SCHOOL FINANCIAL SERVICES UPDATE

1. SCHOOL FINANCIAL SERVICES UPDATE Paul Stone Mike Dooley, CSBO Ramona Garner Daniel Lunghofer, MPA April 25, 2014 2014 Annual Conference

2. ACCOUNTING MANUAL UPDATESFY 2013–14FY 2014–15 Paul Stone School District Accounting Supervisor (360) 725-6306 paul.stone@k12.wa.us 2014 Annual Conference

3. The Second Addendum to the 2013–14 Accounting Manual • A Second Addendum to Bulletin No. 006-13 is in process at OSPI. It will be available on the OSPI website when completed. • The State Auditors Office (SAO) changed their auditing practices. • GASB Statements 63 and 65 changed the GAAP standard layout for financial statements. • The conventional accounting practices for Deposit Arrangements with ESDs for Employee Compensated Absences have been radically modified. 2014 Annual Conference

4. SAO Dual-Opinion Reporting 2013–14 SDAM Addendum • Previously, SAO was able to provide an opinion on financial statements based solely on presentation in accordance with an Other Comprehensive Basis of Accounting (SDAM and F-196). • Only districts filing Comprehensive Annual Financial Report (CAFR) were audited to GAAP. 2014 Annual Conference

5. SAO Dual-Opinion Reporting 2013–14 SDAM Addendum • AICPA peer review of SAO auditing practices. • New SAO “dual-opinion” audits. • Financial Statements compared against two different standards. • OCBOA presentation based on statutory guidance (SDAM and F-196.) • GAAP presentation based on governmental accounting standards. 2014 Annual Conference

6. SAO Dual-Opinion Reporting 2013–14 SDAM Addendum • Timing impact: As GASB Standards become effective, the SAO audits to the new rules. • Guidance originally prepared for inclusion in the SDAM for the 2014–15 fiscal year has been moved up and becomes effective in the current fiscal year. 2014 Annual Conference

7. FY 2013–14 Balance Sheet Changes • GASB Concepts Statement 4 introduced idea of “net position” and inflows/outflows of resources. • GASB Statements 63 and 65 changed the GAAP standard layout for financial statements as a result. • We are changing the balance sheet to conform to these new principles. 2014 Annual Conference

8. FY 2013–14Accounting Manual Updates Inflows/Outflows of Resources • New focus is on the flows of resources: • Inflows of resources: acquisition of net assets. • Outflows of resources: consumption of net assets. • Net assets: Assets over liabilities. • Additional focus on applicable period: • If flow of resources applies to a future period, considered “Deferred Inflows/Outflows of Resources.” 2014 Annual Conference

9. FY 2013–14 AddendumDeferred Inflows of Resources Deferred Revenue is no longer used. General Ledger Changes (2013–14) • GL 750: Unavailable Revenue. • GL 760: Unavailable Revenue—Taxes Receivable. • These are no longer considered liability accounts. 2014 Annual Conference

10. FY 2013–14 Deferred Inflows of Resources 2014 Annual Conference

11. FY 2013–14Deferred Inflows of Resources 2014 Annual Conference

12. FY 2013–14 AddendumFiduciary Funds Fiduciary Fund: General Ledger Changes (2013–14) • GL 856: Held in Trust for Pensions and Other Employment Benefits. (PTF) • GL 857: Held in Trust for Private Purposes. (PPTF) • Fiduciary Fund year-end entries should close to these accounts. • Balances in GL 889 should be JV’d to the appropriate account. 2014 Annual Conference

13. FY 2013–14 Fiduciary Fund F-196 Changes 2014 Annual Conference

14. FY 2013–14 Deposit Arrangements with ESDs for Compensated Absences • Per GASB 10 and SAO: Deposit arrangements for compensated absences are not risk pools. • Assets held by the ESDs on behalf of the districts are still the property of the school districts and balances should be reported on financial statements. • The current practice of recording the periodic payments to the ESD as expenditures for compensated absences is not correct. 2014 Annual Conference

15. FY 2013–14 Deposit Arrangements with ESDs for Compensated Absences • Guidance applies only to districts that are members of their ESD’s Compensated Absence Pool. • Periodic deposits are not considered expenditures because GAAP dictates there is no liability until you have a change in the current financial resources. • Under the current practice, employees have not taken sick leave, districts are setting aside funds in anticipation. 2014 Annual Conference

16. FY 2013–14 Accounting Treatment for Compensated Absences An adjusting entry is required to recognize the district’s pool balance as an asset as of August 31, 2013. 2014 Annual Conference

17. FY 2013–14 Accounting Treatment for Compensated Absences • Current year adjusting entry required. • Periodic expenditures previously recorded should be credited. The debit is an increase in GL 451 Investment/Cash with Trustee. 2014 Annual Conference

18. FY 2013–14 Accounting Treatment for Compensated Absences • New accounting procedure for future periodic payments for Compensated Absence amounts sent to the ESD and held in reserve. 2014 Annual Conference

19. FY 2013–14 Deposit Arrangements with ESDs for Compensated Absences • Two distinct types of expenditure claims. • Annual Compensated Absence buy-back elections. • Compensated Absence cash-outs upon termination. • OMB Cost Circular A-87 does not allow termination payments for unused leave to be directly charged to Federal programs. These costs may only be indirectly charged to Federal programs. • Fringe benefit rates charged to federal programs are being questioned by SAO as unallowable. OSPI and the ESDs are working with SAO on this issue, stayed tuned. 2014 Annual Conference

20. FY 2013–14 Accounting Treatment for Compensated Absences • Recognition of the expenditure occurs when there is a change in the current financial resources. 2014 Annual Conference

21. FY 2013–14 Accounting Treatment for Compensated Absences • The new procedure to record the reimbursement of funds from the ESD. 2014 Annual Conference

22. FY 2013–14 Accounting Treatment for Compensated Absences • The district’s balance in the pool is reflected both as an asset, as well as in the appropriate GL account for the ending fund balance. • Use GL 888, Assigned to Other Purposes: if there is no formal action or language in the agreement. • Use GL 870, Committed for Other Purposes: for pool balances committed by formal Board action. • Use GL 831, Restricted for Compensated Absences: If the written agreement with the ESD explicitly states pool funds may only be used for compensated absences. • At this time, there is no evidence any pools are restricted. 2014 Annual Conference

23. FY 2013–14 Accounting Treatment for Compensated Absences 2014 Annual Conference

24. Other Items in 2013–14Addendum New GL 660: Unearned Revenue. This account is for recording money that the district has received, but has not yet earned. It is a liability because receipt of the money is contingent upon the district performing some service. Example: a parent pre-pays full-day kindergarten tuition in August. The district records it as unearned revenue. 2014 Annual Conference

25. FY 2014–15 Accounting Manual Revisions Are we having fun yet? 2014 Annual Conference

26. FY 2014–15Accounting Manual Updates • The Accounting Manual is published cooperatively by OSPI and SAO. • The School District Accounting Advisory Committee (SDAAC) makes recommendations for updates to the manual in their role of advising on accounting, budgeting, financial reporting, and related matters. • SDAAC meetings are scheduled now through December 2014 for the 2015-2016 Accounting Manual updates. • The SDAAC web page: • http://www.k12.wa.us/safs/PUB/COM/SDAAC.asp. • Has the complete description of changes to the 2014-2015 manual. • Has meeting agendas, materials, list of committee members, etc. 2014 Annual Conference

27. FY 2014–15 Accounting Manual Revisions Summary • New Program 03 Basic Education–Dropout Reengagement, has been added. • New Activity 33 Curriculum, has been added. • Inventory is allowable in the Capital Projects Fund (CPF). • We have revised to/from transportation accounting on the long form in Appendix E. • Audit Frequency and Reporting Levels of Audit Recommendations are new schedules included in the new edition. 2014 Annual Conference

28. FY 2014–15Accounting Manual Revisions • New Program 03 Basic Education–Dropout Reengagement opened for 2014–15. • Program has same allowable activities, objects, and duty codes as Program 02. • Under ESSHB 1418, school districts must have an approved Dropout Reengagement Program to claim FTE for funding. Current list of eligible programs is on the OSPI website: http://www.k12.wa.us/GATE/SupportingStudents/StudentRetrieval.aspx. 2014 Annual Conference

29. FY 2014–15 Accounting Manual Revisions New Activity 33 Curriculum • No current method for capturing curriculum costs (buried in Activity 27). • Legislature provides curriculum funding, no tracking of those funds. • Intended to capture the cost of developing and purchasing new curriculum. • Open in all programs except 97, 98, and 99 2014 Annual Conference

30. FY 2014–15 Accounting Manual Revisions New Activity 33 Curriculum (continued) • Includes the following: • Textbooks. • Electronic textbooks. • Hands-on science kits. • Sheet music. • Workbooks in lieu of textbooks. • Does not include most consumable items (paper, science chemicals, etc.). 2014 Annual Conference

31. FY 2014–15 Accounting Manual Revisions Inventory in the Capital Projects Fund (CPF) • The way technology projects are implemented has prompted a change in the CPF account codes. • In 2014–15: • GL 410 Inventory will be open in the CPF. • GL 430 Prepaid Items will be closed in the CPF. • GL 840 Nonspendable Fund Balance will be open in the CPF. 2014 Annual Conference

32. FY 2014–15 Accounting Manual Revisions We have re-visited to/from transportation accounting in Appendix E. • The long form is now a two-part form: • Part One: Calculates the per-mile rate the district should be using. • Part Two: A separate piece allowing for the calculation of non-to/from trip costs. • On Line 12: “Cost of Drivers including benefits”, excluding the cost of health benefits is allowable. • Health benefits are deemed a core cost of Program 99. 2014 Annual Conference

33. FY 2014–15 Accounting Manual Revisions Audit Frequency The frequency with which a school district is audited by the State Auditor’s Office depends on the district size and the level of risk associated with the district. The following table outlines SAO’s audit frequency schedule for districts. 2014 Annual Conference

34. FY 2014–15 Accounting Manual Revisions Reporting Levels of Audit Recommendations • SAO utilizes the following three levels of reporting issues that arise during a financial audit: • Findings formally address issues in an audit report. Districts are given the opportunity to respond to a finding, and this response, or a synopsis of it, will be published in the audit report. • Management Letterscommunicate less significant issues of noncompliance and make recommendations for strengthening internal controls. Management letters are referenced, but are not included, in the audit report. • Exit Itemsare less serious audit issues than a finding or management letter. These issues are informally communicated to a district. 2014 Annual Conference

35. F-195 Budget Update for FY 2014-2015 Michael J. (Mike) Dooley, CSBO Supervisor, School District and ESD Budgeting (360) 725-6305 mike.dooley@k12.wa.us 2014 Annual Conference

36. F-195 Budget Update for FY 2014-2015 • New items in the General Fund: • In all programs, except 97, 98 and 99, new Activity 33 Curriculum was added. • Objects 0, 2, 3, 4, 5, 7, 8 and 9 are allowed. • With duty codes 001, 002, 003, 004, 005, 120, 121, 122, 130, 131, 132, 250, 251, 252, 310, 311, 312, 314, 320, 321, 322, 324, 330, 331, 332, 334, 400, 401, 402, 490, 491, 492, 494, 520, 521, 522, 610, 630 and 640 allowed in Object 2 certificated salaries, and • With duty codes 001, 002, 003, 004, 005, 900, 903, 940, 943, 960, 963, 970, 973, 980, 983, 990 and 993 allowed in Object 3 classified salaries. 2014 Annual Conference

37. F-195 Budget Update for FY 2014-2015 • New items in the General Fund: • New Program 03 - Basic Education – Dropout Reengagement was added. • Allowable activities are the same as in Program 02. • Allowable objects are the same as in Program 02. • Allowable duty codes are the same as in Program 02. • Under ESSHB 1418, districts must have an OSPI approved Dropout Reengagement Program to claim FTE for funding. 2014 Annual Conference

38. F-195 Budget Update for FY 2014-2015 • New items in the General Fund: • New edit 1.155 applies to school districts that have been approved by OSPI to claim for funding in programs under ESSHB 1418, that is Program 03: • New edit 1.156 applies to school districts that have not been approved by OSPI to claim for funding in programs under ESSHB 1418, that is Program 03: 2014 Annual Conference

39. F-195 Budget Update for FY 2014-2015 • One more (exciting) new item in the General Fund: • New G.L. 831 Restricted for Employee Compensated Absence is open in both the beginning and ending fund balance sections. • New item in the Debt Service Fund: • On page DS4 of the EDS input option, the application will now allow deletion of bond issue dates and amounts. Yeah!!! • New item in the Capitol Projects Fund: • G.L. 840 Nonspendable Fund Balance – Inventory & Prepaid Items is now allowed in both the beginning and ending fund balance sections. • The term “Skills” Center has been changed to “Skill”Center on all screen and report displays. 2014 Annual Conference

40. Budgeting Reminders for FY 2014-2015 • Budgeted Beginning Fund Balance Review: • OSPI will review each school district’s budgeted beginning fund balance after allthe F-196 information is received. • Current budgeted beginning fund balance will be recalculated based upon the prior year actual ending fund balance from the F196. • If the re-calculated budgeted ending fund balance result is negative, your school district may receive a request from OSPI to revise its budget. • Your school board will have 30 days of receiving notice to submit a revised budget to OSPI. 2014 Annual Conference

41. Budgeting Reminders for FY 2014-2015 • Budget Extension Reminders: • All of you are busy preparing your new year budgets, but don't forget any remaining current year budget extensions. • August is the final month to file your F-200 budget extensions with your ESD and OSPI. • Depending on when you submitted your current year F-200 for approval and when you printed your new year F-195 budget document, you may need to reprint your new year budget to allow your current year budget extension to be accurately displayed in the middle column of your new year F-195. 2014 Annual Conference

42. Budgeting Reminders for FY 2014-2015 • Budget Extension Reminders: • Review budget monthly to determine necessity of an extension. • Must complete a budget extension prior to incurring expenditures in excess of the total appropriations as required by RCW 28A.505.150. • For 1st class school districts, adopted and filed prior to incurring expenditures that exceed the appropriation in each fund. • For 2nd class school districts, adopted and approved by both the ESD and OSPI prior to incurring expenditures that exceed the appropriation in each fund. • The ESD and OSPI will adjust budget extensions that do not meet this requirement. 2014 Annual Conference

43. Budgeting Reminders for FY 2014-2015 • Budget Extension Reminders: • WAC 392-138-110 requires that the Associated Student Body initially review revisions to the Associated Student Body (ASB) budget. Therefore, an extension of the ASB Fund budget should occur prior to the closing of school to secure the necessary student involvement. • Check your DSF appropriation for adequate spending level for your district’s debt payment schedule. • Check your TVF appropriation for adequate spending level for those too-good-to-pass-up year end close-out bus deals. 2014 Annual Conference

44. Budgeting Reminders for FY 2014-2015 • F-197 Cash File Questions and Answers: • Background • During the mid-1970s the State Legislature requested OSPI inquire into the matter of school district cash balance amounts and the factors that cause fluctuations, sometimes severe, in cash amounts throughout the school fiscal year. • Initially the data collected was as recorded by the respective county treasurers, and not the records of the district. As a result, differences were found and, for the purposes of these studies, data was revised and adjusted so as to be presented on the same comparable basis. • This brought about a need for a uniform reporting mechanism. Thus beginning in 1979 and through the early 1980s all data for cash flow analysis done by OSPI for legislative reports was taken from the cash file, what we today refer to as the F-197. 2014 Annual Conference

45. Budgeting Reminders for FY 2014-2015 • F-197 Cash File Questions and Answers: • What is the purpose of the F-197? • Monthly data collection mechanism required of educational service districts (ESD) by OSPI and used periodically by School Apportionment and Financial Services (SAFS) to gather select school district financial data – such as net cash, investments, and local deductible revenues – on an as needed basis. • How is the F-197 data used? • Used by both the F-195 and F-196 financial applications for the running of edits to check for budgetary reasonableness and accuracy in year end reporting of a school district’s financial data. • Used in the annual School District and Educational Service District Financial Reporting Summary. • Used by SAO as a supplemental tool as part of its fiscal year end reconciliation of the F-196 to the county treasurer reports. • Used by OSPI in helping to estimate the effects of the proposed delay in the June 30th apportionment payment; used to measure a school district’s Days Cash on Hand as one of the indicators in the financial health tool. 2014 Annual Conference

46. Budgeting Reminders for FY 2014-2015 • F-197 Cash File Questions and Answers: • Does the F-197 data need to be reconciled? • All F-197 data must be entered monthly by the ESDs. Amounts entered are taken from the same source documentation supplied by the County Treasurer for each district located in its boundary. • Pursuant to RCW 28A.510.270, the County Treasurer for each county in Washington State is designated as ex officio treasurer of the districts located in his/her county. • As ex officio treasurer, the County is required to submit to each district a monthly report of the state of the finances. • This report is to be submitted not later than the seventh business day of the following month. 2014 Annual Conference

47. Budgeting Reminders for FY 2014-2015 • F-197 Cash File Questions and Answers: • Does the F-197 data need to be reconciled? • In accordance with WAC 392-123-132, each district shall reconcile amounts reported by its County Treasurer with the district records for all funds. • This WAC, as it is written, is directing a district to reconcile amounts monthly with its county treasurers’ report, not the F-197. • Because the F-197 does not capture all of the county treasurers’ report information, it is not intended to be a replacement for the county treasurers’ monthly report; nor does it relieve a district from its monthly reconciliation of its county treasurers’ report. • The F-197 Cash File application is intended to aide in the reconciliation between a district’s financial reports, i.e. F-196 [pursuant to WAC 392-123-120], and a district’s county treasurers’ report that its county is required to submit to each of its districts monthly. 2014 Annual Conference

48. Budgeting Reminders for FY 2014-2015 • F-197 Cash File Questions and Answers: • OSPI does encourage monthly reconciliation of school district accounts with a simulation of closing using the fund balance budget status report (Form F-198) [pursuant to WAC 392-123-115]. • The F-197 is made available to school districts through the Education Data System (EDS) portal for their recommended comparison to their county treasurers’ monthly report for accuracy and for the reporting of all F-197 discrepancies to their respective ESD for correction. • OSPI’s F-197 in EDS can be thought of as an on-line bank statement that displays a school district’s checking account balance so it will know its bottom line. 2014 Annual Conference

49. FY 2013–14 F-196 Update Ramona Garner Supervisor, School District/ESD Financial Reporting (360) 725-6304 Email: ramona.garner@k12.wa.us 2014 Annual Conference

50. FY 2013–14 F-196 Update Notice is hereby given to school districts and ESDs, in accordance with WAC 392-117-035, that failure to adhere to the due dates below could result in a delay of apportionment payments. The final date for filing or forwarding will be considered as having been met if the postmark or other evidence indicates shipment prior to the due date or the next workday if the due date falls on a weekend. Final Action DateAction October 27 School Districts- Final date for submission of completed F-196 data from the school district to the local ESD. The data will be submitted electronically and/or on an F-196 manual form. Districts not able to submit by the October 27 due date may request a waiver by email or written notice to the ESD. November 3ESDs - Final date for the ESD to review and forward the certification page back to the school district for signature. November 10School Districts - The signed certification page is due from the school district to the ESD. November 17ESDs - Final date the signed certification page by the ESD is due at OSPI, School Financial Services. 2014 Annual Conference