FISCAL ACCOUNTABILITY FOR LOCAL SCHOOL BOARDS

Transcription

1 FISCAL ACCOUNTABILITY FOR LOCAL SCHOOL BOARDS Dennis Heard Governmental Accounting and Auditing Forum December 6, 2012 SCHOOL FISCAL ACCOUNTABILITY ACT Act No created a new chapter in Title 16 of the Code of Alabama. The purpose of this act are to clarify the fiscal responsibilities of the State Superintendent, local superintendents, chief school financial officers selected to carry out the fiscal responsibilities for local school boards, and allow intervention for school boards found to be in an unsound financial condition. 1

2 AMENDED 16-6B-4 FINANCIAL ACCOUNTABILITY RELATED TO STATE FINANCIAL INTERVENTION Allows earlier intervention by replacing the determination of unsound fiscal condition based on the submission of an unsound budget with the submission of fiscally unsound financial reports. Requires the State Superintendent to present a proposal for the implementation of management controls necessary to restore the school system to a sound fiscal condition. SCHOOL FISCAL ACCOUNTABILITY ACT 1. Fiscal management policies. 2. Financial oversight by State Superintendent of Education; appointment and duties of Chief Education Financial Officer; internal audits of schools and school systems. 3. Financial training of local superintendents of education. 4. Appointment; removal of chief school financial officer; qualifications. 5. Supervision, fiduciary responsibility of chief school financial officer; duties. 2

3 SCHOOL FISCAL ACCOUNTABILITY ACT 6. Required reports. 7. Audits. 8. Authority to expend funds. 9. Reserve funds. 10. Penalties for failing to comply with chapter. 11. Liability. 12. Bonding. 13. Publication of budget and financial information for budget hearings. 1. FISCAL MANAGEMENT POLICIES Local board will adopt fiscal management policies that comply with GAAP Policies must include, but are not limited to: Regular reconciliation of bank statements Maintaining fixed assets inventory Deposits Review of monthly revenues and expenditures 3

4 2. STATE SUPERINTENDENT RESPONSIBILITIES Will oversee the financial integrity of local boards of education. Will appoint a qualified Chief Education Financial Officer. Duties of the Chief Education Financial Officer include collecting and analyzing required reports Assist school systems in deteriorating financial positions May employ qualified internal auditors. 3. LOCAL SUPERINTENDENTS TRAINING The State Superintendent will develop programs for the instruction and training of local superintendents Superintendent Training Finance Instruction Legal Requirements All Superintendents are required to complete this training and pass the related competency test 4

5 4. CHIEF SCHOOL FINANCIAL OFFICER In consultation with the local superintendent, the local board will appoint a qualified chief school financial officer who: Shall be an employee of the local board. Meet minimum qualifications of the local board. Meet the requirements established by the State Board of Education. The local board is authorized to remove the chief school financial officer. 5. CHIEF SCHOOL FINANCIAL OFFICER Works under the direct supervision of the superintendent but has a fiduciary responsibility to the local board. The CSFO is an employee appointed by the local board (with input by the superintendent). Recommendation of the superintendent is not required for hiring or dismissal of CSFO. 5

6 DUTIES OF CSFO Verify the receipt of all funds Verify the payment of all funds Make payments only on the written order of the local superintendent Keep accurate accounting records and provide accurate accounting information to the superintendent and local board Produce required reports Be bonded in an amount determined by the State Board of Education NEW CSFO DUTY Personally notify, in writing, each board member and the local superintendent of education of any financial transaction which the chief school financial officer deems to be non-routine, unusual, without legal authorization, or not in compliance with the fiscal management policies of the board. The notification shall be recorded in the minutes of the board by the president of the local board of education. 6

7 6. REQUIRED REPORTS TO LOCAL BOARD Monthly reports to include: Financial statement showing financial status Receipts Expenditures Budget vs. actual expenditures Annual reports to include: Annual budget Fixed asset inventory 7. AUDITS The local board will be audited as early as possible after the end of the fiscal year. State Examiners will audit all county school boards and some city school boards. A city school board may request the State Examiners audit a school or school system. Audit findings will be presented in board meeting with advance notification to the SDE. 7

8 AUDITS OF CITY SCHOOL BOARDS City school boards may employ a CPA firm or use the State Examiners for the annual audit. Financial intervention by the SDE will require city school boards to be audited by State Examiners. Legal compliance audits and program compliance audits shall adhere to standards provided by the State Examiners. A local board may request an audit by the State Examiners upon a change in the CSFO or superintendent. 8. AUTHORITY TO EXPEND FUNDS Local Boards are required to adopt procedures on expenditures that do not require express board approval in advance. 8

9 9. RESERVE FUNDS Local Boards are required to develop a plan to establish and maintain a one-month minimum operating balance. 10. PENALTIES FOR FAILURE TO COMPLY Deliberate, willful, or wanton failure to provide accurate information is a Class A misdemeanor. 9

10 11. LIABILITY No individual member of a local board of education shall be held financially liable for misappropriation of funds of the local board of education unless the individual acts willfully, maliciously, fraudulently, in bad faith beyond his or her authority, or pursuant to a mistaken interpretation of the law. 12. BONDING Employees required to be bonded: Local Superintendent CSFO Other employees handling funds as required by the board. A certified copy of the bond shall be filed with the State Superintendent. The State Superintendent has set the minimum amount of required bonds at $100,

11 13. PUBLICATION OF BUDGET AND FINANCIAL INFORMATION Public hearing information shall be published on a form provided by the State Superintendent. Such information shall contain financial information at both the school and school district level. ACCOUNTABILITY FORM A sample form is provided as guidance for implementing the requirement to notify the board of transactions that are non-routine, unusual, without legal authorization, or not in compliance with the fiscal management policies of the board. Items included on the sample form: Reason for notification - Financial Transaction was non-routine, unusual, without legal authority, not in compliance. Description of Financial Transaction - Responsible Individual, Date of Transaction, and Description of Financial Transaction. 11

12 BONDING REQUIREMENTS The Local Superintendent (or interim or acting) and the CSFO is required to be bonded for a minimum amount of $100,000 each. A certified copy of the bond must be filed with the State Superintendent of Education. Any other employee handling funds should also be covered by a fidelity bond. Errors and Omissions Insurance may be purchased to provide additional coverage, but cannot be used as a substitute for fidelity bond coverage. CHIEF EDUCATION FINANCIAL OFFICER Will oversee the collection and analysis of financial reports required by this Act. Will prepare reports on the financial integrity of local boards of education. Sill assist local boards of education whose financial position is deteriorating. Will be bonded in the amount of $100,

13 UNSOUND FINANCIAL CONDITION Alert and Assistance SDE will provide assistance and advice if their analysis determines the financial reports are fiscally unsound. Continuous Assistance If during the assistance, it is determined the LEA is in an unsound financial condition, the State Superintendent will appoint a person to provide on-site continuous advice on the day-to-day financial operations of the local board. UNSOUND FINANCIAL CONDITION Intervention If the local board remains in an unsound financial condition, the State Superintendent shall request approval by the State Board of Education to have direct control of the fiscal operations of the local board. If approved, a proposal for the implementation of management controls necessary to restore the local board to a sound financial condition shall be presented to the State Board of Education. Upon approval of the plan, the State Superintendent shall appoint a CFO to manage the financial operations of the local board, until the fiscal condition of the local board is restored. 13

14 PREVENTIVE MEASURES POSTING FINANCIAL REPORTS Posting of Financial Information to Local Internet Site: Financial File must be uploaded to the SDE internet portal each month. Local personnel then download the Required Reports generated from the file upload. Required monthly reports must be posted to the local internet site no later than 45 days after the end of the reporting period. 14

15 POSTING CHECK REGISTERS During the export process local school finance personnel are required to indicate whether or not the accounts have been reconciled to the bank statements. Additional Posting Requirements In FY2010, the requirement to post a monthly check register was added by State Board Rules. CSFO S FOR LOCAL SCHOOL BOARDS Adopted by the State Board Rules in 2003 Rules for Chief School Finance Officers Duties and responsibilities of the CSFO Qualifications of the CSFO Education Experience Certification requirements Performance standards Requirements to Continue Certification 15

16 Duties and responsibilities of the CSFO Maintain an accounting system in accordance with GAAP. Maintain a payroll system in accordance with applicable laws and regulations. Prepare financial reports annually and at other times as requested by the local superintendent, local board, and other agencies. Maintain an adequate system of internal controls. Maintain a sound system of cash management. Maintain a sound accounting system in the individual local schools. Maintain a system of contracting and purchasing procedures. Duties and responsibilities of the CSFO Coordinate the preparation of the annual budget and any amendments as appropriate. Maintain the financial operations of the CNP and other special programs. Carry out assigned responsibilities in accordance with federal, state, and local laws. 16

17 CSFO - State Board Requirements Qualifications of the CSFO Established Education requirements for CSFO s hired after June 30, Certification requirements A CSFO must be certified by the State Superintendent as a Certified Chief School Finance Officer: Meet the qualification requirements. Completed the certification course requirements within three years. Performance standards The SDE shall approve a certification program to provide minimum standards, professional development, and continuing education. Requirements to Continue Certification Maintain a valid certification, obtaining at least 18 hours of approved CPE credits during each fiscal year. MONTHLY FISCAL ACCOUNTABILITY REQUIREMENTS Files should be submitted through the SDE website and the required reports posted to school board website within 45 days of month end. During the process, the bank reconciliation verification box should be checked. An edit report is generated with the monthly submission. Correction of these edits during the year means fewer coding edits at year-end. 17

18 AUDIT REPORTS The Audit Report from the Examiners or CPA firm is due to the SDE before June 30. Reminder letters are sent to Superintendent s at the end of May for systems that have not yet submitted finalized audit reports. Continued delays in the submission of a system s audit report could result in the withholding of funds at the discretion of the SDE. 35 REQUIRED REPORTS Required Reports include: Budget Summary Balance Sheet Financial Summary Budget Actual Comparison Check Register Report

19 RESERVE FUNDS A local board of education is required by the School Fiscal Accountability Act to develop a plan to establish and maintain a one month reserve for operating expenses. The establishment and maintenance of adequate fund reserves is necessary to avoid disruption in the educational programs in the schools. ONE MONTH RESERVE A one-month s operating balance shall be determined by dividing the General Fund expenditures and fund transfers out by 12. In determining the General Fund expenditures and fund transfers out, the proposed budget or budget amendment, shall be used. The superintendent or chief school financial officer will inform the board, before the Board votes on a budget or budget amendment, if the approval of the budget or budget amendment will prevent the establishment or maintenance of a one-month s operating balance. 19

20 ONE MONTH RESERVE MEETING Each December the Chief Education Financial Officer releases a report of the school boards that do not meet the one month operating reserve. The superintendent and CSFO of each school board without the one month reserve are required to attend a meeting with the Chief Education Financial Officer. ONE MONTH RESERVE MEETING Fiscal and legal financial obligations and duties of the local superintendent and CSFO are explained. An analysis of each school board s one month s operating balance is presented. The deficiencies of each school board and the obstacles to meet the reserve requirement are addressed. If applicable, the prior year plans for meeting the reserve requirement are discussed. 20

21 ONE MONTH RESERVE MEETING The superintendent and CSFO for each school board are required to submit a draft plan to improve the school board s finances by April 1. The plan is reviewed and changes needed to the required plan are discussed with the superintendent and CSFO for each school board. Once approved by the SDE, the financial improvement plan must be officially adopted by the local board of education. 21

22 Steps to Financial Intervention Step 1. Unsound Financial Condition - Alert and Assistance. The State Department of Education shall provide assistance and advice if an analysis of the financial integrity of a local board of education determines the financial reports are fiscally unsound. Step 2. Unsound Financial Condition - Continuous Assistance. If during the assistance the State Superintendent determines the local board of education is in an unsound financial condition, the State Superintendent will appoint a person to provide on-site continuous advice on the day-to-day financial operations of the local board. Step 3. Unsound Financial Condition - Intervention. If after a reasonable period of onsite continuous assistance, a local board remains in an unsound financial condition, the State Superintendent shall request approval by the State Board of Education to have direct control of the fiscal operation of the local board. If the request is approved, the State Superintendent shall present to the State Board of Education a proposal for the implementation of management controls necessary to restore the local board to a sound financial condition. Upon the approval of the State Board of Education, the State Superintendent shall appoint a chief financial officer to manage the financial operations of the local board, until the fiscal condition of the local board is restored. a. The chief financial officer will have the right of approval of every action affecting the expenditure of funds. b. The chief financial officer shall be bonded and shall not be required to have approval of the local superintendent in the control of the local board s funds. c. The chief financial officer shall assume the duties established for local superintendents of education relating to fiscal operations of local boards of education pursuant to applicable Alabama statutory requirements, rules and regulations of the State Board of Education, and other requirements such as federal regulations, opinions of the Attorney General of Alabama, opinions of the Examiners of Public Accounts, and the interpretations of the State Superintendent of Education. d. The State Superintendent may direct and approve actions: To prevent further deterioration in the financial condition of the local board. To restore the local board to financial stability. To enforce compliance with statutory, regulatory, and other financial standards and requirements.

23 11/29/2012 Fiscal Accountability for Local School Boards Russell W. Raney, CPA Cullman City Schools GAAF December 2012 How do we achieve accountability? Fiscal Management Internal Controls/Oversight Training Collaboration Communication Commitment 1

24 11/29/2012 Fiscal Management Timely reconciliation of bank accounts Maintaining a current fixed asset inventory Deposits Monthly review of revenues and expenditures Budget vs. Actual Conservative budgeting Internal Controls/Oversight Segregation of duties Checks and balances Policies and procedures Audit/Finance Committee Alabama Department of Education 2

25 11/29/2012 Training Required for all bookkeepers Internal and External Required for CSFO Periodic training for school board Collaboration The key to successfully moving forward as an organization is collaboration Budgeting Personnel decisions Capital Planning Strategic Planning 3

26 11/29/2012 Communication Periodic meetings Bookkeepers, superintendent, coaches & booster clubs, newly hired employees Reporting Monthly financial reports to the Board Narrative and Summative Departmental reports Postings on website Accountability Form Accountability Form FINANCIAL TRANSACTION Notification is provided because the financial transaction described below is deemed: A. Non-routine B. Unusual C. Without legal authorization D. Not in compliance with fiscal management policies of the board DESCRIPTION OF FINANCIAL TRANSACTION: Responsible individual(s): Date(s) of transaction: Description of financial transaction: Additional Information Attached Recommended Corrective Action Attached Response From Responsible Individual(s) Attached This notification is required by Act No A copy of this notification is provided to each board member and the local superintendent of education. This notification shall be recorded in the minutes of the board by the president of the local board of education. Signature of Chief School Financial Officer Date 4

27 11/29/2012 Commitment Having policies and procedures in place is great, but if there is a lack of commitment from management or the Board, then you may as well not have anything. We have adopted a mindset of fiscal accountability Maintain fund balance of three months when ALSDE only requires one month CCS Accountability Policy Cullman City Board of Education COMPLIANCE WITH STATE BUDGETING AND FISCAL ACCOUNTABILITY GUIDELINES (Act No ) It is the policy of the Cullman City Board of Education to comply with all state budgeting requirements and state accounting policies and procedures included in the School Fiscal Accountability Act. Budgeting In the budgeting of Foundation Program funds for classroom materials and supplies, technology, library enhancement, professional development, and other areas as the state may require, the Board shall provide opportunities for budget input from appropriate participants as mandated by state law. The Board shall further provide for public budget hearings as required by law. Reconciliations All bank accounts shall be reconciled to the financial records. The chief school financial officer (CSFO) shall be responsible for verifying that monthly bank statements are reconciled to the financial records on a timely basis to ensure accurate monthly financial statements. Thus, each monthly bank statement shall be reconciled by no later than the 20 th day of the following calendar month. 5

28 11/29/2012 Policy Continued Inventory All fixed or capital assets shall be inventoried annually. Inventory records of fixed or capital assets shall be maintained in the Board s Central Office. A supplemental inventory of equipment items not classified as fixed or capital assets shall also be maintained. Deposits Funds received for school purposes by Board officials and employees shall be promptly deposited in the proper bank account. A financial institution used for the deposit and safekeeping of funds shall be approved as a qualified public depository by the Security of Alabama Funds Enhancement (SAFE Program) administered by the Alabama State Treasurer. Review of Monthly Revenues and Expenditures The superintendent shall have monthly reports of revenues and expenditures prepared for review by the Board. The monthly financial reports and annual budget shall be made available to the public on the system s internet site. Policy Continued Reserve Funds The Board recognizes that the establishment and maintenance of adequate fund reserves in necessary to avoid disruption in the educational programs in the schools. The superintendent or CSFO will inform the Board, before the Board votes on a budget or budget amendment, if the approval of the budget or budget amendment will prevent the establishment or maintenance of a one-month s operating balance. A one-month s operating balance shall be determined by dividing the General Fund expenditures and fund transfers out by 12. In determining the General Fund expenditures and fund transfers out, the current proposed budget or budget amendment shall be used. Authority to Expend Funds Without Board Approval The Board grants authority to the Superintendent, subject to applicable laws, policies, and Board-approved budget limitations, to expend funds for operating expenditures without advance Board approval of specific expenditures. All such expenditures shall be included in the monthly expenditure report to the Board. 6

29 11/29/2012 Questions? Russell W. Raney Chief School Finance Officer 7