Spring 2023 UPDATE

Evidence-Based Funding: How Districts

How the Pieces Fit

Business departments within school districts are facing an increasing array of responsibilities, from handling financial transactions and budget planning to overseeing procurement and compliance with various regulations. With the rise of reporting requirements and accountability measures, this department is tasked with an ever-growing workload. Having a good understanding of how the pieces fit can ensure the financial health of your school district.

By Tera Wagner

Cover Story by Eric DePorter, Frances LaBella and Brian O’Keeffe

The Evidence-Based Funding (EBF) Spending Plan will appear in the annual budget form (SD 50-36) beginning in FY24. This article provides key details to help you prepare for the revised spending plan.

By Luke Corry

If you are not familiar with what a Single Audit entails, chances are your school district has not historically expended a significant amount of federal awards that are subject to Uniform Guidance. This article will discuss when a Single Audit is required for your school district and how to prepare for it.

By Stephanie Jacobs

Off Balance Sheet Liabilities

There are items that districts now report in their financial statements that previously may have been “off-balance-sheet.” This article will focus on those items that could impact a district’s operations that maybe are not reported on the financial statements.

By Matthew Geerdes

Are you thinking about going out for Request for Proposal (RFP) for an auditing firm? Gain insight on steps to take when selecting an auditing firm.

By Melissa Morgese

GATA 101 for LEAs

State and federal agencies allocated billions of dollars in grant funds to assist Local Education Agencies (LEAs) in navigating competing priorities for health, safety and education services. Gain an understanding of the process from start to finish with the Grant Accountability and Transparency Act (GATA).

By Kristopher R. Pickford

The Final Word

Asst. Superintendent for Business Services, CSBO

Adlai E. Stevenson HSD 125

Sean’s role as a school business official is to effectively manage the balance between the financial obligation on taxpayers and operational needs of the organization to ensure success for every student. Sean believes that even though the business office is not in the classroom and they do not work directly with students, they are still a very important part of the process.

A Checklist for Selecting an Audit Firm 47

CALENDAR OF EVENTS

Check out www.iasbo.org for the latest Calendar of Events included in the UPDATE mailing to see full seminar listings including location, PDC sponsorship and registration information.

Illinois Association of School Business Officials

Northern Illinois University, IA-103 108 Carroll Avenue DeKalb, IL 60115-2829

P: (815) 753-1276

F: (815) 516-0184

www.iasbo.org

UPDATE Editorial Advisory Board

PDC MEMBERS

Karen Hayes Accounting Auditing & Financial Reporting

Timothy J. Gavin Budgeting & Financial Planning

Maureen Jones Cash Management, Investments & Debt Management

Raoul J. Gravel III, Ed.D. Communications

Seth Chapman Diversity, Equity & Inclustion (DEI)

Wendy Sedwick Food Service

Brian K. O’Keeffe Human Resource Management

Mindy Bradford Leadership Development

Frances A. LaBella Legal Issues

Doug Renkosik Maintenance & Operations

Michael Eichhorn Planning & Construction

Myron Spiwak Principles of School Finance

Trevor Moore Public Policy, Advocacy & Intergovernmental Relations

Nicole Kennedy Purchasing

Justin D. Veihman Risk Management

Jacquelyn Bogan Special Education

Eric Rogers Sustainability & Environmental Health

Tony Inglese Technology

Kenneth E. Surma Transportation

BOARD & EXTERNAL RELATIONS MEMBERS

Eric DePorter President

Steven J. Kowalski SAAC Chair

STAFF MEMBERS

Michael A. Jacoby, Ed.D., SFO, CAE

Executive Director / CEO (815) 753-9366, mjacoby@iasbo.org

Michael Van De Voort, MBA Director of Marketing (815) 764-9353, mvandevoort@iasbo.org

Craig Collins Statewide Professional Development Coordinator, (630) 442-9203, ccollins@iasbo.org

Stacia Freeman Senior Manager of Branding and Communications (815) 762-1177, sfreeman@iasbo.org

Kevin Nelligan Graphic Designer (815) 753-7654, knelligan@iasbo.org

Russ Coomans Communications and Marketing Coordinator, (815) 762-0265, rcoomans@iasbo.org

Chris Harley Membership, Communications and Marketing Coordinator, (815) 762-2048, charley@iasbo.org

Illinois ASBO Board of Directors

Eric DePorter President

David Bein, Ph.D., SFO President-Elect

Tamara L. Mitchell Treasurer

Jan J. Bush Immediate Past President

2020–23 Board of Directors

Anthony R. Arbogast, Edward J. Brophy, Patrick McDermott, Ed.D., SFO

2021-24 Board of Directors

Todd R. Drafall, Sean Gordon, CPMM, CPS, Raoul J. Gravel, III, Ed. D.

2022–25 Board of Directors

Alicia M. Cieszykowski, Melissa L. Morgese, Dr. Kevin T. Werner, CPA

Illinois ASBO Board Liaisons

Steven J. Kowalski Service Associate Advisory Committee Chair

Ed Wright, AIA;LEED AP BD+C Service Associate Advisory Committee, Vice Chair

Perry Hill IASB Board Liaison

Legal Standards for the Management of School Personnel AAC #820

Method to Grow Leadership & Communication Skills AAC #1500

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All materials contained within this publication are protected by United States copyright law and may not be reproduced, distributed, displayed or published without the prior written permission of the Illinois Association of School Business Officials. You may not alter or remove any trademark, copyright or other notice from copies of the content.

References, authorship or information provided by parties other than that which is owned by the Illinois Association of School Business Officials are offered as a service to readers. The editorial staff of the Illinois Association of School Business Officials was not involved in their production and is not responsible for their content.

FROM–THE–PODIUM

Overcoming the Current Challenges in Accounting

Welcome to the Spring 2023 UPDATE! This issue is focused on Accounting and touches on several topics that every business office will likely need to address. I would like to give a quick thank you to the many authors and contributors within this issue who have taken the time to share their expertise.

If you find yourself in a conversation about public education with people who don’t work in the field, I’m guessing the topics of accounting and reporting very rarely come up. They just aren’t areas that the general public thinks about when they are discussing the different hot topics connected to education these days. To me that’s a crying shame, who wouldn’t want to talk about accounting? Of course, I’m kidding, but for those of us who are tasked with keeping our district in good standing, there are quite a few new challenges that we absolutely need to be talking about.

SIMPLY SAYING

Eric DePorter ASSISTANT SUPERINTENDENT OF FINANCE, FACILITIES AND OPERATIONS/CSBO GLEN ELLYN SCHOOL DISTRICT 41

Staying current with new reporting requirements will be vital to ensure that you and your district are prepared for success. Many of these new requirements are small and really won’t require a great deal of time, but committing time to educate yourself on what exactly needs to be completed is essential. While I’m referring to a few of the new reporting requirements addressed in this issue, keeping energized and staying on top of all the routine reporting tasks completed within the business office is certainly something we all need to focus on.

When it comes to addressing the required state or federal tasks that come up during the course of the year, I like to focus on completing what needs to be done and then quickly transitioning on to other tasks. Not everyone works the same way. When I see a team member who is struggling with completing routine tasks on a timely basis, I like to mention the simple quote by John F. Kennedy, “Things do not happen. Things are made to happen.” Don’t overcomplicate things, instead just focus on moving ahead and do what’s needed to help your district provide the very best opportunities you can for the communities you serve.

I hope you are having a great year and don’t forget to make the most of today, you don’t get to do it over!

Staying current with new reporting requirements will be vital to ensure that you and your district are prepared for success.

FROM–THE–OFFICE

Conducting in the World of School District Accounting

Someone once told me that a great leader is like an orchestra conductor. With my background in music – I listened. It’s the idea of waving your baton and each part of the organization comes in just when they are supposed to and they all make music together that sounds glorious. So, our UPDATE issue today is about one section of the orchestra called “accounting.”

Applying this analogy, the school business leader would wave his or her baton and accounting would show up, then in comes operations, then technology, then transportation and so on. And when everything is coming in together, they all work marvelously to create a thing of beauty. As much as we would like to believe that happens – THE ANALOGY IS A

MYTH! In reality, leadership is more like conducting an orchestra during rehearsals, when everything is going wrong. A true leader is the one who knows how to rehearse the right things and make the appropriate adjustments to make it go right.

SIMPLY SAYING

And so, this issue is dedicated to one function that better go right more than it goes wrong and the school business leader had better know how to address all the facets of it before, during or after it goes wrong. That is why this issue focuses on Accounting for Every Dollar. It gets at the heart of what school business professionals bring to a school district. Just take a look at the table of contents and you will see it unveils a host of issues that if not performed or dealt with according to the highest of professional standards, could result in the financial failure of a school district.

• How Districts are Discussing Return on Investment for EBF

• Preparing for Single Audits

• Off Balance Sheet Liabilities

• GATA Reporting

• EBF Reporting

Whether you are discussing the ROI of the EBF distribution, preparing for a Single Audit for the first time, struggling

with GATA reporting or communicating how EBF dollars are spent, a highly trained school business professional can make a huge impact. Illinois ASBO is wholly committed to developing and growing school business professionals that need to orchestrate these issues. And when I say Illinois ASBO, I’m not talking about just the Board of Directors or the Illinois ASBO staff. I’m referring to its members. With nearly 1800 voices joining together to identify and advance best practices, a school district can virtually guarantee that it will be well served when it employs a member of our association.

The Mission Statement of Illinois ASBO is to provide our members and stakeholders with a comprehensive range of professional development activities, services and advocacy through inclusive networking and participation. Think of our UPDATE as just another way to learn and grow. In a nutshell that is professional development!

Now go make some amazing music!

ILLINOIS ASBO

A true leader is the one who knows how to rehearse the right things and make the appropriate adjustments to make it go right.

ILLINOIS ASBO

Taking place at the Weaver Ridge Golf Club of Peoria, the day will have something for everyone! Enjoy a day on the course, participate in contests to win prizes and networking with friends and colleagues.

FROM–THE–FIELD

Identify, Manage and Communicate Your Plans

Let’s set the scene: You are a Business Manager who just drove through some light snow to get to the office. The workspaces are quiet as you arrived a little early. You settle into your warm space and gaze out of your window for a moment to enjoy the apricity of the cold wintery day. The visible steam is rising from your hot cup of coffee, and you are ready to start your meetings. Your phone rings, and it is your trusted Facility Director. She is likely confirming the morning’s meeting. You answer: “Hello.” She blurts out: “The boilers are down at the elementary school, and the classrooms are getting very cold.” You feel like you have just been punched in the mouth!

SIMPLY SAYING

Steven Kowalski BUSINESS DEVELOPMENT MANAGER PERFORMANCE SERVICES, INC.

We all know where the story goes from here. The discussion is about emergency repairs, “throwing good money after bad,” not having enough time to properly design and replace those aging systems with new efficient technology, not to mention the decision to send kids home or not. Ugh!

In my experience as a Service Associate, the most important accounting practices for K12 schools seem to fit into three categories; identify, manage and communicate.

Planning for rising costs is a challenge but getting hit with unexpected costs is even harder. Many districts work with multiple Service Associates to collaboratively create expenditure planning documents. A well thought out plan can help identify, manage and communicate budgets that reduce unexpected costs and create significant future savings. From life cycle costing to grant opportunities to energy and operating costs, administrators are tasked to budget for a myriad of current and future expenditures. When planned out proactively in a timely manner, districts benefit from economies of scale, reduced emergency repairs, lower bids, competitive grants and a host of other cost saving strategies.

Whether you are trying to identify, manage or communicate your budgets, the articles in this edition of the UPDATE, will help you along the way. Also, your Illinois ASBO Service Associates are always here to work as an extension of your team.

“Everyone has a plan until they get punched in the mouth.” — Mike Tyson

CONTRIBUTORS

Luke Corry Senior Resource Allocation Policy Specialist Illinois State Board of Education

Prior to joining ISBE, Luke spent seven years as a school leader (assistant principal and principal) in a Chicago charter school. In his current role, Luke manages the implementation of strategic initiatives that seek to coordinate efforts across agency departments to support efficient and effective resource allocation in school systems.

lcorry@isbe.net

Eric DePorter, CSBO Asst. Supt./Finance, Facilities & Operations Glen Ellyn SD 41

Began his education career in 2010. Eric has an economics degree from the University of Illinois, and a masters degree in Northern Illinois University. He is a member of the Accounting, Auditing & Financial Reporting PDC and is the current President of Illinois ASBO. edeporter@d41.org

Is a Senior Manager in Crowe LLP’s Accounting Advisory Group in Oak Brook, Illinois, and has over 21 years of experience in public accounting providing auditing, consulting and accounting advisory services to governmental and not-for profit organizations. matt.geerdes@crowe.com

Manager Baker Tilly US, LLP

Has over 11 years of experience auditing local governments, including K-12 school districts, with seven of those years with a primary focus on Single Audits. Stephanie has been with Baker Tilly US, LLP for over a year managing the Single Audits for clients and providing Single Audit guidance to engagement teams throughout the firm.

stephanie.jacobs@bakertilly.com

Joined District 161 in July 2012 from Evergreen Park Elementary District 124 where she served as Assistant Superintendent since 1996. Fran has a Bachelor’s degree in Accounting from Villanova University and a MBA with a concentration in Finance from the University of Notre Dame. Fran has been an active member of Illinois ASBO since 1995.

flabella@sd161.org

Prior to joining Wheeling CCSD 21 in 2019, Melissa spent thirteen years in the business office at Elmwood Park CUSD 401. Melissa is currently serving on the Illinois ASBO Board of Directors and is a past-chair of the Illinois ASBO Accounting, Auditing & Financial Reporting PDC.

melissa.morgese@ccsd21.org

Matthew Geerdes Senior Manager Crowe LLP

Stephanie Jacobs, CPA

Frances LaBella, CSBO Asst. Supt./Business Operations Flossmoor District 161

Melissa Morgese Dir./Business Services Wheeling CCSD 21

Brian O’Keeffe, CSBO, Ed. D., SFO Asst. Supt./Business Operations

Wheaton CUSD 200

Began his education career in July 2009. He has worked in a special education cooperative school district, an elementary school district and now a unit school district. He is currently the HR PDC Chair and is the Co-Chair of DuPage Regional Organization at Illinois ASBO. Brian received his Educational Leadership Ed.D. from Western Illinois University. brian.okeeffe@cusd200.org

Kristopher Pickford

Director GATA

Illinois State Board of Education

Prior to joining the Illinois State Board of Education in 2021, Kris spent ten years as the Senior Director of Financial Compliance and Grant Accountability at the Illinois Community College Board. He has also served as the Chief Accountability Officer at both institutions.

Tera A Wagner, CSBO Director of Finance

CHSD 230

Joined District 230 as the Director of Finance in August 2016 from Crete-Monee School District 201-U where she served as Accounting Supervisor since 2011. Tera’s career in government accounting started in 1993. Tera furthered her education by earning a Master’s degree in Accounting and Bachelor’s degree in Accounting & Public Administration from Governors State University. She then achieved her CSBO from Northern Illinois University.

kpickfor@isbe.net

twagner@d230.org

How the Pieces Fit

Business departments within school districts are facing an increasing array of responsibilities, from handling financial transactions and budget planning to overseeing procurement and compliance with various regulations. With the rise of reporting requirements and accountability measures, this department is tasked with an ever-growing workload.

Why do the details matter? How accounting practices performed today affect the end of year reporting. Business departments within school districts are facing an increasing array of responsibilities, from handling financial transactions and budget planning to overseeing procurement and compliance with various regulations. With the rise of reporting requirements and accountability measures, this department is tasked with an ever-growing workload. Despite the growing demands, it is essential that proper procedures and internal controls are in place to prevent fraud and ensure the financial health of the school district. Therefore, having well-trained, efficient staff and implementing strong internal controls are critical to the success of this department. This includes your annual audit, grant reporting and year-end closing. Do you know if your staff are familiar with and utilize the resources available to them for your district to maintain compliance with the Illinois State Board of Education (ISBE)?

ARTICLE By Tera A Wagner,

The Illinois State Board of Education, State and Federal Grant Administration; Illinois School Code - 23 Illinois Administrative Code Part 100 (formerly IPAM) provides the basis and legal framework of school district accounting. It is imperative that your staff are aware that “the primary consideration to any public agency is demonstration of prudent stewardship of funds.” Further consideration and discretion should always be maintained when spending district funds.

The business services department is entrusted with ensuring compliance that begins with the accounts payable department. Accounts payable may be responsible for entering, approving and/or processing purchase orders, e-commerce processing, procurement cards, check requests, travel and expense reimbursement, petty cash, maintaining vendor files including processing W-2’s and 1099’s and internal controls. This list is not all encompassing and can get explosive with each district distributing the duties differently. Management must take into consideration internal controls along with separation of duties. Some departments are so small that one person may have many hats that overlap, making this difficult.

Who within your district has the authority, based on Board policy, to sign contracts or enter into agreements?

Purchase orders are required to create the encumbrance to obligate funds to purchase goods or services. This provides the necessary approvals to maintain compliance with Federal, State and local regulations regardless of the revenue source. Most procedures require advance approval of purchases with defined ship to and bill to criteria. Backdating of a PO is not permitted. Receiving documentation is part of the invoice matching process that is part of the internal controls. There should be a separation between who initiates, approves and processes PO’s; generates the accounts payable checks and reconciles the bank accounts. Having multiple layers of approval can be cumbersome but provides that extra layer of scrutiny to ensure all purchases fall within the scope and have an educational purpose.

be overstated as capital is backed out of this calculation. This calculation appears in the AFR and school report card. Another common mistake is charging an employee's pay to a purchased service or vice/versa causing 941’s and W-2’s not to reconcile.

Accounts payable should perform matching the invoice to the packing slip to the purchase order. Staff receiving should identify if goods are partially or fully received. Accounts payable date/time stamps invoices when received to comply with audit requirements. They run the check registers, post to the general ledger, prepare vouchers, print checks, file, distribute reports according to district procedures and mail checks. A dual review of the check register should be performed to verify what is entered matches what is being processed. Any discrepancies should be researched and reported to the next level of management if necessary.

It is best practice for invoices and statements to go to accounts payable directly with purchase orders specifying the remit address. Never pay from a quote or statement of account as you are not able to see the invoice details in this manner. Establish standardized procedures and identify a method that allows your AP system to capture duplicate payments. If there is no invoice number, the date of service (MMDDYY format) is a good example to adhere to and stay consistent.

Coding invoices should follow the Illinois School Code - 23 Illinois Administrative Code Part 100 (formerly IPAM) to ensure compliance and conformity with ISBE. Coding is standardized to include fund, function and object. Your district may also include location, program and source of funds. It is imperative to code your expense correctly. For example, if an error is made coding a capital outlay purchase as supplies, the operating expense per pupil will

Vendor management: establish procedures for adding and verifying new vendors or addresses. Do they complete a W-9? If ACH information is received, are you calling the vendor directly (from a number you have on file, not one in their correspondence) to verify. Fraud is at an all-time high and we are required to perform our due diligence in ensuring what we perform is accurate. Performing vendor cleanup annually is a good practice to maintain your database. Most software programs have utilities to inactivate vendors with no payments for 2-3 years. Performing utilities to merge duplicate vendors can assist in identifying there are no ghost vendors. Someone outside of accounts payable should perform this.

Procurement cards fall within accounts payable and/or the business department. Most financial systems import all transactions. This should then have the capability to attach receipts, electronically approve and process. You should always ensure the educational purpose of the purchase is identified to adhere to Board policy and audit requirements. Itemized receipts are required, the signed summary is not adequate documentation for the audit. Special detail should be taken to ensure no alcohol is listed on receipts. Best practice is to have blocks put on your cards so no

Having multiple layers of approval can be cumbersome but provides that extra layer of scrutiny to ensure all purchases fall within the scope and have an educational purpose.

purchases can be made at casinos, adult stores, liquor stores, etc. Purchases made outside the USA can also be prohibited. Always ensure the purchases are tax exempt. Your policies should state this and require reimbursement from the cardholder if not adhered to.

notify bidders 3 days prior to opening, opening must be public, bids must be sealed, opened by a board member or designated employee and contents announced. Bids are usually determined to go to the lowest responsible bidder. Best practice is to vet all proposed awardees via your attorney and/or architect to validate they are a responsible bidder. Don’t be afraid to contact those references for feedback.

Business Services may also be responsible for the State and Local Records Management Programs (ilsos.gov) to maintain compliance with Illinois Administrative Codes Title 44, Parts 4000.50, 4500.50, 4000.70, 4500.70, 4000.80 and 4500.80. There are specific requirements that must be followed prior to disposing of student, staff, human resources and business records. Inventory of all records are submitted first, that is, then responded to giving the retention timelines. Requests for disposal certificates must be approved by the Local Records Commission prior to disposing. A secure shredding service should be used for the disposal, so all proper confidential information is properly destroyed.

Bidding processes are commonly performed by the business office. Verification of your board policy’s limits for bidding should be reviewed to ensure you maintain compliance. Most districts require purchases over the $25,000 threshold to go to bid. This threshold may apply to equipment, supplies, certain services, contracts and repairs. Exceptions to the bid requirements are duplicating machines, skilled professional services (RFP) and data processing equipment. Specific requirements must be adhered to: publish the bid 10 days prior to opening,

In addition, there are other considerations that the business office must be aware of. District personnel should be familiar with the Local Government Prompt Payment Act (50 ILCS 505/I-9). The act states that approved bills shall be paid within 30 days after the date of approval; not 10 as some vendors require. Does your financial software lock out certain object codes from specific business office functions? Some software only allows payroll to input salary object (100) codes or allows purchasing to input only nonsalary object (300 and up) codes.

Accounting practices are crucial for a school district to maintain compliance with ISBE and ensure proper year end reporting. As you can see, there are many responsibilities that all interconnect within the business department. This is just one area of consideration. You may also have payroll, benefits, insurance, transportation, food service, etc. It is essential for staff to be familiar with the written procedures, available resources and for management to take into consideration internal controls and separation of duties. The district’s lines of authority (approval process) need to be clearly identified to ensure the proper person is approving their area of responsibility. Reviewing procedures should be performed annually with modifications when necessary.

You should always ensure the educational purpose of the purchase is identified to adhere to board policy and audit requirements.

Accounting practices are crucial for a school district to maintain compliance with ISBE and ensure proper year end reporting. As you can see there are many responsibilities that all interconnect within the business department.

SCHOOL BUSINESS 101

What recommendations would you have for engaging your community in your school district's financial process?

Engaging the community in our district's finances is of vital importance as we seek to establish financial transparency between the district and the community and maintain public trust. Community engagement in the district's financial process builds support and, in turn, aids the district in achieving its short- and long-term financial and operational goals. I recommend presenting clear, concise and understandable information in a visual manner at board meetings. These meetings are an opportune time for the community to be engaged in the district's happenings and providing financial information at these gatherings will deepen the communities understanding of the district's financial process. Along with this, I recommend being transparent on the school district's website and on social media. We utilize our district dashboard by providing

narratives and visuals that correspond with the district's financial and operational indicators. The community can click on various indicators and learn additional information about the district's finances. On social media, we seek to post information communicating short- and long-term financial goals, as well as important information about the district's budget and annual levy. Currently, a new outreach we are implementing is creating videos from the business department. These videos will include relevant information about how the district's finances positively impact students and staff educationally, socially and emotionally and provide capital project improvements in the community. Overall, we seek to engage with our community on an ongoing basis to determine its priorities, foster partnerships and promote learning while maintaining strong fiscal health.”

“ I developed a communication document titled Making the Grade: The Budget at a Glance. I presented this document at our annual community engagement meeting to help the district's stakeholders understand the district's finances. In addition, I distributed this document to the village office, libraries and other local public buildings so that it is available to the community to view at any time. As a side note, Making the Grade: The Budget at a Glance, was a session that I attended at the ASBO International and would encourage Illinois ASBO members to consider the Annual Conference. If you are interested, I can share with you the files I used to build this document.

Do you know where the money goes?

The district organizes the entire budget into four operational categories that summarize how the money is spent. Valley View School District 365 keeps instruction as its top priority, while providing funds necessary in other areas that support instruction.

JORDAN THORSE, Comptroller/Treasurer, Wheaton CUSD 200

The Dollar Bill image below is another convenient way we show our community where the dollars are spent.”

JOHN REINICHE, Assistant Superintendent of Administrative Services, Valley View CSD 365-U

The Illinois Evidence-Based Funding for Student Success Act (ILSC 18-8.15), which was enacted in 2018, brought needed stability to state funding for all districts while directing new dollars to students in the most under-resourced districts. Importantly, the legislation included a requirement that all organizational units, defined as those that are eligible to receive tier funding, must submit an EBF Spending Plan as part of the annual budget process. (The broader term “organizational unit” will be used in place of “districts” in this text to cover the range of entities that are required to submit the EBF Spending Plan.) The format and scope of the plan are determined by the state superintendent and the Illinois State Board of Education (ISBE), but the Illinois School Code outlines three requirements. The plan must include the following:

• A description of how an organizational unit will achieve student growth and make progress toward state education goals.

• The intended use of state funding.

• Additional detail regarding the intended use of state funding attributable to special education costs and students who are English learners or low-income.

The EBF Spending Plan has evolved in the years since it was first implemented. What has not changed is the intent behind the plan: to encourage public dialogue about the allocation of state dollars and to better understand the impact of the EBF formula

Since 2018, organizational units have completed the EBF Spending Plan via an online form in the ISBE Web Application Security (IWAS) system, which is not accessible to the public. ISBE’s 2020 - 2023 Strategic Plan charged staff to convene an advisory group and identify ways to maximize the plan’s value to better support the equitable allocation of funds designated for specific student populations. Beginning in the fall of 2021, a broad group of stakeholders began to consider revisions to the EBF Spending Plan. The advisory group consists of representatives from organizational units and advocacy organizations across the state. Its members include both program and financial leaders within organizational units; they represent large and small organizational units that serve student populations spanning the diversity of Illinois as a whole. Advocacy stakeholders include groups that represent education professionals, regional interests and the various student groups identified in EBF statute.

The advisory group focused its efforts on three objectives — establishing a value proposition and principles to guide the work, identifying a place of integration for maximizing the value of the spending plan and aligning the content of the plan with the value proposition. Through the value proposition, the group aspired to create a plan that would better inform resource allocation, support the use of data-

By Luke Corry SENIOR RESOURCE ALLOCATION POLICY SPECIALIST ILLINOIS STATE BOARD OF EDUCATION

driven needs assessments, promote stakeholder engagement and provide meaningful data to assess the relationship between student outcomes and financial resources. [See chart on the next spread for value proposition and guiding principles]. ISBE has not published prior spending plan responses, so the group considered whether the EBF Spending Plan could be redesigned to provide transparency regarding the intended use of state funds and support productive local dialogue about resource allocation for student groups. After carefully considering several options, advisory group members determined that the EBF Spending Plan would best align with the value proposition through integration into the annual budget process. Therefore, beginning in FY 2024, the spending plan will appear as a new tab within the budget form. (Organizational units that do not submit a budget form to ISBE will be provided with a spending plan template.)

Establishing a New Value Proposition for the Spending Plan Requirement

The advisory group focused its efforts on three objectives:

1. Establishing a value proposition and principles to guide the work.

2. Identifying a place of integration for maximizing the value of the spending plan.

3. Aligning the content of the plan with the value proposition.

IIntegration into the budget accomplishes important goals related to elements of the value proposition. The budget already has public transparency requirements, which include a public hearing and publishing the adopted budget on websites. Additionally, the budget is the plan for all funding sources. Organizational units can consider the intended use of EBF in the context of planned spending from all sources.

Value Proposition --> The EBF Spending Plan will primarily serve to…

• Inform resource allocation decision-making for state dollars and identified student groups (ELs, SPED, low-income) by incorporating the spending plan within broader financial planning processes.

• Support districts in effective engagement of data-driven needs assessments in planning support for student groups most in need.

• Promote fiscal and academic alignment by encouraging conversation between programmatic and financial leaders within a district.

• Support analysis of the relationship between student outcomes and financial resources for Organizational Units and communities.

Guiding Principles

• Comply with all statutory requirements.

• Engage with transparency to show district leaders, parents and the public the proposed uses of EBF dollars.

• Seek to reduce duplicative effort on the part of districts .

• Seek opportunities to embed equitable requirements in the plan that recognize and acknowledge district diversity.

Goal = Productive local dialogue about resource allocation.

Elements of the Revised Spending Plan

The redesigned spending plan largely retains the structure of the current plan — it will be in a new place, but it will still be familiar to education leaders. As with the current plan, the redesigned spending plan has three parts. Part 1 is where organizational units indicate strategies for achieving student growth and making progress toward state education goals. In Part 2, organizational units broadly indicate the intended use of EBF dollars. And Part 3 is where organizational units specify planned investments for special education costs and students who are English learners or low-income. Consistent with the current spending plan, many items allow for the selection of responses from a provided list. (Leaders may select “Other” and provide context when their answers are not on the list.)

There is general consistency with the current plan, but the redesigned plan differs in three ways. First, the questions focus on prioritization. Rather than selecting many strategies

for achieving student growth, for example, organizational units are asked to select the top three highest-priority strategies for the current academic year. Additionally, the plan integrates language from the state funding formula by asking organizational units to indicate the top three priority “cost factors” they will invest in using EBF dollars. Cost factors are investments — in staffing models and resources — that research has demonstrated are strongly correlated with increased achievement. Thirty-four cost factors within the state funding formula are used to estimate adequate resources based on each organizational unit’s unique population. (For more information about the cost factors, see Additional Resources at the end of this document.) Importantly, the cost factors are not meant to be exhaustive and they are not intended to direct spending. Local needs assessments should continue to drive spending decisions, but the cost factors can be helpful as a starting point for local discussion. A final

important change in the revised plan is that organizational units must now identify the investments they are making specifically with tier funding. In this way, the spending plan becomes a valuable communication tool for showing how new resources are being used to support students.

Looking Ahead to FY 2024 Implementation

ISBE typically releases the annual state budget form in May. Taking the following steps will help you to prepare for the FY 2024 EBF Spending Plan:

3 Steps to Prepare!

1. Register for webinars and review guidance. As with any new or annual statewide report, ISBE will hold webinars to provide guidance for completing the spending plan. Be on the lookout for more information in the ISBE Weekly Message later this spring.

2. Brush up on EBF basics and access the revised template. As noted previously, the spending plan uses cost factors as the basis for framing intended investments with state dollars. Both ISBE and Illinois ASBO have great resources that support understanding of the terms embedded in the funding formula. Additionally, ISBE has published the revised spending plan template on its EBF Spending Plan webpage. For these and other materials, see Additional Resources below.

3. Engage department leaders and local stakeholders. Many federal grants have requirements for community engagement, the results of which are described by districts in the Consolidated District Plan (CDP.) Current year EBF distributions are not known at the time the CDP is released (typically in March), but leaders can consider integrating discussion about the intended use of EBF dollars into the relevant stakeholder discussions for other grants, particularly as they relate to special education, English learners and low-income students.

Finally, remember that the EBF Spending Plan is a vehicle to tell a story about how you are connecting state dollars to student need. Outside of the statutory requirements for special education, English learners and low-income students, the School Code does not prescribe particular investments, nor does the EBF Spending Plan dictate a process for decision-making. Integration into the annual budget form provides a new opportunity to foster collaboration across departments and communities in decisions about state resources.

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* Revised Template and Research: https://www.isbe.net/Pages/ebfspendingplan.aspx

* Explanatory Documents: https://www.isbe.net/Pages/EvidenceBasedFunding.aspx

* EBF and ESSA Resources from IASBO: https://www.iasbo.org/legislative/ebf-essa

Evidence-Based Funding: How Districts are Discussing ROI

Governor Bruce Rauner signed into law Public Act 100-0465 or the Evidence-Based Funding for Student Success Act on August 31, 2017. This law changed how school districts receive the bulk of state funds by sending more resources to Illinois' most under-resourced students. More than five years later, three school districts in three different tiers discuss the EBF model and its effect on their district's decision-making.

ARTICLE By Eric DePorter, CSBO

ASST. SUPT./FINANCE, FACILITIES & OPERATIONS GLEN ELLYN SD 41

Frances LaBella, CSBO ASST. SUPT./BUSINESS OPERATIONS FLOSSMOOR SD 161

Brian O'Keeffe, CSBO, Ed. D., SFO ASST. SUPT./BUSINESS OPERATIONS WHEATON CUSD 200

Return on Investment (ROI) is a financial term used to calculate the benefit an investor will receive in relation to their investment cost. So, how does a school district calculate its ROI? The Evidence Based Funding (EBF) model was developed to assist districts in exactly that, determining if the programs invested in by schools are producing a beneficial return as determined by student outcomes. The EBF model gives school districts the ability to compare where they are spending their funds compared to what the model, using evidence-based research, tells us will produce student achievement. For example, the model recommends a staffing ratio for K-3 low-income students of 15:1 and non-low-income students of 20:1. How many students, on average, are in your district’s K-3 classrooms? Has the district’s staffing ratio led to improved student performance? Here is how three different school districts use EBF information to make both financial and curricular decisions.

The EBF model gives school districts the ability to compare where they are spending their funds compared to what the model, using evidence-based research , tells us will produce student achievement.

Tier 1/Tier 2

At 73 percent of the adequacy target, Flossmoor District 161 is a Tier 1 PK-8 grade school district in the south suburban region of Illinois. Prior to the adjustment of the tiers in the 2023 school year, District 161 was a tier 2 district. The district is very interested in identifying the factors that will have the greatest impact on student achievement and directing the district’s funds towards those factors. To achieve this goal, the district administration began a hard look at where funds were currently being spent and whether these areas were in line with the EBF model indicators. During the 2022-23 budget cycle, the district compared staffing ratios for core instruction teachers, specialist teachers, core interventionists and instructional coaches with the model indicators. Additionally, some areas that are modeled on a dollar per student basis, such as gifted and talented, professional development and instructional materials, were also compared with the EBF model investment cost factors.

Flossmoor was able to identify some barriers to EBF model ratios. The first major barrier was space. With schools at or near capacity, additional classroom space to add a class and reduce class size is a significant challenge. To address this challenge, the district has increased core interventionists. However, that places the district in a ratio that is better than the EBF model would indicate has an impact on achievement. Therefore, the curricular teams are now investigating how much student achievement is improved by the core interventionists. How many are supported by actual student achievement data?

Another challenge to implementing the EBF indicators with fidelity is taking a reflective, unbiased review of current practices. For example, Flossmoor has a gifted and talented program that has been in practice for a long time and is a source of pride for the district. The EBF model would indicate that the district is spending twice as much money on that program than is supported by evidence-based research. The district is also investigating if the additional funds are producing student achievement outcomes.

The district is very interested in identifying the factors that will have the greatest impact on student achievement and directing the district’s funds towards those factors.

Tier 3

At 95.29 percent of the adequacy target, Community Unit School District 200 (CUSD 200) is a Tier 3 PK-12 unit school district in central DuPage County. CUSD 200 has been in Tier 3 since the EBF model took effect in Fiscal Year 2018 (CUSD 200 was at 90.2% in FY18).

Today, the EBF model is used to help support staffing conversations with each of our building and department leaders as we prepare for the next school year. Full-time equivalent's (FTEs) by the program in the model are compared to existing program FTEs at the local level. We then look for any significant gaps between how we are currently staffed compared to the model. If there are identified gaps, we begin conversations to determine what additional resources are required based on program/student needs and review the required resources and any obstacles or barriers to adding the identified resource. Obstacles could include financial restraints, facility restraints, contractual restraints and access to professional talent in the field of need. It is our responsibility as educators to remove barriers to supporting student needs, but it must be acknowledged that barriers exist and can complicate your ability to execute, no matter your dedication and desire for change.

Looking into the future, and as CUSD 200 moves closer to adequate funding as defined by the EBF model (100 percent), I would expect our discussions will move away from identifying how to use new EBF dollars from an FTE programming perspective on an annual basis to how our existing programs and the dedicated FTEs are aligned to student academic, social and emotional growth. As noted in Mr. DePorter’s paragraph on the next page, movement into Tier 4 leads to minimal changes in EBF funding, so our internal discourse should naturally move to discussions about program efficacy.

Referencing the official EBF model calculations has proved useful in situations where disagreements about appropriate staffing levels have surfaced.

Tier 4

Glen Ellyn School District 41 is a Tier 4 district with an adequacy calculation of 114 percent for FY23. Since the inception of the EBF model, our adequacy calculation has been in the range of 105 percent up to our current level of 114 percent.

With the variability of our funding as a Tier 4 district being minimal, we have focused on how the different data viewpoints provided by the EBF calculations can help us to analyze our current program offerings. Specifically, we’ve looked at what the adequacy calculations call for and compared them to what we provide as a district. In doing so, we have found quite a few areas where differences exist.

One of the more useful comparisons we have focused on is FTE counts. Being able to point to what the model calls for and then comparing it to what we have, has led to better programmatic review conversations. In every district, conversations occur about staffing levels and whether the model and staffing level in place is appropriate. By referencing the EBF calculations, we now have a third-party voice to support our conclusions.

In addition to assisting with staffing levels, it has served well as a tool during negotiations with our teacher’s union. Referencing the official EBF model calculations has proved useful in situations where disagreements about appropriate staffing levels have surfaced. In the past, we have relied on internally completed comparisons with neighboring districts, which have been deemed somewhat subjective by our union. With the EBF model results now available, those conversations have been far more efficient as the data source is believed to be more objective.

Conclusion

Ultimately, we all have to go through the process of identifying what path to take to deliver the best educational experience for our students. The emergence of the EBF model has provided a new tool to help support, or at times contradict, the path we think most appropriate. While the ultimate goal of the EBF model is to achieve a better level of parity in education funding, being knowledgeable about the many data points available will hopefully add even more value to Illinois School Districts.

Preparing for SingleAudits

If you are not familiar with what a Single Audit entails, chances are your school district has not historically expended a significant amount of federal awards that are subject to Uniform Guidance. However, with the influx of federal funding to address the impact of COVID-19, more school districts were required to undergo a Single Audit than in the past. When participating in federal awards, it is important to know when a Single Audit is required and how to properly prepare for it.

A Single Audit is required when your school district expends $750,000 or more in federal awards within a fiscal year. In addition to the audit of the financial statements, a Single Audit is an audit of a recipient’s federal award program(s) conducted in accordance with 2 Code of Federal Regulations (CFR) Part 200 (Uniform Guidance). The scope of the audit includes all federal awards received by the entity and its aim is to test compliance with the award terms and conditions based upon the audit requirement established by Uniform Guidance, which includes reviewing an entity’s internal controls over the federal award program(s) and testing compliance.

By Stephanie Jacobs, CPA MANAGER BAKER TILLY US, LLP

You may be wondering whether all the school district’s federal awards will be audited during the Single Audit. The simple answer is no. Auditors are required to determine major programs subject to audit using a risk-based approach as outlined in the Uniform Guidance. A major program is the term used to identify the Federal awards that the auditor has determined the need to audit and will issue an opinion over compliance on those programs. During the audit of a major program, auditors are also required to gain an understanding of and test internal controls over compliance.

Auditee Responsibilities

Once the school district accepts federal awards, they also accept certain responsibilities related to the award. The first of which is establishing a system of internal control over the compliance requirements applicable to each federal award to ensure the school district stays in compliance with the applicable requirements year-round, not just at the end of the year. This system of internal control will contain written policies and procedures. For some requirements such as procurement, the Uniform Guidance establishes that

Whenparticipating infederalawards,it isimportanttoknow whenaSingleAudit isrequiredandhow toproperlyprepare forit.

there must be a written procurement policy that conforms to the procurement standards outlined. For other requirements, it may just be a best practice to establish written policies and procedures so that all program officials are aware of the steps taken to ensure compliance with the requirements of the federal awards. Regardless of which policies and procedures are written, for an auditor to test that the system of internal control is being followed, there must be auditable evidence that the control was performed.

Additionally, the school district is responsible for appropriately accounting for the costs of the federal awards in a manner that the costs of each award can be easily identified. Establishing a subset of account numbers that are utilized to track expenditures associated with each specific federal award is a best practice to ensure that federally funded expenditures are adequately tracked throughout the year. Aligning internal budgetary controls with the federal award allocation will allow for the school district to ensure that expenditures are only incurred by the school district for an amount equal to the federally funded awards allocation. This best practice will also allow for the district to review the utilization of the federally funded award to ensure that funding is utilized in accordance with the award agreement and provisions. During the audit of the major program(s), your auditor will request general ledger detail of the Federal award expenditures.

Furthermore, information an auditor will typically ask for relates to the reimbursement claims and related support, grant agreements, grant budgets, grant amendments and communications from the funding agency. A best practice would be to maintain this information in a file for each award so that when the auditor asks for this information, it is readily available.

Lastly, once you are aware your school district is required to obtain a Single Audit, what do you need to do? The school district must procure a qualified auditor to perform the audit. The procurement of the auditor must follow the procurement standards outlined in the Uniform Guidance (2 CFR §200.318 through §200.327). In requesting proposals of audit services, 2 CFR §200.509 requires that the objectives and scope of the audit are made clear and that the school district must request a copy of the audit organization’s peer review report. When evaluating the proposals for audit services, the school district should consider the responsiveness to the request for proposal, relevant experience, availability of staff, the results of peer review and external quality control reviews and price.

Frequently Audited Major Programs

There is typically a commonality in which federal awards are audited the most often at school districts. Before the COVID-19 pandemic, these included the Child Nutrition Cluster, which includes the School Breakfast Program (Assistance Listing Number (ALN) 10.553), National School Lunch Program (ALN 10.555), Special Milk Program for Children (ALN 10.556), Summer Food Service Program for Children (ALN 10.559) and the Fresh Fruit and Vegetable Program (ALN 10.582); Title I Grants to Local Educational Agencies (ALN 84.010); and the Special Education Cluster (IDEA), which includes Special Education – Grants to States (ALN 84.027) and Special Education –Preschool Grants (ALN 84.173).

The COVID-19 pandemic produced legislation authorizing additional federal awards that have been frequently audited. The Education Stabilization Fund, which includes subprograms, such as the Elementary and Secondary School Emergency Relief (ESSER, including ESSER I and II) (ALN 84.425D), the Governor’s Emergency Education Relief (GEER, including GEER

ASingleAuditis requiredwhen yourschooldistrict expends$750,000 ormoreinfederal awardswithina fiscalyear.

Compliance Requirement Brief Explanation

Activities Allowed or Unallowed

Allowable Costs/Cost Principles (2 CFR 200, Subpart E)

This requirement includes the activities the federal award is allowed to be spent on, which could include salaries/wage, supplies, equipment, etc.

This requirement includes a couple of different areas.

• Costs must meet the basic guidelines, which include that the costs have to be necessary and reasonable, treated consistently, be adequately documented, etc. (2 CFR §200.402 through §200.411) as well as the requirements outlined in general provisions for selected items of costs (2 CFR §200.421 through §200.476) (i.e., time and effort reporting).

• Indirect costs must be supported by an indirect cost rate proposal and the rate must be applied appropriately.

Cash Management (2 CFR §200.305)

Eligibility

Equipment and Real Property Management (2 CFR §200.310 through §200.316)

Matching, Level of Effort, Earmarking

If an award is on a reimbursement basis, this requirement means that the costs included on the reimbursement request (claim) have been paid for prior to requesting reimbursement.

This requirement includes specific criteria for determining whether an individual, group of individuals or subrecipients can participate in a program and the amount for which they qualify.

Equipment and real property purchased with federal awards must be included on a listing with specific information included (2 CFR §200.313(d)). If any equipment or real property that was purchased with federal awards is disposed of, there are requirements to ensure the federal agency gets the share of the disposition.

The matching requirement refers to when an award includes a local share of the project. This is not a frequent occurrence in the programs applicable to school districts. The level of effort requirement refers to maintaining a certain level of expenditures of non-federal funds and not supplanting services with federal funds. The earmarking requirement refers to when an award includes a minimum or maximum level of expenditures on certain types of costs, such as administrative or a non-public share.

Period of Performance

Procurement and Suspension and Debarment

(Procurement - 2 CFR §200.317 through §200.326)

(Suspension and Debarment – 2 CFR Part 180)

Program Income

This requirement refers to the period in which costs can be incurred.

The procurement requirement refers to the standards that must be followed when procuring goods or services.

The suspension and debarment requirement refers to ensuring the district does not contract with or subaward federal awards to entities that are suspended or debarred from doing business with the federal government.

Program income is gross income earned that is directly generated by a supported activity or earned as a result of the federal award during the period of performance (i.e., paid breakfasts or lunches for the Child Nutrition programs (ALNs 10.553 and 10.555) or revenue generated as a result of a 21st Century Community Learning Center program (ALN 84.287) activity).

Reporting

Subrecipient Monitoring

(2 CFR §200.331 through §200.333)

Special Tests and Provisions

This requirement refers to financial and programmatic reports that are required to be submitted to the grantor agency.

This requirement refers to procedures a pass-through entity must do if a subaward is created. There are specific requirements, such as specific award information that must be identified to the subrecipient, identifying the risk of a subrecipient, monitoring of the award and any follow-up as necessary.

These requirements are unique to each federal program and do not fit under one of the above compliance requirements.

I and II) (ALN 84.425C) and the American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP ESSER) (ALN 84.425U) have been audited frequently within the last two years. Additionally, the Emergency Connectivity Fund (ALN 32.009) has also been audited as a major program since its creation.

Additionally, due to a change in regulations, the Universal Service Fund – Schools and Libraries (commonly known as E-Rate) (ALN 32.004) will be subject to audit starting with school year 2022-2023. The program has historically not been subject to Single Audit, but the Federal Communications Commission, the federal agency responsible for this program, has updated SAM.gov which specifies that this program is subject to the Single Audit moving forward. Once the pandemic funding ceases to exist, this program may put many school districts over the federal expenditure threshold that would require a Single Audit.

Typically, the Emergency Connectivity Fund and the E-Rate programs are administered by the IT department with the help of a consultant. It is very important to have well established controls over these programs to minimize noncompliance and audit findings related to a lack of internal controls over these programs. The school district’s business office should review internal processes and policies to ensure expenditures and award agreements associated with these federally funded programs are in place to ensure appropriate internal controls are implemented for compliance with the awards provisions.

Compliance Requirements Subject to Audit

Once the auditor has determined a program to be major, they are responsible for auditing the school district’s compliance with the program requirements and the related controls. Refer to the list on the previous page are the compliance requirements that are potentially subject to audit. However, the exact procedures depend on specific awards, recipient characteristics and the auditor’s risk assessment. The list on the previous page only contains the requirements auditors are responsible for auditing, it does not include all the requirements with which the auditee is required to comply.

With the increase of federally funded programs and changes in the requirements of the Single Audit provisions, there is a higher probability that your school district may require a Single Audit. While this increased funding provides significant funding opportunities to school districts for improved programming, there is an increased administrative burden to ensure appropriate internal controls are implemented and that compliance with federal rules and regulations are achieved. Effectively planning for the utilization of these federal awards and implementing internal controls to address specific compliance requirements tailored to each award is a best practice that school districts should implement. This process will allow the school district to reduce the risk that potential questioned costs could be identified during the audit of the federal award, which could result in the recovery of funding by federal agencies. These practices will also allow for the school district to manage the utilization of federally funded awards and ensure that the amount of funding allocated has been utilized for the benefit of students and the community.

Itisvery importanttohave well established controls over theseprograms to minimize noncompliance andauditfindings related to a lack of internal controls over these programs.

By Matt Geerdes, CPA SENIOR MANAGER CROWE LLP

Readers of the financial statements for a school district in Illinois often have questions about what they are viewing.

Questions like:

• How do these financial statements compare to other surrounding districts?

• Is our district management being a good steward of taxpayer resources and using them in a manner to properly educate our children?

• Are there other items out there that could impact a district’s operations that maybe aren’t reported on the financial statements?

This last question is the one we will focus on for this article.

To set the stage, keep in mind that accounting standard setters for entities like state and local governments and school districts, the Government Accounting Standards Board (GASB), listen to concerns submitted by users of financial statements. These users can be members of an entity’s management that prepare the statements, members of an entity’s governance, investors who purchase securities issued by an entity to raise capital (i.e., a purchaser of a district’s general obligation bonded debt) and the general public. While the specific rules issued by the GASB and its corporate counterpart the Financial Accounting Standards Board (FASB) have differences, the GASB and the FASB have the same goal in mind — and that is to address the continuous need for financial statement users who are looking for relevant information to assess historical performance and help make current and future decisions.

Reporting Items that Have Impact

A recent theme that the standard setters have been addressing in their rulemaking is the impact of items that were not required to be reported on a district’s financial statements but had an impact on operations. Many of the recent GASB pronouncements have been added to clarify the accounting rules for certain areas of a district’s operations and to make sure that items that may have been considered “off-balance-sheet”, but had a significant impact on a district, should be reported in a manner that users can see how these items affect performance. There are several items that districts now report in their financial statements that previously may have been “off-balance-sheet.”

Accounting Topic GASB Pronouncement

Pension Liabilities and Related Information

GASB Statement No. 68, Accounting and Financial Reporting for Pensions –An Amendment of GASB Statement No. 27

Other Post Employment Benefit Liabilities and Related Information

GASB Statement No. 75, Accounting and Financial Reporting for Post Employment Benefits Other Than Pensions

Asset Retirement Obligations

Current Impact

Current and long-term pension obligations for the Illinois Municipal Retirement Fund and Teacher’s Retirement System are now reported on the financial statements along with applicable disclosures for short-term and long-term funding requirements (previously these disclosures were required but were limited in form).

Similar to pensions, obligations for retiree health care under the Teacher Health Insurance Security Fund and District sponsored plans that were previously limited (and in many cases were not reported) are now included in required disclosures and certain financial statement line items.

Resources Held for Others (Such as Student Activity Funds)

Leases – Lessor and Lessee Requirements

Issuance and Reporting of Conduit Debt Obligations

GASB Statement No. 83, Certain Asset Retirement Obligations

GASB Statement No. 84, Fiduciary Activities

GASB Statement No. 87, Leases

GASB Statement No. 91, Conduit Debt Obligations

While these have limited applicability to Illinois school districts, when present these are now required to be reported on the financial statements with related disclosures.

Districts now have to report certain student activity funds as part of the Education Fund due to the change in the definition of a fiduciary activity by the GASB.

Leases that previously had limited/no disclosures or financial statement reporting are now reported.

While these have limited applicability to Illinois school districts, when present, there are now required disclosures that were previously inconsistent in practice, with potential reporting on the financial statements if the district may have a responsibility for future repayment.

GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457

There is limited applicability to Illinois school districts, but it could be appliable based on any changes to current retirement plan governance as well as the structure of a district’s plan that could meet the definition of a fiduciary activity per GASB Statement No. 84 (i.e. where the district is the trustee of the plan assets and would report an obligation to the participants).

So, does that mean that with the adoption of these standards, there aren’t any more items that may be “off-balance-sheet” and the situation is going to stay that way? Not quite. Below are several items currently “off-balance-sheet” that GASB has addressed with standards that will have future reporting implementation.

Accounting Topic GASB Pronouncement Future Impact

Public-Private and Public-Public Partnerships and Availability Payment Arrangements

GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements

Subscription-Based Information Technology Arrangements

GASB Statement No. 96, Subscription-Based Technology Arrangements

This standard is required to be implemented for Illinois school districts for the fiscal year ending June 30, 2023. It may not be as relevant for Illinois school districts but could occur and thus districts need to assess their arrangements with outside entities that could fall into the scope of this guidance.

This standard is required to be implemented for Illinois school districts for the fiscal year ending June 30, 2023. Similar to leases, districts will need to review their software agreements and technology contracts to determine future required accounting, such as contracts with general ledger software providers and enterprise resource planning software providers.

Certain Types of Compensated Absences That May Not Be Accounted For Currently (Such As Sabbaticals)

GASB Statement No. 101, Compensated Absences

This standard is required to be implemented for Illinois school districts for the fiscal year ending June 30, 2025, which will require districts to assess the types of leave offered to employees, how they are accounted for internally as well as how required obligations are calculated for financial statement presentation.

GAAP, Cash/Modified Cash and Regulatory Reporting Models

The manner in which these topics are reported on the financial statements and/or disclosed in the footnotes is dependent upon a district’s adopted reporting model, with the three models used in Illinois school districts being:

1. GAAP (Generally Accepted Accounting Principles) Model — Reports all activities on an accrual basis and follows all GASB pronouncements.

2. Cash/Modified Cash Model — Reports cash and certain assets/liabilities on the financial statements but includes disclosures as required with a key disclosure being what is/what is not included in the adopted accounting policies.

X While this is not a full GAAP presentation, it is considered acceptable to the Illinois State Board of Education and many users of the financial statements, as the auditor’s report typically will include an unmodified (or clean) opinion with an explanation, since the reporting model still follows the basic GAAP provisions of GASB.

3. Regulatory Model — Uses reporting forms from the Illinois State Board of Education’s Form 50-35 and can include cash basis or accrual basis reporting. Disclosures are also included as to how this reporting model differs from the GAAP model.

X The auditor’s report will contain an adverse opinion as it pertains to GAAP as this presentation is not in line with the GAAP model but normally will also contain an unmodified report on a regulatory basis.

Monitoring the GASB Requirements

Standard setters continue to listen to constituents as well as perform post implementation reviews of issued standards, which include items that were previously considered “off-balance sheet” items. That will necessitate districts to monitor requirements from the GASB, as management is ultimately responsible for the adoption and presentation of activity within financial statements based on adopted accounting policies required by the standard setters. Remember, auditors do NOT set policy, they only render opinions on the financial statement presentation!

Some other items to keep in mind:

• For items that are still “off-balance sheet”, such as construction commitments and unused letters of credit, most of these items require disclosure in the current reporting framework. A common theme of these disclosures (as well as a common question from users) is a discussion on how future expenditures will be funded, regardless of the reporting model.

• Districts who report financial statements on basis other than GAAP (cash basis or regulatory basis accepted by the Illinois State Board of Education) do need to monitor accounting developments as well. While the liabilities above would not be reported on the financial statements due to the adopted accounting policies, constituents may be asking about how the district is considering funding obligations that aren’t reported. Will it be tax increases, grants or other revenue sources? Those obligation payments WILL have to be reported on a cash basis as expenditures, so reporting will occur in some form sooner or later!

If you have questions, please do not hesitate to reach out to the Illinois ASBO Accounting, Auditing and Financial Reporting PDC Members. They will be happy to address any questions you may have.

By Melissa Morgese DIRECTOR

A Checklist for Selecting an Audit Firm

Are you thinking about going out for Request for Proposal (RFP) for an auditing firm? The school district requests proposals from qualified individuals and accounting firms interested in providing audit functions. The yearly audit function will be performed to ensure that the operating procedures including all internal controls are being followed and that all expenditures of school district funds are in accordance with laws, regulations and district policy. What is needed for an Audit Firm RFP?

The yearly audit function will be performed to ensure that the operating procedures including all internal controls are being followed and that all expenditures of school district funds are in accordance with laws, regulations and district policy.

Here is a checklist of things you will need to have for your Auditing RFP:

GENERAL INFORMATION:

Name and address of the government issuing the RFP.

Name, address, title and telephone number of person to contact regarding questions.

Response due date and time deadline.

Number of copies of response.

Contract period — clarify if this is a multi-year contract proposal and if there is a chance it could be extended longer.

Specific location and method of delivery of response.

SCOPE OF THE AUDIT:

Explain that the annual audit shall consist of preparation and examination of governmental activities, each major fund and the aggregate remaining fund information (collectively referred to as “basic financial statements”). Your school district might also want a CAFR (Comprehensive Annual Financial Report); if that is the case then have that detailed in the scope.

Inform prospective proposers whether the Single Audit Act applies to the school district. You will need a single audit if your school district receives money from the federal government from grants and spends more than $750,000 of federal dollars in a single fiscal year.

Describe your school districts accounting system, administrative controls, records and procedures.

Identify the appropriate auditing standards.

Inform prospective proposers that data from prior years (audit reports and management letters) will be available.

Describe expected audit products and the required format of the audit report.

Explain any assistance that your organization will offer, such as staff support to assist the auditor (which could materially reduce your audit cost).

Outline the expected schedule of work.

Establish a Fee Schedule Page along with extra services and hourly rates.

RFP QUALIFICATIONS:

The audit shall be conducted under the supervision of a licensed Certified Public Accountant experienced and knowledgeable in Illinois school district auditing. The senior field auditor must have three to five years of actual experience in supervising a school district audit.

The firm must have demonstrated efforts to keep its staff current in the industry and in governmental organizations by active participation in such organizations.

The firm must meet the continuing professional education requirements of Government Auditing Standards.

The firm must provide a copy of its most recent peer review report.

The auditor does not have a record of substandard work. The proposal must disclose any enforcement action to which the firm has been subject during the past three years or which is in progress.

The firm must provide the names, titles, addresses and phone numbers of at least 4 school district or other units of local government clients for whom the firm has performed audits within the last 2 years similar in scope and reporting as those required by the district.

The firm must have existing engagements with at least 6 Illinois public school districts or other units of local government.

An expedient RFP will have certain information from prospective auditors to help you make your decision. Below are some of the questions an expedient RFP will ask prospective auditors to state:

How they would conduct the audit and if it were a multi-year contract, how they would approach the work efforts of the subsequent year(s)?

What are their firms’ qualifications and those of the proposed audit staff, including their government auditing experience?

Whether they meet appropriate state licensing requirements?

What are their policies on notification of changes in key personnel?

Whether the proposed staff have received continuing professional education in governmental accounting and auditing during the past two years?

Whether they are independent, as defined by applicable auditing standards?

Whether they have been suspended or debarred from performing government audits?

Have they received a positive peer review within the last three years?

I just highlighted some of the information you will need for an auditing firm RFP. All of our school districts are different and have certain requirements from the school board; however, this is a good head start on getting an RFP established. In an effort to have the best auditing firm for your school district, you need to do your research and plan for the future.

In an effort to have the best auditing firm for your district,school you need to do your research and plan for the future.

GATA 101 for LEA$

Introduction to GATA

School administrators were under a lot of pressure as they managed increased funding during the height of the COVID-19 pandemic. Both state and federal agencies allocated billions of dollars in grant funds to assist Local Education Agencies (LEAs) in navigating competing priorities for health, safety and education services. It is essential to apply a risk-based, data-driven approach that balances an increase in reporting and accountability to maximize the value of state and federal funds. The Illinois State Board of Education (ISBE), which acts as a steward of those funds, prioritizes proactive communication and supportive services to our network of grantees. We hope to expand those services by discussing the Grant Accountability and Transparency Act (GATA).

It is essential to apply a risk-based, data-driven approach that balances an increase in reporting and accountability to maximize the value of state and federal funds.

GATA (30 ILCS 708) became effective on July 16, 2014. The Act charged the Illinois Governor’s Office of Management and Budget with the development and implementation of a coordinated, non-redundant process for the provision of effective and efficient selection and monitoring of grant recipients’ oversight, thereby ensuring quality programs and limiting fraud, waste and abuse. Grant-making agencies developed uniform processes for administering different grant programs throughout the state. These processes can be segregated into two main features: 1) prequalification steps that are completed prior to the application for a grant and 2) post-award steps that are completed after a grant has been awarded.

Prequalification

An entity must be “prequalified” before it can receive a grant award. Grant applicants must complete a Fiscal and Administrative Risk Assessment, known as the Internal Control Questionnaire, which is available through the GATA Grantee Portal. Grant applicants, at the discretion of the awarding agency, must also complete a second programspecific risk assessment. The ISBE program-specific risk assessment is completed in the ISBE Web Application

Security (IWAS) system. Additionally, five qualification checks are used to determine good standing for grantees:

1) Sam.gov/Unique Entity Identifier (UEI) for account verification, 2) Federal Employer Identification Number (FEIN) or permanent tax ID number), 3) Illinois Secretary of State registration, 4) Illinois Stop Payment List, and 5) Illinois Department of Human Services Sanctions List. Grant recipients must complete these verification steps, which are electronically tracked in the GATA Grantee Portal.

SAM.gov discontinued the use of Dun & Bradstreet’s Data Universal Numbering System (DUNS) to identify businesses in April 2022. It was replaced by UEI codes, which are automatically assigned to entities upon registration. The U.S. General Services Administration, who oversees SAM.gov, provided a webinar for LEAs and local governments on December 6, 2022, to assist entities that were troubleshooting the registration and renewal process. The webinar was recorded and an FAQ was released the following week.

Figure 1: Statewide Single Audit Submissions

ARTICLE By Kristopher R. Pickford DIRECTOR OF GATA ILLINOIS STATE BOARD OF EDUCATION

Post-award

Section 7000.440 of GATA requires an awardee to complete a grant closeout, which includes final expenditure and performance reports. ISBE modified the performance submission rules in fiscal year 2023 from biannual to annual, which is the minimum required by legislation in order to reduce administrative burden for grant recipients. Single audits are also required for grantees that expended $750,000 in federal funds. The increase in federal grant dollars related to COVID-19 funding meant hundreds of LEAs would eclipse the $750,000 threshold and receive a single audit for the first time. This was evidenced by the 79.83% increase in Illinois single audit submissions since 2018. See Figure 1. Fortunately, the U.S. Office of Management and Budget extended the FY 2021 due date for all single audits nationwide per M-20-21, allowing grant recipients more time to fulfill this requirement. FY 2022 did not have an extension.

Award Count

Conclusion

GATA applied Federal Uniform Guidance to state awards per 30 ILCS 708/5 (b). The adoption of GATA was not a “new” requirement, but rather a new uniform procedure. The School Code already mandates Generally Accepted Government Auditing Standards audits and Federal Uniform Guidance had already mandated performance/ expenditure reports and single audits. The newly implemented uniform processes included the creation of the Catalog of State Financial Assistance (for state awards), Uniform Grant Agreement (for all awards), GATA portal registration, uniform prequalification steps and merit-based review (for competitive awards). Grant accountability will continue to evolve in an effort to streamline the grant processes and ISBE will continue to support our education partners during these changes.

$Grant accountability will continue to evolve in an effort to streamline the grant processes and ISBE will continue to support our education partners during these changes.

ISBE administers approximately one-third of Illinois’ 42,000 grant awards and strives to assist in the Board’s mission of providing each and every child with safe and healthy learning conditions, great educators and equitable opportunities by practicing data-informed stewardship of resources and policy development, all done in partnership with educators, families and stakeholders.

Please contact the ISBE GATA team at gata@isbe.net if you have grant-related regulatory concerns.

Resources:

GATA Grantee Portal: grants.illinois.gov/portal/

ISBE Web Application Security: apps.isbe.net/iwas/asp/login.asp?js=true

ISBE GATA webpage: www.isbe.net/Pages/Grant-Accountability-and-Transparency-Act.aspx

GSA SAM.gov Stakeholder Forum: sam.gov/content/entity-registration

UEI codes: sam.gov/content/duns-uei

Webinar for LEAs and local governments: buy.gsa.gov/interact/community/47/activity-feed/post/d78da4a7-4aaf-4714bfc4-44c2d3c01076/Stakeholder_Forum_Recap_State_and_Local_Governments_Seeking_Federal_Assistance_ Learn_about_Registering_in_SAM_gov

Section 7000.440 of GATA: www.ilga.gov/commission/jcar/admincode/044/044070000E04400R.html

Legislation: www.ecfr.gov/current/title-34/subtitle-A/part-76/subpart-G/subject-group-ECFR54971d4c79871f9/ section-76.720

M-20-21: www.whitehouse.gov/wp-content/uploads/2020/04/Implementation-Guidance-for-Supplemental-FundingProvided-in-Response.pdf

Federal Uniform Guidance: www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part-200?toc=1

Catalog of State Financial Assistance: govappsqa.illinois.gov/gata/csfa/Default.aspx

Online Sites for School Accounting and More…

The accounting field can be challenging to stay up to date with current regulations and best practices. The good news is that many websites are valuable resources for those engaged in the financial reporting field. However, obtaining the most helpful information can be time-consuming. Below are some website suggestions that cover various topics, including sources such as professional associations, state government and publications. Let us know on the Illinois ASBO peer2peer community what your go-to sites are for school accounting information.

Association of School Business Officials International

The gold standard in annual comprehensive financial reports. For 50 years, the Certificate of Excellence in Financial Reporting (COE) has honored school districts for their high-quality Annual Comprehensive Financial Report (ACFR). Visit this site for more information on applying for the COE.

https://asbointl.org/Web/Awards/COE/Certificate_ of_Excellence.aspx

Office of the Illinois Secretary of State

The Records Management Section of the Illinois State Archives is responsible for assisting state and local government agencies with the disposal of records. In Illinois, no public record may be disposed of without the approval of the appropriate records commission. Visit this site for more information about the procedures to dispose of state records.

https://www.ilsos.gov/departments/archives/ records_management/home.html

Accounting Today

Accounting Today is a valuable resource for accountants who are involved with tax preparation, bookkeeping, auditing and financial planning. It focuses on accounting standards, technology, audit and assurance and wealth management.

https://www.accountingtoday.com/

Accounting Coach

Governmental Accounting Standards Board

The GASB standards are recognized as authoritative by state and local governments, state Boards of Accountancy, and the American Institute of CPAs (AICPA). The GASB develops and issues accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to taxpayers, public officials, investors and others who use financial reports.

https://www.gasb.org/

Illinois State Board of Education

ISBE has a responsibility to advocate for what all of Illinois’ children deserve. The State Board makes budget recommendations to the General Assembly annually each January. The state constitution mandates that the “primary responsibility for financing the system of public education” belongs solely to the state. The following topics are all covered on the Financing, Budgets and Funding section of ISBE's website.

• Agency Budget Information

• Federal and State Monitoring

• Funding and Disbursements

• School Finance

• Single Audit

• School District Reorganization

• Evidence-Based Funding

• Education Purchasing Program

• State Funding & Forecasting

https://www.isbe.net/Pages/Finance-Budgets-andFunding.aspx

This website provides information and training in all areas of accounting and bookkeeping. It is useful for student learning or as a guide for advanced professionals.

https://www.accountingcoach.com/

THE FINAL WORD

SOUNDING OFF ABOUT SCHOOL DISTRICT ACCOUNTING

SEAN CARNEY

ASST. SUPT./FINANCE & OPERATIONS/CSBO

ADLAI. E. STEVENSON HSD 125

I believe the CSBO is…

the most important role at Adlai E. Stevenson High School. Similar to all of my colleagues, we must effectively manage the balance between the financial obligation on our taxpayers and operational needs of our organization to ensure success for every student. We are the ones that get it done. We might not be in the classroom or work directly with students, but we are a very important part of the process.

What do you see as the biggest accounting challenge(s) facing school business officials?

In my opinion, the biggest accounting challenge for school business officials is finding a method for districts to compare their finances. More specifically, a method of comparison that our various communities understand and trust. The State has tried to create a mechanism for this type of comparison (Operating Expense Per Pupil), but it is difficult for a taxpayer to understand the formula. Furthermore, the State now utilizes a different method to calculate OEPP for the district report card.

Accounting issues to watch…

We all need to pay attention to the various GASB standards that are enacted. Additionally, I believe there are two specific accounting issues that a district should watch for:

• Fund Balances – Does your community understand your fund balance?

Are comparisons made to other districts that might not be similar to yours?

Is your fund balance inflated because of receipt of early property taxes?

• Accrued Liabilities – OPEB, retirement and absences.

What can districts do to improve their accounting process?

If a district is concerned about their accounting practices or procedures, I would recommend starting with a review of prior year audits and/or discussion with your auditors. I would also recommend talking to your peer network. Why reinvent the wheel, when many of us have updated procedures and practices.

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