School District Debt
deene.dayton@state.sd.us
773-5932
1
CO Certificates

CO certificates represent long-term debt with
the intent to pay it back utilizing the CO levy.
2
CO Certificates

Complete your 5-year CO plan to ensure that
your district has sufficient resources available
to take on a series of long-term debt payments
SDCL 13-16-9.2

3 Mill max regarding the CO levy
3
CO Certificates

Set up a capital projects fund #41 for the
construction phase of the project

If there are different sources of funding, it is
recommended to use a separate fund number
for each capital project.
4
CO Certificates

Place all means of finance for the project into
the Capital Projects Fund……such as:

CO certificate issuance




Capitalized interest directly to CO Fund
Transfer from CO Fund
Grants….energy grant
Donations
5
CO Certificates

Make all the payments towards the project
from the Capital Projects Fund…….even
early payments such as architect fees, if
possible
6
CO Certificates

Spend issuance money in compliance with
bond covenants


Furnishings???
Leftover money on stadium lights???
7
CO Certificates

Adopt a spending priority for the Capital
Projects Fund…….which dollar is spent first,
CO certificates???, transfer in??? Donations??

Consider operational unit field or a
spreadsheet for tracking
8
CO Certificates

The capital projects fund should have a
budget.

Most large projects fall within two school
years.
9
GO Bond

General Obligation bonds are similar to CO
certificates except the source of funding for
repayment of the debt is a separate tax levy
10
GO Bond

Most of the slides pertaining to CO
certificates will also apply to GO bonds.
Such as the use of a capital projects fund,
budgeting and spending priority.
11
GO Bond


One significant difference from CO
certificates is that a GO bond will trigger the
use of a separate Debt Service Fund #31
(separate fund for each bond issuance)
GASB 54 states that debt service funds are
used to account for financial resources
restricted to expenditure for principal and
interest …
12
GLTD

General long-term debt, such a CO
certificates and GO bonds, are tracked during
the year in a separate self balancing set of
accounts referred to as General Long Term
Liabilities

Fund #00
13
GLTD

Some of the accounts within Fund #00 are:

708 Unrestricted Net Assets
501 Bond Payable
502 CO Certificates Payable
14
GLTD

The balance of the General Long Term
Liabilities is added to Exhibit I at the end of
the year by reconciling entry.
15
GLTD

General long-term liabilities are reported on
Exhibit I (Statement of Net Assets) in two
accounts as follows:


Due within one year
Due in more than one year
16
The Issuance



Debt issuance dollars are placed into a Capital Projects Fund
as follows:
41-101 Cash
41-5000-614 Issuance Costs:




Bond Counsel Fee
Underwriters Discount Fee
Insurance
41-8150-619 Discount on Bonds Sold



Or
41-5123 Premium on Bonds Sold
41-5121/5125 G.O. Bonds/Certificates Issued
17
The Issuance


There generally is a premium (other financing
source) or a discount (other financing use) on
each issuance. This arises when the “stated
rate of interest” is more or less than the
“market rate of interest”.
These accounts are amortized annually and
the end of year balance may be blended with
the liability account on Exhibit I.(193/473)
18
The Issuance


The debt issuance accounts, 5121 and 5125,
are always reported at the full face amount
stated on the debt instruments….. generally a
large round number.
These accounts are reported as increases in
liabilities on Exhibit I during the
reconciliation process.
19
The Issuance

Issuance costs, reported as 5000 Debt Service
Expenditures on Exhibit IV, are reported as
an asset account called “Deferred Charge”
(194) on Exhibit I.

Materiality is always a consideration.
20
The Issuance


Sometimes the timing of a bond issue is such
that the tax levy cannot be put in place in time
to have tax dollars available to make the first
debt service payments. In that case, some of
the issuance dollars are peeled off and placed
directly into a Debt Service Fund to service
the first debt service payment or two.
Cash
 G.O. Bonds Issued (OFS)
21
Servicing the Debt

Governments have the option of recognizing
an expenditure and a liability in a debt service
fund in the current period if “debt service
fund resources have been provided during the
current year for payment of principal and
interest due early in the following year”
(within 30 days)
22
Servicing the Debt


An interest expense accrual should be
recognized on the G-W statements when a
significant amount of time has elapsed since
the last interest payment date. (materiality)
Debit Expense
Credit Liability
23