Arkansas School District Finance

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1 Arkansas School District Finance

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As laws, rules and procedures change, the information contained in this manual will be revised.

4 School Finance Manual Purpose The purpose of the manual is to provide guidance and resources for school districts to become better informed and enable fiscally responsible practices. As laws, rules and procedures change, the information contained in this manual will be revised. This manual is not fully comprehensive of the rules, regulations and funding sources available for districts. As a result, this manual should only be used as a reference. 4

5 Assessment and Local Taxes Primarily, school districts are funded through a combination of local and state taxes. The Real, Personal and Utility taxes comprise three main categories. Real, Personal and Utility Assessments are added together to create the Total Assessment for a school district. Real + Personal + Utility = Total Assessment 5

6 Assessment and Local Taxes School District X has the following assessment information: Real Assessment $50,000,000 Personal Assessment $20,000,000 Utility Assessment $75,000,000 Millage Rate 40 mills This would produce a Total Assessment of $145,000,000. To Calculate the amount of taxes, multiply the Total Assessment by.001 and then by the millage rate. This number will produce the amount of taxes expected (at 100% collection rate). $145,000,000 X.001 x 40 = $5,800,000 6

7 Assessment and Local Taxes To calculate the 98% amount, multiply the expected taxes by 98%. $5,800,000 X 98% = $5,684,000 Determining the amount of taxes short of the 98% of the URT, the total millage rate (40) can be divided in two categories: 25 mills for URT and 15 mills above the URT. The anticipated taxes are calculated by prorating the 25 and 15 mills. 25/40 X $5,684,000 = $3,552,500 (URT) And 15/40 X $5,684,000 = $2,131,500 (Mills above URT) 7

8 Assessment and Local Taxes In looking at the local URT ($3,552,500), the district is funded this amount even if local taxes do not produce this amount. This is done through the 98% true-up. Assume, the district had an actual tax collection of $5,300,000, it would produce the following amounts: URT: 25/40 X $5,300,000 = $3,312,500 And Above the URT 15/40 X $5,300,000 = $1,987,500 Since the district did not collect 98% of the URT ($3,552,500), the difference between the 98% of URT and actual taxes collected ($3,312,500) is calculated: $3,552,500 - $3,312,500 = $240,000 8

9 Assessment and Local Taxes The actual assessment and collection rate is unique to each individual district. For good financial forecasting, it is recommended to look at historical date (past assessment, past collection rates, etc ), current trends (New building, abandoned homes, new or moving industry and businesses, etc ), collection rates (Obtained by comparing past tax collections to assessments) and other pertinent information to make more informed financial decisions. 9

10 Assessment and Local Taxes The amount of local funds collected is divided by the number of students to derive at the amount of local money collected per student. The difference between the local amount per student collected and the foundation funding is then paid by the state to the district. For example, if a district collects $1,500 through local taxes per student and the foundation funding amount is $6,781, the state would pay the district $5,281 per student in foundation funding. The total amount of foundation funding can be calculated by multiplying the amount paid by the state x prior year 3 Quarter Avg. ADM. State foundation funding is provided to districts beginning in July and occurring through June on a monthly basis. 10

11 Funding Matrix The funding matrix is based upon a 500 student enrollment school. In the matrix, the amount of per pupil funding can be divided in smaller categories thus representing revenue for a school. 11

12 Funding Matrix 12

13 Funding Matrix 13

14 Categorical Funds 4 Categories: ALE, ELL, NSL, and PD. This is in addition to foundation funding. There is a limitation to the amount of carry-over categorical funds a district can have at the end of a fiscal year. Districts that carry over larger than allowed amounts may be required to surrender those unspent excess funds. Districts must expend a minimum of 85% of the current year NSL funding. Concerning all categorical funds, the total aggregate balance shall not exceed 20%. 14

15 Categorical Funds ALE While there are many requirements to ALE funding, it is important to understand that a student must be in the ALE environment for a minimum of 20 consecutive days. In addition, there are other criteria that must be met. An ALE program must comply with the rules set forth by ADE and A.C.A et. Seq. For the school year, ALE funding is set at $4,640 per full-time equivalent (FTE). An example of ALE funding is as follows: Student A 89 B 178 C 178 D 12 Number of Days Enrolled in ALE Since student D was not enrolled the required 20 consecutive days, funding is not available for that student. The FTE can be calculated by dividing the number of days each student was enrolled in ALE by the number of days in the school year (typically 178) and adding those together. (89/178) + (178/178) + (178/178) = 2.5 Multiply the FTE (2.5) by the ALE funding amount ($4,640) 2.5 X $4,640 = $11,600 15

16 Categorical Funds ELL In the school year, the amount of funding per ELL student is $338. For example, if a district had 247 ELL identified students, the amount of funding would be: $338 X 247 = $83,486 ELL funding is considered restricted and must be used on allowable expenditures. Funding for this category occurs during the current school year and funds may be carried over from one year to the next, subject to limits. Disbursement schedule for ELL could change 16

17 Categorical Funds NSL NSL funding is based upon the percentage of students eligible in a district for free/reduced lunches. The NSL funding percentage is calculated from the October 1 enrollment report (Cycle 2) from the previous year. The funding amount per-student can be found in the table below: Percentage of students eligible for free/reduced lunches Funding per-student for the school year 0-69% $ % $1, % $1,576 17

18 Categorical Funds PD To calculate the total PD funding, the previous year 3 Quarter ADM is multiplied by the PD amount. For example, if a school had a 3 Quarter ADM for of 629 students, the PD funding would then be multiplied by 629. $26.05 X 629 = $16, There are restrictions on PD funds. Rules and laws should always be referenced. 18

19 NSL Matching Grants NSL Matching Grant Program A.C.A $4,300,000 set aside to be distributed on a dollar for dollar pro rata matching basis until funds are exhausted For school district expenditures for evidence-based programs to improve the academic achievement of NSL students Evidence-based programs are limited to: Tutors as set out in A.C.A (b)(4)(C)(i)(b)(4) Before school academic programs and after-school academic programs, including transportation to and from the programs under in A.C.A (b)(4)(C)(i)(b)(2) Prekindergarten programs under in A.C.A (b)(4)(C)(i)(b)(3) 19

20 NSL Matching Grant Program A.C.A , cont. Identified Program Codes: Commissioner s Memo FIN * NSLA, Before and After Academic Program 005* NSLA, Pre-K 006* NSLA, Tutors 204* NSLA/SP ED, Before and After Academic Program 205* NSLA/SP ED, Pre-K 206* NSLA/SP ED, Tutors 20

21 NSL Matching Grant Program A.C.A , cont. Per ADE Rules Governing Distribution of Student Special Needs Funding and the Determination of Allowable Expenditures of Those Funds May 2016: In order for Regular NSL funds to be allowable: Tutors must be able to demonstrate competency (as determined locally) in each area where instruction is provided. Tutors must work under the supervision of highly qualified classroom teachers. Providing research-based before and after-school academic programs, including transportation to and from the programs. Providing research-based pre-kindergarten programs that meet the program standards as outlined in the Rules Governing the Arkansas Better Chance Program. 21

22 NSL Matching Grant Program A.C.A Meant to supplement, not replace, the districts NSL spending. Calculation based on expenditures incurred from July 1, 2017 to June 30, Calculation method: New fund and revenue code 282* NSL Match Grant Not calculated towards the 85% NSL expenditure requirements if properly coded allocated amounts, see Commissioner s Memo to be published October Act 243 of 2018 appropriated $4.3 million for the NSL Matching Grant program for The Department will adopt rules to implement this program. 22

23 Calculation: Student Growth Funding FY19 student growth funding will compare: FY18 quarter 4 ADM to FY17 3-quarter ADM from cycle 7 FY19 quarter 1 ADM from cycle 3 to FY18 3-quarter ADM FY19 quarter 2 ADM from cycle 5 to FY18 3-quarter ADM FY19 quarter 3 ADM from cycle 6 plus any changes to FY19 quarters 1 and 2 in cycle 6 to FY18 3-quarter ADM Changes made by the district in cycle 7 to ADM of quarters 1, 2, and 3 from cycle 6 may result in funding corrections Student growth funding calculations exclude increases resulting solely from consolidation or annexation 23

24 Student Growth Funding If net revenues minus any recoupment under A.C.A (a)(4)(B) plus miscellaneous funds calculated under A.C.A (b)(1)(A) exceed the foundation funding amount, a school district will be eligible to receive the amount of student growth funding that exceeds net revenues minus any recoupment under A.C.A (a)(4)(B) plus miscellaneous funds calculated under A.C.A (b)(1)(A). 24

25 Student Growth Funding Comparison: An eligible school district will receive the higher funding category after comparing: Student growth funding plus special needs isolated or small district funding minus excess net revenues plus calculated miscellaneous funds above foundation funding amount; to Declining enrollment funding 25

26 Disbursement: Student Growth Funding In January 2019, after school district eligibility for special needs isolated or small district funding has been determined, expect disbursement of: 100% of declining enrollment funding - if declining enrollment funding exceeds special needs isolated or small district funding plus partial year student growth funding (FY18 quarter 4 plus FY19 quarter 1) minus excess revenues above foundation funding amount; or Partial year student growth funding (FY18 quarter 4 plus FY19 quarter 1) - if partial year student growth funding plus special needs isolated or small district funding minus excess revenues above foundation funding amount exceeds declining enrollment funding 26

27 Additional information: Student Growth Funding Student growth and declining enrollment are unrestricted funding categories, but expenditures are tracked for reporting to the legislature (no transfers out of these restricted codes) ADE Rules Governing the Calculation Methods for Declining Enrollment and Student Growth Funding for Public School Districts dated October 2009 will be revised to reflect changes from Act 741 of 2017 Drafting and approval of revised rules may change the outlined process 27

28 Declining Enrollment Funding Example, if a district experienced the following during the FY 19 year: FY17 3 Q ADM FY18 3 Q ADM FY19 3 Q ADM ( )/2 900 = X FY 19 per-student foundation funding 50 X $6,781 = $339,050 This would be considered the Declining Enrollment Funding for the FY19 School year. 28

29 Limitation on Fund Balances A.C.A Districts with a year end net legal balance that exceeds 20% of current year net legal balance revenues shall reduce the net legal balance to no more than 20% of current year net legal balance revenues within 5 years (Act 1105 of 2017) o Net legal balance is the combined balance for the teacher salary fund, the operating fund, and the debt service fund; minus the combined balance for categorical funds and escrow balance restricted for the retirement of federal qualified bonds o Net legal balance revenues are the revenues placed in the salary fund, the operating fund, and the debet service fund; minus the revenues placed in the categorical funds and proceeds derived from federal qualified bonds 29

30 Limitation on Fund Balances A.C.A , cont. Net legal balance revenues do not include: o Bonds or other debt proceeds, o Loans, o Bonded debt refunding savings, o Consolidation and annexation funding, o Audit adjustments, o Proceeds from the sale or loss of district real or personal property, o Interfund transfers, or o Other nonrevenue financing sources defined in the Arkansas Financial Accounting Handbook. 30

31 Limitation on Fund Balances A.C.A , cont. Districts balances may be reduced by transferring funds into the building fund. o Funds transferred into the building fund must be used for construction, renovation, repair, or other planned expenditures. o If the building fund expenditures are canceled, and transferring the funds back to the fund from which they came would increase the net legal balance to more than 20%, the district may spend the funds on: Prekindergarten programs' Remediation programs' Career and technical education or workforce readiness programs, or Any other program or for any other purpose allowed by law 31

32 The ADE shall: Monitor annually for compliance Limitation on Fund Balances A.C.A , cont. Withhold state funding when the district fails to make the required reduction The withholding amount shall be equal to the amount the district failed to reduce the balance District may request the Commissioner grant a waiver of the withholding Waiver must describe the unusual and limited circumstances for failure to reduce the balance June 30, 2018 balances will be the first balances reviewed for compliance after year-end close out A Commissioner s Memo will be published in June so that schools can review where they stand before close out Commissioner s Memo FIN published with data to give schools idea of how balances would be reviewed when effective Commissioner s Memo RT for coding requirements: Balances (Act 1105 of 2017) required to be transferred to Fund General building transfers to fund 3000 Review monthly on APSCN website at the following link: ADE will publish Rules 32

33 Federal Title Funds Title I, part a Improving the academic achievement of the disadvantaged. The purpose of this title is to ensure that all children have a fair, equal, and significant opportunity to obtain a high quality education and reach, at a minimum, proficiency on challenging State academic achievement standards and State academic assessments. 33

34 State Aid Notices: School Districts Preliminary: Late July Early August Preliminary: Late February Early March Preliminary: Late June Early July Final: Late August Early September Open Enrollment Charter Schools Preliminary: August Preliminary: Late February Early March Preliminary: Late June Early July Final: Late August Early September 34

35 Other Topics: Bonded Debt Assistance EETF E-Rate Miscellaneous Funds 35

36 Other Topics: Child Nutrition Better Chance Medicaid ARMAC Isolated Funding 36

37 Special Education Catastrophic Early Childhood Residential Title VI Part B Maintenance of Effort How to Calculate and How to Reduce 37

38 Annual Statistical Report (ASR) Rankings Ranked by Per Pupil Expenditures Ranked by ADA Ranked by ADM Ranked by K12 Licensed FTE Ranked by Average Salary K12 (Classroom) Licensed Ranked by Licensed FTE Ranked by Average Salary Licensed FTE 38

39 Calculating Carryover Amounts The amount of necessary carryover varies by district. SOME of the factors to consider when evaluating carryover include: Staff Payment Schedule Interest Bond Payments Tax Revenue Revenue Sources Schedule Act

40 Corrective Action Plan (CAP) To ensure compliance with federal and state requirements, the corrective action plan (CAP) shall include the following elements: Each statement must be individually addressed (use reference numbers assigned by the auditor) Include the contact person responsible for the CAP Provide a detailed planned corrective action Provide an anticipated completion date for the planned corrective action Reasons for disagreement with audit findings, if applicable 40

41 Corrective Action Plan (CAP) Uniform guidance requires that the auditee (school entities) to include more detailed reasons for any recurring findings in the CAP The corrective action plan must be prepared by the school entity and not the auditor The CAP shall be received within thirty (30) days of filing with the Federal Audit Clearinghouse (FAC) Commissioner s Memo FIN (includes template to assist with CAP) 41

42 Corrective Action Plan (CAP) 42

43 Corrective Action Plan (CAP) 43

44 Budget Review 44

45 Budget Review 45

46 Budget Review 46

47 Budget Review 47

48 Budget Review 48

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50 We are here to help! 50

Arkansas Department of Education Special Education Finance & Budgeting Workshop

Arkansas Department of Education Special Education Finance & Budgeting Workshop 2009-2010 Presenters: Donald Watkins, Administrator Robert Coats, Budget Analyst Patricia Izquierdo, Finance Manager Clara