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 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.