s Memo FIN-12-078 – Maintenance of Effort26. School District Sales Tax Exemptions from the Dept. of Finance &

Administration27. Certificate of Appointment as District Treasurer Form