How to Read The
Board Secretary’s
“Interim” Financial
Report
Thomas Eldridge
SBA/Board Secretary
Lawrence Township Board of Education
Mercer County, New Jersey
1
Why The report doesn’t
seem to make sense!
• Why does excess revenue show as a negative? Isn’t excess
revenue a good thing?
• Why do we show Resources as assets….when they are not
yet earned?
• What about the rest of the assets? Or long term liabilities?
• What about the things we learned in school:
• Current ratio?
• Return on Assets?
• Return on Equity?
• A small retained earnings, i.e. fund balance is better; Why ?
2
Goals for today
• Understand how to read the Board
Secretary’s Report.
• Understand how to use the Board
Secretary’s Report as:
• Managerial tool
• Protection through disclosure
• Talking points between you and your
board.
3
Goal of Financial
Reporting
• Agency Problem-Without standard reporting,
we have the ability to present information in a
light that is most favorable to us. Not a good
thing. Why is this possible…..
• Information Asymmetry-A political problem.
It is necessary to put into a standard format
that which you already know so that users of
information can make independent
judgements about your work. Why? And
Who uses this report?
4
What is the Board Secretary’s
Report? N.J.S.A. 18A:17-9 Defined: Also
Require by 6A:23A-16.2 Principles and directives for accounting and
reporting
• Total appropriations
• Total amount of orders charged against each appropriation
account
• Total amount of warrants(checks) issued for each account,
(18A:19-1) who signs them, and (18A:19-2) when they can be
paid and by whom.
• Total cash receipts
• Cash and appropriation balances
• Reconciled bank account balances (Treasurer’s Report)
Not done yet……also look to 6A:23A-16.10( c) Why?
What
do we do with this information?
5
What does the Report tell
the information user?
Manage Resources to Achieve Goals
• Total appropriations

• Total amount of orders
charged against each
account
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• Total amount of warrants
issued for each account
• Total cash receipts
• Cash and appropriation
balances
• Reconciled bank account
balances
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6
Spending plan & status of plan
How much we have contracted
for through PO’s and Payroll
How much we have paid(Bills
List)
Who funds the budget? What
funds have been received?
Cash balances and how much
is left in the spending plan
available for use
Treasurer’s Report
How do I find this
information?
The Report as a managerial
tool to manage resources:
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Does my cash reconcile?
Do I have enough cash to pay the bills? Funds 10, 20?, 30?, 40?
Can I make an inter-fund loan? If so, How do I track it?
How do I make sure my Reserve Liabilities reconcile to my Reserve
allocated cash?
How do I proof my Accounts Receivable?
What happens if I don’t regularly prove my Accounts Receivable?
Can the report tell me if I made an Accounting Entry/Journal Error?
Is there a way to make absolutely sure my A/P is accurate at a glance?
Did Transportation Department and Student Services Department
encumber their respective contracts? (Routes & Tuition)
I don’t have time to communicate….but I’ll be in trouble if I
don’t…..How do I communicate financial information to my
Board/Superintendent?
7
Focus on The Report…..twice
a month(QSAC)…
The report
•Understand
•Use it for your needs
8
Demystifying the Report:
The format
Balance Sheet
SUMMARY
LEVEL
DETAIL
LEVEL
RESOURCES:
-Cash
-Acct. Rec.
-Revenue
Summary
Revenue Detail
Report
=
LIABILITIES:
-Accts. Pay.
-Reserves
-Appropriations
Summary
-Fund Balance
Appropriation Detail
Report
Let’s start with what we know and keep touching
base as we go. What we know…..
9
Appropriations Objectives:
Apply, Control, Comply
1. Original Budget Appropriations
2. Transfers between appropriations
3. Adjusted Budget Appropriations
4. Orders
a.
b.
Expenditures (18A:19-1)….signatures, etc.
Encumbrances
5. Funds Available
6. Answer the questions:
a.
b.
What happens to Funds Available?
Do we have enough resources to accomplish the spending plan?
10
Budgeted Appropriations
1.
Budgeted Appropriations are a spending plan
approved by the BOE during budget development
2.
Appropriations are matched by Budgeted Revenue and
Budgeted Fund Balance
3.
“Budget” means estimate….18 months before final expenditure.
4.
Budgeted Appropriations change and become “Adjusted
Appropriations.” How do they change? Who can change them?
5.
BOE certifies every month that there have been no “overexpenditures” and that there are “Sufficient funds”. NJAC
6A:23A-16.10c(3) Budgetary Controls, which refers to 18A:22-8
for the detail to which the certification applies. NJAC 6A:23A16.10c(3) refers to the “Minimum Chart of Accounts.”
11
Where do I find the Appropriations?
Objective #1. Original Budget:
Found in the Board
Secretary’s Report (monthly)
Your spending plan = program(s)=Board goals/objectives
How much did we budget for……?
Where did this number come from? How often do you proof it? What is a better
number to use for your Appropriations proof12?
Proofing Original
Appropriations
13
Prove original to
Final doe Budget
PROOFING THE BOARD SECRETARY'S REPORT
19 LIABILITIES
20 400's
Accounts Payable are documented and itemized
21
Interfunds Payable have corresponding Interfund Receivable in other funds
22 601
Appropriations "601" = Final DOE Budget
23
24
Less: (DOE) Budgeted Increase in Capital Reserve (shown in DOE budget-NonGAAP)
Appropriations "601" = Original Appropriations
14
2015/2016
Yes
NA
$
$ 68,497,899.00
$ (1,600,000.00)
$ 66,897,899.00
Quick check: Original
Budget
• What is the original budget?
• What should the Board Secretary’s Report “Original Budget” equal?
• Who approved the “Original Budget?”
• I should always prove that the Board Secretary’s “Original Budget” is correct by
comparing it to:
• A. Power Points posted on the website
• B. Budget Brochures
• C. The final DOE Approved Budget
• Where can I find the Total Original General Operating Fund Budget within the
Board Secretary’s Report?
15
How do we typically change the budget?
Monthly certification
6A:23A-16.10 Budgetary controls and overexpenditure of funds
(a) A district board of education or charter school board of trustees shall implement
controls over budgeted revenues and appropriations as follows:
1. A district board of education or charter school board of trustees shall only
approve an encumbrance or expenditure (liability or payment) that, when added to
the total of existing encumbrances and expenditures, does not exceed the amount
appropriated by the district board of education or charter school board of trustees
in the applicable line item account established pursuant to the minimum chart of
accounts referenced in N.J.A.C. 6A:23-2.2(g)1.
(c) 3. A district board of education or charter school board of trustees shall obtain a
certification from the school business administrator/board secretary each month
that the total of encumbrances and expenditures for each line item account do not
exceed the line item appropriation in violation of (a) above.
What practical thing do you need to do to make this
16
true? ………….TRANSFERS
Transfers: Statute
18A:22-8.1 Transfer of funds, conditions.
2.Except as otherwise provided pursuant to this section, whenever a
school district desires to transfer amounts among line items and
program categories, the transfers shall be by resolution of the
board of education approved by a two-thirds affirmative vote of the
authorized membership of the board; however, a board may, by
resolution, designate the chief school administrator to approve
such transfers as are necessary between meetings of the board.
Transfers approved by the chief school administrator shall be
reported to the board, ratified and duly recorded in the minutes at a
subsequent meeting of the board, but not less than monthly.
17
Objective #2. Transfers Report (Found
on the agenda) 18A:22-8.1(8.3), 6A:23A-13.3,
6A:23A-16.10, 6A:23A-14.1 (CAP. RES.)
1.
Transfers are changes to the spending plan:
a.
b.
Changes due to estimates
Changes due to needs
2.
Transfers are BOE approved on the agenda each month, 2/3
majority vote. 18A:22-8.1
3.
Transfers occur between meetings with the superintendent’s
approval. 18A:22-8.1
4.
Restrictions: 10% Rule, Surplus
1.
2.
3.
5.
What is an account? 6A:23A-13.3(a)
What is the “From” rule? 6A:23A-13.3 (f)
What is the “To” rule? 6A:23A-13.3(g)
Others: Reserve(s), Unbudgeted Revenue, Prohibitions…
18
What do transfers look like?
Objective #2. Transfers List
BOE approved as “SBM-2” on the 6/11/12
Agenda
6A:23A-13.3 (a) All transfers shall be executed only by district board of education
resolution approved in accordance with law and regulation applicable to the particular
circumstances and each resolution shall indicate the exact amount of the transfers to
and from the applicable accounts or fund balance
6A:23A-16.10( c) district board of education or charter school board of trustees shall
ensure the following occurs at every regular district board of education or charter school
board of trustees meeting: 1. The school business administrator/board secretary shall
present to the district board of education or charter school board of trustees a report
showing all transfers between line item accounts as well as appropriations, adjustments
to appropriations, encumbrances and expenditures for each line item account shown on
the budget form prepared in accordance with N.J.S.A. 18A:22-8. This report is in
addition to the report required by N.J.S.A. 18A:17-9
(Board Secretary’s Report)
19
Where do we find the effects of Transfers?
Objective #2 & #3
Transfers….to Adjusted Budget
Increases and Decreases
per line
This shows the reason from the
“Transfers List”
Total amount of transfers in/out to-date.
20
Result:
Adjusted Budget...No Over-expenditures!
Quick check
• What is a good reason for a transfer to occur?
•
•
•
•
A. Unforeseen circumstance
B. Incorrect budget estimate
C. Starting a new program
D. A & B
• Who approves a transfer?
• Restrictions: 10%, Surplus, Capital Outlay
How do we see the effect
of a transfer?
21
Objective #3.
Adjusted Budget
= (Original budget) +/- (Transfers + Prior Yr. Encumbrances “PO’s”)= Adjusted Budget
How do we prove to the Adjusted Budget? What two total numbers must agree?
22
So what do we know about our budget so far ?
Prove original and Adjusted to
Final doe Budget
PROOFING THE BOARD SECRETARY'S REPORT
19 LIABILITIES
20 400's
Accounts Payable are documented and itemized
21
Interfunds Payable have corresponding Interfund Receivable in other funds
22 601
Appropriations "601" = Final DOE Budget
23
Less: (DOE) Budgeted Increase in Capital Reserve (shown in DOE budget-NonGAAP)
24
Appropriations "601" = Original Appropriations
25
Add: Prior Year Encumbrances
26
Add: Appropriation from Capital Reserve for BF Chimney
27
Add: Appropriation from Capital Reserve for Turf Project
28
This should be your new "601" under the "Adjusted Budget"
23
2015/2016
Yes
NA
Yes
$
$
$
$
$
$
$
$
68,497,899.00
(1,600,000.00)
66,897,899.00
2,304,843.05
14,588.00
3,600,000.00
72,817,330.05
Adjusted Appropriations
agree with what?
24
Quick Check:
Adjusted Budget
• The Original Budget is the final budget and cannot be
changed.
• True or False
• How do we calculate the Adjusted Budget:
A. Original budget +/- Transfers + Prior Yr. PO’s= Adjusted budget
B. Original budget +/- Transfers = Adjusted budget
C. Original budget never changes
• What is the total amount of the Adjusted Budget?
• In what two places can you find the total “Adjusted
Budget”, i.e. revised appropriation?
25
Ok, We know the plan. What
has been spent ?
Objective #4.
“Orders” & Encumbrances, N.J.S.A. 18A:19-2:
Bean Theory…..and bean counting
Adjusted Budget – “Orders” = Funds Available
AN OPPORTUNITY FOR INTERNAL CONTROLS!
-18A:18A Who signs
-LFN 2015-20 BA’s Threshold
-Encumbrances…no
confirming orders!
-Who reviews Aggregates?
-Who tracks Compliance
-6A:23A-6.5 Segregation of duties
26
NJSA18A:18A, NJAC 6A:23A-22.14, NJAC 5:30, NJAC 5:34
Objective #4.
“Orders” & Expenditures, N.J.S.A. 18A:19-2
Payments of Claims…..Bills list….
AN OPPORTUNITY FOR INTERNAL CONTROLS!
PAYMENTS/EXPENDITURES:
-18A:19-1 Who signs
-18A:19-2 Who pays
-18A:19-4.1 SBA…..Alone
-18A:19-3 Affidavit
27
-Does
the Board have a part in “Expenditures”?
(on bills list-Typically “SBM-1”)
Orders proof
Adjusted Budget – “Orders” = Funds Available
28
Tie In: Budget to Balance
Sheet
CASH
29
What happens to unspent Fund Available?
Reserve for
Encumbrance
2. Reserve For
Encumbrance
Increases your
“Non-owned”
Liability, think of
it as a pre“Accounts
Payable” liability.
1. Encumbrance
lowers your
“owned” Liability
CASH
30
rEVIEW
31
Review of
Appropriations
• Original Budget
• Transfers
• Adjusted Budget
• Orders-Encumbrance-Expenditure
• Funds Available
• What is important about know these functions?
32
Fund Balance
From Audit
From Final Budget
PROOFING THE BOARD SECRETARY'S REPORT
43 770 Fund Balance, July 1 equals audit
44 771 Reserved Fund Balance
45 303 Budgeted fund balance equals amount approved by BOE at budget time plus transfers
47
Closing entry for Excess interest to Capital Reserve (year end)
48
Undesignated and Reserved together
33
2015/2016
10
Yes
NA
Yes
NA
Yes
$
$
$
$
$
10
3,812,383.87
(2,066,210.00)
1,746,173.87
Revenue
Objective: Understand
1. Original Budgeted Revenues
2. Adjusted Budgeted Revenues
3. Actual Revenues, Receipts, Receivable
4. Unrealized Revenue
5. Answer the questions:
a.
b.
c.
What happens to excess revenue?
How much revenue will we collect?
How much revenue have we collected?
34
Objective #1.
Budgeted Revenue
1. Budgeted revenue, along with surplus, is used as
resource to fund the spending plan (Appropriations)
2. “Budget” means estimate
3. “Budget” does not mean we already have the cash.
4. We are paid the cash that matches the Budgeted
Revenue in installments throughout the year.
5. Our revenue is primarily funded through property
taxes (Ad Valorem taxes) and state aid.
Where do I find the Revenue Schedule?
35
Objective #1. Budgeted Revenue:
How to use the Schedule
REVENUES=APPROPRIATIONS-BUDGETED FUND BALANCE
36
Is this important?
Next: Where else can we find this?
What does this tie
into? Assets Side
CASH
+FICA
37
Difference between
301 and 302
Why does this show on the Assets Side?............What if it didn’t?
Why does this turn negative when38we have “over-realized” revenue?
Proof of Revenue &
Receivables
PROOFING THE BOARD SECRETARY'S REPORT
Note 2: Receivables Proof
Enter 141
Less: From Rev. Schedule:
Parcc Aid
Growth Aid
Transportation Aid
Extraordinary Aid
Sp. Ed. Aid
Cat. Sec. Aid
Sup. Trans Aid
Total Aid A/R
Is this FICA A/R?
$3,109,339.00
40,410.00
40,410.00
612,017.00
1,898,053.00
417,886.00
3,008,776.00
$100,563.00 Ok
Tuition Due
Final DOE Budget
39
Corresponding
Payable in another
Fund (Fund 20)
Part III. Balance Sheet
Balance Sheet
RESOURCES:
-Cash
-Acct. Rec.
SUMMARY
DETAIL
-Revenue
Summary
Revenue Detail
Report
40
=
LIABILITIES:
-Accts. Pay.
-Reserves
-Appropriations
Summary
-Fund Balance
Appropriation Detail
Report
The Balance Sheet:
Assets =Liabilities
41
Cash should reflect the net results of Deposits(Receipts)
and (Disbursements+Cash Transfers)
What we learned:
1. Appropriations
2. Revenue
3. Interim Balance Sheet(Liquid Assets)
•
•
•
•
Summary of Appropriations
Summary of Revenue
Reserve Accounts
Fund Balance(Surplus)
• 100% TRANSPARENT-ONLINE and
COMMUNICATED TO THE BOE MONTHLY
42
What code citations govern the
Board Secretary’s Report
• N.J.S.A. 18A: 17-9. Secretary; report of
appropriations, bank reconciliations; custodial duties,
etc.
• N.J.S.A. 18A: 17-10. Secretary; annual report
• N.J.A.C. 6A:23A-16.10 Budgetary controls and over
expenditures of funds. See old 6A:23-2.2 re: 2R2
• N.J.A.C. 6A:23A-16.10(c)(vi)”The 60 day rule”
• NJQSAC!
43
Questions
44