What Every School
Business Administrator
Should Know…
About Certain Accounting,
Auditing, and IRS Issues
Presented by
Juanita A. Petty, School Business Administrator, Wayne Public Schools
Heidi A. Wohlleb, Partner, Nisivoccia, LLP
Kathryn L. Mantell, Partner, Nisivoccia, LLP
Accounting Issues
Transfers Among Funds

N.J.S.A. 18A:22-8.2(3)(a) provides that no transfer may be
made from appropriations or surplus accounts for interest
and debt redemption charges. However, a district can
transfer funds from the capital reserve account to the debt
service fund to offset principal and interest payments for
bonded projects in the LRFP.

Districts may not transfer from the general fund to the
special revenue fund, except for the budgeted transfer to
fund preschool education.

When specifically approved by the voters or board of school
estimate or the Commissioner, districts may transfer surplus
from the general fund to the capital projects fund.
Transfers Among Funds

Unexpended bond proceeds for pre-EFCFA bonds that
are on hand one year or longer, for which there is no
new purpose for the unexpended funds, may be
transferred to either the general fund or the debt
service fund by board resolution.

Any board contribution to the food service fund,
including the payment of certain salaries or other
identified specific expenditures should be budgeted and
expended as a transfer to cover deficit in account 11000-310-930 and is reflected as an operating transfer in
the district’s CAFR.
Line-item Transfers

For all line item transfers from an advertised
appropriation account as defined under N.J.A.C. 6A:23 13.3(e), a two-thirds affirmative vote of the authorized
membership of the school board is required pursuant to
N.J.S.A. 18A:22-8.1.

Line-item transfers from an advertised appropriation
account as defined under N.J.A.C. 6A:23A-13.3(e) which
on a cumulative basis exceed 10 percent of the amount
included in the original budget require Executive County
Superintendent approval.
Line-item Transfers

Line-item transfers to an advertised appropriation account
identified as general administration, school administration,
central services and administrative information technology
or other support services that, on a cumulative basis,
exceed 10 percent of the amount included in the original
budget, require Executive County Superintendent approval.
N.J.A.C. 6A:23A–13. 3(g).

In addition to the above noted transfers, transfers to capital
outlay excluding equipment (for non-referenda projects; all
transfers to referenda projects require voter or board of
school estimate approval) require approval by the Executive
County Superintendent and may be approved only to
supplement a capital project previously approved by the
voters or board of school estimate for an “emergent
circumstance.” N.J.A.C. 6A:23A-13.3(h).
Appropriation of Additional
Revenue

Pursuant to N.J.A.C. 6A:23A-13.3, departmental approval is
required for appropriation of surplus or other unbudgeted or
underbudgeted revenue except for specific revenue sources
identified in the administrative code (N.J.A.C. 6A:23A13.3(d)). The six specified revenue sources are as follows:

Exemption granted in the award notice of additional state aid.

Tuition revenue generated from a district specific program
(excludes formal sending/receiving relationships).

School transportation revenue generated from a district or from
a joint or Cooperative Transportation Service (CTS) agency
pursuant to N.J.S.A.18A:39-11.

Restricted miscellaneous local revenue.

Federal revenue.

Any revenue amount excluded from the excess surplus
calculation in the prebudget year.
Appropriation of Surplus

Prior to April 1, appropriation of surplus or other unbudgeted or
underbudgeted revenue (except for those exempted under
N.J.A.C. 6A:23A-13.3(d)) is not permitted unless by a twothirds affirmative vote of the authorized membership of the
school board petitioning the Commissioner for approval of an
“emergent circumstance.” The district is required to submit to
the department, board certification of an emergent
circumstance that cannot be addressed and completed with
current appropriations, and a copy of the most current board
secretary report.

Between April 1 and June 30, Executive County Superintendent
approval and two-thirds affirmative vote of the authorized
membership of the school board are required for the
appropriation of surplus or other unbudgeted or underbudgeted
revenue. The district is required to submit to the department,
board certification that the appropriation is necessary to
achieve the thoroughness standards and a copy of the most
current board secretary report. (N.J.A.C. 6A:23A-13.3(b).
Transfers to Various Reserve
Accounts

Capital or Maintenance Reserve


A district may establish a capital or maintenance reserve by
budget appropriations or through a transfer by board resolution
(prior to June 30) any unanticipated revenue or unexpended
line-item appropriation amounts, or both, to the capital
reserve or the maintenance reserve account for withdrawal in
subsequent school years.
Emergency Reserve

A district may establish an emergency reserve account by
budget appropriations or through a transfer by board resolution
at year end of any unanticipated revenue and unexpended lineitem appropriation amounts. The account balance is not to
exceed $250,000 or 1% of the district’s general fund budget up
to a maximum of $1,000,000, whichever is greater.
Transfers to Various Reserve
Accounts

Debt Service Reserve


Districts may establish a debt service reserve account in the
debt service fund for proceeds from the sale of district
property. Transfers may not be made to the reserve account if
a district does not have any outstanding debt. The funds are to
be used to retire outstanding debt obligations of the district
within the lesser of five years from its inception or the
remaining term on the obligations. Any remaining balance must
be used for tax relief.
Tuition Reserve

A district can establish a tuition reserve in the general fund at
June 30 by board resolution for up to 10% of the estimated
tuition cost in the contract year for an anticipated tuition
adjustment in the second year following the contract year.
Withdrawals from the Capital
Reserve Account

Withdrawals for Local Amount of School Facilities Projects:

Withdrawals for referendum authorized school
facilities projects may be made if the capital reserve
use and amount is identified in the approved
referendum question

Withdrawals for a non-referendum school facilities
project may be made, by board resolution, up to 110%
of the local share less excess costs. Withdrawals must
be transferred to the capital projects fund and
accounted for separately with the corresponding
SCC/SDA grant.
Withdrawals from the Capital
Reserve Account

Withdrawals for Excess Costs or Other Capital Projects:

Upon voter, board of school estimate, or
board approval, withdrawals may be made
costs of a school facilities project or other
(need a separate Statement of Purpose in
budget).
capital project
to fund excess
capital project
the advertised

Withdrawals for referendum approved other capital projects
may be made if the capital reserve use and specific amount
is identified in the approved question.

Withdrawals for additional funds for a referendum- approved
project may be made if voter approved through the original
budget certified for taxes which must include a Statement
of Purpose which includes the amount of excess costs to be
withdrawn, the date of the referendum, the amount of the
local share in the approved referendum, and the reason
needed to exceed the original approved amount.
Withdrawals from the Capital
Reserve Account

Withdrawals for Debt Service:

A district, by board resolution, may withdraw and
transfer funds to the debt service fund to offset
principal and interest payments for bonded projects
in the LRFP.
Withdrawals from the
Emergency Reserve Account

Withdrawals from the reserve require the approval of
the commissioner unless the withdrawal is necessary to
meet an increase in total health care costs in excess of
4%.
Withdrawals from the Tuition
Reserve Account

The maximum amount that may be restricted at year
end is 10 percent of the estimated tuition cost of the
contract year.

Upon certification of rates in the third year following
the contract year, full appropriation of the applicable
year’s reserve must be liquidated and any remaining
balance related to that year must be reserved and
budgeted for tax relief.
Title I/IDEA Grants - Nonpublic
Portion

Title I Grant: The District must demonstrate that
considerable effort was made to reach out to nonpublic
schools (usually written correspondence that services
were not necessary). Nonpublic allocation can then be
carried forward for “unrestricted” use the following
year.

IDEA Grant: The District should have documentation of
its efforts to engage the nonpublic schools and approval
from the NJDOE Grants Office in order to carry forward
the remaining balance for “unrestricted” use in the
following year.
Common (Correcting) Audit
Journal Entries







Collection of prior year Extraordinary Aid or Non-Public
Transportation Aid posted as current year revenue receipt and not
as collection of prior year accounts receivable.
Current year Extraordinary Aid or Non-Public Transportation Aid not
posted.
Debit/credit memos not posted or not posted correctly.
These
memo items should be posted as both a receipt and a disbursement.
Should not be a payable at year end.
Nonpublic Aid – check to ensure expenditures per your records agree
with final report.
Nonpublic Home Instruction – please record an expenditure and
offsetting accounts receivable, if applicable.
Checks dated in June must be released no later than 10 days
(preferably less) after month end.
TPAF reimbursement on Federally Funded grant programs –
reimbursement for pensionable salaries only – not stipends. There
is an expectation by DOE that the entire reimbursement will be
charged to the grant.
GASB 68

Effective for fiscal year-end 6/30/15 audits

Will have PERS and TPAF pension liability not
just current year pension expense recorded in
the district-wide financial statements and
disclosures of the liability in the notes to the
financial statements.

Calculation of liability will be prepared by an
actuary hired by the NJ Division of Pensions
and Benefits.
Auditing Issues
Travel
Expenditures/Regulations

A Board of Education shall include in its travel policy a
requirement for the employee or board member to submit
an appropriate party as designated, and within a timeframe
specified by the Board’s policy, a brief report that includes
the primary purpose for the travel and the key issues that
were addressed at the event and their relevance to
improving instruction or the operation of the school district.

The circular places certain restrictions on out-of-state
travel.

School districts must obtain prior written approval of the
Executive County Superintendent for a travel event that
exceeds $5,000 as required by N.J.A.C. 6A:23A-5.9.
Travel
Expenditures/Regulations

Workshop/Travel Reimbursement

Professional Leave Request

Travel Certification

Post-Professional Development Report Form

SOP – Reimbursement to Staff

Personal Expense Reimbursement

Mileage Claim Voucher Form
State Consolidated Monitoring
Results

Title I, IDEA Basic and Preschool, Title II, Title III, Race to the
Top and Perkins

Common Financial/Fiscal Related Findings

Time and Activity Sheets were not prepared or did not
meet the current requirements. If 100% of employee’s
salary is charged to Title I, must complete semi-annual
certification attesting to performance of Title I-related
duties. If less than 100% of employee’s salary is charged to
Title I, must complete monthly personal activity reports signed by employee and supervisor.

District is contracting with other school district, ESC’s,
independent consultants that provide services to students.
Related contracts do not contain a per-service or hourly
rate and a not-to-exceed amount. Also, contracts were not
approved by Board resolution.

District did not appoint annually all individuals charged to
federal grants by Board resolution.
State Consolidated Monitoring
Results

Common Financial/Fiscal Related Findings

The District does not have a purchasing manual that details
procedures for the procurement of goods and services.

For Title I schools operating a targeted assistance program,
funds may be used for programs and services that benefit only
identified Title I students who met the established criteria
defined by the school district.

Supplanting of Title I funds used for salaries in a targeted
assistance program – avoid by

Operating an after-school tutoring program for which Title I
supported staff only assist Title I students, or

If used for in-class support for required existing Basic Skills teacher,
use Title I funds for above and beyond expenses.
Single Audit Changes
effective for Fiscal Year-end
6/30/16 Audits

Change in threshold from $500k to $750k.

Type A program - $750k.

Type B program – under $750k. Type B programs not subject
to audit review are those less than 25% of Type A threshold.

Change in percent of required coverage of programs tested
from 25% to 20% for low risk auditees and from 50% to 40% for
non low risk auditees.

Reduced number of compliance requirements to review but
auditors have option to add those removed to special tests
and provisions.
IRS Issues
Employee vs. Independent
Contractor Issues

IRS conducting field audits

Pay particular attention to occupational therapists, physical
therapists, and sports officials (should be employees)

IRS now using three-prong test vs. the old 20 questions

Ensuring 1099s have been issued to all independent
contractors

Penalty of 28% (assessed to District) for any non-issued 1099s
403b Contributions/Accumulated
Sick and Vacation Pay

Sometimes referred as “Terminal pay”

Saves Board cost of employer Social Security and Medicare
taxes

Allows employee to shelter more income

Specific criteria need to be followed