ETHICS IN SCHOOL FINANCE
DR. LEN ELOVITZ
As chief educational officer, you have a fiduciary
responsibility to insure that the district follows laws and
regulations, operates efficiently, safeguarded its assets,
accurately prepares and files required reports and school
funds are correctly collected and expended.
Case Study #1
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It has come to your attention that your high school
principal is using the funds leftover from defunct student
activities as his school’s “sunshine fund” sending flowers
and cards to teachers who are ill, having a baby, etc.
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What course of action would you as superintendent take?
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Would your actions be different he was using the funds
for personal gain?
Case Study #2
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School supplies representative runs into you, the
superintendent, one summer and asks if he can help you
with your ordering. It seems that the district is always
returning about 10% of the order for refunds.
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What would you do?
Case Study #3
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The auditor brings to your attention that he came across
the possibility that the district is making payments to a
phantom company.
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What would you do?
Other Cases
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3 for 2 computer deal
Instrument rentals – Supe’s daughter clarinet
Staff development payments – AP clerk cashing checks
Junkets for administrators and their paramours
ISLCC STANDARDS
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Standard 3: A school administrator is an
educational leader who promotes the success of
all students by ensuring management of the
organization, operations, and resources for a safe,
efficient, and effective learning environment.
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Standard 5: A school administrator is an
educational leader who promotes the success of
all students by acting with integrity, fairness, and in
an ethical manner.
AASA Code of Ethics
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http://www.aasa.org/content.aspx?id=1390
2. Fulfills all professional duties with honesty and integrity
and always acts in a trustworthy and responsible
manner.
7. Avoids using his/her position for personal gain through
political, social, religious, economic or other influences.
10. Honors all contracts until fulfillment, release or
dissolution mutually agreed upon by all parties.
ASBO International
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ASBO_Professional_Standards
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See Page 19
SCHOOL ETHICS ACT - 1991
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New Jersey School Ethics Act
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State Employee Ethics Training
Fiscal Accountability
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Too many superintendents have been fired because they
did not pay attention to the fiscal conditions of their
school district.
Some constituencies are more concerned with the
finances than anything else.
The quality of the instructional program will be affected
by the district’s financial health
Fiscal Integrity is Exemplified by
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An ongoing process of
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Revenue Projection
Expenditure Budgeting
Budget Monitoring
Auditing
Revenue Projection
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Awareness of Revenue sources
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State Aid
Federal Aid
Tax base
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Grants
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District ratable trends
Surrounding districts finances
Knowledgeable
Proactive
Never send anything back
Alternative revenue sources
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Advertising
Foundation
Expenditure Budgeting
Superintendents Role
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Evaluate economic climate - talk to the board
Estimate other revenues
Come up with an idea of what might fly in terms of percentage
Translate into building budget base
Consider enrollment projections
Provide principals and other purchase center heads with their base and
budget planning forms
Personnel
Principal defense
Compile budget
Make adjustments
Present to Board
Get Board approval
“sell” the budget
Election/Board of School Estimate
Pass/Fail
Budget Monitoring
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Monthly review
Pay attention to salary accounts
Time of year
Encumbrances
Unencumbered balances
Fiscal resolutions
Bill list
ASK THE SBA
AUDITING
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A systematic procedure for verifying the the financial
operations of a school district.
The purpose is to determine that property and funds are
being used in a legal and efficient way.
Rarely results in the discovery of dishonesty
Helps in correcting procedural errors and as a reporting
mechanism to public
Required yearly external audit
Review of citations
Comprehensive Year-end Audits Usually
Include:
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A study of BOE minutes
Verification of all monetary receipts
Verification of all expenditures
Review of all financial records
Reconciliation of all statements and accounts
Review of all subsidiary records – deeds, insurance
policies, inventories, etc.
Review of student activity and other fiduciary accounts
CAFR
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The Comprehensive Annual Financial Report (CAFR) is
the basis for the district’s official annual report in NJ and
most other states. It should include all of the funds and
account groups of the LEA. It is organized into three
primary sections: 1) an introductory section, 2) a financial
section, and 3) statistical section.
Receiving and Depositing Funds
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Most school districts in NJ are fiscally independent
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The district has control of its own budget and has
custody of its own funds
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Taxes are collected by municipal officials on behalf of the
school district
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All funds are deposited in the bank or banks designated
by the BOE as its depository
Expending School Funds
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Authorization for the expenditure of school funds is
strictly controlled by statute and code.
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In NJ, who can spend school district funds?
The Purchase Cycle
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PO is cut
SBA approves
Business Office Numbers, Bursts, distribute
Vendor receives PO and Voucher
Principal receives receiving copy and file copy
Business Office copy is placed in circular file
District receives good or services
Principal signs and returns receiving copy to B.O. where it is attached to B.O. copy
in the circular file
Vendor sends invoice and voucher to B.O. where it is attached to B.O copy in the
circular file
When all documents are received they are placed in file for payment
At a designated time they are recorded on payment list which generates the bill list
and prints the checks
The bill list is passed by BOE and checks are distributed
Purchasing and Contracts
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Bidding Laws – NJ Local Public Purchasing Law
Title 40:11
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NJ Bidding threshold $17,500
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Exceptions
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Professional services
Extraordinary unspecifiable service
Insurance
Protecting School Funds
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Surety Bonds
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Protects the district against fraud or loss
Motivates officials to be businesslike in handling funds under
their jurisdiction.
Types
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Fidelity
Public Official
Contract
Guarantees the performance of a contract or obligation
If a monetary loss occurs, the surety company reimburses the
board and goes after the individual or company to recover the
loss.