school seminar 2016

SCHOOL DISTRICT SEMINAR

May 9, 2016

8:30 – 12:30

Hosted by

Benning Group, LLC

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Aaron Mercier,Regional Superintendent for Carroll, Jo Daviess &

Stephenson Counties

Brian Stewart, 89th District Representative

Dallas Pieper, Freeport School DistrictEnrollment & Transportation Director

Don Benning, PartnerJenny Blocker, Partner

Kyle Polhill, Senior Staff AccountantKyle DeMus, Senior Staff AccountantAmanda Degner, Staff Accountant

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ROE update by Aaron Mercier

Illinois legislative update by Brian Stewart

Transportation costs & reporting by Dallas Pieper

BREAK

Budgets & administrative costs

Bond issuance and related accounting issues

Uniform Guidance and grant updates

Year-end tips & reminders

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Regional Office Update

Presented by

Aaron MercierRegional Superintendent for

Carroll, Jo Daviess & Stephenson Counties

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Illinois Legislative Update

Presented by

Brian Stewart89th District Representative

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Transportation Costs & Reporting

Presented by

Dallas PieperFreeport School District

Enrollment & Transportation Director

BREAK!

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Display and inspection: Must publish where, when, and timeframe available

Must be on display AT LEAST 30 days prior to hearing

Budget hearing: Must publish where, when, and time of hearing

Adopted/rejected at a public meeting

Must be adopted by the end of the first quarter of the fiscal year (September 30)

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File with county clerk within 30 days of adoption• Failure to file can result in levy not being extended

Electronically submit to ISBE within 30 days of adoption (and no later than October 31)• https://sec1.isbe.net/attachmgr/default.aspx

Districts with websites are required to:1. Post current budget2. Notify parents/guardians of posting and web

address

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District may make transfers between various line items within any one fund

• Transfers cannot exceed in the aggregate 10% of the total budgeted expenditures for that fund.

• The budget transfer would need to be approved by Board Resolution

• Best used when needing to make a correction to the budget that doesn’t increase overall expenditures

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Example 1: District records special education room & board costs under the instruction function (10-1200-690) instead of Other Support Services (10-2190-690)

Example 2: District budget’s all of the special ed. salaries in the 1200 function, when the special ed. pre-school salaries should’ve been in the 1225 function

As long as the amounts transferred in the aggregate is less than 10% of the Educational Fund budget no amendment to the budget is necessary

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When does the District’s budget need to be amended?

When a change in the budget results in the estimated total expenditures, in an individual fund, being greater than 10% of the initially adopted budget.

Based on the change in the overall fund, not on a line-by-line basis

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Decreases to a fund’s overall budgeted expenditures does not require the District to amend their budget.

Increases or decreases to a fund’s overall budgeted revenues does not require an amendment to the budget.

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Example: During the year, a District’s boiler unexpectedly failed and needed to be replaced. The cost of a new boiler system is expected to be $90,000.

Initial budget for the O&M Fund was $1,000,000

An overall increase of $100,000 to the O&M Fund would require an amendment to the budget.

Assuming the other expenditures are within budget the District would NOT need to amend the budget.

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Example 2: During the year, a District’s boiler unexpectedly failed and needed to be replaced. The cost of a new boiler system is expected to be $110,000.

Initial budget for the O&M Fund was $1,000,000

• An overall increase of $100,000 to the O&M Fund would require an amendment to the budget.

• Assuming the other expenditures are within budget the District would need to amend the budget.

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Example 3: During the year, a District’s boiler unexpectedly failed and needed to be replaced. The cost of a new boiler system is expected to be $110,000.

Initial budget for the O&M Fund was $1,000,000

• An overall increase of $100,000 to the O&M Fund would require an amendment to the budget.

• Budget expenditures for supplies and purchased services decreased $15,000.

Since our overall expenditures in the O&M Fund increased by only $95,000, the budget would NOT need to be amended.

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Other times it may be necessary to amend budget:

Abolishment or Abatement of the Working Cash Fund

Transfers between funds

• Example: Transferring facilities sales tax from Capital Projects Fund to the Debt Service Fund

Changes in Grant Budget

Limitation of Administrative Costs

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Display and inspection:• Must publish where, when, and timeframe available• Must be on display AT LEAST 30 days prior to hearing

Budget hearing:• Must publish where, when, and time of hearing

Adopt amended budget at a public meeting before June 30th.

Post amended budget on the District website

Submit amended budget to ISBE within 30 days of adoption (In the subject area write “Amended Budget”)

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Example: The District’s June board meeting is scheduled for Monday June 20th, 2016. Prior to the board meeting on June 20th

is the scheduled budget hearing.

• In order to meet the availability and inspection requirements, the amended budget and date of the budget hearing would need to be published and on display by Friday May 20th, 2016.

• Exception: If District did not meet the May 20th deadline to allow the budget to be on display for 30 days prior to the June 20th meeting, the amended budget would still need to be published and displayed by May 31, 2016. The District could then schedule the budget hearing and a special board meeting to be conducted by June 30th, 2016.

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Omitting beginning fund balance and/or cash (and investment) balances.

Reporting cash (and investment) balances on the Summary of Cash Transactions that are less than zero.

Omitting inter-fund loans (or repayments) on the Summary of Cash Transactions.

Reporting short-term borrowing (original issuance & repayment of principal) as a receipt (revenue) and/or a disbursement (expenditure).

Omitting short and/or long-term debt issuances. Be sure to implement strong budgetary control

during the year (monitor frequently for line item variances).

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Mechanics of a School District Budget http://www.isbe.state.il.us/sfms/budget/mechanics.pdf

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QUESTIONS?

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Under provisions of Section 17-1.5 of the Illinois School Code, the District’s budgeted administrative expenditures cannot increase more than 5% over their prior year’s actual administrative expenditures.

The State Superintendent may impose sanctions for non-compliance that may culminate in withholding of General State Aid payments due to the District.

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The following functions are considered administrative expenditures:

• 2320-Executive Admin Services (Superintendents & Assistants)

• 2330-Special Area Admin Services (Supervisor for Federal Programs, Special Programs & Title Programs)

• 2490-Other Support Services-School Admin (Department Heads and Deans)

• 2510-Direction of Business Support Services (Business Manager)

• 2570-Internal Services

• 2610-Direction of Central Support Services (Director of Planning, Information Services, Staff Services)

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Options if budgeted amounts increase greater than 5% of actual: Waive the limitation if District is in the lowest 25th

percentile (4th Quartile) for admin. expenditures

• By board action, subsequent to a public hearing

• Requires the vote of at least two-thirds of the board

• District needs to notify ISBE of the limitation waiving within 45 days of such action

http://www.isbe.net/sfms/AdminCaps/AdminCaps.htm

School Business Division: 217-785-8779

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Other options: Amend budget to come into compliance no later

than June 30th

Request a waiver from the General Assembly pursuant to the procedures in Chapter 105 of the Illinois School Code (105 ILCS 5/2-3.25g)

• Used if District is ineligible to waive based on administrative expenditures (25th percentile) and all available and reasonable remedies to comply have been exhausted

• Waiver applies only to the specific school year for which the request is made

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Waiver Process: Hold a public hearing to consider the waiver

request

Post notice on the District’s website at least 14 days in advance of the hearing

Publish the notice in a newspaper of general circulation within the District at least 7 days before the public hearing

Provide written notice to the affected collective bargaining agent at least 7 days before the public hearing

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Waiver process continued: Provide written notice to the State legislators who

represent the territory in which the District is located

Copies of all of the above notices must be submitted with the waiver application

The waiver application must specify the amount, nature, and reason for the relief requested

The waiver application must list all remedies the District tried to comply with the 5% limitation

Applications must be postmarked no later than 15 calendar days following approval of the board

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Overview of Waiver Process:http://www.isbe.net/isbewaivers/html/overview.htm

Waiver Application and Checklisthttp://www.isbe.net/isbewaivers/html/application.htm

Rules and Waivers Division: 217-782-5270

QUESTIONS?

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General Obligation Bonds (G.O’s)• Building Bonds

• Health & Life Safety Bonds

• Funding Bonds

Working Cash Fund Bonds

Alternative Revenue Bonds

Refunding Bonds

Tort Judgement Funding Bonds

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Issued to pay the cost of acquiring school sites and buildings, equipping, repairing, and reconstructing new and existing school buildings and additions.

Bonds are secured by ad valorem tax on property in the District.

Approved by voters by referendum during a regularly scheduled election.

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Issued to pay the cost of altering, reconstructing, or repairing school buildings or permanent, fixed equipment or purchase and install equipment

An architect or engineer must conduct a survey and issue findings in a “safety survey report”

Not subject to referendum as long as the safety survey report was approved by the School Board, Regional Superintendent, and State Superintendent

Bonds are secured by ad valorem tax on property in the District

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Issued to create or increase the working cash fund

• Revenue Stream secured by annual tax levy

• Maximum financing term of 20 years

The principal amount of these bonds cannot exceed

• 85% of the taxes allowed to be levied for educational purposes for the current year

• Plus 85% of the last known personal property replacement tax entitlement

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The Board must adopt a resolution declaring its intent to issue bonds.• A notice must be published in the newspaper

• For 30 days after the publication, registered voters can request a petition

• If a petition with signatures of at least 10% of the registered voters is filed with the School Board within 30 days, then bond must be approved by voters during a regularly scheduled election

• If no valid petition is submitted the District can issue the bonds

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Example: District issues $500,000 in working cash bonds Long-Term Debt Account Group Entry

99-350 Amount Provided for Payment on LTD $500,000

99-501 Bonds Payable $500,000

Entry to Record Bond Proceeds in Working Cash Fund 70-101 Cash $500,000

70-7210 Principal on Bonds Sold $500,000

Repayment from the Debt Service Fund Tax Levy 30-5200-620 Interest on Bonds $10,000

30-5300-610 Bond Principal Retired $40,000

30-101 Cash $50,000

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105 ILCS 5/20-10 of Illinois School Code District may ABATE its working cash fund at any time, upon

the adoption of a resolution

The resolution is adopted by the Board of Education

Allows a direct transfer to any fund or funds most in need

Working Cash Fund must maintain a balance of at least 0.05% of its EAV

Use 8110 to transfer money out of Working Cash

Use 7110 by the receiving fund to record the incoming transfer

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Loan from Working Cash Fund

Upon adoption of resolution by the Board of Education

District may loan money to any Fund with the anticipation that the Working Cash Fund will be repaid with revenue generated from that Fund• Example: District loans money to Capital Projects Fund in

anticipation of revenue generated by School Facility Occupation Tax

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School Facilities Occupation Tax

Restricted tax revenues

Required to be recorded in Capital Projects fund.

Revenue #1983

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School Facilities Occupation Tax Eligible Capital Projects

Demolition New Facilities Additions & Renovations Land Acquisitions Ongoing Maintenance Parking Lots Disabled Access & Security Fire Prevention & Life Safety Durable Equipment (non-moveable items) Section 17-2.11 of the School Code Financing costs Abatement of property taxes levied to pay bonds issued for

capital purposes

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District issues $2,000,000 capital projects bond Bond Proceeds - $2,000,000

Bond Premium - $ 100,000

Issuance Costs - $ 30,000

Capitalized Interest - $ 50,000

District will use School Facilities Occupation Tax to make principal and interest in Debt Service Fund Annual Payments are $100,000

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Entry to Record Bond Proceeds Cap Projects Fund 60-101 Cash $2,100,000

60-7210 Principal on Bonds Sold $2,000,000

60-7220 Premium on Bonds Sold $ 100,000

To Record Issuance Costs 60-8990 Other Uses $30,000

60-101 Cash $30,000

To Record Capitalized Interest in Debt Service Fund

30-101 Cash $50,000

30-7230 Accr. Int. on Bond Sold $50,000

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To Transfer Sales Tax from Capital Projects Fund 60-8990 Other Uses $100,000

60-101 Cash $100,000

To Record Sales Tax in Debt Service Fund 30-101 Cash $100,000

30-7990 Other Sources $100,000

Make payment from Debt Service Fund using 30-5200 and 30-5300

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QUESTIONS?

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What is it?

Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards

“Super Circular”

“Omni Circular”

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Intention of the reform:

Reduce administrative burden and provide for consistency in grant administration

Increase efficiency and effectiveness of federal awards

Strengthen oversight of and accountability for federal awards

Reduce risk of waste, fraud, and abuse

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Audit impact:

Single Audit threshold for FY16 is now $750,000

Major program threshold is also $750,000

Questioned costs threshold increased from $10,000 to $25,000

BUT… ISBE still requires ALL questioned costs to be reported

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Applies to -

New federal awards and

Additional funding increments of existing federal awards

…made after December 26, 2014

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A-102

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Administration requirements

(subparts A-D)

Administration requirements

(subparts A-D)

Cost principles

(subpart E)

Cost principles

(subpart E)

Audit requirements

(subpart F)

Audit requirements

(subpart F)

A-87 A-133

Three major sections:

Subpart E – Cost Principles & Compensation Requirements:

Time-and-effort reporting REQUIRES time & distribution records to be maintained for all employees whose salary is either 1. Partially or fully paid with federal funds OR

2. Used to meet a match or cost-share requirement

Can NOT be based on budget estimates!

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Other time-and-effort record requirements:

System of internal controls – provides assurance that amounts are accurate, allowable, properly allocated

Records must reasonably reflect total activity of the employee

Nonexempt employees must prepare records indicating the total number of hours worked each day

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ISBE time and effort requirements:

Semi-annual certification for Single Cost objective:

• Personnel works on only one Federal Award or

• Program is totally funded by Federal Award

Personnel Activity Report – Multiple Cost objective:

• Personnel works on more than one Federal Award or

• Program is funded by more than one Federal Award

http://www.isbe.net/ea/default.htm

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Administrative Requirements key changes:

Subrecipient monitoring:

• The pass through entity MUST perform a risk assessment to determine appropriate monitoring

• Verify subrecipients have audits, if required

• Review audit results and adjust pass-through entity records, if needed

• Determine necessary enforcement action for subrecipient noncompliance – and FOLLOW UP

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Subrecipient Monitoring & Risk Assessment

Subrecipient risk factors:

• Prior experience with same or similar subawards

• Results of previous audits

• Is the subrecipient required to have a Single Audit? Was this subaward audited as a major program?

• New personnel? Substantially changed systems?

• Extent and results of Federal awarding agency monitoring

DOCUMENT THE RISKS AND YOUR ASSESSMENTS!

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Elements that must be in every subrecipient agreement:

1. Subrecipient name & DUNS number

2. Clearly identify the federal award number & award date

3. CFDA number and name; must identify the dollar amount made available under each CFDA number at the time of disbursement

4. Indirect cost rate for the federal award, or de minimisindirect cost rate if applicable

5. Additional requirements of the PTE – i.e. required reporting, terms and conditions of closeout of the subaward, etc.

6. A requirement that the subrecipient allow the PTE and/or its auditors access to subrecipient’s records

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Administrative Requirements key changes:

Procurement:• TWO year grace period for procurement standards

only - Procedures must be in place by 12/26/16

• Expenditures must be necessary and economical –shared service purchases recommended where practical

• Written conflict of interest policies required

• Documentation of procurement activities/procedures required

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Administrative Requirements key changes:

Written policy documentation Uniform Guidance REQUIRES written policies for

Cash management

Procurement

Subrecipient monitoring

Conflicts of interest

Time-and-effort reporting

STRONG EMPHASIS on internal controls over allocations of salaries & wages to federal awards

Review your allocation methodologies

If based on budget, periodically adjust to actual

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QUESTIONS?

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IDHFS Medicaid Administrative Outreach (MAO) fee:

The fees for processing MAO is to be recorded by the District

• Expense has actually occurred by reducing amount of MAO funds received by the District

• Record fee as:

• Cr. revenue account #4991(MAO)

• Dr. special ed. purchased service expense

• account 1200-310 or something similar in the special education area

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IDEA Room and Board reimbursements:

Problems:

Dates entered for reimbursement from ISBE don’t match the invoice number of days billed by facility

Reimbursement received by District doesn’t match invoice and District doesn’t catch it

Facility isn’t billing timely and reimbursements have been received

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IDEA Room and Board reimbursements:

Solution:

District & Spec. Ed Coop. should receive bill directlyfrom private facility

The bill should be used for entering the number of days for reimbursement

District is to review the reimbursement and match the number of days reimbursed to the number of days billed on a regular basis

Definitely before fiscal year end to address any problems!

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IDEA Room and Board:

Excess Cost:

• ISBE’s website with webinar & worksheet:

• http://www.isbe.net/spec-ed/html/idea_part-b.htm

• Questions & Answers pdf:

• http://www.isbe.net/spec-ed/pdfs/idea-excess-cost-faq.pdf

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Paid Lunch Equity:

Requirement of National School Lunch Program

Weighted Average Price (WAP) for paid lunch must be greater than or equal to the difference between the federal per meal reimbursement rate for paid lunches and free lunches.

• $2.70 minimum rate for FY 2016

Weighted Average Price =

Number of paid meals by site x price per meal for Oct. = total price

Total price / total # of meals = WAP

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Paid Lunch Equity:

Each District must complete the Paid Lunch Equity Calculator for FY 2015-2016 to determine compliance using October 2014 info.

If WAP for FY 2015-16 is below $2.70 the District is not in compliance with Paid Lunch Equity.

Must increase prices by 2% and CPI (2.19% for FY15), for a total increase of 4.19%.

This is a minimum increase – can increase higher.

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Paid Lunch Equity:

Be sure to complete calculator every year.

Check out ISBE’s website• Excellent PowerPoint presentation for completing the

calculator

• Should be completing the SY 2016-2017 calculator now to determine FY17 lunch prices using October 2015 information.

http://www.isbe.net/nutrition/htmls/nslp_hhfka_implementation.htm

For FY17, the District’s weighted average price must be at least $2.78

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Please have head cook print

this prior to fiscal year end.

“Spent, Previous

Orders” counts towards

Single Audit Computation

Fresh Fruit & Vegetable Commodity

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Subtract amount of DOD fresh

fruits & veggies to arrive at

Total Non-Cash

Commodity

April Commodity Bulletin

Please print for audit!

AA

7/1/13

7/1/137/1/13

The expenditure account #’s for each grant should: match grant budget, and match grant expenditure report.

i.e. – 1000 Instruction in grant budget– use the correct function in the District/JA’s general ledger 1100 – regular K-12 1125 – regular pre-k 1200 – special education k-12 (IDEA Flow-Through) 1225 – special education pre-k (IDEA Pre-school) 1250 – remedial & supplemental (Title I) 1400 – CTE programs (CTEI, Perkins, Tech Prep)

The grant budget needs to be taken into consideration when preparing the District/Joint Agreement’s budget.

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QUESTIONS?

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Clean-up dormant/discontinued accounts

Considered dormant after one year of no activity

Board responsibility to transfer funds to another activity fund, the District, or members of the group

“Class” funds should be transferred to Class Treasurer

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Tournament funds

Gate receipts are district funds (1711)

Concessions revenue and expenses should be recorded in the appropriate activity fund

If accounted for as activity fund:

Gate receipts are the only revenue in the fund

Expenses are for referee/official fees, supervisor fees, and IHSA remittances

Any remaining balance must be transferred to the District prior to year-end.

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Other District-related items

Any items that should be revenue or an expenditure of the District should be transferred prior to year end

• Fees (parking, locks, etc.)

• Gate Receipts (unless a specific fundraising event)

• Grants - NO grant receipts or expenditures should be recorded in the activity funds!

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Year-end payroll reporting considerations

Include amounts paid to District employees for supervision of after-school/extra curricular activities on their W-2

Gross up amounts paid to referees/officials from activity funds with amounts paid from imprest/District funds for 1099 reporting

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Review .3, .4, and .5 accounts for proper classification and adjust as necessary

Capital Asset (definition) Any parcel of land, building, improvement to land other

than buildings, instrument, machine, apparatus, or set of articles that: Under normal conditions of use, including reasonable care

and maintenance, can be expected to serve its principal purpose for longer than 12 months;

Does not lose its identity through fabrication or incorporation into a different or more complex unit or substance;

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Capital Asset (definition) Is nonexpendable; that is, if damaged or some of its

parts are worn out, it is more feasible to repair than replace;

Retains its appearance and character through use; and

Has a cost equal or in excess of the capitalization threshold adopted by the school board

Capitalization threshold (definition) $ above which the cost of an item will be

depreciated

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3-year Useful Life Equipment: Repairs or modifications to:

pupil transportation vehicles,

pupil monitoring equipment installed on school buses,

food service computer equipment (exclusively)

5-year Useful Life Equipment: Pupil transportation vehicles, Driver ed. cars, Vehicles or transportation equipment used in food service program (exclusively), Equipment necessary for special education facility operations

10-year Useful Life Equipment: Any equipment not listed above

20-year Useful Life Land Improvements

50-year Useful Life Buildings and Building Improvements

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Each district has its own unique allocation %:

Allocation % based upon 1978 Personal property portion of EAV compared to total 1978 EAV (% does not change)

A portion of CPPRT tax received must be allocated to the IMRF fund only.

Need Total Budgeted Expenditures for IMRF/SS Fund

Total ACTUAL Medicare and FICA expenditures as of 6/30

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Total Budgeted expenditures IMRF / SS Fund $ 175,950

Less: Actual FICA expense (Medicare and SS) (40,993)

Amount subject to allocation 134,957

District allocation % (BASED UPON 1978 EAV %) 0.04024

Required allocation to IMRF fund $ 5,431

Perform CPPRT allocation calculation as of 6/30 and record transfer of revenue as follows:

Dr. Rev. #1230 of Ed / O&M fund

Cr. Cash of Ed / O&M fund

Dr. Cash of IMRF fund

Cr. Rev. #1230 of IMRF fund

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All restricted revenues need to be tracked by the district to account for:

Beginning balance

Total revenues received

Total expenditures disbursed

Remaining restricted balances at 6/30 – results in restricted fund balance.

Can be done in a spreadsheet.

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Tax levies: Special Education Facilities Leasing IMRF School Facility Occupation Tax

Fees: Driver’s Education

Grants: Federal & State (local, if any specific restrictions)

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Expenditures should be further broken down:

• Date purchased

• Description of purchase

• Amount of purchase

Provides a readily available history, especially for audit purposes.

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Income is recorded when cash is received and expenditures are recorded when cash is disbursed

Constructive receipt – when an amount is credited to your account or made available to you without restriction

• Early property tax distributions

Undistributed checks – all expenditure checks written prior to year end should be distributed as soon as reasonably possible prior to year end. Do not HOLD checks.

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Winnebago County – May 27th (ACH or check)

Stephenson County – June 3rd (ACH only)

Jo Daviess County – July 1st (ACH only)

Carroll County – undetermined; likely end of June (ACH only)

Ogle County – sometime in June (ACH only)

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Review all misc. revenue and expense accounts and reclassify if at all possible When reimbursements are related to District

expenditures, record reimbursements directly against the proper expenditure account

• Except for grant reimbursements – record in proper revenue account

• E-rate is to be recorded in Misc. Revenue OR net directly against the related expenditure account.

Describe any items remaining in these accounts as much as possible for AFR itemization detail

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Sale of equipment = rev. #7310

Fees = rev. #1720

Donations = rev. #1920

Athletic admissions = rev. #1711

Other admissions = rev. #1719

Refund of prior year expenditures = rev. #1950

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Record all transfers to/from the Debt Service Fund: If desired, record entries to transfer interest earned

FROM Debt Service Fund to the Ed Fund

Transfer principal and interest payments TO Debt Service for payments of long term debt

Watch allocations – be careful not to create negative fund balances (especially in Tort)

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Review grant budgets and amend if necessary Allowed to make line item transfers up to 20% of

total grant budget

Review adjusting journal entries from the prior year audit and calculate/post applicable entries for the current year

Bank reconciliations/long-outstanding items

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QUESTIONS?

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If you have further questions after today’s seminar, please feel free to contact us.

Visit our website at www.benninggroup.com

Freeport office 815-235-3157

Monroe office 608-325-5035

Rockford office 815-316-2375

Don Benning, Partner dbenning@benninggroup.com

Jenny Blocker, Partner jblocker@benninggroup.comCurt Kleckler, Partner ckleckler@benninggroup.com

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THANK YOU FOR COMING!

BE AUDIT YOU CAN BE!

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