Fiscal Fitness
A Guide to Monitoring
Your School District’s Budget
Mary Ellen Clark
Office of Operations and Management
Services
Michael Abbott
Office of Audit Services
New York State Education Department
sponsored
by
New York State Education Department
Center for School
Leadership
with support from
The Wallace Foundation
produced
and distributed by
New York State School Boards Association
February
2004
Preface
All too often, as school board members you are
catapulted into the middle of the flurry of reports, communications, statistics,
and intra-school relations. School staff, colleagues and the citizens who
elected you expect instant effectiveness. Your effectiveness can be expedited
through proper orientation and training. In the meantime, in your eagerness to
be good contributing board members, the time to step back and reflect on
governance issues is sometimes neglected.
Policy
development is the board’s most important responsibility and as such should
provide continuity of purpose and clear guidelines for staff performance. This
is especially important for those policies that stem from requirements imposed
upon the board and the school district by statute.
The board has statutory responsibility for ensuring that public monies are
properly accounted for and protected. Fiscal Fitness – A Guide to Monitoring
Your School District’s Budget has been prepared by State Education Department
staff and produced and distributed by the New York State School Boards
Association to assist boards of education in exercising their oversight
responsibility for public funds. A board’s policy and responsibility will be
brought to life in this document through the use of sample policies and reports
and clear and comprehensive descriptions of financial practices and procedures.
This will permit the board to better monitor the fiscal health of the district
through its review of the district’s monthly and annual financial reports.
Richard P.
Mills
Commissioner of Education
Table of Contents
The School District’s Financial Health
Keeping the District
in Sound Financial Condition
Financial Management and Accounting
Policy
Key Accounting and Internal Control
Procedures
Encumbering
Process
Budgetary
Transfers
Treasurer’s
Receipts
Check
Process
Fund Balance
Projection
Cash Flow
Projection
Audit of
Claims
Monitoring Compliance to Avoid Fiscal Stress
Key Monthly
Financial Reports
Monthly Treasurer’s Cash Report
Board Review Actions
– Monthly Treasurer’s Cash
Report
Budget Status
Report
Board Review
Actions – Budget Status Report
Key Annual Financial Statements
Management’s
Discussion and Analysis
(MD&A)
Statement
of Net Assets
Statement of Activities
Combined Balance
Sheet – Government Funds
Statement of
Revenues, Expenditures and Changes
in
Fund
Balances – Government Funds
Questions Regarding Key Financial Management
Practices
Budget
Development
Fiscal Monitoring – Budget
Administration
Financial Condition – Reviewing the District’s
Year-end Financial Statements
Next Steps
Glossary
Appendix
– Key State Education Department Contacts
The
School District’s Financial Health
The most important reason for managing a school district’s financial
condition is to sustain the education of students on a long-term basis.
The socioeconomic environment and how management adapts to the climate are major
factors that influence the fiscal health of the district. District wealth is a
key determinant of its capacity to generate revenues. The district leadership
alone has minimal influence to improve the wealth of a district. However, it can
control how it adapts to the economic environment. Recognizing potential
financial stress, making hard choices with programs and services, developing
realistic budgets and making timely decisions when faced with stress are all
within the capability of a district.
School districts must have structurally balanced budgets. This
means that revenue estimates should be based on documented data. Estimated
expenditures should reflect all recurring expenditures and include the cost of
any new programs or activities. One-shot revenue sources should be carefully
used so as not to generate long-term dependency.
Keeping the District in Sound Financial Condition
A
district is in sound financial condition if:
· It has enough cash
on hand to pay current bills and those that are due shortly.
· It
has sufficient revenues to support expenditures on an ongoing basis with minimum
reliance on the district’s savings/fund equity.
· It can meet
long-term debt obligations and maintain a good credit rating.
· It
can provide education services at a level that meets the needs of all students
demonstrated by student results that meet or exceed State
standards.
· Its administrative staff has demonstrated a
commitment to professional development and continuing education.
·
Its long-range fiscal plan is compared frequently to actual progress and
adjusted to meet dynamic environmental conditions.
· It maintains
its buildings in a condition to avoid unexpected major renovation
costs.
· It files all state and federal aid claims in a timely and
accurate manner, to avoid few or no major post-filing adjustments.
· It engages an experienced auditing firm that encourages
business office staff to discuss changes in school district accounting
requirements as they arise, throughout the year.
· Frequent
interaction occurs between the board of education and the administration
relating to discussions of the district’s fiscal status and trends.
Financial Management and Accounting
Policy
The accurate
presentation of the school district’s financial affairs is the essence of the
accounting/auditing system. Data generated from the accounting records are the
basis for many decisions made by the board of education and the school district
administration. A comprehensive district accounting policy should include
all phases of the financial management, internal controls, accounting and
auditing process consistent with law and regulation and the duties and
responsibilities of the board of education. Such a policy should:
· Adhere to the Uniform System of Accounts for School
Districts.
· Stipulate the creation, issuance and analysis of
periodic financial reports (cash reconciliation, budget status, annual financial
report, fund balance projection, cash flow projection, extra-classroom activity
fund, etc.).
· Require the signature of the treasurer or, when
designated, the deputy treasurer in the treasurer's absence, on district checks,
and stipulate rules for the use of the facsimile check signer.
·
Stipulate the responsibility of various fiscal officers of the district
regarding budgetary transfers, encumbrance and mass encumbrance
procedures.
· List the classification of expenditures and the
procedure for approving claims for payment.
· Stipulate safeguards
concerning the supervision and handling of cash and other district
funds.
· Include the development of cash flow projections for
investment and borrowing.
· Show the accounting and supervision of
scholarship and trust funds donated to the district.
· Outline the
governance procedure for extra-classroom activity funds.
· Outline
the procedure for approval and reimbursement of travel and conference
attendance.
· Stipulate the annual designation of the certifying
official for payroll.
· Show the adoption of a scope of the annual
independent audit of financial
records.
Care should be taken to insure that the
adopted policies conform with law, regulation and good business practices. See
www.emsc.nysed.gov/ mtgserv/gemsho.htm for a sample recommended policy
(select Sample Accounting Policy).
Key Accounting and
Internal Control Procedures
The
following procedures should be included in the district’s administrative
regulations to ensure that the board’s policy is understood and implemented by
staff members.
Encumbering
Process
The encumbering process’s
principal purpose is to prevent the creation of liabilities in excess of
approved appropriations. It further aids in identifying line item
accounts where unencumbered appropriations are available for transfer and also
helps in the forecast of year-end fund balance.
In order for a school district to maintain budgetary control and to get an
accurate estimate of its uncommitted appropriations, the district must encumber
all of its known obligations. An encumbrance against an appropriation is
required before an obligation can be created. Encumbering after the fact does
not satisfy that condition.
Mass encumbering of
all known obligations should be made to insure that the budget is not overspent,
to project and arrive at an estimated June 30 fund balance and to maintain
budgetary control.
These obligations
include salaries, debt service, utilities, fringe benefits, BOCES contracts, and
all other known obligations. Mass encumbering of all known contractual
commitments should be completed at the latest by the end of the first quarter of
each fiscal year.
Perhaps 85 percent of a budget
should be mass encumbered as soon as these obligations are known and liquidated,
as expense is incurred payroll by payroll, and claim by claim. It will be also
necessary to make adjustments periodically to the encumbrances to reflect where
expenditures are processed below or above expectations. An example is where
staff replacement salaries are lower than the salaries of persons who have left,
or when a mild winter has reduced utility costs.
Budgetary Transfers
The
Uniform System of Accounts prescribed for School Districts, Education Law
section 1718 and good budgetary control require that there be uncommitted
appropriations available before encumbrances are placed or expenditures posted.
Further, section 170.2(k) of the Commissioner's Regulations states that it
is the board of education’s duty to keep the incurred obligations within the
amount of the total annual appropriations voted or authorized, and the prior
year's outstanding encumbrances. This requirement guards against the
creation of liabilities in excess of the appropriations. Section 170.2(1) of the
Commissioner's Regulations provides for such transfers and permits the board to
authorize the chief school officer to make transfers within limits as
established by the board.
Delegating this
authority to the superintendent, combined with advanced encumbering of all known
obligations, and encumbering purchase orders before release, will prevent
expending appropriations beyond the amount authorized. Therefore, transfers must
be made prior to the over expenditure or over encumbrance of an object code. The
budget status report's (see page 11) appropriations (object codes) should never
be overspent or over-encumbered.
The transfer
of appropriations is of critical importance and all parties concerned – the
purchasing agent, business official and the treasurer – should have written
confirmation of the information. The purchasing agent needs to know if the
transfer has been approved; the treasurer needs to have accurate information and
documentation for accounting purposes; and the business official needs a record
of the month's authorized transfers from which he or she can make a summary
report to the board. It should be noted that any transfers authorized by the
superintendent would be shown in the "Transfers and Adjustments" column of the
budget status report submitted at the next board meeting.
A
transfer request form should be used to control and document approval of budget
transfers. The form acts as a document of original entry and should be
recorded in the general journal and subsequently in the general ledger and
subsidiary ledger accounts.
See www.emsc.nysed.gov/mtgserv/gemsho.htm
for a sample budgetary transfer form (select Budgetary Transfer
Process).
Treasurer's
Receipts
Section 170.2(h) of the
Commissioner's Regulations requires the district treasurer to acknowledge the
receipt of monies paid over to his or her custody with pre-numbered duplicate
receipts. The purpose of this regulation is to establish an audit trail for
internal control that will protect the treasurer in the receipt of funds.
Employees other than the treasurer who receive monies on behalf of the district
must issue pre-numbered receipts in triplicate as required by section 170.2(i)
of the Commissioner's Regulations.
Check
Process
The board of
education should authorize a single signature check, bearing the signature of
the district treasurer, and authorize the use of a check-signing
machine. The value of having and using a check-signing machine is to
reduce the time consumed in signing checks, as well as provide increased
security and control over the issuance of checks. The treasurer must keep
personal control and custody of his or her signature plate, must either sign the
checks personally or be present when the checks are run through the check
signing machine, and must maintain a log of the checks written. If the board
appoints a deputy treasurer to serve in the treasurer’s absence, a separate
signature plate is required for the deputy treasurer.
The board, assisted by the district business
official and chief administrative officer, should develop a written policy
governing the use of the check-signing machine. The safeguards listed below
should be in board policy.
· The treasurer should retain a
key to the check-signing machine and should not surrender or delegate that
responsibility to any other individual. The treasurer should be present and
should control the check-signing process when checks are run and should compare
the checks against the approved warrant and certified
payroll.
· The check-signing machine should be secured in a
protected area and not available to unauthorized individuals. The
signature plate should be removed and retained by the treasurer.
When the treasurer leaves, his or her signature plate must be
destroyed. The signing of blank checks should be expressly
forbidden.
· The treasurer should record the first and last
number of checks run, the date of the run, the sequential number of voided
checks within each run and maintain and sign the check-signature register. All
voided or spoiled checks should be marked and retained. An inventory record,
requiring user signature, should be kept and sequential use audited and
verified.
· An individual who is not a member of the
business office staff, should audit the check register. This audit should be
conducted at intervals approximating the payroll periods to verify the accuracy
of the register against the machine's tally counter. Further, reconciliation
should be made promptly (if possible, reconciliation should be completed the
same day that cancelled checks and statement are received from the
bank).
Fund Balance
Projection
To begin with,
fund balance is calculated based on the “modified accrual basis of
accounting” and is increased by revenues and decreased by expenditures.
Fund balance projection should begin by January and updated monthly. First, the
revenue received to date and the estimated amount of revenue to be received
during the balance of the year are added to the retained fund balance. Then the
expenditures to date, outstanding encumbrances, and estimated expenditures for
the balance of the year are subtracted from that amount to arrive at the
projected fund balance.
See www.emsc.nysed.gov/mgtserv/gemsho.htm for an
example of a format to be used for fund balance management (select Fund Balance
Management).
Cash Flow
Projection
Cash position is
calculated based on the “cash basis of accounting” and is increased by cash
receipts and decreased by cash payments. On the other hand, fund balance
is a calculation that is increased by revenues and decreased by expenditures. A
cash flow projection is similar to a fund balance projection except that it
charts the expected cash position of the district throughout the year.
The cash flow projection should start in July
with the beginning cash position of the district. The estimated monthly cash
disbursements and cash receipts should be calculated to arrive at the cash flow
projection for each month. Cash flow should be projected for all funds and for
the entire school year and updated monthly. For an example of a format of cash
flow projections, go to www.emsc.nysed.gov/mgtserv/gemsho.htm
Audit of
Claims
Claims may be
audited by the board of education or by an internal auditor appointed by the
board of education in accordance with either section 1709 (20a) or
section 2526 of the Education Law. It is generally recommended that an internal
auditor be appointed since this provides for more timely payment of bills and
relieves the board of a routine financial
function.
A claim to be submitted to the
internal claims auditor for approval before the treasurer may make payment shall
meet the following conditions:
· The purchasing agent's signature
has authorized the release of the purchase order.
·
The original receiving copy was signed and dated by receivers authorized by the
board, indicating that the materials or services were received on the dates
stated and the charges are correct.
· The purchase order or
schedule of claims contains the purchasing agent's signature as the “officer
giving rise to the claim.”
· The charges are not duplicates of an
item(s) already paid.
· The proposed payment is for a valid and
legal purpose.
· The unit price billed (invoice) does not exceed
the bid or contract authorization.
· The extensions are correct,
no unauthorized taxes are paid, discounts are taken, and transportation charges,
where applicable, are accurate.
See www.emsc.nysed.gov/mgtserv/gemsho.htm
for an example of a more extensive procedure that may be used by the internal
claims auditor (select Audit of Claims).
Monitoring
Compliance to Avoid Fiscal Stress
The board of education should have a process to
identify and monitor the district’s fiscal status to ensure its fiscal solvency
and integrity. Each fund’s cash and budgetary status should be
constantly monitored throughout the fiscal year so the district can predict and
respond to fiscal stress.
Fiscal stress indicators may include:
·
over-expended or over-encumbered appropriations;
· inadequate budget
appropriations and/or revenues to carry the district through the remainder of
the fiscal year;
· cash flow deficit;
· fund balance erosion or
depletion;
· a growing inability of the special aid and/or school lunch
fund to pay back inter-fund loans.
Key Monthly
Financial Reports
Monthly
Treasurer's Cash Report
The treasurer
is required to report to the board of education monthly on the status of all
district funds in a monthly cash report. The cash report shows the district’s
total cash position. It provides detailed information as to the sources of cash
and whether funds received from these sources during the period were adequate to
pay the district’s disbursements for the same period.
The report’s format
is set forth in section 170.2(o) of the Commissioner's Regulations, which
requires that the cash balance on hand be shown on the report. This means total
cash balance, including checking, money management, savings accounts,
certificates of deposit or any other of a fund's separate investment monies. The
treasurer should include all funds' cash positions in the monthly
report.
In addition, section 170.2(o) requires a report for each fund
showing:
· the cash balance on hand at the beginning of the
month;
· receipts by source during the month;
·
total disbursements during the month;
· the cash balance on hand
at the end of the month; and
· reconciliation with bank
statements.
Pages from a sample treasurer’s
monthly cash report using the Special Aid Fund as an example are available at www.emsc.nysed.gov/mgtserv/gemsho.htm
(select Sample Treasurer’s Cash Report).
Board Review Actions –
Monthly Treasurer's Cash Report
· Check for negative bank
balances.
· Check to see if month-end balances reconcile to the bank
statements.
· Review the kinds of adjustments that are being made in
the
bank
reconciliation to see if these adjustments are in the normal course of
the
business, or if they point to a problem in the district’s systems or processes.
· Review the district’s cash flow projection to see if it has been
adjusted to reflect any material differences in the district’s cash position.
Budget Status Report
The
budget status report compares a district’s budget against actual revenue
received and expenditures/encumbrances incurred at a fixed point in time during
the school year. It provides an accounting of how budget estimates compare to
actual activity to ensure that the district does not overspend. It also provides
a sense of the school district’s capacity to budget accurately and its ability
to enforce the budget and control finances during the course of the year.
The treasurer must also present the board with
the budget status report for each fund at least quarterly; monthly if transfers
were made. The presentation and format is in section 170.2 of the Commissioner's
Regulations. The regulation and sound fiscal management practice outline the
format in which the budget status report must be presented. The format, which
appears below, is not optional; it is mandated.
Revenue accounts must
include:
· Estimated
revenues
· Amounts received to date of the
report
· Revenues estimated to be received
during balance of fiscal year
Appropriation accounts must include:
·
Original appropriations
· Transfers and
adjustments
· Revised
appropriations
· Expenditures to
date
· Outstanding
encumbrances
· Unencumbered
balances
In addition to the information
required by regulation, the district treasurer should consider adding the
following to the status report:
· A column to the revenue section to show
adjustments (overages and deficiencies) to the original
estimate for each account code and a column to show the current estimate of
revenue for each account code (original estimate plus or minus any adjustments)
· A column to show the percent of revenue collected for the current year
· A column to show the prior school year’s actual revenues and
expenditures for each account code
To see pages
from a sample budget status report, go to www.emsc.nysed.gov/mgtserv/gemsho.htm
(select Format for Budget Status Report).
Board Review
Actions – Budget Status Report
· Review the budget status report
to determine the number of function-object budget codes that have been overspent
or over-committed. It should be noted that both Education Law section 1718 and
Commissioner’s Regulation section 170.2 prohibit budgetary overspending or
incurring an obligation for which an appropriation does not exist.
·
Review the report to determine whether all known obligations are mass encumbered
to preclude over-commitment of a specific code or transfer of an appropriation
when there is really no excess amount. The types of expenditures which lend
themselves to mass encumbering are salaries, debt service, fringe benefits,
utilities, contracts, and payments to BOCES.
· Review the report to see
if any accounts are overspent.
· Ascertain whether any modifications to
the spending plan are required.
· Review budgeted revenue from each
source to determine if budgeted amounts are being realized. How close is actual
revenue received to the budgeted amount? Does the district expect to realize the
uncollected portion of the revenue by the end of the school year? Estimated
revenues projected for future years’ budgets should be adjusted accordingly if
there is a gap between actual revenue received and the amount projected for
those years.
· Review both revenue and expenditure figures to see if
expenditures are being kept in line with actual available revenues. It should be
noted that actual and expenditure amounts and adjustments to the original budget
should be considered in developing the next year’s budget to be presented to the
voters.
Key Annual Financial Statements
Education Law section 2116-a
and Commissioner’s Regulation section 170 require the board of education to
secure an annual audit by an independent auditor.
The district’s
financial statements are made up of many schedules and include the following
major components.
· Management Discussion and Analysis
(MD&A)
· Statement of Net Assets (district-wide)
· Statement
of Activities (district-wide)
· Combined Balance Sheet – Government Funds
(by funds)
· Statement of Revenues, Expenditures and Changes – Government
Funds (by funds)
· Notes to Financial Statements
· Required
Supplementary Information (RSI) other than
MD&A
In addition, the independent audit firm
is required to issue a management letter as part of the audit. The management
letter should include recommendations for improvements that should be brought to
the board’s attention.
Additional information
concerning the audit of financial statements can be found in the State Education
Department’s 2003 Audit Reference Manual, available at
www.emsc.nysed.gov/mgtserv/gemsho.htm (select: Audit Reference
Manual).
Management’s Discussion and Analysis
(MD&A)
The Management’s
Discussion and Analysis, which introduces the district financial statements, is
a required component. It is intended to be a readable, objective analysis of a
school district’s financial activity during the year.
It serves to introduce and summarize the
information contained in the statements that follow and provides a framework and
context for understanding the information they contain. Information regarding
MD&A can be found in the 2003 Audit Reference Manual, Appendix 1, at www.emsc.nysed.gov/mgtserv/gemsho.htm.
Statement of Net Assets
The Statement of Net Assets
reports the district’s assets, liabilities and net assets. Net assets equals
assets minus liabilities. This statement includes capital assets and
depreciation on capital assets. It is similar to a balance sheet. For more
information on the Statement of Net Assets, go to www.emsc.nysed.gov/mgtserv/gemsho.htm
and select 2003 Audit Reference Manual.
Statement of
Activities
The Statement of
Activities reports revenues, expenses and other changes in net assets of the
district as a whole. It is similar to an income statement. The Statement of
Activities also reports gross expenses, offsetting program revenues and net cost
information at the function or program level for the current year. General and
other revenues are reported separately from program revenues.
The significance of this statement is
that for the first time there is a presentation of the district’s net cost,
financed by general revenues (taxes and state aid) of each major function or
program.
For more information on the
Statement of Activities, go to
www.emsc.nysed.gov/mgtserv/gemsho.htm
and select 2003 Audit Reference Manual.
Combined
Balance Sheet – Government Funds
Whereas the Statement of Net Assets is a report of all district funds, the
Combined Balance Sheet is presented by fund types, in this case government funds
(general fund, debt service, other governmental funds). This balance sheet
primarily contains short-term financial information. It allows the board to
examine the district’s short-term assets and liabilities, determine the
short-term need for cash, assess short-term financing needs and the district’s
ability to meet them, and analyze the nature of current financial resources.
The fund balance section of the balance sheet
presents the reserved and unreserved portion of the fund balance. Reserves
signify portions of fund balances that are set aside for future purposes and
therefore cannot be appropriated for general uses. The unreserved portion may
include an amount designated to fund part of the next year’s budget. Generally,
the only truly available portion may be the unreserved (and undesignated)
balance in the general fund. For an example, go to www.emsc.nysed.gov/mgtserv/gemsho.htm
and select: 2003 Audit Reference Manual.
Statement of
Revenues, Expenditures
and Changes in Fund Balances – Government
Funds
The Statement of Revenues,
Expenditures and Changes in Fund Balances is also presented by fund types
(government funds). This statement focuses primarily on cash and other current
financial resources that enter and leave the district, and the district’s
short-term resources and resource needs. It enables the board to examine the
flows of short-term resources. It shows whether expenditures match revenues, and
indicates whether the district will be able to pay for future services. For more
information, go to www.emsc.nysed.gov/mgtserv/gemsho.htm
, select the 2003 Audit Reference Manual and Appendix 3.
Questions Regarding Key
Financial Management
Practices
In addition to the
questions specific to each of the reports, the following questions address key
areas related to budget development, budget administration, financial condition,
and other fiscal monitoring. The questions will help boards of education
understand some of the district’s key financial management
practices.
Budget Development
· What written
information is available to district staff regarding budgetary objectives and
budget preparation procedures?
· Does the district establish a budget
calendar to ensure the various phases of the process are completed in a timely
manner?
· How is public input solicited and considered in developing the
budget?
· Are the district’s budgeted amounts for educational programs
adequate to ensure all students meet the higher standards or does the district
need to consider alternatives?
· How does the district’s budget relate to
its strategic plan, long-term operating plan and capital plan?
Fiscal Monitoring – Budget
Administration
· What obligations does the district mass
encumber at the beginning of the year?
· How often does the district
prepare budget status and treasurer’s cash reports to monitor its financial
condition?
· How often does the district compare budget revenue and
expenditure amounts to actual results? Does the district take action to keep
expenditures in line with revenue?
· How does the district ensure
projected (uncollected amounts) revenues are not overstated? Are projected
revenues updated, as new information becomes available?
· How and when
does the district project its year-end fund balance?
Financial Condition – Reviewing the District’s
Year-end Financial
Statements
· Did the district end the year with a surplus or deficit with its
revenues and expenditures? What caused the district to have a surplus or
deficit? At what point did the district become aware of the surplus or
deficit?
· How are revenues trending in comparison to expenditures over
the past three to five years? Are expenditures out-pacing revenues?
·
What are the reasons for significant variances that occurred between the
district’s budget as amended, if applicable, and actual revenues and
expenditures?
· How much is in the district’s General Fund – Fund
Balance (savings) account? Has the district been adding to or depleting this
account in the past three to five years?
· How does the district
determine how much fund balance/savings to designate toward next year’s budget?
Does the district comply with the two percent limit for undesignated
funds?
Next Steps
· Ask your
business official to explain the district’s financial reports.
· Ensure
your management team is adequately trained to understand the district’s
finances.
· Make sure you are budgeting five years ahead.
· Take
advantage of services and information from the New York State School Boards
Association, the New York State Council of School Superintendents, the New York
State Association of School Business Officials, the State Education Department
and your district superintendent.
· Check the district’s state aid and
building projects on the web: http://www.stateaid.nysed.gov/ and www.emsc.nysed.gov/facplan
· Discuss the district’s year-end financial condition and the management
letter with the district’s independent auditor (certified public
accountant).
· Check for information on school business management on the
website: www.emsc.nysed.gov/mgtserv/gemsho.htm
· Check for information on the Office of the State Comptroller’s
website: http://www.osc.state.ny.us/
Glossary
Accruals. Expenditures that are incurred in the current period but will
not be paid until the next period, or revenues that are earned in one
period but will not be received in cash until the next
period.
Adopted budget. A document that provides budgetary
appropriations necessary for expenditures. The Uniform System of Accounts for
School Districts requires that the adopted budget be recorded in the districts
accounts. This is done through budgetary appropriations entries, which are made
at the function level – for example, Teaching – Regular School – and object
level, 2110.2 Equipment, in at least the same detail as the SBM budget document.
See
www.emsc.nysed.gov/mgtserv/gemsho.htm
and click on 2003-2004 SBM-1.
Advance (mass) encumbering.
Encumbering all known obligations early in the fiscal year. This helps maintain
budgetary control and helps give an accurate projection of fund balance
savings.
Budgetary appropriations. These authorize and limit
spending authority. Budgetary control requires that appropriations are available
prior to incurring an obligation. Each appropriation account must show the
amount of the budgetary appropriation, the account encumbered but remaining
unexpended, the amount expended, and the unencumbered
balance.
Encumbrances. These are commitments related to
unperformed contracts for goods and services used in governmental (fund)
accounting because governments cannot legally expend more than the amount
authorized (budgeted). An encumbrance is partly: (a) a budgetary entry because
it represents a future expenditure and the authority to spend, and (b) a
proprietary entry because it is a contingent liability that will become a
liability to pay for goods and services received by the district. When an
employee is hired and before that person is put on the payroll, or when a
purchase order for an item or service is created but before it is sent out, an
encumbrance must go into the accounting records. When the district receives the
item or service, that encumbrance is “liquidated” or
cancelled.
Expenditures. These are recognized when the district
has received goods and services and becomes liable to pay for
them.
Revenues. Also known as receivables, these are recorded when
measurable – in dollars – and available – collectible in the current period or
soon thereafter to pay liabilities owed at year-end.
Appendix
Key State Education Department
Contacts
Educational Management (518) 474-6541
Audit
Services (518) 473-4516
State Aid (518) 474-2977
Facilities
Planning (518) 474-3905
Grants Management (518)
474-3936