Year-End Accounting Transfers

Dr. ChristensenMissouri Financial Accounting Manual

http://dese.mo.gov/divadm/finance/acct_manual/documents/sf-AStateRequirements_000.pdf

Chapter 165, RSMo, provides that all school monies

must be accounted for within a framework of four

funds: Incidental Fund (Fund 1) Teachers Fund (Fund 2) Debt Service Fund (Fund 3) Capital Projects Fund (Fund 4)

School Accounting Overview

The General (Incidental) Fund is used to account for all financial resources except those required to be accounted for in another fund. This fund accounts for transactions involving local taxes; Foundation Program payments such as Basic Formula, Transportation, Early Childhood Special Education, Career Ladder, Educational Screening Entitlement/PAT and Vocational/At-Risk; along with various other transactions associated with federal projects.

Incidental Fund (Fund 1)

The Special Revenue (Teachers) Fund is used to account for revenue sources legally restricted to expenditures for the purpose of teachers’ salaries and benefits and tuition payments to other school districts.

This fund does not carry a balance from year to year. At the end of each fiscal year, this fund balance is zero.

Teacher’s Fund (Fund 2)

The Debt Service Fund is used to account for the resources accumulated for and the payment of long-term debt. Amounts in the Debt Service Fund are generated from the Debt Service Fund tax levy and are used solely to retire bonded debt. While paying agent fees are always a legitimate expense of the Debt Service Fund, other expenses associated with the issuance of bonds are paid from the various funds (depending on whether the bond issue is a new issue or a refunding issue).

Debt Service Fund (Fund 3)

The Capital Projects Fund is used to account for all facility acquisition, construction, lease purchase principal and interest payments and other capital outlay expenditures.

Expenditures for ordinary repairs to school property will not be made from the Capital Projects Fund. Capital expenditures are defined as expenses paid or incurred for the acquisition or repair of assets that will remain useful for more than one year. Examples of these expenditures would be the cost of acquisition, construction, or erection of buildings, remodeling or reconstruction of buildings and the furnishing thereof, and similar property having a useful life substantially beyond the current fiscal year. Expenses in this fund shall be capitalized and Internal Revenue Service guidelines will be used to determine the appropriateness of specific expense items in the Capital Projects Fund.

Capital Projects Fund (Fund 4)

Revenue placed in the Capital Projects Fund may come from the following sources: tax rate set in the Capital Projects Fund money received from Basic Formula Classroom Trust Fund bond sale proceeds net insurance recoupment for a capital loss money received from the sale of capital assets including real

estate, school houses, other buildings, furniture and equipment interfund transfers money received from any other source for buildings, equipment,

lease purchase obligations, or other capital purposes

Capital Projects Fund (Fund 4)

A school’s budget cycle (fiscal year) starts in July. A school’s budget must be adopted prior to July

The new budget is adopted before the end of the fiscal year The school is still receiving revenue and making

expenditures after the new budget has already been approved

The new budget is approved in June prior to knowing or setting the tax rate in August

There are many “changes” and “unknowns” when a budget is initially adopted, so multiple changes to the budget are necessary.

Budgeting Process

For the 2012-2013 budget, we made numerous changes in both revenue and expenditure accounts.

The budget is a working document. Changes are made to the budget to reflect the most current informaton.

Budget Changes

January Budget Amendments

Budget Amendments- January 2013         

Revenue Accounts Account Budgeted Amended Differenc

e `  Code Amount Amount  Delinq. Tax-- Dade County 5112 4,902 9,908 5,006 Received more than budgetedEarnings on investments 5141 10,000 19,336 9,336 Received more than budgeted

Basic Formula 5311 2,758,5752,713,134 -45,441ADA less than expected and change in

DVM

Transportation 5312 78,000 94,177 16,177State paying 36.55% of allowable costs

nowClassroom Trust Fund 5319 244,831 269,319 24,488 Will receive more than budgeted           Projected Effect on Revenues       9,566     Expenditure Accounts  

Bus stipend2552-6131 0 4,000 -4,000 not budgeted

Contracted Food Services2561-6391 0 60,000 -60,000 not budgeted

Food Supplies2561-6471 105,000 85,000 20,000 Paying less for food with OPAA

Land Acquision4020-6511 35,000 0 35,000 not purchasing land

           Projected Effect on Expenditures     -9,000  Projected Net Effect on Budget       566  

Budget Amendments- April 2013           

Revenue Accounts Account Budgeted Amended Differenc

e Start `  Code Amount Amount -74,256  

Current Greene Taxes 51111,611,21

51,625,83

4 14,619 -59,637 Personal property assessments higherCurrent Dade Taxes 5111 102,792 107,516 4,724 -54,913 Personal property assessments higher

Current Lawrence Taxes 5111 126,579 136,319 9,740 -45,173ADA less than expected and change in

DVMFinancial Inst. Tax 5114 15,000 33,019 18,019 -27,154 More banking activityEarnings on investments 5141 19,336 28,544 9,208 -17,946 More interest paid to schoolInsurance proceeds 5631 0 11,293 11,293 -6,653 Insurance paid for storm damages              Projected Effect on Revenues       67,603     Expenditure Accounts  

Capital Improvements2540-6530 10,000 211,774 -201,774 -208,427

replacing roofs and tuck-pointing out buildings

Substitute bus drivers2552-6161 3,500 8,700 -5,200 -213,627 lots of illness among drivers

Contract Services2561-6391 60,000 105,000 -45,000 -258,627 OPAA contracted food service

Food Supplies2561-6471 85,000 34,676 50,324 -208,303 OPAA buys food now, not the school

Principal on Bonds5111-6611 150,000 0 150,000 -58,303

bond refinancing/added to final payment year

Other Fees (bond refinancing)

5311-6631 1,200 113,322 -112,122 -170,425 bond refinancing

             Projected Effect on Expenditures     -163,772  Projected Net Effect on Budget       -96,169   

April Budget Amendments

Budget Amendments- June 2013      

   

Revenue Accounts Account Budgeted Amended Difference `

  Code Amount Amount  

Prop. C 5113 605,070 667,327 62,257 Received more state taxes

Earnings on investments 5141 28,544 41,303 12,759 More interest paid to school

Classroom Trust Fund 5319 269,319 295,989 26,670 Received more than budgeted

School Lunch Program 5445 99,000 146,736 47,736 More students eating lunch

School Breakfast Program 5446 36,000 52,094 16,094 More students eating breakfast

           

Projected Effect on Revenues       165,516  

   

Expenditure Accounts  

AGE Certified Salary 1110-6111 397,160 413,556 -16,396 Teachers coded to different school account

AGE Career Ladder 1110-6111 5,643 12,475 -6,832 Teachers coded to different school account

AGE Sub Salary 1110-6121 15,000 16,758 -1,758 Used more subs than expected

AGE Sick Leave Pay 1110-6141 3,000 4,612 -1,612 Paid more sick leave than budgeted

AGE PSRS 1110-6211 67,726 73,233 -5,507 More salary=more retirement

AGE Spec. Ed. Substitutes 1221-6121 1,000 3,545 -2,545 Used more subs than expected

HS Spec. Ed. Non-cert. Salary 1221-6151 15,985 24,264 -8,279 Added an aide position in mid-year

HS Spec. Ed. Health Insurance 1221-6241 25,474 27,165 -1,691 Paid insurance on new employee

Spec. Ed. OT/PT 1221-6313 8,000 15,549 -7,549 Mores students needing OT/PT services

EC Substitute Teacher 1251-6121 0 750 -750 Illness of teacher required a substitute

EC Social Security 1251-6231 0 863 -863 Paid more than budgeted

EC Health Insurance 1251-6241 7,517 8,412 -895 Paid more than budgeted

EC Equipment 1251-6541 0 15,805 -15,805 Purchased playground equipment

ECSE Certified Salary 1281-6111 28,224 35,279 -7,055 Made part-time teacher full-time

Tuition to Other Districts 1911-6311 6,800 12,563 -5,763 Paid local tax effort for foster kids elsewhere

           

Projected Effect on Expenditures     -83,300  

Projected Net Effect on Budget       82,216  

June Budget Amendments

Budget Totals Before June Budget Amendments

      Total Incidental Teacher Debt Service Capital

Balance June 30 2012 3,802,938 2,225,415 - 248,663 1,328,860

Estimated Revenue 2012-2013 6,719,555 2,404,028 3,957,974 283,187 74,366

Est. Receipts and Balances 2012-2013 10,522,493 4,629,443 3,957,974 531,850 1,403,226

Estimated Expenditures 2012-2013 6,889,980 2,426,169 3,851,691 257,995 354,125

Revenue Vs Expenditure   (170,425) (22,141) 106,283 25,192 (279,759)

Balances Prior to Transfers   3,632,513 2,203,274 106,283 273,855 1,049,101

Zero Teachers Fund Balance Transfer     106,282 (106,283)    

Capitol Project Allowable Transfer (7%)     -     -

- - - - - - - -

Estimated Fund Balance Jun-13 3,632,513 2,309,556 - 273,855 1,049,101

Budget Totals After June Budget Amendments

      Total Incidental Teacher Debt Service Capital

Balance June 30 2012 3,802,938 2,225,415 - 248,663 1,328,860

Estimated Revenue 2012-2013 6,885,071 2,478,833 4,046,900 284,971 74,366

Est. Receipts and Balances 2012-2013 10,688,009 4,704,248 4,046,900 533,634 1,403,226

Estimated Expenditures 2012-2013 6,973,280 2,445,416 3,899,939 257,995 369,930

Revenue Vs Expenditure   (88,209) 33,417 146,962 26,976 (295,564)

Balances Prior to Transfers   3,714,729 2,258,832 146,962 275,639 1,033,296

Zero Teachers Fund Balance Transfer     146,962 (146,962)    

Capitol Project Allowable Transfer (7%)     -     -

- - - - - - - -

Estimated Fund Balance Jun-13 3,714,729 2,405,794 - 275,639 1,033,296

Effect on Budget after June Budget Amendments

      Total Incidental Teacher Debt Service Capital

Balance June 30 2012 3,802,938 2,225,415 - 248,663 1,328,860

Estimated Revenue 2012-2013 10,180,071 2,625,795 3,899,938 3,579,971 74,366 Est. Receipts and Balances 2012-2013 13,983,009 4,851,210 3,899,938 3,828,634 1,403,226

Estimated

Expenditures 2012-2013 7,468,280 2,445,416 3,899,939 752,995 369,930

Revenue Vs Expenditure   2,711,791 180,379 (0) 2,826,976 (295,564)

Balances Prior to Transfers   6,514,729 2,405,794 (0) 3,075,639 1,033,296

Zero Teachers Fund Balance Transfer   (0) 0    

Capitol Project Allowable Transfer (7%)   -     -

- - - - - - - -

Estimated Fund Balance Jun-13 6,514,729 2,405,794 - 3,075,639 1,033,296

    -    

Estimated Unrestricted Money 2,405,794 2,405,794 - 1,033,296

Percent Unrestricted by Operations (funds 1 & 2)   37.91% - 3%

Percent of Contingency/Carryover (funds 1-4)   87% - 92%

District Goal for Contingency/Carryover $ 1,120,242 15%     

Difference between Goal and Contingency $ 1,285,552 72%  Budget$ + or -: 2,711,791

Budget Summary after June Amendments

The school district gets a financial audit every year. The auditor typically comes the second week in July. The auditor makes recommendations and changes to

account postings to keep the district in compliance. The audit and budget transfers are done to finalize

total expenditures and revenues in each fund. It is typical for numerous budget transfers to take

place during the audit. For this reason, the school board approves budget amendments to be made during and as a result of the audit.

Auditor

In the June school board meeting, the school board approved, as they do every year, amendments to be made during the audit. The minutes for that board meeting state the following:

Don Christensen, Superintendent, presented the 2012-2013 year-end financial report and budget amendments.

Motion made by Lisa Reece, seconded by Doug Renshaw, to approve the proposed 2012-2013 year-end financial report and budget amendments and any final amendments made by the auditor.

Vote: Unanimous

Budget Amendment Approval

Final Budget Transfers

Final Budget Transfers

LOCAL REVENUES TOTAL OPERATING TEACHER DEBT CAPITAL

STATE REVENUES

5311 Basic Formula 2,758,575 - 2,758,575

5312 Pupil Transportation 78,000 78,000 -

5314 Early Child. Sp. Edu. 35,000 - 35,000

5317 Career Ladder -

5319 Classroom Trust Fund 244,831 - 244,831 -

TOTAL REVENUES 100.00% 6,642,386 2,342,703 3,978,926 275,703 45,054

Revenue Allocated to Fund 2

We had originally allocated all of our formula revenue and all of our Classroom Trust Fund revenue to fund 2.

We had budgeted to spend $3,978,926 in fund 2.

Revenue Allocated to Fund 2

ANNUAL SECRETARY OF THE BOARD REPORT (ASBR)

Fiscal Year 2012-2013

General Special Debt Capital Total

(Incidental) Revenue Service Projects All

Fund (Teachers) Fund Fund Fund Funds2012-2013 Levy Unadjusted 3.1155 0 0.5 0 3.6155

2012-2013 Levy Adjusted 3.1155 0 0.5 0 3.6155

3111 Beginning Fund Balances 2,225,415.17 0 248,662.79 1,328,860.41 3,802,938.37

5899 Total Revenue (See Part II) 2,653,742.75 3,760,087.61 3,578,438.18 369,276.93 10,361,545.47

5999 Total Revenue And Balances 4,879,157.92 3,760,087.61 3,827,100.97 1,698,137.34 14,164,483.84

5510 Transfer To 0 0 0 0 0

6710 Transfer From 0 0 0 0 0

9999 Expenditures (See Part III) 2,258,200.40 3,760,087.61 695,962.38 319,785.26 7,034,035.65

3112 Ending Fund Balances 2,620,957.52 0 3,131,138.59 1,378,352.08 7,130,448.19

3412 Restr Fund Balances 0 0 2,856,396.00 0 2,856,396.00

Unrestricted Ending Fund Balance (Incidental + Teachers Funds) 43.55%

2012-2013 ASBR Data

After all revenues and expenditures were accounted for by the auditor, our total fund 2 expenditures for the year were $3,760,087– not the 3,978,926 we had originally budgeted ($218,839 less).

Most of this discrepancy comes from having to budget to pay teachers eligible to retire for their accumulated sick leave. When they don’t retire, they don’t get paid their sick leave until they do, so we don’t use the budgeted amount.

Our formula revenue ended up at $2,712,953--$45,622 less than we had originally budgeted.

However, there were enough gains in other revenue areas to offset this difference. Prop. C (state sales tax) revenue accounted for much of this.

Revenue vs. Expenditures

By the end of the audit, there was ample revenue in fund 2 to meet our obligations without using any of our Classroom Trust Fund revenues.

Fund 2 is zeroed out, so it doesn’t carry a balance. So, the Classroom Trust Fund revenues had to go somewhere else.

Classroom Trust Fund revenues are some of the only revenues that can be placed in any fund (1-4) as desired.

In looking at our schools’ current and future needs, the best placement of those funds was in fund 4.

There was no “7%” transfer of funds, there was just an allocation of Classroom Trust fund revenues that couldn’t stay in Fund 2 because that fund has to be zeroed out at the end of the fiscal year.

Fund Allocation

In the original adopted budget, we had estimated having an unrestricted reserve of 42.38%. After all of our budget amendments through the year, including June, our unrestricted reserve estimate was at 37.91%.

The budget for the new year (2013-2014) showed an estimated unrestricted reserve of 42.1%.

In discussions with the auditor regarding the placement of the Classroom Trust Fund revenues, I told him that what I had discussed with the board in our budget discussions was having an unrestricted reserve of at least 42%.

By allocating our Classroom Trust Revenues to Fund 4, we were left with an unrestricted reserve of 43.55%-- this was a higher percentage than what the original budget had indicated, higher than what the most recent budget approval had indicated after making the June budget amendments, and it was higher than the percentage which the board had just approved in the new year’s budget.

Fund Allocation

In looking at our schools’ financial future for the next few years, there will be fewer opportunities to allocate funds to fund 4, so we will have to live off our balances for several years in that fund.

We are starting this year with a budget balance of $1,378,352 in Fund 4.

This year, we had originally planned to deficit spend in Fund 4 by $366,296– taking our fund balance down to an estimated $1,012,056.

Need For Fund 4 Balances

We chose to pay outright for the new bus rather than paying thousands of dollars in interest in lease purchase payments. That means we will deficit spend in Fund 4 by an additional $51,245– taking our fund balance down to $960,811.

We currently have the following older route busses: Two busses built in 1995 One bus built in 1996 Two busses built in 1997 One bus built in 1998

Each bus costs approximately $80,000 to purchase. We need to replace at least the two oldest busses before they turn 20 years old.

Need For Fund 4 Balances

Roofing Most of our roofs are in good shape at this

time. The only roof that hasn’t been replaced is the roof on the gym at Bois D’Arc.

The majority of the roof on the high school (other than the two-story part of the building) was replaced in 1998. It had a 10 year warranty. It is now five years out of warranty and we will need to start replacing it (older sections first) before we start having serious leaks.

Need For Fund 4 Balances

Technology Infrastructure All of our new state testing will now be digital–

taken on computers. Much of our technology infrastructure is 10

years old. Our costs associated with replacing the

infrastructure as it fails is high.

Need For Fund 4 Balances

Instructional Technology Using technology in the classroom for instructional purposes is

important in order to teach students what they will need to know when they graduate and get jobs or go to college.

Purchasing and maintaining instructional technology is expensive. We replaced all the computers in one elementary computer lab

this year. We have multiple labs that need to be updated/replaced regularly.

We need to purchase enough technology to meet our testing needs by the end of the year. We also need to have the bandwidth available in order for all students to be testing at the same time in the district. We will probably need to double our band width again this year.

Need For Fund 4 Balances

Yearly Expenses Athletic uniforms– replaced on a rotating basis. Sports equipment and scoreboards

Our football, baseball and softball scoreboard are no longer supported– they quit making parts.

Desks and chairs—they wear out and need to be replaced on a rotating basis.

Replacing copy machines and printers. Printers are relatively cheap, copy machines cost $12,000-$15,000 each.

Custodial and kitchen equipment– it wears out with use and has be to replaced.

Need For Fund 4 Balances

According to school board policy (CB and DB):

“The superintendent of schools shall be the chief executive officer of the Board of Education and the administrative head of all divisions and departments of the Ash Grove R-IV School District…The Board designates the superintendent to serve as the budget officer of the district.”

Bottom Line

Classroom trust fund revenue can be allocated into any account.

The board approved an unrestricted reserve amount in all approved budgets and amendments varying from 37.91% to 42.38%

The board approved any transfers at the time of the audit. As the “Chief Executive Officer” and “Budget Officer” of the

district, I approved the allocation of last year’s Classroom Trust Fund revenue ($295,989) into Fund 4 because it best met the current and future financial needs of the school district.

That allocation resulted in a year-ending unrestricted reserve of 43.55% which exceeded all board approved estimates.

Bottom Line