Arizona School District Mid-Year Financial Checkup
by Kenneth McGovern, Senior Associate
Posted on February 22, 2017
As May quickly approaches, most school districts are starting to plan on their final budget revision for the current year (FY17) as well as their proposed budget for the new year (FY18). Some districts are still wrapping up their audit for FY16! In conjunction with the budget revision, this would be an excellent opportunity to perform a mid-year general ledger checkup.
For the budget, districts should review the latest BUDG75 report for the prior year as well as the latest BUDG25 report for the current year from ADE’s website. The BUDG75 report will verify the calculated budget balance carryforward and the BUDG25 will verify the currently calculated General Budget Limit for Maintenance and Operations as well as the Unrestricted Capital Outlay. If the district is calculating different budget limits, then a comparison to the latest APOR55-1 report should be made.For FY17 only, districts ought to keep in mind that ADE should be using FY17 student counts for growing districts, and FY16 student counts for declining districts. Discussing these discrepancies with ADE might reveal an inadvertent use of the incorrect student counts when preparing the APOR55-1 and BUDG25 reports. If an error is discovered, then ADE will make the appropriate adjustments to the respective reports.
For the General Ledger, several items can be reviewed now in order to alleviate some year-end clean up. Some items to look at are as follows:
- Negative revenues and expenditures
- Transfers Out equals Transfers In
- Grant expenditures are within budget
- Grant and Equalization payments are recorded correctly
- Budget controlled funds have a positive budget balance
- Cash controlled funds have a positive cash balance
- Coding errors
Negative revenues and expenditures
Performing a quick A-Z sort on all revenues as well as all expenditures will reveal any negative items. Remember, if the District’s financial software stores revenues as a negative balance, then positive amounts are actually a negative revenue.Negative revenues and expenditures usually arise from an incorrect refund, return of monies, or journal entry errors.
Both Fund Transfers-Out (object 6930) and Indirect Costs Transfers Out (object 6910) MUST equal Fund Transfers-In (object 5200). Indirect costs should be equal to the approved indirect costs from each federal grant plus the approved indirect cost from Food Service, if applicable.
A comparison of each budget line against current expenditures for each grant will reveal any line item that needs to be corrected. Either a correcting journal entry can be made, or a budget revision can be requested, depending on the grant and expenditure. Do not forget that most grants require final amendments to be submitted 90 days prior to the grant close. Many grants end on June 30, which means April 1st may be the deadline for amendments.
Grant and Equalization payments
A comparison of the District’s current APOR64-1 report from ADE against state revenues posted to the General Ledger (object 3110 and 3120) should reveal missing entries or coding errors. The same should be done for each grant posted on ADE’s GME website. Grant reimbursements should be compared to revenues posted to each grant in the General Ledger.Correcting entries can be made to correct any errors.
Budget controlled funds
Budget controlled funds should have a positive budget balance. A quick review should be performed to confirm proper expenditure coding. Adjusting entries can be made to move expenditures to the appropriate fund(s).
Cash controlled funds
Cash controlled funds should have a positive cash balance. Expenditures should be moved to other allowable funds to reinstate cash in those deficit funds. Remember to include all student activity clubs in the analysis.
A quick review of the General Ledger might identify unallowable coding items. Some examples include:
- Capital items cannot be coded to the General Fund (001),
- Special Education must be coded to Program 2XX,
- Food Service must be coded to either Fund 510 or Fund 001, and
- Function 3100; Student Transportation must be coded to Program 400 and Function 2700.
Districts are encouraged to consult the Uniform System of Financial Records for allowable coding items.
Identifying some of the above issues now will allow sufficient time to research and possibly make the appropriate adjustments by the end of June. Researching and fixing errors and issues now can greatly reduce the time and stress at the end of the year.