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Tier 1 Training Annual Updates 2010-2011 School Year School Management Issues


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Title: Tier 1 Training Annual Updates 2010-2011 School Year School Management Issues

Tier 1 TrainingAnnual Updates2010-2011 School
YearSchool Management Issues UpdatesSchool
Finance Issues Updates
Required TrainingACA Section 6-20-2204
  • Tier 1 Tier 2 apply to school districts,
    open-enrollment charter schools and education
    service cooperatives.
  • Tier 1 required for
  • Superintendents
  • Cooperative Directors
  • Charter Schools Directors
  • Person responsible for preparing budget or
    overall accounting responsibility (GBM)

General Business ManagerACA Section 6-15-2302
  • A chief financial officer or business manager,
    however the position is titled, who
  • Is responsible for fiscal operations
  • Under direction of superintendent
  • Meets minimum qualifications specified by ADE Rule

Required Tier 1 - ContentACA Section 6-20-2204
  • School laws of Arkansas
  • Laws and rules governing the expenditure of
    public education funds, fiscal accountability,
    and school finance
  • Ethics and
  • Financial accounting and reporting of schools,
    school districts, open-enrollment public charter
    schools, and cooperatives.

Tier 1 Initial Training-12 HoursACA Section
  • School Revenues 2 hrs
  • School Expenditures 2 hrs
  • School Ethics Audit Compliance 2 hrs
  • School Purchasing 2 hrs
  • School Finance Issues Updates 2 hrs
  • School Management Issues Updates-2hrs

Tier 1 Annual TrainingACA Section 6-20-2204
  • 4 hours of annual training and instruction in
    order to maintain basic proficiency in the topics
    required in the initial 12 hours of Tier 1
  • Must receive training by December 31st for the
    current school year.
  • Accreditation citation for failure to meet
    December 31st deadline.
  • Unable to continue in position if training not
    received by March 1st of following calendar year.

Tier 2 Annual TrainingACA Section 6-20-2204
  • For employees who do not make decisions about
    selecting codes or who have a limited number of
    codes that they can use.
  • Principals
  • Assistant Principals
  • School Secretaries
  • Program Directors

Tier 2 Annual TrainingACA Section 6-20-2204
  • 4 hours per year
  • School district, charter school or cooperative
    responsible for providing the training
  • Trainers required to attend Tier 1 training
  • Maintain records of all employees required to
    have Tier 2 training and who have completed Tier
    2 training.

School Finance Issues Updates
Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Budget report (6-20-2202)
  • Submitted to ADE through APSCN with cycle 1 due
    September 30th.
  • To be approved by board in a legally held meeting
    and signed by president and ex- officio financial
  • If budget not submitted by September 30th
  • Warrants and checks issued after September 30 not
  • Ex officio financial secretary or surety liable
    for checks/warrants issued after September 30th
  • State funding suspended until budget submitted

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Annual financial report (6-20-2202)
  • Submitted to ADE through APSCN with cycle 9 due
    August 31st.
  • Information required
  • Daily expenditures and receipts
  • Fund balances
  • Reasons for maintaining rather than spending fund
  • Transfers between funds

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Final Close of General Ledger
  • Required by September 15th for year ended the
    previous June 30th.
  • No changes can be made to the prior year
    financial data after September 15th.
  • If changes are made after submitting cycle 9,
    cycle 9 must be re-submitted by September 15th.
  • If a change is needed after final close but
    before September 15th, APSCN can assist.

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Uniform budget and accounting system
  • Arkansas Educational Financial Accounting and
    Reporting System
  • Establish and implement process and procedures
    for financial reporting.
  • Uniform chart of accounts-Arkansas Financial
    Accounting Handbook (Arkansas Handbook).
  • To comply with federal reporting requirements
  • Provide valid comparisons of expenditures of
    schools, school districts, charter schools and

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Arkansas Handbook shall include, but not be
    limited to
  • Categories to allow for the gathering of data on
    separate functions and programs
  • Categories and descriptions of expenditures to be
    reported on the annual school performance report
  • Categories and descriptions of expenditures that
    allow for the gathering of data required by law.

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Examples of categories of expenditures required
    to be reported
  • Annual School Performance Report
  • Total expenditures
  • Instructional expenditures
  • Administrative expenditures
  • Extracurricular expenditures
  • Capital expenditures
  • Debt Service expenditures

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Examples of categories of expenditures required
    to be reported-Continued
  • Functions and programs provided by law
  • Athletic expenditures
  • Student transportation expenditures
  • School district level administrative costs
  • School level administrative costs
  • Instructional facilitators
  • Supervisory aides

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Functions and programs provided by law-Continued
  • Substitutes
  • Property Insurance

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Examples of categories of expenditures required
    to be reported-Continued
  • From following sources of revenue
  • Student growth
  • Declining enrollment
  • Special education catastrophic occurrences
  • Special education services
  • Technology grants
  • Debt service funding supplement

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • From following sources of revenue-Continued
  • General facilities funding
  • Distance learning
  • Gifted and talented

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Examples of categories of expenditures required
    to be reported-Continued
  • Categories and descriptions of restricted fund
  • Categories and descriptions of expenditures that
    each education service cooperative shall report
    on its annual report authorized by law.

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Arkansas Financial Accounting Handbook and APSCN
  • Web site location of Handbook is
  • FMSgtFinancial Management System-Training
  • Arkansas Financial Accounting Handbook 2009/2010
  • Commissioners Memos on Coding
  • Frequently asked questions

Educational Financial Accounting and Reporting
Act of 2004 (6-20-2201)
  • Arkansas Handbook modeled after the Financial
    Accounting for Local and State School Systems,
    2003 Edition (National Center for Education
    Statistics, U.S. Department of Education-Institute
    of Education Sciences, NCES-2004-318)
  • A new NCES edition was published June, 2009.
    Online version can be found at

Arkansas Financial Accounting Handbook
  • ADEs Arkansas Public School Computer Network
    (APSCN) is responsible for maintaining the
    Arkansas Handbook and implementing revisions
    necessary to gather and report financial data
    required by state and federal law.

Arkansas Financial Accounting Handbook
  • Financial coding structure (chart of accounts)
    within Arkansas Handbook
  • Fund
  • Source of Fund
  • Function
  • Location
  • Program
  • Subject Area
  • Object

Arkansas Financial Accounting Handbook
  • Fund
  • Teacher Salary Fund (Fund 1)
  • Operating Fund (Fund 2)
  • Building Fund (Fund 3)
  • Debt Service Fund (Fund 4)
  • Dedicated M O/Capital Outlay (Fund 5)
  • Federal Fund (Fund 6)
  • Activity Fund (Fund 7)
  • Food Service Fund (Fund 8)

Arkansas Financial Accounting Handbook
  • Source of Fund
  • Examples
  • Student Growth Funding (217)
  • Declining Enrollment (218)
  • Professional Development (223)
  • Alternative Learning Environment (275)
  • English Language Learners (276)
  • National School Lunch Act-State (281)

Arkansas Financial Accounting Handbook
  • Function
  • Instruction (1000-1999)
  • Support Services (2000-2999)
  • Operation of Non-Instructional Services(3000-3999)
  • Facilities Acquisition and Construction
  • Other Uses (5000-5999)

Arkansas Financial Accounting Handbook
  • Instruction Function-direct interaction between
    teachers and students
  • Regular Programs (1100-1199)
  • Special Education (1200-1299)
  • Workforce Education (1300-1399)
  • Adult/Continuing Education (1400-1499)
  • Compensatory Education (1500-1599)
  • Other Instructional Programs (1900-1999)

Arkansas Financial Accounting Handbook
  • Support Services Function-provide administrative,
    technical and logistical support to facilitate
    and enhance instruction.
  • Includes
  • Student Support (2100-2199)
  • Instructional Staff Support (2200-2299)
  • General Administration (2300-2399)
  • School Administration (2400-2499)

Arkansas Financial Accounting Handbook
  • Support Services Function-provide administrative,
    technical and logistical support to facilitate
    and enhance instruction-Continued
  • Includes
  • Central Services (2500-2599)
  • Operation Maintenance of Plant (2600-2699)
  • Student Transportation (2700-2799)

Arkansas Financial Accounting Handbook
  • Operation of Non-instructional Services Function
  • Food Service Operations
  • Other Enterprise Operations
  • Community Services Operations

Arkansas Financial Accounting Handbook
  • Facilities Acquisition and Construction Services
  • Land Acquisition
  • Land Improvement
  • Architectural Engineering Services
  • Building Acquisition and Construction
  • Site Improvement
  • Building Improvements

Arkansas Financial Accounting Handbook
  • Other Uses Function
  • Debt payments (principal interest)
  • Transfers to other district funds
  • Indirect costs
  • Payments to state for prior year overpayment
  • 98 URT collection rate exceeded per 6-20-2305

Arkansas Financial Accounting Handbook
  • Location Code The three-digit ADE assigned LEA
    number for schools that identifies the campus
    where funds are expended.

Arkansas Financial Accounting Handbook
  • Program Code a program is a plan of activities
    and procedures designed to accomplish a
    predetermined objective or set of objectives.
    This code will enable all expenditures pertaining
    to a particular program to be tracked across
    funds, sources of funds, functions and locations.

Arkansas Financial Accounting Handbook
  • Program Code Examples
  • NSLA Supplementing Salaries of Teachers (015)
  • State Academic Facilities Funded (070-099)
  • Athletics (115)
  • Non-athletic extracurricular activities (116)
  • Special Education (200)
  • Gifted Talented (270)
  • Alternative Education (438)

Arkansas Financial Accounting Handbook
  • Subject Area Use of this code is not currently
    required by ADE. School districts use this code
    for a variety of purposes pertaining to their own
    needs. State or federal reporting requirements
    could require designated subject area codes at
    some point in the future.

Arkansas Financial Accounting Handbook
  • Expenditure Budget Unit The sixteen-digit
    number entered for all expenditures that includes
    the fund, source of fund, function, location,
    program, and subject area codes.
  • Revenue Budget Unit The four-digit number
    entered for all revenue that includes the fund
    and source of fund codes.

Arkansas Financial Accounting Handbook
  • Revenue Object /Account A five digit number
    that describes the revenue.
  • Expenditure Object A five digit number that
    describes the type of expenditure
  • Salary (61000-61999)
  • Employee Benefit (62000-62999)
  • Purchased Services (63000-65999)
  • Supplies and Materials (66000-66999)
  • Capital Outlay (67000-67999)
  • Other (68000-68999)

Coding Changes for 2009-2010
  • Expenditures from Foundation Enhanced Funding
    (FIN-09-047, 1/29/09)
  • Fund/Source of Fund Codes Required for all
    expenditures paid with Foundation and Enhanced
    Educational Funding
  • Fund 1-Teacher Salary Fund
  • Fund 2-Operating Fund
  • Source of Fund 000
  • Source of Fund 100-199

See Appendix A-1 for Adequacy Funding Matrix
Coding Changes for 2009-2010
  • Revenue included in foundation funding
  • State foundation funding (31101)
  • 25 mills Uniform Rate of Tax (URT)
  • Property Taxes (11110-11140)
  • Excess Commission (11150)
  • Land Redemption (11160)
  • Penalties Interest (11400)
  • Interest on Unapportioned Property Taxes (11500)
  • Miscellaneous Funds (per formula found in ACA

Coding Changes for 2009-2010
  • Miscellaneous Funds-ACA 6-20-2303(11)
  • Federal Forest Reserves (42100)
  • Federal Grazing Rights (42400)
  • Federal Mineral Rights (42300)
  • Federal Impact Aid (42500)
  • Federal Flood Control (42200)
  • Wildlife Refuge Funds (41200)
  • Severance Taxes (21200)
  • Revenue in Lieu of Taxes (12800)
  • Local Sales Use Tax for Education (11200)

Coding Changes for 2009-2010
  • Enhanced Educational Funding-Revenue Code 31102
  • ACA 6-20-2305(a)(2)(C)
  • (iii) The General Assembly has determined that
    the funding provided by the subdivision
    (a)(2)(C), which is known as Enhanced
    Educational Funding, is in addition to, and in
    excess of, the amount of funds necessary to
    provide an adequate education as required by the
    Arkansas Constitution.

Coding Changes for 2009-2010
  • Enhanced Educational Funding-Revenue Code
  • ACA 6-20-2305(a)(2)(C)
  • (iv) Enhanced Educational Funding is available
    from a combination of fortunate economic factors,
    conservative budgeting of all state government,
    and the favorable forecast of state revenues. As
    a result, the enhanced component of Enhanced
    Educational Funding cannot be ensured and may not
    be relied on beyond the 2009-2010 school year.

Athletic Expenditures Coding
  • Tracking and accounting for the amount of state
    funds that are used to support interschool
    athletic programs in public schools. (ACA
    6-20-2001 6-20-2004)
  • State funds-All money derived from state
    revenues, specifically including, but not limited
    to, distributions from the Department of
    Education Public School Fund Account and ad
    valorem property taxes distributed to a public
    school or school district.
  • Athletic expenditures-All direct and indirect
    expenses related to interschool athletic
    programs, prorated if necessary.

Athletic Expenditures Coding
  • Interschool athletic program
  • Any athletic program that is organized primarily
    for the purpose of competing with other schools,
    public or private or
  • Any athletic program that is subject to
    regulation by the Arkansas Activities

Athletic Expenditures Coding
  • Athletic expenditures to include but not be
    limited to
  • Salaries and fringe benefits related to athletic
  • Travel, including bus-related operation and
    maintenance, to and from any interschool athletic
    program event for students, faculty, spirit
    groups, band, or patrons of the school district.

Athletic Expenditures Coding
  • Athletic expenditures to include but not be
    limited to Continued
  • Equipment
  • Meals
  • Supplies
  • Property and medical insurance
  • Medical expenses
  • Utilities
  • Maintenance of facilities

Athletic Expenditures Coding
  • Rules Governing Athletic Expenditures for Public
    School Districts-September 2007 (See Appendix
  • Commissioners Memo COM-08-156,
    6/06/2008-Athletic Expenditures and Allocations
    (See Appendix B-2)
  • Commissioners Memo FIN-10-049, 12/30/2009
    Athletic Expenditure Audits (See Appendix B-3)
  • Commissioners Memo FIN-10-051, 1/14/2010 FY10
    Transportation Rates (See Appendix B-4)

Athletic Expenditures Coding
  • Problems reported by Arkansas Division of
    Legislative Audit in Special Report on Athletic
  • For 2008-2009 (48 SE Arkansas districts reviewed)
  • Review adjustments totaled 3.4M (14.7)
  • Athletic expenditures for 23 districts adjusted
    in excess of 10, ranging from 7,759 to 2.0M.
  • 27 districts improperly allocated coaches
  • 9 districts improperly allocated construction

Athletic Expenditures Coding
  • For 2007-2008 (51 NW Arkansas districts reviewed)
  • Review adjustments totaled 3.3M (6.8)
  • Athletic expenditures for 14 districts adjusted
    in excess of 10, ranging from 11,694 to
  • 4 districts did not properly code athletic
    related construction costs.
  • 18 districts did not code the salaries of spirit
    group sponsors and athletic directors as athletic
  • Program code 115 not used in the budget unit of
    all athletic expenditures.

Athletic Expenditures Coding
  • For 2007-2008 (51 NW Arkansas districts
  • 17 districts coded positions such as gatekeepers
    and bus drivers to direct instruction-function
  • 16 districts improperly allocated coaches

Athletic Expenditures Coding
  • For 2006-2007 (50 Central Arkansas districts
  • Review adjustments totaled 4.3M (18.9)
  • Athletic expenditures for 19 districts adjusted
    in excess of 10, ranging from 7,518 to 1.1M.
  • 9 districts failed to properly code athletic
    related construction costs.
  • Salaries of spirit group sponsors and athletic
    directors not coded to athletics.
  • Function code 1150 for direct instruction used
    for all athletic expenditures.

Athletic Expenditures Coding
  • For 2006-2007 (50 Central Arkansas districts
  • 20 districts improperly allocated coaches base
    contract amounts between athletics and
  • www.arklegaudit.gov Select Special Reports
    on the next screen type Athletic Expenditures
    in the search box.

Athletic Expenditures Coding
  • Sanctions for improper coding of Athletic
    expenditures (or other material misstatements in
    reported data)
  • Section 8.00 of ADE Rule-Arkansas Financial
    Accounting and Reporting System and Annual
    Training Requirements (See Appendix B-5)
  • Fiscal Distress (Also in Rule Governing Athletic
    Expenditures for Public School Districts-9.00)
  • Probation, suspension or revocation of
    professional license.
  • Accreditation citation/probation.

Chapter 4 of Arkansas Financial Accounting
Handbook- A Guide for a Minimum Property
Accounting System
  • Expenditures for acquiring capital assets,
    including land, buildings, equipment, vehicles,
    furniture, technology related hardware and
    software, and infrastructure are coded to object
    codes in the 67100-67499 range if the unit cost
    is 1,000 or more.

Chapter 4 of Arkansas Financial Accounting
Handbook- A Guide for a Minimum Property
Accounting System
  • Capital Outlay must meet all of the following
  • Retains original shape, appearance and/or
    character with use.
  • Does not lose its identity through fabrication or
    incorporation into a different or more complex
    unit or substance.

Chapter 4 of Arkansas Financial Accounting
Handbook- A Guide for a Minimum Property
Accounting System
  • It is non-expendable that is, if the item is
    damaged or some of its parts are lost or worn
    out, it is more feasible to repair the item than
    to replace it with an entirely new unit.
  • Under normal conditions of use, including
    reasonable care and maintenance, it can be
    expected to serve its principal purpose for at
    least two years.
  • Unit cost of at least 1,000.

Coding ARRA Revenue Expenditures
  • Commissioners Memo FIN-09-077, 5/07/2009,
    provides the following for American Recovery and
    Reinvestment Act (ARRA) funds
  • Fund/Source of Fund Codes
  • Revenue Codes
  • CFDA
  • Program Code for Expenditures

Coding ARRA Revenue Expenditures
  • Expenditure Program Codes
  • 050 Buildings/Additions, 2500 or more
  • 051 Major Renovations, 2500 or more
  • 052 Equipment, 2500 or more
  • 053 Vehicles, 2500 or more
  • 054 Tech. Hardware/Software, 2500 or more
  • 055 Infrastructure, 2500 or more
  • 056 Program Direct Service (to students)
  • 057 Professional Services
  • 058 All Other

Fiscal Assessment and Accountability Program
  • Indicators of fiscal distress (ACA 6-20-1904)
  • Declining balance determined to jeopardize the
    fiscal integrity of a school district or
    education service cooperative.
  • An act or violation determined to jeopardize the
    fiscal integrity of a school district or
  • Any other fiscal condition of a school district
    or cooperative deemed to have a detrimental
    negative impact on the continuation of
    educational services by that district or

Fiscal Assessment and Accountability Program
  • Fiscal Integrity To comply completely and
    accurately with financial management, accounting,
    auditing, and reporting procedures and facilities
    management procedures as required by state or
    federal laws and regulations in a forthright and
    timely manner.

Fiscal Assessment and Accountability Program
  • Examples of acts or violations
  • Failing to properly maintain facilities
  • Violation of fire, health or safety codes
  • Violation of construction codes
  • State or federal audit exceptions or violations
  • Failure to provide timely and accurate required
    financial reports
  • Insufficient funds to cover legal obligations
  • Failure to meet state expenditure requirements
  • Failure to comply with purchasing or bid
  • Default on debt obligations
  • Material variances between budget and actual
  • Failure to comply with audit requirements

Fiscal Assessment and Accountability Program
  • Fiscal Distress Early Intervention (Act 798 of
  • Commissioners Memo FIN-10-018 provides a
    checklist superintendents can use to determine if
    early intervention should be considered.
  • Early intervention is provided by ADE if it is
    determined that a school district has experienced
    two or more indicators at a nonmaterial
    levelbut without intervention could place the
    district in fiscal distress.
  • Communication requirement is a two-way street
  • By August 31 ADE notifies superintendent if it is
    aware of two or more nonmaterial indicators
    having occurred in the prior school year.
  • By August 31 the superintendent notifies ADE if
    he or she is aware of two or more nonmaterial
    indicators having occurred in the prior school
  • ADE and superintendent to review all data and
    make a determination regarding the need for early

Fiscal Assessment and Accountability Program
  • Fiscal Distress Early Intervention (Act 798 of
  • Within 30 days of determination ADE shall
  • Provides notice to the school districts
    superintendent and board of directors that
  • Describes the nonmaterial indicators
  • Identifies the support available from ADE
  • The board of directors shall place on the agenda
    for its next regularly scheduled meeting a
    discussion of the notice of nonmaterial
    indicators of fiscal distress.

School Management Issues and Updates
Frequent Audit Findings2008-2009
  • Review of 237 Audits (85 of total)
  • 462 Audit Findings
  • 201 findings related to failure to maintain time
    certification records for federally funded
  • 185 findings related to internal control and lack
    of segregation of duties. (See Appendix C-1)

Time Distribution
  • Federal law requires for all employees paid with
    federal funds. This includes Child Nutrition and
    Special Education.
  • Time distribution records are also called PARs
    (personnel activity reports).
  • Time distribution refers to the requirement
    that an employee paid from federal funds
    allocate his time among the funding sources
    that pay his salary.
  • Records must be maintained that reflect this
    distribution of effort, or time distribution
  • Rules for Time Distribution are found in OMB
    Circular A-87.
  • Federal funds can pay for goods or services to
    the extent that there is a benefit to the federal
  • This benefit must be documented.

Time Distribution Records
  • Frequency
  • Does the employee work on one federal program or
    multiple programs?
  • Examples
  • An employee working 50 of time for Title I and
    50 for district would have two programs.
  • An employee working 50 for Title I and 50 for
    Title V would also have two programs.
  • An employee working 100 of his time on Title I
    would have a single program.

Time Distribution Records (Continued)
  • Example
  • Targeted Assisted school wants to set up a
    computer lab. An aide works in the lab. The lab
    is used for Title I - 50 of the time. District
    uses the lab 50 of the time. Time Distribution
    Records would indicate the aide time for federal
    funds Title I 50 of time and district funds -
    50 of time.
  • If appropriate time distribution records are
    maintained to document services, then Title I can
    pay for half the aides salary and benefits.

Time Distribution Record Keeping
  • Time distribution records are above and beyond
    the normal payroll records used by an
    organization to document time and attendance.
  • If an employee works for one federal program,
    then time distribution records are simple.
  • Periodic, semi-annual certifications signed and
    dated by employee or supervisor with firsthand
    knowledge of the work performed are required
    twice a year.
  • Federally-funded employees working for multiple
    programs must keep monthly Personnel Activity
    Reports (PARs). Must be signed and dated by the
    employee, detailing the actual time spent engaged
    in the various programs.

Time Distribution Record Keeping(Continued)
  • Maintain PARS in central audit file by fiscal
  • Time Distribution rules apply to teachers paid
    with federal funds. This includes Special
  • Can I use lesson plans as the required time
  • Yes
  • If written schedules were followed.
  • If notes are made after the fact to indicate
    completion of each activity.
  • If lesson plans account for the total time
    compensated for.
  • If lesson plans are prepared at least monthly and
    coincide with pay periods.
  • If completed lesson plan is signed by the
  • If lesson plans are retained and maintained as
    time and attendance.

Blanket PARS Certification
  • If several employees work full time on the same
    program, then blanket semi-annual certification
    can be filed.
  • The supervisor filing the blanket certification
    must have actual, firsthand knowledge of the work
    that the employees perform.
  • Required once every six months.

Sample Personnel Activity Reports/Time
Certification Forms
  • Commissioners Memo FIN-10-041 dated 11/06/2009
    includes Sample PAR and Time Certification forms.

Solving Internal Control Audit Findings
Internal Control
  • A process to
  • Create reliability of financial reporting
  • Assess risk
  • Control preventable loss
  • Promote efficiency and effectiveness of
  • Ensure compliance with applicable law/rules
  • Promote public trust

Purpose of Internal Control Policy
  • Internal control gives the school board and
    administration reasonable assurance that the
    district/charter will
  • Achieve its goals
  • Operate effectively and efficiently
  • Provide accurate and reliable financial data
  • Operate in compliance with current federal and
    state laws and rules

What are the Goals of Internal Control?
  • Limit opportunity for theft or unauthorized use
  • Ensure proper and legal expenditure/disbursement
  • Detect errors and fraud in a timely manner
  • Alert management of relevant required courses of
  • Provide accurate financial information
  • Provide documentation of proper accounting
  • Provides reasonable assurance that misstatements,
    losses, noncompliance with laws/rules would be
  • Promote public trust and confidence

Five Components of Internal Control
  • Control Environment
  • Risk Assessment
  • Control Activities
  • Information and Communication
  • Monitoring
  • See Appendix D-1 for Discussion of Each

Key Control Activity
  • Segregation of Duties
  • Lack of segregation of duties is one of the most
    frequent audit findings.
  • Idea is for individuals responsible for making
    entries to the general ledger, to not have access
    to subsidiary records that support entries to the
    general ledger.
  • Districts with one person accounting offices
    often have inadequate segregation of duties.

Control Activities (Continued)
  • Examples of Needed Duty Segregation
  • Authorization and maintenance of approved vendor
    files and entry of accounts payable.
  • Set up new employee records and issue payroll
  • Fixed asset physical inventory and maintain fixed
    asset inventory in computer system.
  • Process checks or bank deposits and reconcile
    bank account.

Control Activities (Continued)
  • Cost/Benefit analysis for having adequate
    segregation of duties
  • The cost of adding personnel can be easily
  • The benefit of having adequate segregation of
    duties is not as easily measured.
  • The superintendent and the board should carefully
    assess the risk of having too much control in the
    hands of one person.

How will you know Internal Controls are working?
  1. Risks are appropriately identified and managed
  2. Interaction of the various governance groups
  3. Significant financial, managerial, and operating
    information is accurate, reliable, and timely
  4. Employees conduct and actions are in compliance
    with policies, applicable laws and regulations
  5. Employees are trained to be responsible for
    notifying the superintendent/director of
    irregular circumstances
  6. Resources are acquired economically, used
    efficiently, and adequately safeguarded
  7. Quality and continuous improvement are
  8. Significant regulatory issues are recognized and
    addressed appropriately.

Other School Management Issues and Updates
Federal Contracts
  • Concerns
  • Davis-Bacon Act (DBA)
  • Debarment (EDGAR, 34 CFR Part 85 covers
    debarment for contracts which include federal
  • Legislative Audit and the U. S. Department of
    Labor are monitoring school districts compliance
    on these issues.

Davis-Bacon Act (DBA)
  1. Applies to federal contracts of 2,000 or more.
  2. Applies to federal contracts for construction,
    renovation, and/or repair. This would include
    painting, running conduit, and installing white
  3. Applies to the entire project if any part of the
    project is paid with federal funds.

Davis-Bacon Act (DBA)
  • District is responsible for ensuring that
    contractors comply with DBA.
  • Monitoring Requirements include
  • Requiring contractors to provide weekly
    copies of certified payroll with original
    signature and maintain for audit purposes.
  • Verifying rates in all classes of workers.

Davis-Bacon Act (DBA)
  • Conducting interviews to verify pay received
    and hours worked per week. (Prevailing rate is
    the rate of pay established in approved
    contract. Rate may change in market, but not
    for the approved contract.)

Davis-Bacon Act (DBA)
  1. Legislative Audit and the U. S. Department of
    Labor are monitoring to determine district
  2. Required to keep all records and documentation
    for three (3) years under federal law.

Davis-Bacon Act (DBA)
  • 8. It is the Department of Labors interpretation
    that any school district, charter school, or
    educational cooperative that accepts funds for
    construction purposes assumes the role of the
    federal government becoming the Contracting
    Officer referred to in the wage law.

  • The Education Department General Administrative
    Regulations (EDGAR)34 CFR Part 85 contains the
    requirements for entities receiving contracts
    paid with federal funds. Part 85 covers all
    federal education programs including ARRA.

  • The Excluded Parties List System (EPLS)
    identifies parties excluded from receiving
    federal contracts.
  • EPLS includes the names and other valid
    information for all contractors debarred,
    suspended, excluded, or disqualified for
    procurement contracts.
  • This list can be found at https//www.epls.gov
  • Commissioners Memo FIN-10-047 found at
    contains the Arkansas Department of Education
    guidance on debarment.

  • Contractors debarred are excluded from receiving
    contracts, and districts shall not award
    contracts to these contractors.
  • After receiving bids or proposals, the district
    shall review the EPLS. Keep a printout from EPLS
    to document the district verified the
    contractors status and complied with the

  • Bids received from debarred contractors shall be
    entered on the list of bids and rejected.
  • Prior to the awarding of the contract, the
    district shall again review EPLS to ensure that
    no contract is made with a debarred contractor.

  • Debarment applies when federal contract is
    expected to equal or exceed 25,000.
  • Debarment shall not exceed three (3)
  • years.
  • Districts need to verify status before awarding a
    federal contract equal to or exceeding 25,000.

  • Three methods to comply with debarment
    requirements as per Legislative Audit
  • Verify status of contractor by accessing the EPLS
    system. Print report to verify for audit.
  • Vendor could provide certification that they have
    not been debarred and are not currently on the
    excluded parties list.

  • 3. District can make it a requirement of the
    contract that in order to contract with any
    vendor where the cost of the contract exceeds
    25,000 that the contract must include a
    statement that the vendor is not currently on the
    federal government excluded parties list (EPLS).

Homeless Expenditure Requirements
  • Districts and Charter Schools are required to
    serve Homeless children.
  • Districts are required to reserve Title I, Part
    A funds as may be necessary to serve Homeless
    students attending both Title I and non-Title I

Homeless Expenditure Requirements
  • Services provided to Homeless students must be
    comparable to services provided to students
    attending Title I schools.
  • Districts may provide Homeless students with
    educationally-related support services such as
    tutoring, an item of clothing to meet a schools
    dress or uniform requirements, summer school,
    medical, dental, eyeglasses, immunization, and/or
    school supplies. (Must document not readily
    available from other sources.)

Homeless Expenditure Requirements
  • Title I funds may not be used to pay for a
    Homeless students living expenses, drivers
    license fees, extracurricular activities, or
    transportation to and from their school of
  • Homeless students may receive services not
    offered to other Title I students.

Homeless Student Definition
  • Children who lack a fixed, regular, and adequate
    nighttime residence including
  • Students who are sharing housing with friends or
    relatives because of a loss or hardship.
  • Families living in transitional housing that is
    designed to move people from homelessness to a
    housed state.
  • Children who are abandoned in hospitals or are
    awaiting foster care.

Homeless Student Definition
  • Children living in hotels and motels that are
    designed for low-income residents.
  • Students living in inadequate housing or housing
    not appropriate for habitation, such as
    campgrounds, cars, parks, public spaces,
    abandoned buildings, bus or train stations, or
    other inadequate facilities like garages or sheds.

Homeless Student Definition
  • Unaccompanied youth who have run away or been
    pushed out by parents and are living in
    shelters or with friends or relatives.
  • Migrant students who qualify as homeless because
    of their living situation.
  • All Homeless students are eligible for Title I
    regardless of whether they are enrolled in a
    Title I school or are struggling academically.

Required Set Aside Homeless Students
  • Federal law requires that districts set aside
    funds to serve Homeless students.
  • Statute does not define a formula for determining
    the appropriate amount to set aside.

Required Set Aside Homeless Students
  • Suggested method Obtain estimated count of
    Homeless students in district and multiply the
    number by the districts Title I, Part A per
    pupil allocation. Set that amount aside in the
    ACSIP budget. Currently, Homeless is budgeted
    under 3351 Welfare.

Homeless Caution
  • Recent states monitoring has cited districts for
    under-identifying homeless students.

Identifying Homeless Students
  • Use the comprehensive Homeless definitions in
    estimating Homeless students.
  • Do not pick out one or two of the Homeless
    definitions, use all seven!

Homeless Resource
  • U. S. Department of Education Non-Regulatory
    Guidance for Education for Homeless Children and
    Youth Program can be found at the website below
  • http//www.ed.gov/programs/homeless/guidance.doc

Title ISection 9521 of ESEA34 CFR 299.5
  • Maintenance of Effort (MOE) is required by
    federal law to ensure that federal funds are not
    used to replace state and local funds.
  • Maintenance of Effort (MOE) is a district-level
    test that measures whether a district is
    providing a consistent level of local and state
    support from year to year.

  • Districts may seek a waiver of MOE by
    demonstrating that the decline in MOE was the
    result of an exceptional or uncontrollable event
    or a drastic decline in financial resources.
  • (Section 9521(c))

  • The following ESEA programs are subject to the
    maintenance of effort requirement
  • Title I, Part A
  • Title I, Part A, ARRA
  • Title I, Part D, Neglected/Delinquent Programs
  • Title II, Part A Improving Teacher Quality
  • Title II, Part D Educational Technology
  • Title III, Part A English Language Learners
  • Title IV, Part B 21st Century Community Learning
  • Title VI, Part B, Subpart 2 Rural Education

  • The MOE provision requires that LEAs maintain at
    least 90 of their level of expenditures for
    programs from state and local funds from one year
    to the next.
  • The LEA cannot reduce the amount it spends for
    educational programs from state and local funds
    and just pay for those programs from federal

  • A district may receive its full allocations of
    ESEA funds only if it has met the MOE
  • If a districts expenditures from state and local
    funds fall below the 90 threshold, the state
    must reduce the districts ESEA allocations by
    the percentage below the minimum that
    expenditures fell short.

What expenditures are included in the MOE
  • State and local funds for education
  • Administration
  • Instruction
  • Attendance and Health Services
  • Transportation
  • Operation and Maintenance of Facilities
  • Fixed Charges
  • Net expenditures to cover deficits for food
    services and student activities

MOE calculations should not include
  • Community services
  • Capital outlay
  • Debt services
  • Expenses incurred as a result of a presidentially
    declared disaster
  • Expenditures from funds provided by federal

Maintenance of Effort
  • If a district is using ARRA funds as local funds
    for purposes of meeting the MOE provision,
    districts must remember that in FY 2011 when the
    ARRA funds expire, the district will have to
    maintain the MOE obligation from regular local
    and state funds.

Maintenance of Effort
  • For the latest ADE guidance, see FIN-10-040
    issued November 17, 2009.

Special EducationMaintenance of Effort
  • Reminder Special Education has a 100
    requirement on Maintenance of Effort.

Special EducationMaintenance of Effort
  • Exceptions to 100 requirement are
  • The voluntary departure, by retirement or
    otherwise, or departure for just cause, of
    special education personnel
  • A decrease in the enrollment of identified
    children with disabilities

Special EducationMaintenance of Effort
  • The termination of the obligation to provide
    special education program to a particular child
    with a disability that is an exceptionally costly
    program because the child has left the district,
    has reached the age at which the LEA obligation
    has ended, or the child no longer needs special
    education services or

Special EducationMaintenance of Effort
  • The termination of long-term costly expenditures
    in a special education project, such as
  • For further special education requirements see
    IDEA Section 613.

Current NSLA Funding
  • Current NSLA funding levels
  • 90 or above F/R 1,488
  • 89 to 70 F/R 992
  • 69 and below F/R 496

NSLA Transitional Funding
  • Beginning in 2009-2010, if the percentage of
    eligible F/R students changes enough to result in
    a change in the level of NSLA funding, then NSLA
    Transitional Funding goes into effect.

NSLA Transitional Funding
  • The amount of NSLA funding per eligible F/R
    student shall be increased or decreased in each
    year of a three-year transition period by
    one-third of the difference between the NSLA
    funding per student for the current year and the
    amount of NSLA funding in the immediately
    preceding school year.

NSLA Transitional Funding
  • Example
  • For 10-11 the district has lost NSLA poverty
    students and a decrease is due
  • Level 09-10 l,488
  • Level 10-11 992
  • 496 3 165.33/year

Example District Lost NSLA Poverty
  • Year 1 1,488.00
  • - 165.33
  • 1,322.66 x eligible F/R students
  • Year 2 1,322.66
  • - 165.33
  • 1,157.34 x eligible F/R students
  • Year 3 1,157.34
  • - 165.34
  • 992.00 x eligible F/R students

NSLA Transitional Funding
  • Example
  • For a district that has increased in NSLA poverty
    students and an increase is due
  • Level 09-10 992
  • Level 10-11 1,488
  • 496 3 165.33/year

Example District Increased NSLA Poverty
  • Year 1 992.00
  • 165.33
  • 1,157.33 x eligible F/R students
  • Year 2 1,157.33
  • 165.33
  • 1,322.66 x eligible F/R students
  • Year 3 1,322.66
  • 165.34
  • 1,488.00 x eligible F/R students

Website Requirements
  • Current laws related to school district/ charter
    school website requirements
  • A.C.A. 6-11-129
  • A.C.A. 6-13-619
  • A.C.A. 6-13-620
  • A.C.A. 6-15-2202

Website Requirements
  • As per A.C.A. 6-13-620, district/charter school
    must publish and maintain a website populated
    with the most current information, including
  • Board minutes
  • Budgets
  • Monthly expenses
  • Salary schedules for ALL employees
  • Annual audit
  • Annual financial report
  • Annual contract information

Website Requirements
  • A.C.A. 6-11-129 increased the information that
    must be on a districts/charters website.
  • Minutes of regular and special meetings of the
  • Current year budget within 30 days after
    submission to ADE
  • Monthly expenditures of the district/charter
  • Financial reports indicating local and state

Website Requirements
  • School district/charter school balances
  • Salary schedules for all employees, including
    extended contracts and supplemental pay schedules
  • Current contract information for all current
    school employees
  • Annual statistical/financial report for
    district/charter school
  • Current annual budget
  • Personnel policies

Website Requirements
  • A.C.A. 6-15-2202 increased information required
    by districts/charters to be posted on their
  • ACSIP School Improvement Plan
  • Uses of NSLA funding - current and previous year
  • Annual district/school report card
  • School Improvement status of each school in
    parent friendly language
  • Supplemental services available

Website Requirements
  • District status on any type of distress
  • Distress plans
  • Parent Involvement Plan and Policy
  • Teacher qualifications for all schools
  • Compliance is required for accreditation. Data
    must be easily accessible and shall be the actual
    data for two previous school years.

Website Requirements
  • As per A.C.A. 6-15-2202, the Department of
    Education shall monitor annually for compliance
    with website requirements and shall report
    failures in compliance to the State Board of

Website Requirements
  • A.C.A. 6-13-619 requires that school board
    meeting notice must be published on the website
    10 days prior to meeting.
  • If a school board meeting date is changed,
    district/charter school must publish new meeting
    date, time, and location not less than 24 hours
    prior to rescheduled meeting.

IT Security
  • A.C.A. 6-11-128 requires ADE to formulate
    security policies.
  • Commissioners Communication RT-09-010 outlined
    the security requirements established by ADE.
    (See Appendix E-1)

IT Security
  • ADE implemented security policies in cooperation
    with DIS and a security vendor, Coalfire.
  • ADE established standards for districts/ charters
    to implement regarding information/data security,
    access procedures, continuity plans, and
    emergency procedures.

IT Security
  • Legislative Audit is auditing for security
    compliance. Currently, problem is identified as
    a supplemental finding when missing. Beginning
    in 2010-2011, any failure to comply will be a
    more serious finding.

IT Security
  • Policy Statements
  • District management and IT staff will plan,
    deploy, and monitor IT security mechanisms,
    policies, procedures, and technologies necessary
    to prevent disclosure, modification or denial of
    sensitive information.
  • Physical access to computer facilities, data
    rooms, systems, networks and data will be limited
    to those authorized personnel who require access
    to perform assigned duties.

IT Security
  • Policy Statements, continued
  • 3. Network perimeter controls will be implemented
    to regulate traffic moving between trusted
    internal (District) resources and external,
    untrusted (internet) entities. All network
    transmission of sensitive data should enforce
    encryption where technologically feasible.

IT Security
  • Policy Statements, continued
  • System and application access will be granted
    based upon the least amount of access to data and
    programs required by the user in accordance with
    a business need-to-have requirement.
  • Application development and maintenance for
    in-house developed student or financial
    applications will adhere to industry processes
    for segregating programs and deploying software
    only after appropriate testing and management

IT Security
  • Policy Statements, continued
  • Monitoring and responding to IT related incidents
    will be designed to provide early notification of
    events and rapid response and recovery from
    internal or external network or system attacks.
  • To ensure continuous critical IT services, IT
    will develop a business continuity/disaster
    recovery plan appropriate for the size and
    complexity of District IT operations.

IT Security
  • Policy Statements, contd
  • 8. Server and workstation protection software
    will be deployed to identify and eradicate
    malicious software attacks such as viruses,
    spyware, and malware.

IT Security
  • Audit checklist for IT practices is on the
    Legislative Audit website. www.legaudit.state.ar.u
  • (Check Resources, then Publications, then IS
    Application Audit Checklist)
  • Requirements include Location Security, Access,
    Disaster Plan, Network Security, Continuity

Continuity Plan Requirements
  • Legislative Audit and DIS have established that a
    district/charter continuity plan must contain the
    following elements, which are FEMA standards
  • Essential daily processes for all divisions/
    units at a school. Examples are Administration,
    Information Technology, Maintenance,
    Instructional Staff, Food Services

Continuity Plan Requirements
  • Order of Succession. Include the primary,
    secondary, and tertiary persons to take over a
    specific essential job if the person assigned to
    that position is no longer a
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