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Accounting and Financial Regulatory Manual
Accounts Receivable – School Lunch and Textbook Rental
Affordable Care Act Penalties, Fines, or Tax
Average Daily Membership (ADM)
The following was provided by the Indiana Archives and Records Administration in response to an inquiry made with the Indiana Public Access Counselor "As I understand your questions, a bank/payroll vendor will be serving as an agent for an Indiana governmental unit regarding access to public records and compliance with records retention. The bank/vendor would thus be required to maintain the checks, bank statements, payroll records, etc. for the same period as the agency. The bank/vendor may well hold the information, but the obligation remains with the agency to provide access upon request, not the bank or vendor. The agency further has the obligation to provide access to the materials throughout the required retention. In the case of cancelled checks/warrants they are currently required to be maintained for 6 (six) years after the completion of the State Board of Accounts Audit. Payroll records are dependent upon the type."
2019 ACCOUNTING AND FINANCIAL REGULATORY MANUAL
We have updated the Accounting and Financial Regulatory Reporting Manual effective for reporting periods beginning January 1, 2019. Units provide information in the Gateway Annual Financial Report submission and that information is included in the financial statements in accordance with this manual. These financial statements are audited by the State Board of Accounts. The following changes discuss the additional information that will be presented in the financial statements and collected from the Annual Financial Report submission in Gateway. This new manual can be found at the link below and under the Uniform Compliance Guidelines section of the school page on the State Board of Accounts website at https://www.in.gov/sboa/4449.htm.
2019 Accounting and Financial Regulatory Reporting Manual
The financial statement will present the beginning balance, total receipts, total disbursements, and ending balance for each fund separately.
Debt and leases will no longer be included in unaudited information but will instead appear in the notes to the financial statements. The debt note disclosure has been updated to include the beginning balance for the year, as well as increases and decreases of long-term debt during the year. The disclosures for debt and leases will include a schedule of principal and interest payments until the maturity of the debt or lease.
Transfers to and from funds will appear as a note disclosure. The note will contain details of the specific fund that transferred money and the fund that received the money. The amount will also be disclosed.
The pension note disclosure will provide additional details, such as benefits provided under the plan, actuarial assumptions, and the funding policy. If postemployment benefits other than pension benefits are offered, a note should indicate the plan type, plan description, benefits offered, and contributions to the plan.
The only schedule appearing as supplementary information will be the Schedule of Capital Assets. The format has been updated to include the beginning balance for the year, as well as increases and decreases of capital assets during the year by asset category.
The appendix of the manual contains examples of the financial statement, note disclosures, and the supplementary information.
We have compiled a document that outlines the schedule of changes to the Accounting and Financial Regulatory Reporting Manual below.
Schedule of Regulatory Changes
The board of school trustees or other governing body of a school corporation has the responsibility to examine and approve all accounts payable vouchers (claims) before they are forwarded to the treasurer of the school corporation for checks to be written in payment thereof. Accordingly, each accounts payable voucher (claim) should be made available for examination by each member of the board present at a public meeting.
IC 5-11-10-1.6(c) provides: "The fiscal officer of a governmental entity may not draw a warrant or check for payment of a claim unless: (1) there is a fully itemized invoice or bill for the claim; (2) the invoice or bill is approved by the officer or person receiving the goods and services; (3) the invoice or bill is filed with the governmental entity's fiscal officer; (4) the fiscal officer audits and certifies before payment that the invoice or bill is true and correct; and (5) payment of the claim is allowed by the governmental entity's legislative body or the board having jurisdiction over allowance of payment of the claim. This subsection does not prohibit a school corporation, with prior approval of the board having jurisdiction over allowance of payment of the claim, from making payment in advance of receipt of services as allowed by guidelines developed under IC 20-20-13-10. "We are of the audit position IC 5-11-10-1.6(c)(2) may be complied with by attaching to the Accounts Payable Voucher Form 523, the receiving copy of the Purchase Order Form 98, signed by the person receiving the goods or services.
IC 5-11-10-2 requires the State Board of Accounts to prescribe a form which will permit claims from two (2) or more claimants to be listed on a single document. IC 5-11-10-2 further provides that when such list is signed by members of the governing body, showing the claims and amounts allowed each claimant and the total claimed and allowed as listed on such document, the members of such governing body need not sign each claim. The form prescribed under this provision shall be prepared by or filed with the disbursing officer of the political subdivision (Treasurer of a School Corporation) together with the supporting claims and all such documents shall be carefully preserved by the disbursing officer as a part of the official records of the office.
The State Board of Accounts has prescribed General Form 364 titled "Accounts Payable Voucher Register". The form provides for showing the dates of the period covered and the number of each page and the total number of pages, date the claim was filed with the school corporation by the claimant, the number assigned to the claim by the school corporation, the name of the claimant, the fund to which the payment will be charged, the amount of the claim as filed, the amount allowed by the board, the check number and any necessary memoranda concerning the claim, particularly in relation to amounts disallowed.
When using General Form 364 in the process of allowing claims, members of the board need not sign or initial each claim. All members present at the meeting at which the claims listed on the register are allowed, in whole or in part, must sign the register.
ACCOUNTS RECEIVABLE – SCHOOL LUNCH AND TEXTBOOK RENTAL
The governing body of a governmental unit should have a written policy concerning a procedure for the writing off of bad debts, uncollectible accounts receivable, or any adjustments to record balances. Documentation should exist for all efforts made by the governmental unit to collect amounts owed prior to any write-offs. Officials or employees authorizing, directing or executing write-offs or adjustments to records which are not documented or warranted may be held personally responsible. We have not taken exception with a School Board approved policy regarding inactive accounts. The policy should define when an account balance is considered inactive. A policy may allow positive account balances to be receipted back into the Fund (we recommend account balances of $10 or less). However, keep in mind that if a parent or anyone else comes forward and makes a request (and could document entitlement), then they would be entitled to a refund. A school should have a policy in place that does not allow significant negative account balances to incur. The School Board approved policy could allow nominal negative account balances to be offset against the positive balances in the Fund. However, any material negative balances should be pursued for collection.
Due to upcoming changes to the Accounting and Financial Regulatory manual issued by the State Board of Accounts (SBOA), the Gateway Annual Financial Report (IC 5-11-1-4) that is due on August 29th, 2021 will be requiring that accumulated depreciation be reported for capital assets. There will be an additional table under the capital assets section of the report which will be requiring the beginning balance, additions, reductions, and the ending balance of accumulated depreciation by asset class. There are other changes to the report such as revisions of the risk assessment questions, financial data by fund reporting, and other changes that SBOA has trained school officials on the past few years.
We have not previously provided specific training on accumulated depreciation, so we are creating a training video that will be emailed out to all units soon. If you have any questions as you are filing the AFR, please contact gateway@sboa.in.gov.
The following is required if the proper officers of any school corporation determine the need for expenditure of more money in the current year than was provided for in the approved annual budget:
(1) The governing body in all cases of additional appropriations must meet and determine that they desire to appropriate for the expenditure of more money than was appropriated in the annual budget. Accordingly, questions concerning the procedures for additional appropriations, should be directed to the Department of Local Government Finance
(2) The governing body determines whether to proceed with the proposal. An approval may not be in excess of the amount advertised, but can be less than requested. The governing body must adopt a resolution of additional appropriations.
(3) If a school corporation proposes an additional appropriation from a fund that receives property tax levied under IC 6-1.1, the additional appropriation must be reported to and approved by the Department of Local Government Finance. A school corporation may make an additional appropriation without the approval of the Department of Local Government Finance if the appropriation is from a fund that does not receive property tax, however, those appropriations shall be reported to the Department of Local Government Finance.
After the public hearing, the proper officers of a school corporation shall file a certified copy of the final proposal and any other relevant information to the Department of Local Government Finance.
(4) Upon receipt of the certified copy of a proposal for additional appropriations, the Department of Local Government Finance will, in not less than fifteen (15) days after receiving the certificate, determine (in writing) if sufficient funds are available or will be available. The Department of Local Government Finance shall limit the additional appropriation to revenues available or to be made available, which have not been previously appropriated.
(5) If the Department of Local Government Finance disapproves an additional appropriation under IC 6-1.1- 18-5, the Department of Local Government Finance shall specify the reason for disapproval on the determination sent to the school corporation.
A school corporation may request a reconsideration of a determination of the Department of Local Government Finance by filing a written request for reconsideration. A request for reconsideration must: (1) be filed with the Department of Local Government Finance within fifteen (15) days of the receipt of the determination by the political subdivision; and (2) state with reasonable specificity the reason for the request. The Department of Local Government Finance must act on a request for reconsideration within fifteen (15) days of receiving the request.
ADMINISTRATIVE EXPENSES TITLES I AND II
Allowable maximums for administrative expenses under Titles I and II are 5% and 10% respectively. Administrative salary expense is governed by federal and state regulations. Salaries of Superintendents of School Districts, Assistant Superintendents, Treasurers of School Districts, Principals of Schools and their Assistants are regularly paid from the General Fund of the School Corporation as necessary operating expenses. Normally the positions are covered by full-time contracts and cannot be reimbursed with Title I and II funds. Payments of salaries from Title I and II funds to these individuals could be considered as supplanting of expenses regularly paid from other school funds. Reimbursement for services provided by these staff positions for these federal funds may be recouped by claiming an Indirect Cost Expense based on the approved school corporation rate. Payments of salaries to a less than full-time treasurer, bookkeeper, teacher or aide whose time can be documented as to which Title served, should be included as a direct expense on the budget. A time log must be maintained to substantiate the charges to each of the applicable funds for person’s salary is paid from more than one fund source.
AFFORDABLE CARE ACT PENALTIES, FINES, OR TAX
The State Board of Accounts has received many questions regarding our audit position with regards to the Affordable Care Act. Most of the questions have inquired specifically about the penalties, fines, or tax associated with this law. While our general audit guidelines prohibit the paying of penalties and interest and states that those payments would be a personal charge to the fiscal officer, administrator, or board, we do not believe this general guideline should apply to this controversial, mandated, and complicated law. We also believe that the governing boards should be making the fiscal decisions associated with their unit of government and the implementation of this law. Therefore, if the fiscally wise decision of the board is to pay the penalties, fines, or tax instead of the cost of the insurance then we will not personally charge the officials involved. One of the conditions necessary to not charging the penalties, fines, or tax is to have the governing board officially document their decision to not comply with the Affordable Care Act. This could be a motion in the board minutes, a resolution, or an ordinance. In summary, as long as there is an official action of the board to choose to pay the fines, penalties, or tax, the State Board of Accounts will not personally hold anyone in that unit of government accountable for reimbursing the cost of those penalties, fines, or tax.
Recently, we have been asked to provide an audit position regarding the distribution and transaction recordings for the Annual Performance Grant provided by IC 20-43-10-3. After discussions with other state agencies and review of the Indiana Code, we will not take exception to school corporations following their current collective bargaining agreement or, if the grant distribution is not included in the collective bargaining agreement, following the suggestions contained in the Indiana Department of Education’s December 3, 2014 memo to distribute the grant on a school building basis.
It is our audit position that we will not take exception to school corporations recording the Annual Performance Grant in their records by receipting the grant amount into the “Performance Based Awards” section (3750-3759) of the Chart of Accounts from the Accounting and Uniform Compliance Guidelines Manual for Indiana Public School Corporations. If the school board has not appropriated expenditures from the fund, then they would need to provide that appropriation prior to the disbursements of the grant.
Finally, it is our audit position that we will not take exception to school corporations recording the Annual Performance Grant in their records by following the suggestions contained in the Indiana Department of Education’s December 3, 2014 memo. The memo suggests that school corporations receipt the grant into the General fund (100). If there are not sufficient appropriations in that fund to make the disbursements, then the school board would have to request additional General fund appropriations approval from the Indiana Department of Local Government Finance.
IC 5-3-1-3(c) provides for the required components of the annual financial report.
IC 5-3-1-3(e) states, "The department of education shall do the following: (1) Develop guidelines for the preparation and form of the financial report. (2) Provide information to assist school corporations in the preparation of the financial report."
IC 5-3-1-3(f) states, "The annual reports required by this section and IC 36-2-2-19 and the abstract required by IC 36-6-4-13 shall each be published one (1) time only, in accordance with this chapter."
IC 5-3-1-3(g) states, “Each school corporation shall submit to the department of education a copy of the financial report required under this section. The department of education shall make the financial reports available for public inspection.”
Please note that the annual financial report referred to in these statutes is not the same Biannual Financial Report (Form 9) that is required to be submitted to IDOE School Finance and it is not the same Gateway Annual Financial Report that is required to be submitted to the State Examiner per IC 5-11-1-4.
IC 20-28-9-18 states "(a) Upon a teacher's written request, a governing body shall withhold the requested amount of money from the salary of the teacher for a purpose described in subsection (c). (b) Upon a written request from a beneficiary of the Indiana state teachers' retirement fund, a governing body may receive a given amount of money for a purpose described in subsection (c). (c) The governing body shall hold the amounts described in subsections (a) and (b) and pay the amounts, as requested by the teacher or the beneficiary, to an insurance company or other agency or organization in Indiana that provides, extends, supervises, or pays for: (1) insurance or other protection; or (2) the establishment of or payment on an annuity account; for the teacher. If a dividend accrues on a policy, the dividend shall be paid or credited to the teacher. (d) If less than twenty percent (20%) of the teachers employed by a governing body request payment of the amounts described in subsection (c) to a single recipient, withholding the amounts of money for insurance, dues, or other purposes is discretionary with the governing body."
Since the statutory definition of a teacher includes the other professional people of the School Corporation, administrators, attendance officers, librarians, etc., the State Board of Accounts will not take audit exception if a school corporation applies IC 20-28-9-18 to those employees also.
IC 5-10-1.1-1 provides, in part, ". . . any political subdivision (as defined by IC 36-1-2-13) may: (1) agree with any employee to reduce and defer any portion of such employee's compensation which under federal law may be deferred under a nonqualified deferred compensation plan and subsequently contract for, purchase, or otherwise procure insurance and investment products appropriate for a nonqualified deferred compensation plan (all referred to in this chapter as "funding"), for the purpose of funding a deferred compensation plan for such employee; (2) if the political subdivision is a school corporation, establish an employee savings plan that is a defined contribution plan qualified under Section 401(a) or 403(b) of the Internal Revenue Code, and contribute amounts to the plan on behalf of eligible employees to be credited and allocated to an account for each employee; and (3) contribute amounts before January 1, 1995, and continue or begin to contribute amounts after January 1, 1995, to a nonqualified deferred compensation plan on behalf of eligible employees, subject to any limits and provisions under Section 457 of the Internal Revenue Code."
The State Board of Accounts is of the audit position that when purchase orders or contracts have been written during the year for the necessary purchases of the school corporation and such purchase orders or contracts have been entered in the Ledger of Appropriations Allotments, Encumbrances, Disbursements and Balances to encumber a sufficient amount of the proper appropriation to provide for payment when due, a permissible procedure is available to carry forward to the next budget year any amounts so encumbered which have not been liquidated as of December 31. Any such encumbrances carried forward must be for the exact amount of the purchase orders or contracts outstanding shall be carried to the same program and expenditure account in the ledger for the new budget year as that in which they appeared for the year ending December 31. These amounts when carried forward should be entered individually on each of the expenditure accounts affected and in total on the program (appropriation) account as an opening entry separate from the next annual appropriation amount. The total amount of encumbered appropriations carried forward for any fund must not exceed the fund cash balance or the available appropriation balance as of December 31 or a funding difficulty could exist during the new budget year.
Liquidation of the amounts carried forward must be made individually for each purchase order encumbered when payment of the claim is entered on the record following receipt of the items purchased. The balance of an encumbrance for a vendor's claim for payment of specific purchases found to be less than the amount of the encumbrance carried forward, may not be used to authorize payment of any other claim. Such balance must be liquidated at the time of liquidating the purchase order or contract or permitted to expire at the close of the budget year. Any amount of claim for payment that is greater than the encumbered amount carried forward must be charged against the available appropriation for the same purpose from the current budget or an additional appropriation obtained for that specific purpose.
Please contact the Indiana Board for Depositories at 317-232-5258, if you have any questions regarding approved depositories or visit http://www.in.gov/tos/deposit/2377.htm.
Any assignment of the wages of an employee is valid only if all of the following conditions are satisfied in accordance with IC 22-2-6-2:
1. The assignment is:
- in writing;
- signed by the employee personally;
- by its terms revocable at any time by the employee upon written notice to the employer; and
- agreed to in writing by the employer.
2. An executed copy of the assignment is delivered to the employer within ten (10) days after its execution.
Some of the purposes for which paying a wage assignment may be made include the following:
1. Premium on a policy of insurance obtained for the employee by the employer.
2. Pledge or contribution of the employee to a charitable or nonprofit organization.
3. Purchase price of bonds or securities, issued or guaranteed by the United States.
4. Purchase price of shares of stock, or fractional interests therein, of the employing company, or of a company owning the majority of the issued and outstanding stock of the employing company, whether purchased from such company, in the open market or otherwise. However, if such shares are to be purchased on installments pursuant to a written purchase agreement, the employee has the right under the purchase agreement at any time before completing purchase of such shares to cancel said agreement and to have repaid promptly the amount of all installment payments which theretofore have been made.
5. Dues to become owing by the employee to a labor organization of which the employee is a member.
6. Purchase price of merchandise sold by the employer to the employee, at the written request of the employee.
7. Amount of a loan made to the employee by the employer and evidenced by a written instrument executed by the employee.
8. Contributions, assessments, or dues of the employee to a hospital service or a surgical or medical expense plan or to an employees' association, trust, or plan existing for the purpose of paying pensions or other benefits to said employee or to others designated by the employee.
9. Payment to any credit union, nonprofit organizations, or associations of employees of such employer organized under any law of this state or of the United States.
10. Payment to any person or organization regulated under the Uniform Consumer Credit Code (IC 24-4.5) for deposit or credit to the employee's account by electronic transfer or as otherwise designated by the employee.
11. Premiums on policies of insurance and annuities purchased by the employee on the employee's life.
12. The purchase price of shares or fractional interest in shares in one (1) or more mutual funds.
13. A judgment owed by the employee if the payment: A. is made in accordance with an agreement between the employee and the creditor; and B. is not a garnishment under IC 34-25-3.
Independent Contractor or Employee:
We often receive inquiries regarding whether an athletic official is an employee of the school corporation or an independent contractor.
The determination whether athletic officials are employees or independent contractors can have important tax, liability, and labor ramifications. Generally, an employer must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. An employer does not generally have to withhold or pay any taxes on payments to independent contractors.
IHSAA considers athletic officials to be independent contractors. The IHSAA Officials Handbook states:
"Independent Contractor Status: IHSAA licensed officials are considered independent contractors and not employees of the IHSAA or member schools. As independent contractors, the official is entitled to remunerations for services rendered, but has no entitlements which may be available to an employee of the IHSAA or member schools."
The IRS has not made an official determination of whether athletic officials are employees or independent contractors. However, the IRS has ruled on this issue twice in Revenue Rulings.
In Revenue Ruling 57-119, the IRS held that college sports officials were employees of an athletic association composed of colleges and universities for federal employment tax purposes. The association selected, trained and assigned the officials and also required extensive reporting by the officials.
In Revenue Ruling 67-119, the IRS ruled that a group of high school officials were independent contractors and not employees of their own associations. The association provided training and assigned the officials games, but found that these acts were not enough to make the officials employees of their own association.
The IRS has provided the following guidance for determining if an individual is an independent contractor or employee on their website (http://www.irs.gov/Businesses/Small-Businesses-&-SelfEmployed/Independent-Contractor-Self-Employed-or-Employee):
Common Law Rules
Facts that provide evidence of the degree of control and independence fall into three categories:
1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
Form SS-8
If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.
Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8.
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker.
When the athletic official is also employed by the school corporation as a teacher or other employee of the school corporation, this should be disclosed on Form SS-8 and may result in a different determination by the IRS. In instances where an individual provides services in two separate roles to the same business, the IRS examines separately the relationship between the worker and the business for each performance of services. Just as with any examination of worker status, the IRS examines each relationship based on facts that fall into the three categories of evidence explained above—behavioral controls, financial controls, and relationship of the parties. If an employer-employee relationship is found with regard to performance of services for only one role of the worker, remuneration with regard to only those specific services is subject to all FICA and income tax withholding requirements under the Code. If an employer-employee relationship is found for both roles, then remuneration for all services performed by the worker for the business are subject to withholding requirements under the Code.
In conclusion, the determination can be complex and depends on the facts and circumstances of each case. If the IRS rules that a worker was wrongly classified as an independent contractor, there could be significant tax penalties imposed on both the employer and employee. We recommend that either the employer or employee file Form SS-8 in advance with the IRS, which will result in the IRS officially determining the proper worker classification for each circumstance.
Payment of Athletic Officials:
The State Board of Accounts will not take exception to the payment of athletic officials using an online payment system with the following conditions:
1. The School Board must authorize the use of the online payment system through a resolution, which has been approved in the minutes.
2. The School Board must implement and insure that proper internal controls are in place.
3. The athletic director shall provide the ECA treasurer with a detailed list of athletic officials that have been scheduled to officiate each contest. A Purchase Order/Accounts Payable Voucher (SA-1) must be completed with a copy of the detailed list attached.
4. The ECA treasurer shall transfer the appropriate rate of payment for each official on the detailed list and the estimated transaction fees for the corresponding payments to the trust account.
5. After the officials have officiated a contest, the athletic director must validate that the contest was held and services were provided through the online payment system.
6. Once the contest has been validated by the athletic director, payments to the officials are initiated by the ECA treasurer through the online payment system.
7. The ECA treasurer shall print and retain a report of all payments and transaction fees paid from the trust account. This listing should be attached to the SA-1, supporting the disbursements from the trust account. Any payment without proper documentation may be the responsibility of that officer or employee.
8. The trust account must be reconciled by the ECA treasurer on a monthly basis.
9. The ECA treasurer is responsible for compliance with all rules, regulations, guidelines, and directives of the Internal Revenue Service and the Indiana Department of Revenue.
10. At the end of the school year, all funds remaining in the trust account must be receipted back into the extra-curricular Athletic Fund and deposited into the ECA bank account.
Attendance Officers; Appointment In Completely Reorganized Counties
In a county which has been completely reorganized into one or more school corporations under IC 20-23-4, the governing body of each school corporation with fifteen hundred (1,500) or more students in average daily attendance shall appoint an attendance officer. The governing body of each school corporation which has less than fifteen hundred (1,500) students in average daily attendance may appoint an attendance officer. If the governing body of a school corporation which has discretion in whether or not to appoint an attendance officer declines to make an appointment, the superintendent of the school corporation shall serve as ex officio attendance officer under section 35 of this chapter. When the governing body of a school corporation makes an appointment under this section, it shall appoint an individual nominated by the superintendent. However, the governing body may decline to appoint any nominee and require another nomination. The salary of each attendance officer appointed under this section shall be fixed by the governing body; in addition to salary, the attendance officer is entitled to receive reimbursement for actual expenses necessary to properly perform the officer’s duties. The salary and expenses of an attendance officer appointed under this section shall be paid by the treasurer of the school corporation. (IC 20-33-2-31)
Ex Officio Attendance Officers
When the governing body of a school corporation elects not to appoint an attendance officer under section 31 of this chapter or when an appointing authority elects not to appoint an attendance officer under section 33 of this chapter, the superintendent shall serve as an ex officio attendance officer. A superintendent acting in this capacity may designate one (1) or more teachers as assistant attendance officers. These assistant attendance officers shall act under the superintendent's direction and perform the duties the superintendent assigns. Ex officio attendance officers and assistant attendance officers appointed under this section shall receive no additional compensation for performing attendance services. (IC 20-33-2-35)
Joint Employment of Attendance Officer
The governing bodies of two or more school corporations may enter into a voluntary mutual agreement for the joint employment of an attendance officer. The agreement must stipulate the manner in which the joint attendance officer shall be appointed, paid and supervised. The attendance officer may then be appointed, paid and supervised under the terms of the agreement; however, compensation for any attendance officer employed under this section shall be paid entirely by the school corporations involved with no assistance from the civil government. (IC 20-33-2- 36)
Attendance Officers; Appointment In Optional Separate District
The governing body of a school corporation that has fewer than fifteen hundred (1,500) students in average daily attendance may organize the school corporation as a separate attendance district and appoint an attendance officer. The governing body, in making the appointment, shall appoint an individual nominated by the superintendent; however, it may decline to appoint any nominee and require another nomination. All compensation for an attendance officer appointed under this section shall be paid by the treasurer of the school corporation in which the officer is employed. (IC 20-33-2-37)
Attendance Officers; Appointment Of Additional Officers
Any school corporation, attendance district, or remainder attendance district may appoint more attendance officers than are specifically authorized or required under this chapter. However, these additional attendance officers shall be appointed in the same manner as required by law for other attendance officers. Compensation for additional attendance officers appointed under this section shall be paid entirely by the school corporation or school corporations involved. (IC 20-33-2-38)
See IC 20-33-2-39 through IC 20-33-2-41 for information relating to the duties of attendance officers and licensing requirements. See IC 20-33-2-32; IC 20-33-2-33; and IC 20-33-2-34 for information concerning school corporations that have not been reorganized under IC 20-23-4.
IC 20-34-3-14 states, "(a) The governing body of each school corporation shall annually conduct an audiometer test or a similar test to determine the hearing efficiency of the following students: (1) Students in grade 1, grade 4, grade 7, and grade 10. (2) A student who has transferred into the school corporation. (3) A student who is suspected of having hearing defects. (b) A governing body may appoint the technicians and assistants necessary to perform the testing required under this section. (c) Records of all tests shall be made and continuously maintained by the school corporation to provide information that may assist in diagnosing and treating any student's auditory abnormality. However, diagnosis and treatment shall be performed only on recommendation of an Indiana physician who has examined the student. (d) The governing body may adopt rules for the administration of this section." IC 20-34-3-15 used to provide remedial measures for hearing impaired students. However, it was repealed by P.L. 233- 2015.
Inquiries have questioned the correct procedure for accounting for school corporation audit costs.
We find that IC 5-11-4-3(b) remains applicable to guide these processes. IC 5-11-4-3 (b) states in part: ". . . Immediately upon receipt of the certified statement, the county auditor shall issue a warrant on the county treasurer payable to the treasurer of state out of the general fund of the county for the amount stated in the certificate. The county auditor shall reimburse the county general fund, except for the expense of examination and investigation of county offices, out of the money due the taxing units at the next semiannual settlement of the collection of taxes."
Therefore, counties shall continue to forward examination of record payments to the Treasurer of State for school corporation audits and examinations when billed by the State Board of Accounts. The county general fund shall then be reimbursed from property tax collections of that school corporation at the next semiannual settlement. The school corporation may direct the county auditor to reduce the distributions of a specific fund or multiple funds that continue to have property tax levies for the examination of records expense.
AVERAGE DAILY MEMBERSHIP (ADM)
Student Engagement Policy and Supporting Documentation:
When calculating a school’s ADM, which is incorporated into a school corporation’s state tuition support calculation, only “eligible pupils” may be included in the ADM. In order to be considered an “eligible” pupil, the student must be enrolled in the school corporation.
The Indiana Department of Education (IDOE) has released guidance for reporting ADM information and requires supporting documentation of enrollment and attendance information by grade and school to be signed by the building principle, or head of school, and made available in the event of an audit. There is no further guidance as to what the terms “enrolled” and “attending” mean outside of IC 20-43-1. Therefore we are of the audit position that each school should adopt a student engagement policy which would mirror the requirements set forth for virtual charter schools in IC 20-24-7-13(h). If a student fails to continue attending after the ADM count date, the student is still subject to the state’s Compulsory School Attendance requirements found in IC 20-33-2.
Recent audit reports are continuing to note that records to support Average Daily Membership (ADM) as reported to the Department of Education have not been retained in accordance with IC 5-15, the Preservation of Public Records Law.
The State Board of Accounts is of the audit position that School Officials should maintain all records, including ADM records (enrollment cards, rosters, reporting forms, etc.), which substantiate the number of students claimed for ADM.
The building level Official (Principal, Assistant Principal, etc.) responsible for reporting ADM to the School Corporation Central Office should provide a written certification of ADM (written or electronic, which is retained for audit) to properly document responsibility. The certification should at a minimum include a statement detailing the names and location of the records used (these records must be retained for public inspection and audit) to substantiate ADM claimed.
Virtual Schools:
The analysis to determine whether a student is eligible for inclusion in an ADM count for a virtual school is similar to a brick-and-mortar school. The definition of “attending” in IC 20-43-1-7.5 includes that a “virtual presence” is required for a student to be “enrolled” within the virtual school. “Virtual presence” is not defined, however IC 20-24-7-13(h) states:
(h) A virtual charter school shall adopt a student engagement policy. A student who regularly fails to participate in courses may be withdrawn from enrollment under policies adopted by the virtual charter school. The policies adopted by the virtual charter school must ensure that:
(1) adequate notice of the withdrawal is provided to the parent and the student; and
(2) an opportunity is provided, before the withdrawal of the student by the virtual charter school, for the student or the parent to demonstrate that failure to participate in the course is due to an event that would be considered an excused absence under IC 20-33-2.
(i) A student who is withdrawn from enrollment for failure to participate in courses pursuant to the school's student engagement policy may not reenroll in that same virtual charter school for the school year in which the student is withdrawn.
(j) An authorizer shall review and monitor whether a virtual charter school that is authorized by the authorizer complies with the requirements described in subsections (h) and (i).
Therefore, “virtual presence” refers to the regular participation of a student by virtual means. IDOE has recommended that a 30 day period of inactivity be considered when developing student engagement policies.
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Board of School Trustees:
Bond Tax Anticipation Warrants
Liability
IC 26-2-7-4 states: "Subject to section 8 of this chapter, a person found liable under other applicable law is liable under this chapter to the holder of a check if the person executed and delivered the check to another person drawn on or payable at a financial institution and the person does either of the following:
(1) Without valid legal cause stops payment on the check.
(2) Allows the check to be dishonored by a financial institution because of any of the following:
(A) Lack of funds.
(B) Failure to have an account.
(C) Lack of an authorized signature of the drawer or a necessary endorser."
Cost and Fees
IC 26-2-7-5 states: "A person liable under section 4 of this chapter is also liable for all of the following:
(1) Interest at the rate of eighteen percent (18%) per annum on the face amount of the check from the date of the check's execution until payment is made in full.
(2) Court costs incurred in prosecuting an action that may be brought by the holder to collect on the check.
(3) Reasonable attorney's fees incurred by the holder if the responsibility for collection is referred to an attorney who is not a salaried employee of the holder. If legal action is filed to effect collection and the collection on the check is referred to an attorney who is not a salaried employee of the holder, the holder of the check is entitled to minimum attorney's fees of not less than one hundred dollars ($100).
(4) Actual travel expenses not otherwise reimbursed under subdivisions (1) through (3) and incurred by the holder to do either of the following:
(A) Have the holder or an employee or agent of the holder file papers and attend court proceedings related to the recovery of a judgment under this chapter.
(B) Provide witnesses to testify in court proceedings related to the recovery of a judgment under this chapter.
(5) A reasonable amount to compensate the holder for time used to do either of the following:
(A) File papers and attend court proceedings related to the recovery of a judgment under this chapter.
(B) Travel to and from activities described in clause (A).
(6) Actual direct and indirect expenses incurred by the holder to compensate employees and agents for time used to do either of the following:
(A) File papers and attend court proceedings related to the recovery of a judgment under this section.
(B) Travel to and from activities described in clause (A).
(7) All other reasonable costs of collection."
Liability for Continued Nonpayment
IC 26-2-7-6 states: "(a) This section does not apply to a person who has allowed a check to be dishonored because of lack of funds if both of the following apply:
(1) The person reasonably believed that there were sufficient funds in the account to cover the check.
(2) The insufficiency of funds is caused by the dishonoring of a third party check that had been deposited into the person's account.
(b) If a person liable under this chapter does not pay to the holder the full amount of the check not more than thirty (30) days after the certified mailing of written notice that the check has not been paid, the person is liable for, and the court shall award judgment for, the following, whichever applies:
(1) If the face amount of the check is not greater than two hundred fifty dollars ($250), three (3) times the face amount of the check.
(2) If the face amount of the check is greater than two hundred fifty dollars ($250), the face amount of the check plus five hundred dollars ($500)."
Remedies
IC 26-2-7-7 states: "A person must elect whether to pursue a claim either under this chapter or under IC 34-24-3-1 (or IC 34-4-30-1 before its repeal)."
Exemption
IC 26-2-7-8 states:
"(a) A person who has allowed a check to be dishonored is not liable under this chapter if, not more than ten (10) days after the holder has given notice that the check has not been paid by the financial institution, the person pays to the holder the full amount of the check.
(b) A payment made under subsection (a) is effective for all purposes as of the date the payment is made." Also, please be aware of IC 35-43-5-5 concerning check deception.
We are often asked if "choir outfits" for students may be bought under the same statute regarding band uniform purchases even though the "choir outfits" could possibly be considered as personal in that the students may keep the clothing.
The State Board of Accounts is of the audit position IC 20-30-15-8(b) provides "A governing body may appropriate from the school corporation's general fund for any one (1) year an amount equal to the total funds raised by school patrons during the year in which the appropriation is made to purchase band uniforms for high school bands sponsored by high schools located within and operated by the school corporation." (Our emphasis) IC 20-30.15-8 does not specifically refer to "choir outfits".
The School Board, if desiring, could consider the provisions of IC 20-26-5-4(a)(3) "Promotion of School" or the provisions of IC 20-26-3-1, et seq., School Corporation Home Rule. The School Corporation Attorney should provide written guidance concerning the applicability of these statutes to the "choir outfits". The appropriateness of a purchase if deemed to be for personal purposes may result in an audit exception.
We have also taken the audit position the purchase of band uniforms is not only a one time purchase, but may be repeated in subsequent budget years, limited each year to an amount equal to the amount raised by school patrons during that same budget year.
BANK STATEMENTS AND CANCELED CHECKS
The treasurer of the school corporation should receive a monthly statement at the close of each month from each designated depository which should include all checks paid through the bank and canceled during the period covered by the statement. IC 5-13-6-1 provides in part, “(e) All local investment officers shall reconcile at least monthly the balance of public funds, as disclosed by the records of the local officers, with the balance statements provided by the respective depositories."
The State Board of Accounts’ audit position is that all canceled checks should be retained in the file with the bank statement with which they were returned which will facilitate any future reference of one to the other that may be necessary for either accounting or audit purposes.
IC 5-15-6-3(a) concerning optical imaging of checks states, in part:
“. . . 'original records' includes the optical image of a check or deposit document when:
(1) the check or deposit document is recorded, copied, or reproduced by an optical imaging process . . . ; and
(2) the drawer of the check receives an optical image of the check after the check is processed for payment . . ."
The Public Purchase Law, IC 5-22-1-1 et seq. and the Public Work Law, IC 36-1-12-1 et seq., both require the preparation of specifications, publication of a legal notice requesting bids for the designated purpose and publishing a time and place for opening of the bids received in required situations.
IC 20-26-4-6 provides that the governing body of any school corporation may designate a committee of at least two (2) of the governing body's members, or a committee of not less than two (2) employees of the school corporation, to open and tabulate bids in connection with the purchase of supplies, material, or equipment; for the construction or alteration of a building or facility; or for any similar purpose. Such bids may be opened by the committee at the time and place fixed by the advertisement for bids; must be read aloud and tabulated publicly, to the extent required by law for governing bodies; and must be available for inspection. The bids must be reported to, and tabulation entered upon the records of, the governing body at its next meeting following the bid opening. No bid shall be accepted or rejected by the committee, but such bid must be accepted or rejected solely by the governing body in a board meeting open to the public as provided in IC 20-26-4-3.
BOARD OF FINANCE - ANNUAL MEETING
IC 5-13-7-6 requires each local board of finance to meet annually after the first Monday and on or before the last day of January. At the annual meeting the board of finance shall elect from the board's membership a president and a secretary. The board of finance shall also receive and review the written report of the investing officer that summarizes the school corporation's investments during the previous year. The report must contain the name of each financial institution, governmental agency or instrumentality or other person with whom the school corporation invested money during the previous calendar year. The board of finance is to review the overall investment policy of the school corporation. The following format is recommended to be completed and given to the Board of Finance:
SCHOOL BOARD MEMBER COMPENSATION - PER DIEM
IC 20-26-4-7 states in part "(a)". . . the governing body of a school corporation by resolution has the power to pay each member of the governing body a reasonable amount for service as a member, not to exceed: (1) two thousand dollars ($2,000) per year; and (2) a per diem not to exceed the rate approved for members of the board of school commissioners under IC 20-25-3-3(d). (b) If the members of the governing body are totally comprised of appointed members, the appointive authority under IC 20- 23-4-28(e) shall approve the per diem rate allowable under subsection (a)(2) before the governing body may make the payments. (c) To make a valid approval under subsection (b), the appointive authority must approve the per diem rate with the same endorsement required under IC 20-23-4-28(f) to make the appointment of the member."
IC 20-25-3-3 states in part (d) "Board members are entitled to receive compensation not to exceed the amount allowed under IC 20-26-4-6 and a per diem not to exceed the rate approved for members of the city-county council established under IC 36-3-4 for attendance at each regular and committee meeting as determined by the board."
We understand members of the City-County Council in Marion County still currently receive one hundred twelve dollars ($112) for regular meetings and sixty-two dollars ($62) for committee meetings.
The State Board of Accounts will not take audit exception to reimbursement in accordance with the aforementioned for meetings that comply with IC 5-14-1.5-1 et seq., the Open Door Law.
Please note IC 5-14-1.5-4 provides in part (b) "As the meeting progresses, the following memoranda shall be kept: (1) The date, time, and place of the meeting. (2) The members of the governing body recorded as either present or absent. (3) The general substance of all matters proposed, discussed, or decided. (4) A record of all votes taken, by individual members if there is a roll call. (5) Any additional information required under IC 5-1.5-2-2.5. (c) The memoranda are to be available within a reasonable period of time after the meeting for the purpose of informing the public of the governing body's proceedings. The minutes, if any, are to be open for public inspection and copying."
We are of the audit position that a board of school trustees should formally determine board members that are eligible to attend, vote, testify, gather information for other committees, etc., and receive compensation for attendance at those individual committee meetings. We are also of the audit position board members which have not been formally authorized by a board of school trustees to attend committee meetings, should not receive compensation for attendance at committee meetings.
QUORUM FOR SCHOOL BOARD ACTION
The State Board of Accounts is sometimes questioned regarding the statutory provision concerning the number of board members necessary to take official action at a board meeting.
IC 20-26-4-3 (f) states "At a meeting of the governing body, a majority of the members constitutes a quorum. Action may not be taken unless a quorum is present. Except where a larger vote is required by statute or rule with respect to any matter, a majority of the members present may adopt a resolution or take any action."
Some specific statutes require a favorable vote from a majority of the total membership of the governing board. IC 20-26-4-4(c) states in part "If a vacancy in the membership of a governing body occurs for any reason . . . the remaining members of the governing body shall by majority vote fill the vacancy by appointing a person from within the boundaries of the school corporation, with the residence and other qualifications provided for a regularly elected or appointed board member filling the membership, to serve for the term or the balance of the term . . ."
IC 20-26-4-8 states in part concerning contracts "However, each contract must be approved by a majority of all members of the governing body." IC 6-1.1-17 which deals with formulation of the annual budget for the school corporation and IC 6-1.1-18-5 concerning additional appropriations each refers to the "proper officers" of the political subdivision which has been generally interpreted as all members of the governing board. If questions arise concerning signatures necessary on budget or additional appropriation documents, you should contact the Department of Local Government Finance.
IC 20-23-4 provides for the redemption of school aid bonds if any, by a reorganized school corporation. These are bonds which were issued by the township, city or town and although they are a debt obligation of the civil unit, since they were originally sold for school building purposes, the statute authorizes the school corporation to stand the expense of redemption by way of collections in the Debt Service Fund for payment to the officials of the civil unit who must in turn repay the bondholders or the paying agent.
Our long standing audit position has been as follows if any school aid bonds still exit: A community school corporation or a united school corporation organized according to the provisions of Chapter 202 of the Acts of 1959 as amended, may assume the obligation to pay the civil corporations located within the geographical limits of the school corporation the amount of the school aid bonds and coupons coming due each year, if the reorganization plan provided for such payments. If the organization plan did not provide for such payments, the board of school trustees may, by resolution adopted, provide for making such payments to civil corporations. The exact amounts of school aid bonds and coupons coming due each year shall be paid to civil townships, civil cities or civil towns in semiannual installments on the 20th day of June and December each year, regardless of the financial status of the civil corporation's Civil Bond Fund. Prior to the 20th day of June and December each year, request that the township trustee, city controller or city or town clerk-treasurer certify to the treasurer of the school corporation the exact amount of school aid bonds and coupons coming due in July and January. The amount so certified must be paid to the civil corporations. School corporation treasurers may not pay civil aid bonds and coupons directly to the payee because these obligations are not a debt of the school corporation. Payments must be made to township trustees or civil authorities. Payments for civil aid bond obligations must be made from the Debt Service Fund, Account 54300.
INDIANA BOND BANK – TAX ANTICIPATION WARRANTS
We are of the audit position that Indiana Bond Bank transactions should be recorded in the records. Accordingly, receipts should be issued (Account 5430) for the amount of the tax anticipation warrant, checks issued (Account 51200) for repayment of the amounts borrowed, Account 60300 should be charged for securities purchased, etc. Additionally, the Treasurer's Daily Balance of Cash, Depositories and Investments, (General Form 361), and Register of Investments (General Form 350) should contain a record of each transaction.
Please note all receipts, checks and records should contain notations that these transactions are in accordance with the Bond Bank Tax Anticipation Warrants issued and note where the securities are held by reference to the safekeeping receipt that you are to receive. Also, please ensure that interest income is properly receipted into the records through the normal accounting system.
Finally, we understand the Indiana Bond Bank will provide guidance concerning any potential arbitrage requirements, and if the entire amount available is not drawn by a school corporation, the residual amount will be sent to a school corporation to be used to repay the total amount of the advance.
AUDIT POSITION ON OFFICIAL BONDS
The State Board of Accounts (SBOA) received numerous questions, concerns, and comments from a variety of sources regarding the changes made to Ind. Code § 5-4-1-18 by Senate Enrolled Act (SEA) 393. In response, the SBOA is issuing the attached Updated Bulletin on SEA 393, which replaces the bulletin issued on July 24, 2015. The attached bulletin addresses or clarifies the following issues:
1. The SBOA will not take audit exception to schedule bonds—by name or position—if the bonds are authorized by ordinance, endorsed to cover faithful performance, and include aggregate coverage sufficient to cover all officers, employees, and contractors required to be bonded.
2. The SBOA will not take audit exception if a political subdivision purchases a crime insurance policy in lieu of a bond if the crime insurance policy is authorized by ordinance, endorsed to cover faithful performance, and includes aggregate coverage sufficient to cover all officers, employees, and contractors required to be bonded.
3. It is the audit position of the SBOA that, for purposes of IC 5-4-1-18(a)(7), a “contractor” is a person or business in a contractual relationship with the political subdivision who has a fiduciary relationship with or performs a fiscal responsibility for the political subdivision, and whose accounts are not otherwise covered by the Federal Deposit Insurance Corporation (FDIC).
…5. Considering materiality and the risk of loss to the governing body of a school corporation, the SBOA will not take audit exception if individuals who receive, process, deposit, disburse, or otherwise have access to public funds in an amount less than $100 per event or duty are not bonded.
...X. Bonds for School Treasurers
A. School Treasurers. School treasurers, deputy treasurers, and “any individual whose official duties include receiving, processing, depositing, disbursing, or otherwise having access to funds that belong to a school corporation or the governing body of a school corporation” must be bonded. IC 20-26-4-5(a).
1. The bond amount is determined by the school corporation’s governing body. IC 20-26-4-5(a).
2. The term of the bond is one year commencing on July 1.
3. The bond may be an individual bond, or a blanket bond if (1) the blanket bond is endorsed “to cover the faithful performance of all employees and individuals acting on behalf of the governing body or the governing body’s school corporation,” and (2) “includes aggregate coverage sufficient to provide coverage amounts specified for each individual required” to be bonded. IC 20-26-4-5(b).
4. The governing body must determine who must be bonded under the statute. The term “official duties” is not defined. It is our position that “official duties” may include duties set forth in a job description, duties that are customary or routinely performed, or duties that are assigned but not frequently performed. For example, cafeteria cashiers, teachers who routinely collect lunch money from students and employees who collect textbook rental fees must be bonded. The statute does not require the individual to be an employee of the school corporation. So, for example, parents volunteering in the school lunchroom or at an extracurricular sporting event must be bonded if their official volunteer duties include receiving public funds such as lunch money or admission fees.
5. There is no dollar threshold or de minimis exception in the statute. However, considering materiality and the risk of loss to the governing body, the SBOA will not take audit exception if individuals who receive, process, deposit, disburse, or otherwise have access to public funds in an amount less than $100 per event or duty are not bonded.
6. We recommend that all bonds be filed with and kept by the trustee or board of school trustees. Copies of the bonds must also be submitted to the State Board of Accounts electronically via Gateway with the school’s Annual Financial Report.
B. Extracurricular Treasurers. Extracurricular account treasurers must be bonded if they handle funds in excess of $300 during the school year. IC 20-41-1-6(a).
1. The bond amount is determined by the superintendent and principal of the school approximating the total “anticipated funds that will come into the possession of the treasurer at any one time during the regular school year.” IC 20-41-1-6(a). If school lunch or textbook rental fees are handled by an extracurricular treasurer, then the governing body must set the amount of the bond “sufficient to protect the account for all funds coming into the hands of the treasurer of the account.” IC 20-41-2-6(b).
2. The term of the bond is not specified, but an extracurricular treasurer must be designated “immediately upon the opening of the school term….” Thus, we recommend an annual bond commencing on July 1.
3. The bond may be an individual bond or a blanket position bond for all extracurricular account treasurers. IC 20-41-1-6(b).
4. The bond must be filed with the trustee or board of school trustees. IC 20-41-1- 6(a). A copy of the bond must also be submitted to the State Board of Accounts electronically via Gateway with the school’s Annual Financial Report.
All Bonding Situations
We have noted situations where various employees (other than bonded treasurers and deputy treasurers) are involved in handling cash and cash related transactions (i.e., textbook rental collections, school lunch, etc.) without the school corporation being afforded bond coverage.
We strongly recommend and encourage school officials to immediately obtain bond coverage for all employees that might be handling cash and related transactions. School corporation officials should also give consideration to providing supplemental crime insurance coverage.
Whenever deemed necessary to bond any other employee of a school corporation, the governing body may bond or cause to be bonded such employee or employees by either individual or blanket bonds conditioned upon faithful performance of duties, and in amounts and with surety approved by the school board. A blanket bond should not include any officer, deputy or employee for whom an individual bond is required by statute. Individual bonds are required for the school corporation treasurer and the deputy treasurer.
The official bonds of treasurers, corporation or extra-curricular, must be written for a period of one (1) year, the term of office of the respective treasurer. Bonds may be for a shorter period for a person appointed to complete the term of a treasurer who resigned or is deceased. The bonds shall be payable to the State of Indiana as required by IC 5-4-1-10; and, after approval, shall be filed and recorded in the office of the recorder of the county wherein the treasurer resides as provided in IC 5-4-1-5.1 as well as with Board of School Trustees. No charge shall be made by the recorder of the county for recording the official bonds of any public officer, deputy, appointee or employee (IC 36-2-7-10).
When a minimum premium is required for official bonds, school corporation officials should make certain maximum coverage is provided for the required minimum premium. The State Board of Accounts is of the audit position a new bond should be obtained each year and continuation certificates or renewals should not be used in lieu of obtaining a new bond.
The procedures for the accounting of the proceeds of the sale of a general obligation bond issue and the investment and use of same are somewhat complicated and require reference to several laws. Our article will be limited to the subject of bond issues for school construction as authorized by IC 20-48-1.
When bonds are sold, the amount of principal (face value) received shall be receipted to a Construction Fund in Receipt Account Number 5110 and deposited in a designated depository for necessary expenditure. The amount then (if desired) may be invested (please ensure arbitrage problems do not exist). Any premium on the sale or accrued interest (interest earned from date of issue or most recent prior interest payment date to the date of sale) must be receipted to the Debt Service Fund in Receipt Account Number 5120 (IC 5-1-12-2). Please do not confuse "accrued interest" with "interest earned from investment of the proceeds of the sale". Investment of the proceeds must be in accordance with the investment law as found in IC 5-13-9. Interest earned from investment of the proceeds shall be receipted to Receipt Account Number 1510 of the Construction Fund or, if the governing board so designates, to the General Fund or Debt Service Fund (IC 5-13-9-6)
When securities are purchased as an investment of Construction Fund moneys, the check is recorded in Expenditure Account Number 60300 of the Construction Fund. The amount of the check is included in the total expenditures for the day which is posted to the appropriation Control Account, the Construction Fund, and the Control of All Funds in the Fund Ledger. The amount invested or the cost of securities purchased is also entered in the Clearing Account for Investments (Account Number 8500) on the Receipts-Purchase of Investments (Number 8510) side to retain the identity of the asset and maintain the balance in your accounting records. Also set up a Register of Investments (Form 350) to provide a record of the investments and their earnings for the fund from which the investment was made (Construction Fund).
If interest is received while the security is held by the school corporation, record the amount on the Register of Investments on the same line as the investment is recorded; also, receipt the interest to Receipt Account Number 1510 of the Construction Fund (or General Fund or Debt Service Fund, if designated). Post the interest to the fund and the Control of All Funds. Deposit the interest in the designated depository.
When the investment is sold or matures, receipt the sale price to the Construction Fund and to the Control of All Funds. Record in the receipt account for the Construction Fund the purchase price of the security in Account Number 6510, Sale of Securities, and any amount received in excess of the purchase price to Account Number 1510, Interest on Investments. Also, disburse from Clearing Account 8500 by entering on the disbursements side. Sale of Investments (Number 8520) an amount equal to the purchase price of the security previously entered in Number 8510 which will reduce the balance for the overall investment transaction in the Clearing Account to zero. Record the sale on the Register of Investments on the same line as the purchase was recorded. Any amount received in excess of the purchase price will be recorded on the Register of Investments as interest received.
IC 20-27-8-7 states: “When a school bus driver operates under a transportation or fleet contract, the compensation for the school bus driver or fleet contractor is determined and fixed by the contract on a per diem basis for the number of days on which: (1) the calendar of the school corporation provides that students are to attend school; (2) the driver is required by the school corporation to operate the bus on school related activities; and (3) inservice training is required by statute or authorized by the school corporation, including the safety meeting workshops required under section 9 of this chapter.”
The contract forms for school bus providers are prescribed by the State School Bus Committee and are the Driver Owned Equipment Contract for Transporting Children or the Fleet Contract for Transporting Children, as applicable, for a driver-owner or a fleet contractor respectively.
Methods of Payment
Employment Contracts “(a) If a school corporation owns in its entirety the school bus equipment in its entirety, the school corporation may employ a school bus driver on a school year basis in the same manner as other noninstructional employees are employed. (b) If a school corporation employs a school bus driver under subsection (a), the employment contract between the school corporation and the school bus driver must be in writing. (c) A school corporation that hires a school bus driver under this section shall purchase and carry public liability and property damage insurance covering the operation of school bus equipment in compliance with IC 9-25. (d) Sections 5 through 32 of this chapter do not apply to the employment of school bus driver hired under this section.” (IC 20-27-5-4)
Driver Furnishing Body Or Chassis Of School Bus
“(a) If a school bus driver is required to furnish the school bus body or the school bus chassis, or both, the governing body of the school corporation shall enter into a written transportation contract with the school bus driver. (b) The transportation contract may include a provision allowing the school bus driver to be eligible for the life and health insurance benefits and other fringe benefits available to other school personnel.” (IC 20-27-5-5)
Fleet Contracts; Benefits Package
“(a) When a fleet contractor is required to provide two (2) or more school buses and school bus drivers, the governing body of the school corporation shall enter into a written fleet contract with the fleet contractor. (b) The fleet contract may include a provision allowing the school bus drivers to be eligible for the life and health insurance benefits and other fringe benefits available to other school personnel.” (IC 20-27-5-6)
Transportation Or Fleet Contracts; Negotiations
“Transportation or fleet contracts may either be: (1) negotiated and let after receiving bids on the basis of specifications, as provided for in section 10 of this chapter; or (2) negotiated on the basis of proposals by a bidder in which the bidder suggests additional or altered specifications. A school corporation negotiating and executing a transportation contract shall comply with section 5 and sections 9 through 16 of this chapter. A school corporation negotiating and executing a fleet contract shall comply with sections 8 through 16 of this chapter.” (IC 20-27-5-7)
Payments should be in accordance with applicable Internal Revenue and State Department of Revenue reporting requirements.
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Capital Assets Establishing the Estimated Cost
Charge for Use of School Facilities
Compensatory Time - Fair Labor Standards Act
Computer Consortium Advancements and Training Grants
Cybersecurity Incidents - Reporting
We have previously been provided the Division of School and Community Nutrition of the Department of Education policy regarding vending machines which states in part that vending machines containing foods of minimal nutritional value cannot be sold in the food service area during the breakfast and/or lunch periods. These foods (carbonated beverages, candy, etc.) may however be sold outside the food service area during meal periods. The policy also provided that the sale of competitive foods (which meet certain nutritional requirements) may, at the discretion of the state agency and school food authority, be allowed in the food service area during the breakfast or lunch periods only if the income from the sale of such foods accrues to the benefit of the nonprofit food service or the school or student organizations approved by the school.
The Division of School and Community Nutrition policy allows the school food authority to determine where the income from the sale of competitive foods shall go in conformity with the above policy.
The State Board of Accounts is of the audit position that as long as the Division of School and Community Nutrition policy allows for a choice that the decision of which fund the vending revenue is to be accounted for in should be in accordance with the following:
1. The proceeds should accrue to that group's extra-curricular fund if a particular student group or organization manages the vending function.
2. The proceeds may go to the athletic fund if the vending in question is located at athletic events and managed by athletes or athletic department individuals.
3. The proceeds should go to the School Lunch Fund or the Extra-Curricular General Fund, Student Activity Fund or Concession Fund for the benefit of all students and spent consistent with page 6-3 of the "Accounting and Uniform Compliance Guidelines manual for Extra-Curricular Accounts" if no particular student group manages the vending function.
The Board of School Trustees should document their preference in the board minutes.
The possibility exists that an Audit Result and Comment may appear in a report if the School Lunch Fund fiscal status is adversely affected by the policy.
ESTABLISHING THE ESTIMATED COST OF CAPITAL ASSETS
When it is not possible to determine the historical cos of capital assets owned by a governmental unit, the following procedure should be followed.
Develop and inventory of all capital assets which are significant for which records of the historical costs are not available.
Obtain an estimate of the replacement costs of these assets. Through inquiry determine the year or approximate year of acquisition. Then multiply the estimated replacement cost by the factor for the year of acquisitions from the Table of Cost Indexes. The resulting amount will be the estimated cost of the asset.
In some cases estimated replacement cost can be obtained from insurance policies; however, if estimated replacement costs are not available from insurance policies, you should obtain or make an estimate of the replacement costs.
If the replacement cost is estimated to be $76,000.00 and the asset was constructed about 1946, then the estimated cost of the asset should be reported as $6,080.00.
$76,000.00 X .08 = $6,080.00
A Cash Change Fund may be established in any school corporation with the approval of the governing body (board of school trustees), where any officer or employee of the school corporation is charged with the duty of collecting fees or other cash revenues. Such Cash Change Fund when authorized by the governing body, shall be established by a check drawn on the General Fund of the school corporation in an amount to be determined by the governing body. The check is drawn in favor of the officer or employee who has been designated as custodian of the Cash Change Fund. The custodian shall convert the check to cash and be held responsible for the safekeeping of such cash and the proper accounting thereof in the same manner as required for other funds of the school corporation. The governing board shall have authority to increase or decrease such fund and shall require the entire Cash Change Fund to be returned to the General Fund if and when no longer needed for the purpose established or when a change is made in the custodian of the fund. (IC 36-1-8-2).
IC 36-1-8-2 is particularly applicable in a school corporation where either a Textbook Rental Fund or School Lunch Fund, or both, are maintained as school corporation funds. A check is drawn on the General Fund for an authorized Cash Change Fund, then recorded as a disbursement in the General Fund.
Also, a Cash Change Fund must be opened in the Asset Accounts section of the Clearing Accounts in your ledger to establish a control for the amount of the cash until returned to the General Fund.
CHARGE FOR USE OF SCHOOL FACILITIES
IC 20-26-5-4 provides in part "In carrying out the school purposes of school corporation, the governing body acting on the school corporation's behalf has the following specific powers . . .(7) To lease any school property for a rental that the governing body considers reasonable or to permit the free use of school property for:
(A) civic or public purposes; or
(B) the operation of a school age child care program for children who are at least five (5) years of age and less than fifteen (15) years of age that operates before or after the school day, or both, and during periods when school is not in session;
if the property is not needed for school purposes. Under this subdivision, the governing body may enter into a long term lease with a nonprofit corporation, community service organization, or other governmental entity, if the corporation, organization, or other governmental entity will use the property to be leased for civic or public purposes or for a school age child care program. However, if payment for the property subject to a long term lease is made from money in the school corporation's debt service fund, all proceeds from the long term lease must be deposited in the school corporation's debt service fund so long as payment for the property has not been made . . ."
We have not taken audit exception to a school board establishing a schedule of fees for admission to or use of any facility, outside of the school corporation's regular school program. All such fees shall be receipted into the fund which originally purchased the property unless otherwise provided by law. Examples have included use of a swimming pool or other athletic facility, or use of classrooms or other space in a school for purposes of school age childcare. The school corporation may pay any necessary and authorized expense in the use or operation of the facility.
We are also of the audit position the board of school trustees could, by resolution, adopt a schedule of fees for different admissions or situations. The board for example, may allow all school children residing in the school corporation to be admitted free to the pool or other athletic facility, or admitted for a nominal fee. Adults residing in the school corporation may be charged a greater fee than the charge to children, and non-resident children and adults may be charged a greater fee than resident children and adults. The matter should be resolved by the school board with the written advice of the school corporation attorney.
Please be advised IC 20-26-5-1(d) states in part: "…If a school corporation implements a child care program as described in subsection (c)(1) or enters into a contract with an entity described in subsection (c)(2) to provide a child care program, the school corporation may not assess a fee for the use of the building, and the contract between the school corporation and the entity providing the program must be in writing. However, the school corporation may assess a fee to reimburse the school corporation for providing security, maintenance, utilities, school personnel, or other costs directly attributable to the use of the building for the program. In addition, if a school corporation offers a child care program as described in subsection (c)(1), the school corporation may assess a fee to cover costs attributable to implementing the program."
IC 20-26-5-2(b) concerning Latch Key programs states in part: "…A school corporation may not assess a fee for the use of a building for a child care program required under subsection (a). However, the school corporation may assess a fee to reimburse the school corporation for providing security, maintenance, utilities, school personnel, or other costs directly attributable to the use of a building for a child care program. If a school corporation conducts a child care program under subsection (a)(1), the school corporation may assess a fee to cover costs attributable to implementing the program."
The “Dvrsn” or Diversion amounts provided by the Indiana Department of Education (IDOE) is not always being provided prior to the grant information due date in Gateway. If a school is unable to update Gateway prior to the commencement of an audit we will propose an adjustment to the Schedule of Expenditures of Federal Awards (SEFA) and if the adjustment is made before the audit starts, we will not take exception. The “Dvrsn” amount should be reported in the commodities total in the program year that the Indiana Department of Education reported it and not based on the allocation date.
We would like to also bring to your attention to an article in the March 2018 School Bulletin titled “Commodities Inclusion on Federal Expenditure Schedules” on page 7. This article discusses that the summary information at the top of the IDOE School Nutrition Portal should not be used to determine the amount of commodities to include in the Schedule of Expenditures of Federal Awards (SEFA) federal expenditures. Instead, the summation of the individual detailed transactions is the appropriate way to calculate the non-cash assistance amounts.
https://www.in.gov/sboa/files/2018-March-School-Bulletin.pdf
USE OF COMPENSATORY TIME OFF UNDER THE FAIR LABOR STANDARDS ACT
The Fair Labor Standards Act (FLSA) is a federal law that sets standards for minimum wage, overtime, and child labor. Pursuant to an agreement with employees or their representatives, state or local government agencies may arrange for their employees to earn comp time instead of cash payment for overtime hours.
As a condition for use of compensatory time off in lieu of overtime payment in cash, an agreement of understanding must be reached prior to performance of the work. Any comp time arrangement must be established pursuant to the applicable provisions of a collective bargaining agreement, memorandum of understanding, any other agreement between the public agency and representatives of overtime-protected employees, or an agreement or understanding arrived at between the employer and employee before the performance of the work. This agreement may be evidenced by a notice to the employee that compensatory time off will be given in lieu of overtime pay (for example, providing the employee a copy of the personnel regulations). The comp time must be provided at a rate of one-and one-half hours for each overtime hour worked. For example, for most state government employees, if they work 44 hours in a single workweek (4 hours of overtime), they would be entitled to 6 hours (1.5 times 4 hours) of compensatory time off. When used, the comp time is paid at the regular rate of pay.
Most state and local government employees may accrue up to 240 hours of comp time. Law enforcement, fire protection, and emergency response personnel, as well as employees engaged in seasonal activities (such as employees processing state tax returns) may accrue up to 480 hours of comp time. An employee must be permitted to use comp time on the date requested unless doing so would “unduly disrupt” the operations of the agency.
When employees reach these ceilings, any additional overtime that is worked must be paid. FLSA compensatory time off stays on the books until the employee uses the time or until it is paid out. Employees cannot "use or lose" compensatory time off.
For answers to other questions on the Fair Labor Standards Act or the Family and Medical Leave Act, contact your nearest U.S. Department of Labor, Wage and Hour office: Indianapolis: (317) 226-6801; South Bend: (574) 236- 8331.
COMPUTER CONSORTIUM/EDUCATION TECHNOLOGY ADVANCEMENTS
School Technology Advancements can be approved from the State's School Technology Advancement Account established within the Common School Fund in accordance with IC 20-49-4.
The accounting procedure for these advancements is the following:
1. A special fund titled "Computer Consortium/Education Technology Advancements" and numbered 3190 for reporting on the Form 9 should be set up on your records when any money is received in support of the approved advancement. The money is to be receipted to the fund in Receipt Account Number 3220 "Computer Consortium Advancements", totaled and posted to the receipt side of the fund.
2. The proper procedures, after following the provisions of the Public Purchase Law are, the items are received, payment is approved and the check is written and should be recorded in Expenditure Account Number 22250 "Computer Assisted Instruction Services: of the above new fund. The amount must be included in the total for the posting period which is carried to Account Number 22000 of the fund and to the disbursement side of the fund to reduce the balance remaining.
3. Repayment to the State of the advancement is to be handled in the same manner as Common School Fund advancements for school construction; that is, withheld from distributions by the State of tuition support for the school corporation's Education Fund. The school corporation may budget for these annual repayments as part of its Operations Fund tax rate and levy in Account Number 54200. The amount when collected in the Operations Fund may be paid to the Education Fund, Account Number 3113, to replace the amount withheld from the State support distribution for the Education Fund.
4. Money received in support of these advancements as approved; receipted to a special fund as described herein; and, disbursed for the designated purpose as defined in the authorizing statute, IC 20-49-4, does not require appropriation before expenditure.
Please note that the provision for expenditure from the Fund without an appropriation being required applies only to the money advanced by the State for the purchases and does not include any Education Fund or Operations Fund money.
CONFLICT OF INTEREST DISCLOSURES
Pursuant to IC 35-44.1-1-4 and for those situations in which they are required, Conflict of Interest Disclosure statements can now be filed with the Indiana State Board of Accounts through the Gateway system. Schools can obtain PDF forms of the disclosures and meet the filing requirements by going to https://gateway.ifionline.org/sboa_coi/.
One of the steps in a regular examination of the financial records and accounts of a school corporation by the State Board of Accounts is a review of the various contracts entered into by the governing body of the school corporation for the school corporation's benefit. The review of construction contracts, construction manager contracts, lease-rental agreements, personnel contracts, transportation contracts, etc. discloses, in some instances, clauses and instances where these contract provisions result in the school corporation's making payments from public funds for unauthorized purposes or for which there is no comparable value received for the school corporation.
We would suggest that before a governing body approves or signs a contract for any purpose, whether major or minor in nature, the members review the contract very closely for such flaws. An advisable procedure for the governing body, and often financially beneficial to the school corporation, is to have persons experienced in such contractual functions review the contract before board approval. Naturally, the attorney for the school corporation should review the contract for legality as well as content before the contract is approved and signed by the board.
Contracts between governmental units:
The Interlocal Cooperation Act, IC 36-1-7, provides authority for local governmental units to negotiate written contractual agreements to cooperatively or jointly exercise powers that each is authorized to perform separately.
IC 36-1-7-12 states "(a) Whenever a contract provides for the purchase, sale, or exchange of services, supplies, or equipment between or among Indiana governmental entities only, no notice by publication or posting is required. (b) Whenever a contract provides for one (1) Indiana governmental entity to make a purchase for another, compliance by the one with the applicable statutes governing public bids constitutes compliance by the other. (c) A governmental entity may make a purchase from any other governmental entity or under another governmental entity's referenced written contract if there is compliance with state purchasing law by the original purchasing unit. (d) Two (2) or more governmental entities may procure together or with a nonprofit entity if the requirements of the public purchasing statutes are met."
Other Programs:
Joint Services and Supply
IC 20-26-10-3 provides "(a) Two (2) or more school corporations acting through their respective governing bodies may engage in joint programs under a written agreement executed by all participating school corporations. (b) The agreement shall do the following: (1) Designate the type of purchases, leases, or investments to be made. (2) Prescribe the manner of approving persons employed under the joint program. (3) Designate the type of construction, remodeling, or additions to be made on the school buildings. (4) Provide for the organization, administration, support, funding, and termination of the program, subject to the provisions of this chapter."
Administration and Supervision
IC 20-26-10-4 states "An agreement shall designate one (1) of the participating school corporations to administer and supervise the joint program, including receiving and disbursing funds, executing documents, and maintaining records under this chapter and the agreement between the participating school corporations".
Instruction of Children with Disabilities
IC 20-35-4-1 states in part "(a) A school corporation acting individually or in a joint school services program with other corporations may establish and maintain instructional facilities for the instruction of children with disabilities." Additional sections provide for the transfer and transportation of children with disabilities; special personnel may be employed; building or leasing the necessary school buildings; and purchasing special equipment needed in a class.
Federal Funds
IC 20-35-4-1 states in part "(i) If the state receives funds from the federal government to aid in the operation of any school for children with disabilities, the division shall distribute among these schools the grant of federal funds that are appropriated. The federal funds shall be expended for the purposes for which the funds are granted."
IC 20-35-5-1 et seq. provides for the formation of a special education cooperative by two (2) or more participating school corporations.
Collaboration with Other School Corporations
IC 20-42.5-2-1 provides in part "A school corporation individually, in collaboration with other school corporations, and through the educational services centers may undertake action to reduce noninstructional expenditures and allocate the resulting savings to student instruction and learning. Actions taken under this section include the following: (1) Pooling of resources with other school corporations for liability insurance, property and casualty insurance, worker's compensation insurance, employee health insurance, vision insurance, dental insurance, or other insurance, whether by pooling risks for coverage or for the purchase of coverage, or by the creation of or participation in insurance trusts, . . ." Certain procedures are required.
Shared Services Arrangements
IC 20-42.5-2-2 provides "A school corporation may use shared services arrangements with other school corporations and units of government, including: (1) the use of shared administrative services overseeing transportation, food service, facilities, or other operations; (2) the use of shared administrative services to manage finance, payroll, human resources, information technology, purchasing, or other administrative services; and (3) the use of shared resources to provide instruction, supplemental services, extracurricular activities, or other student services. School corporations are not required to merge schools, consolidate, or otherwise relinquish control of curriculum, instruction, or student activities to use shared services arrangements. "
Collaboration with Contiguous School Corporations
IC 20-42.5-2-3 states "A school corporation may collaborate with contiguous school corporations to explore the use of cooperatives among school corporations, commonly managed school corporations, or the consolidation of school corporations to provide effective and efficient management of the school corporations or functions of the school corporations."
Educational Service Centers
IC 20-42.5-2-4 states "(a) Educational service centers established under IC 20-20-1 shall support and facilitate actions by school corporations under this article, including by the use of an educational service center's existing cooperative agreements. (b) School corporations and educational service centers may use the division of finance of the department and the office of management and budget to provide technical assistance under this article. (c) Not later than August 31 of each year, the educational service centers shall report to the state board the results of the efforts of the educational service centers under this article during the preceding school year."
Contracts for retiring employees:
IC 5-10.2-4-3 concerns the average of the annual compensation and states in part: “(a) Except as provided in subsection (f), in computing the retirement benefit for a nonteacher member, ‘average of the annual compensation’ means the average annual compensation calculated using the twenty (20) calendar quarters of service in a position covered by the retirement fund before retirement in which the member's annual compensation was the highest. However, in order for a quarter to be included in the twenty (20) calendar quarters, the nonteacher member must have performed service throughout the calendar quarter. All twenty (20) calendar quarters do not have to be continuous but they must be in groups of four (4) consecutive calendar quarters. The same calendar quarter may not be included in two (2) different groups. (b) This subsection does not apply to a teacher member described in subsection (c). In computing the retirement benefit for a teacher member, ‘average of the annual compensation’ means the average annual compensation for the five (5) years of service before retirement in which the member's annual compensation was highest. In order for a year to be included in the five (5) years, the teacher member must have received for the year credit under IC 5-10.4-4-2 for at least one-half (1/2) year of service. The five (5) years do not have to be continuous” …”(d) Subject to IC 5-10.2-2-1.5, ‘annual compensation’ means: (1) the basic salary earned by and paid to the member plus the amount that would have been part of that salary but for: (A) the state's, a school corporation's, a participating political subdivision's, or a state educational institution's paying the member's contribution to the fund for the member; or (B) the member's salary reduction agreement established under Section 125, 403(b), or 457 of the Internal Revenue Code; and (2) in the case of a member described in subsection (c) and for years of service to which IC 5-10.4-5-7 does not apply, the basic salary that was not paid during the year but would have been paid to the member during the year under the member's employment contracts, if the member had not taken any unpaid leave of absence to serve in an elected position. The portion of a back pay award or a similar award that the board determines is compensation under an agreement or under a judicial or an administrative proceeding shall be allocated by the board among the years the member earned or should have earned the compensation. Only that portion of the award allocated to the year the award is made is considered to have been earned during the year the award was made. Interest on an award is not considered annual compensation for any year. (e) Compensation of not more than two thousand dollars ($2,000) received from the employer in contemplation of the member's retirement, including severance pay, termination pay, retirement bonus, or commutation of unused sick leave or personal leave, may be included in the total annual compensation from which the average of the annual compensation is determined, if it is received: (1) before the member ceases service; or (2) within twelve (12) months after the member ceases service.”
We are of the audit position for the benefit of those teachers who are retiring as of the close of school year, that all compensation for service rendered on teaching contracts should be completed by the close of the school year (June 30) so that full reporting may be made of both compensation and service for that teacher at the close of the school year following which the retirement is to become effective.
Contracts with Private Schools:
Please be aware of IC 20-35-6-2 which states "(a) The state superintendent may contract with instate or out-of-state public and private schools, state agencies, or child caring institutions (as defined in IC 12-7-2-29(1)) to pay, with any funds appropriated for this purpose, the excess costs of educating children of school age: (1) who have been identified as eligible for special education services; and (2) whose disability is of such intensity as to preclude achievement in the existing local public school setting. The state shall pay the costs of the services that exceed the regular cost of educating children of the same age and grade level in the child's school corporation. The school corporation shall pay the share of the total tuition cost that is the regular per capita cost of general education in that school corporation. (b) School corporations shall pay their share of the total tuition costs for children with disabilities served under this section. (c) The state board shall adopt rules under IC 4-22-2 necessary to implement this section."
COOPERATIVE REPORTING - GATEWAY ANNUAL FINANCIAL REPORT (AFR)
Per IC 5-11-1-4 every municipality and local government is required to provide electronically and in a manner prescribed by the state examiner, financial reports for the fiscal year not later than sixty days after the close of the fiscal year.
Most schools are on a fiscal year-end and are required to report an Annual Financial Report (AFR) to the State Board of Accounts (SBOA) in the Indiana Gateway for government units (https://gateway.ifionline.org/) by August 29th of each year.
Cooperatives such as Special Education Cooperatives formed under IC 20-35-5-2 and Career and Technical Education Cooperatives formed under IC 20-37, if established as separate entities, must file an AFR in Gateway before the August 29th deadline.
IC 33-37-3-1 states, "(a) The fees prescribed in civil actions or paternity actions may not be collected from the state or a political subdivision in an action brought by or on behalf of the state or the political subdivision. (b) This section does not prevent collecting fees from a defendant when the state or political subdivision is successful in its action."
Since school corporations are included in the definition of a political subdivision, court filing fees in both civil and small claims court are not applicable. Furthermore, the State Board of Accounts is of the audit position that item (b) above concerns the applicable court collecting the fees, not a school corporation.
We have received inquiries concerning the State Board of Accounts’ audit position for the use of credit cards by school officers and employees. Accordingly, the following is our audit position:
The State Board of Accounts will not take exception to the use of credit cards by a governmental unit provided the following criteria are observed:
1. The governing board must authorize credit card use through an ordinance or resolution, which has been approved in the minutes.
2. Issuance and use should be handled by an official or employee designated by the board.
3. The purposes for which the credit card may be used must be specifically stated in the ordinance or resolution.
4. When the purpose for which the credit card has been issued has been accomplished, the card should be returned to the custody of the responsible person.
5. The designated responsible official or employee should maintain an accounting system or log which would include the names of individuals requesting usage of the cards, their position, estimated amounts to be charged, fund and account numbers to be charged, date the card is issued and returned, etc.
6. Credit cards should not be used to bypass the accounting system. One reason that purchase orders are issued is to provide the fiscal officer with the means to encumber and track appropriations to provide the governing board and other officials with timely and accurate accounting information and monitoring of the accounting system.
7. Payment should not be made on the basis of a statement or a credit card slip only. Procedures for payments should be no different than for any other claim. Supporting documents such as paid bills and receipts must be available. Additionally, any interest or penalty incurred due to late filing or furnishing of documentation by an officer or employee should be the responsibility of that officer or employee.
8. If properly authorized, an annual fee may be paid.
Credit Card Refunds:
It is becoming a common practice for Schools to accept electronic payments, such as debit cards and credit cards, from students and parents for services. We have been asked to develop an audit opinion about when it becomes necessary for the school to issue a refund of an electronic payment. It is our audit position that credit card or other electronic payments received by the governmental unit may be refunded electronically if the governmental unit has adopted a resolution pursuant to IC 36-1-8-11.5. Adequate internal control procedures should be developed so the normal accounting system is not bypassed and the refunds would be subject to IC 5-11-10, the claims process.
SCHOOL CROSSING GUARDS
We have received questions regarding a school corporation’s responsibility to hire crossing guards.
Our audit position is that a school crossing guard can only be appointed by the parties noted in the statute below.
IC 9-13-2-161.3 states: "School crossing guard" means a person at least eighteen (18) years of age appointed by one (1) of the following:
(1) Safety board.
(2) Board of public works and safety.
(3) Town board.
(4) Board of public safety.
(5) Sheriff.
IC 9-13-2-161.5 describes a “school crossing zone” and states that a school crossing zone means a part of a roadway distinctly indicated for crossing by children on the way to or from school by lines or other markings on the surface of the roadway or by signs.
Fees:
Fees should only be collected as specifically authorized by statute or properly authorized resolutions or ordinances, as applicable, which are not contrary to statutory or Constitutional provisions.
1. The school board would be required to adopt a rental charge and fee schedule for all amounts assessed to students.
Fees should only be collected as specifically authorized by statute or properly authorized resolutions or ordinances, as applicable, which are not contrary to statutory or Constitutional provisions.
2. The school would be able to establish a rental charge based on the requirements of IC 20-26-12-2 for items that meet the definition of a “curricular material”.
IC 20-18-2-2.7 states, “Curricular materials means systematically organized material designed to provide a specific level of instruction in a subject matter category, including:
(1) books;
(2) hardware that will be consumed, accessed, or used by a single student during a semester or school year;
(3) computer software; and
(4) digital content.”
IC 20-26-12-2 states in part: “…The annual rate may not exceed twenty-five (25%) of the retail price of the curricular materials. (b) Notwithstanding subsection (a), the governing body may not assess a rental fee of more than twenty-five percent (25%) of the retail price of curricular materials that have been:
(1) extended for usage by students under section 24(e) of the chapter; and
(2) paid for through rental fees previously collected.”
3. The school would be able to establish an educational fee for items that meet IDOE’s definition of “consumable curricular material”.
IDOE has defined “consumable curricular materials” as a consumable core instructional curricular material used by students for no more than one (1) school year. In addition, consumable kit materials that are part of an adopted curricular material are considered part of this category.
Allowable costs included, but are not limited to standard workbooks; activity logs; practice sets; manipulatives; authentic literature; materials used for laboratory courses; instructional materials used for high ability or special education; and high ability or special education books selected locally.
4. The school would be able to establish an educational fee for items in which they receive a written legal opinion that the fee would not violate the Indiana Constitution.
IC 20-26-4-1 concerning duties of the School Corporation Treasurer, states in part: "The treasurer is the official custodian of all funds of the school corporation and is responsible for the proper safeguarding and accounting for the funds . . ." Therefore, all grant monies and properly authorized fees at an individual building should be transferred to the School Corporation Central Office on a timely and regular basis for receipting into the appropriate school corporation fund. The School Corporation Attorney should provide written guidance concerning whether fees are appropriate in regards to Constitutional provisions. (Accounting and Uniform Compliance Guidelines Manual for Extra-Curricular Accounts Ch. 6)
5. The school can only charge rental and educational fees to students that receive the good/service in which the fee was based.
Finally, we have given our opinion that all educational fees should be accounted for in the School Corporation records because they are established to pay of curricular expenses. So even if the ECA Treasurer collects fees along with rental charges and the Curricular Materials Rental fund is accounted for in the ECA records, our expectations are that the educational fees are remitted to the School Corporation Treasurer for inclusion in the School Corporation records.
Curricular Materials Fund:
We are of the audit position if any school corporation funds have been used to purchase the textbooks or financial commitments or guarantees have been made by the school corporation, the curricular materials rental program must be operated through the Curricular Materials Rental fund of the school corporation in the corporation records.
Storage and Disposal:
Upon a written determination by the governing body of a school corporation that curricular materials are no longer scheduled for use in the school corporation, the governing body may sell, exchange, transfer, or otherwise convey the curricular materials. However, before a governing body may mutilate or otherwise destroy curricular materials, the governing body must first comply with IC 20-26-12-3 (b), IC 20- 26-12-3 (c), IC 20-26-12-4 and IC 20-26-12-5. (IC 20-26-12-3 (a))
REPORTING CYBERSECURITY INCIDENTS
House Enrolled Act 1169 (2021) added IC 4-13.1-2-9 as a new section to the Indiana Code which requires political subdivisions, as defined in IC 36-1-2-13, to report any cybersecurity incident using their best professional judgement to the Indiana Office of Technology (IOT) without unreasonable delay and not later than two business days after discovery of the cybersecurity incident. A cybersecurity incident may consist of one or more of the following categories of attack vectors: (1) Ransomware, (2) Business email compromise, (3) Vulnerability Exploitation, (4) Zero-day exploitation, (5) Distributed denial of service, (6) Web site defacement, (7) Other sophisticated attacks as defined by the chief of information officer and that are posted on the officer’s Internet web site. (IC 4-13.1-1-1.5)
Cybersecurity incidents can be reported on IOT’s web site at the following webpage. https://www.in.gov/cybersecurity/report-a-cyber-crime/
- D
Debt Payments from the Operations Fund
Debt Service - Certified Shares
Delayed School Start Dates and Payment to Certified School Employees
Dependent Children - Transfer Tuition
Disaster Relief Funds - Accounting and Budgeting
Disposition of Old Outstanding Checks
DEBT PAYMENTS FROM THE OPERATIONS FUND
We have recently received questions regarding the payment of debt from the Operations Fund.
IC 20-40-18-5 states “The operations fund may be used only to do the following:
(1) Carry out a capital projects plan approved under:
(A) IC 20-46-6 (before January 1, 2019); or
(B) section 6 of this chapter (after December 31, 2018) for facility expenditures described in section 7 of this chapter.
(2) Pay transportation costs described in section 8 of this chapter.
(3) Carry out a school bus replacement plan approved under:
(A) IC 20-46-5 (before January 1, 2019); or
(B) section 9 of this chapter (after December 31, 2018).
(4) Pay expenses that are allocated to overhead and operational expenditures or to nonoperational expenditures under IC 20-42.5.
(5) Provide funds to an art association or a historical society as provided in IC 36-10-13.
(6) Establish, maintain, and equip a public playground under IC 36-10-14.
It is our opinion that Debt, other than those expenses included in the capital project plan, cannot be paid from the Operations fund under IC 20-40-18-5.
DEBT SERVICE – CERTIFIED SHARES
We have received questions regarding transfers of funds from the Operations Fund to the Debt Service Fund. School certified shares, which are “allocations of local income taxes to the school corporation under IC 6-3.6” can be deposited into the Operations Fund (IC 20-40-18-2) or the Referendum Controlled Project Tax Levy Fund (IC 20-40-19-2).
IC 20-46-7-4 states “The governing body of each school corporation shall establish a levy in every calendar year sufficient to pay all obligations.”
IC 6-3.6-6-18 states “A civil taxing unit may pledge its certified shares to the payment of bonds or to lease payments for:
(1) any purpose of the civil taxing unit;
(2) any purpose of another governmental entity located in any part in the county, including a governmental entity organized on a regional basis; or
(3) any purpose for which certified shares may be used under IC 6-3.6-10.
The pledge must be approved in an ordinance adopted by the fiscal body of the political subdivision.”
Our audit position is that if any Local Income Tax revenue has been pledged under IC 6-3.6-6-18 then this pledge must be in a resolution approved by the school board. The amounts noted in the resolution may be transferred from the Operations Fund to the Debt Service Fund. However, Local Income Tax allocations may not be deposited directly into the Debt Service Fund. The school chart of accounts has been updated accordingly.
PUBLIC EMPLOYEES DEFERRED COMPENSATION PLANS
IC 5-10-1.1 provides authority for the State and departments and agencies, and any political subdivisions (including school corporations) to enter into a deferred compensation plan for employees. Each plan shall be selected by the governing body of the political subdivision. Participation shall be by written agreement between each employee and the governing body of the political subdivision, which agreement provides for the deferral of compensation and subsequent administration of such funds. The governing body of the political subdivision for purposes of funding such agreements may in accordance with IC 5-10-1.1-7: "(1) designate one (1) of its agencies or departments to establish and administer such plans and choose such funding as deemed appropriate by the agency or department, which may include more than one (1) funding product; (2) extend the state employees' deferred compensation plan to employees of the political subdivision, subject to the terms and conditions of the state employees' deferred compensation plan as it is established from time to time; or (3) offer both of the plans described in subdivisions (1) and (2)." IC 5-10-1.1-3 states: "A deferred compensation plan established under this chapter exists and serves in addition to other retirement, pension and benefit systems established by the state, or political subdivision, and may not effect a reduction of any retirement, pension or other benefit provided by applicable law. Any compensation deferred under such a plan shall continue to be included as regular compensation for the purpose of computing the retirement and pension benefits earned by any employee." Please see IC 5-10-1.1-1 et seq. for the various requirements, programs, and extent of participation available to school corporations.
DELAYED SCHOOL START DATES AND PAYMENT TO CERTIFIED SCHOOL EMPLOYEES
We have been asked about the delay to school start dates that certain schools are implementing and the resulting implications to the scheduled payments to teachers.
The State Board of Accounts (SBOA) would not take exception if a school corporation were to continue to pay teachers on the original pay dates established for a school year pursuant to Indiana Code 20-28-9-15 notwithstanding a delayed start date:
IC 20-28-9-15 states: “Teacher payment when school is closed If during the term of the teacher's contract:
- the school is closed by order of the: (A) school corporation; or (B) health authorities; or
- school cannot be conducted through no fault of the teacher; the teacher shall receive regular payments during that time. If a canceled student instructional day (as defined in IC 20-30-2-2) is rescheduled to comply with IC 20-30-2, each teacher and (notwithstanding IC 20-27-8-7) each school bus driver shall work on that rescheduled day without additional compensation.
If, however, a teacher does not work on one of the “rescheduled days”, which represent the end of the delay school year, unless a waiver to the instructional days requirement is granted, SBOA would expect the school corporation to seek repayment of the funds.
Also, if a teacher separates from employment during the school year and the payment schedule results in the teacher being paid for services not performed and for which there is not provision in the teachers’ contract, SBOA would expect the school corporation to seek repayment of the funds.
TRANSFER TUITION – CHILDREN OF SCHOOL CORPORATION EMPLOYEES
We are often asked if a school corporation may provide a special benefit by allowing children of employees who do not live within a school corporation's boundaries to attend school without paying transfer tuition.
Effective July 1, 2010 Public Law 30, Senate Enrolled Act 252 amended IC 20-26-11-6 to provide in part (b) "A transfer may be accepted regardless of whether, as a condition of the transfer, the transferee school requires the requesting parents or student to pay transfer tuition in an amount determined under the formula established in section 13 of this chapter for the payment of transfer tuition by a transferor school corporation. However, if the transferee school elects to charge transfer tuition, the transferee school may not offset the amounts described in section 13(b) STEP TWO (B) through section 13(b) STEP TWO (D) of this chapter from the amount charged to the requesting parents or student. (c) When the transferee school elects to charge tuition to the requesting parents or student, the tuition determined under subsection (b) must be paid by the parents or the student before the end of the school year in installments as determined by the transferee corporation. (d) Failure to pay a tuition installment that is agreed to by the parents or student and the transferee school corporation is a ground for exclusion from school. (e) If the transferee school elects not to charge transfer tuition to the parents or student under this section, the transferee school may not charge transfer tuition or fees to the transferor school."
Students are permitted to attend school in the school corporation of legal settlement without charge for tuition in accordance with the Indiana Constitution, Article 8, Section 1. We are of the audit position school corporations should very carefully consider uniformity and potential taxation issue concerns if waiving transfer tuition only for select groups.
Please review the Board for Depositories website at http://www.in.gov/tos/deposit/index.htm for the current correct list.
A disaster recovery is a written plan that contains detailed instructions on how the county will respond to incidents such as a natural disaster, cyber-attack, or other disrupting events. The plan will allow for continuity of service despite these events. This includes access to data as well as access to critical documents and resources. One of the key components for protecting data is adequate backup of the data.
A disaster recovery plan should include procedures for backing up financial data frequently, if not daily, and for storing those backups in a separate and secure location. Backups that are saved on the same server as the financial software will most likely be affected by the same malware as the main data, leaving the backup useless. Storing the backup in a secure location not connected to the main server is the safest option. The plan should also include procedures to test this data regularly to ensure that the backup system is working. Storage of back-ups may be on an isolated server, in the cloud or on a server maintained by your software vendor. Being able to quickly restore access to the financial and other data of the county will greatly aid the county’s ability to continue to provide service. In additional, by statute, all transactions that occur in the accounting system must be recorded and accessible upon request whether for audit or a public records request.
Governmental entities also should keep their anti-virus software up-to-date and apply security patches in a timely manner. Additional training for staff in recognizing and avoiding malware would also be beneficial in avoiding a disruption to service from a cyber-attack. The Indiana State Office of Technology has a website with a wealth of information available on cyber security and can be a great resource. The website can be found at www.in.gov/cybersecurity/
DISASTER RELIEF FUNDS – ACCOUNTING AND BUDGETING
Based upon language contained in IC 10-14-3-17(j)(5) which states that a political subdivision may waive procedures and formalities otherwise required by law pertaining to the appropriation and expenditure of public funds where a national disaster or security emergency has been declared, the following procedures should be followed when disaster relief funds are received.
Money received or expected to be received form the Federal Emergency Management Agency (FEMA), the State Emergency Management Agency, or the State Lottery Commission for tornado, flood, ice storm, or other types of declared disasters should be accounted for in the following manner:
If the money is to be used to reimburse funds for expenditures already incurred and paid and the conditions of IC 10-14-3-12 have been met, the amount received may be added back to the appropriation balances from which the expenditures have been previously made.
If the money is to be used for future expenditures, a separate fund should be set up entitled “Disaster Relief Fund.” Such fund would not require appropriation or additional appropriation prior to spending the money in the fund.
It is recommended that all related expenditures records (claims, minutes, correspondence, contracts, damage survey report, etc.) be maintained in a separate file for future audits required by State and Federal agencies.
DISPOSITION OF OLD OUTSTANDING CHECKS
Pursuant to IC 5-11-10.5, all checks outstanding and unpaid for a period of two years as of December 31 of each year are void.
Not later than March 1 of each year, the Treasurer shall prepare or cause to be prepared a list in duplicate of all checks outstanding for two or more years as of December 31 last preceding year. The original copy shall be filed with the board of finance of the school corporation and the duplicate copy maintained by the Treasurer. The Treasurer shall enter the amounts so listed as a receipt to the fund or funds upon which they were originally drawn and remove the checks from the list of outstanding checks. If the fund on which the checks were originally drawn is not in existence, or cannot be ascertained, the amount of such checks shall be receipted to the General Fund.
Each list prepared must show:
(1) the date of issue of each check;
(2) the fund upon which the check was originally drawn;
(3) the name of the payee;
(4) the amount of each check issued; and
(5) the total amount represented by the checks listed for each fund.
When a school corporation warrant is lost or for some other reason has not been presented for payment by the depository on which drawn, and evidence of this fact is submitted, the school corporation is authorized to issue a duplicate warrant to replace the original warrant; however, certain safeguards should be exercised before the duplicate warrant is issued, as recommended in the following outline:
1. The person, firm, or corporation requesting the duplicate warrant should submit to the school corporation treasurer an affidavit setting out all pertinent information with reference to such warrant. A separate affidavit should be furnished by the payee and by each party to whom it was endorsed. A suggested form of affidavit will be found on page 13.
2. Immediately upon receipt of the affidavit, the school corporation treasurer should issue a stop payment order on the original warrant to the bank on which it was drawn.
3. Delay issuing the duplicate warrant until the warrants for the month in which the stop payment order was issued are returned by the bank and the school corporation treasurer has verified that the original warrant has not been cashed.
4. Issue the duplicate warrant on the next warrant number of the current series, under current date (not the date it was originally issued), bearing the payee's name, amount and other details shown on the original warrant, but clearly indicate thereon that it is "issued to replace warrant number ___, dated ________, 20__." In this manner no problems should arise when the warrant is presented to the bank for payment, which sometimes happens when it is given the date and number of the original warrant on which payment was stopped. It is not permissible to have unnumbered warrants furnished by the printer for this purpose; always use the next warrant number in the current series but show thereon the warrant number it replaces.
5. The duplicate warrant is not to be posted to the ledgers since it is issued only for the purpose of replacing the original warrant. To identify it as a duplicate so it will not be posted and added with the disbursements for the month, simply circle the copy in the warrant register or otherwise identify it as a "Duplicate."
A duplicate warrant might, under emergency conditions, be issued within a short time after the stop payment order is given the bank where the bank furnishes a statement that they have checked the paid warrants to date and the warrant in question has not been paid. However, a safe position is to wait until the canceled warrants for the month in which the stop payment order was issued are returned by the bank and the fiscal officer has verified the warrant has not been paid.
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Early Retirement – Buyout Plans
Elementary and Secondary School Emergency Relief (ESSER) Stipends
Employees' Assignment of Wages
Extra-Curricular Accounts
Gateway Reporting Requirements
We understand some school corporations are offering buy-out plans to staff to encourage early retirement. Some of these buy-out plans may anticipate expenditures far into the future, in some cases five years or longer.
The State Board of Accounts is of the audit position school corporations should be in compliance with IC 20-42-4-1 which states "This chapter applies to a school corporation that: (1) after June 30, 2001, establishes a retirement or severance plan that will require the school corporation to pay postretirement or severance benefits to employees of the school corporation; or (2) includes in a collective bargaining agreement or other contract entered into after June 30, 2001, a provision to increase: (A) the benefit; or (B) the unfunded liability; under a retirement or severance provision that will require the school corporation to pay postretirement or severance benefits to employees of the school corporation." And IC 20-42- 4-2 which states "(a) A school corporation must fund on an actuarially sound basis the postretirement or severance benefits that will be paid to employees under a plan, an agreement, or a contract described in section 1(1) of this chapter or an increase described in section 1(2) of this chapter. (b) A school corporation must place the assets used to fund on an actuarially sound basis the postretirement or severance benefits in a separate fund or account, and the school corporation may not commingle the assets in the separate fund or account with any other assets of the school corporation."
IC 9-18.5-15 provides for education license plates fees. IC 9-18.5-15-4(c) states, "The bureau shall require a person who purchases an education license plate under this chapter to designate the Indiana school corporation the person wants to receive the fee that the person pays under subsection (a)(2)."
IC 9-18.5-15-6 states: "(a) If an educational foundation that is exempt from federal income taxation under Internal Revenue Code Section 501(c)(3) is established as an Indiana nonprofit corporation for the benefit of a school corporation designated to receive a fee under section 4(c) of this chapter, fees designated to go to the school corporation shall be distributed to an educational foundation that provides benefit to the designated school corporation. A school corporation that receives benefit from an educational foundation that meets the requirements of this section shall: (1) obtain a certificate from the educational foundation that certifies to the school corporation and the county auditor that the educational foundation: (A) is exempt from federal income taxation under Internal Revenue Code Section 501(c)(3); and (B) is established as an Indiana nonprofit corporation to provide benefit to the school corporation; and (2) provide a copy of the certificate described in subdivision (1) to the county auditor. (b) If a school corporation designated to receive a fee under section 4(c) of this chapter does not receive benefit from an educational foundation described under subsection (a), the fees designated to go to the school corporation shall be distributed to the school corporation and may only be used for purposes other than salaries and related fringe benefits. (c) Before the twentieth day of the calendar month following the calendar month in which a fee was collected, the bureau shall distribute the fees collected under this chapter to the county auditor of the county in which the designated school corporation's administration office is located. Each monthly distribution under this subsection shall be accompanied by a report to the auditor that shows: (1) the total amount of the monthly distribution for all school corporations in the county that were designated to receive an education license plate fee under this chapter; and (2) the amount of the fees that are to be distributed to each designated school corporation in the county. (d) Within thirty (30) days of receipt of a distribution from the bureau under subsection (c), the county auditor shall distribute the fees received to: (1) an educational foundation under subsection (a), if the school corporation has provided a copy of the certificate described in subsection (a); or (2) the school corporation under subsection (b); whichever subsection is applicable. The county auditor shall designate which school corporation is to receive benefit in connection with a distribution to an educational foundation under this subsection. If the school corporation receives benefit from more than one (1) educational foundation, the superintendent of the benefited school corporation shall determine, and inform the auditor in writing, how fees received are to be distributed to the educational foundations. The county auditor shall, simultaneously with a distribution to an educational foundation, send the school corporation to receive benefit a notice of the distribution that identifies the recipient educational foundation and the date and the amount of the distribution. (e) Funds received by an educational foundation under this chapter must be used to provide benefit to the designated school corporation." (Our Emphasis)
ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ESSER) STIPENDS
We have received many questions relating to the payment of stipends with ESSER funds. The Indiana Department of Education (IDOE) has provided guidance that schools may use funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, ESSER II, or ESSER III to support stipends for staff activities related to the public health emergency. Examples of allowable items would include additional planning time, additional duties performed, virtual teaching etc… Reimbursement for these expenditures would be allowed starting with the beginning of the public health emergency as declared by Governor Eric Holcomb.
In an audit the State Board of Accounts will audit to the guidance provided by the passthrough entity (IDOE). Stipends cannot be automatic or provided generally to all staff members without proper justification and documentation providing the additional duties or work performed for which the stipend was based. Internal controls must exist for the payment of any stipends approved by the board. Any expenditures allowed by IDOE should be coded to expenditure accounts where staff would normally be paid from. There is an object code in the chart of accounts for stipends (131). Schools must be able to provide documentation showing that the School Board has approved the payment of stipends and have set qualifications to receive them. Documentation must meet the minimum standards of 2 CFR 200.430. Any legal opinions provided by a School Corporation’s legal counsel should be documented and provided to SBOA audit staff upon request.
ELECTRONIC FUNDS TRANSFER
Payment of Claims:
The school board may adopt a resolution to authorize an electronic funds transfer method of payment of claims. If the school board adopts a resolution, the school corporation may pay money from its funds by electronic funds transfer.
A school corporation that pays a claim by electronic funds transfer shall comply with all other requirements for the payment of claims by political subdivisions.
"Electronic funds transfer" means any transfer of funds, other than a transaction originated by check, draft, or similar paper instrument, that is initiated through an electronic terminal, telephone, or computer or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit an account. [IC 36-1-8-11.5]
State Distributions:
IC 4-8.1-2-7 provides that State distributions may be received via Electronic Funds Transfer (EFT). The following reviews the guidelines and procedure for distributions that can be acquired.
IC 5-13-5-5 and IC 20-26-4-1(e) provide that when the governing body authorizes a treasurer to transact the school corporation business with a financial institution via EFT a resolution must be adopted. The resolution must specify the type of transactions to be conducted by EFT and require that adequate documentation of the transaction(s) is maintained.
The following procedures must be followed if your school corporation receives EFTs from the State.
(1) Determine which distributions you wish to have electronically transferred.
(2) School Board must adopt a resolution authorizing the EFT. Each distribution to be electronically transferred should be stated in the resolution.
(3) Select a designated depository or depositories to handle your transactions.
(4) Execute the Automated Direct Deposit Authorization Agreement, State Form 47551 (copy attached). An Authorization form is needed for each distribution requested electronically.
(5) Record the transaction in applicable receipt accounts.
School Lunch:
We understand from the Division of School and Community Nutrition Programs, Indiana Department of Education (IDOE) that the Auditor of State requires school food distributions be made to one bank account at the school corporation central office. Accordingly, please account for school food receipts and subsequent distributions to individual school buildings, if applicable, as provided below.
School lunch reimbursements should be receipted to School Lunch Fund 0800 by using appropriate Receipt Accounts in the 4290 series. Disbursements to the individual buildings would be charged to expenditure account, 31500, Distribution of School Lunch Reimbursements.
Consequently, in preparation of the Form 9 report, the school corporation treasurer will need to take steps to ensure that all individual school buildings school lunch receipts and disbursements are added together for inclusion in the Form 9 report, and that the receipts and expenditures are not added twice.
Therefore, school corporations with extra-curricular school lunch funds will only report on the Form 9, the total receipts and disbursements of the individual schools and not report the reimbursement received through the State which is transferred to the school buildings.
EMPLOYEE’S ASSIGNMENT OF WAGES
Any assignment of the wages of an employee is valid only if all of the following conditions are satisfied in accordance with IC 22-2-6-2:
1. The assignment is:
A. in writing;
B. signed by the employee personally;
C. by its terms revocable at any time by the employee upon written notice to the employer; and
D. agreed to in writing by the employer.
2. An executed copy of the assignment is delivered to the employer within ten (10) days after its execution.
Some of the purposes for which paying a wage assignment may be made include the following:
1. Premium on a policy of insurance obtained for the employee by the employer.
2. Pledge or contribution of the employee to a charitable or nonprofit organization.
3. Purchase price of bonds or securities, issued or guaranteed by the United States.
4. Purchase price of shares of stock, or fractional interests therein, of the employing company, or of a company owning the majority of the issued and outstanding stock of the employing company, whether purchased from such company, in the open market or otherwise. However, if such shares are to be purchased on installments pursuant to a written purchase agreement, the employee has the right under the purchase agreement at any time before completing purchase of such shares to cancel said agreement and to have repaid promptly the amount of all installment payments which theretofore have been made.
5. Dues to become owing by the employee to a labor organization of which the employee is a member.
6. Purchase price of merchandise sold by the employer to the employee, at the written request of the employee.
7. Amount of a loan made to the employee by the employer and evidenced by a written instrument executed by the employee.
8. Contributions, assessments, or dues of the employee to a hospital service or a surgical or medical expense plan or to an employees' association, trust, or plan existing for the purpose of paying pensions or other benefits to said employee or to others designated by the employee.
9. Payment to any credit union, nonprofit organizations, or associations of employees of such employer organized under any law of this state or of the United States.
10. Payment to any person or organization regulated under the Uniform Consumer Credit Code (IC 24-4.5) for deposit or credit to the employee's account by electronic transfer or as otherwise designated by the employee.
11. Premiums on policies of insurance and annuities purchased by the employee on the employee's life.
12. The purchase price of shares or fractional interest in shares in one (1) or more mutual funds.
13. A judgment owed by the employee if the payment:
A. is made in accordance with an agreement between the employee and the creditor; and
B. is not a garnishment under IC 34-25-3.
IC 20-26-5-4 now states in part ". . . the governing body . . . has the following specific powers . . . To appropriate from the school corporation's general fund an amount, not to exceed the greater of three thousand dollars ($3,000) per budget year or one dollar ($1) per pupil, not to exceed twelve thousand five hundred dollars ($12,500), based on the school corporation's previous year's ADM, to promote the best interests of the school corporation through: . . . (B) provision for expenses incurred in interviewing job applicants; . . ."
We would not take audit exception to a school corporation paying the expense of moving a successful applicant, their family and personal property from a prior residence to a new location in or near the school corporation by passing a resolution in accordance with IC 20-26-3-1 et seq. (based on a claim being filed with supporting documentation, i.e. receipts, etc.)
The State Board of Accounts is of the audit position that when purchase orders or contracts have been written during the year for the necessary purchases of the school corporation and such purchase orders or contracts have been entered in the Ledger of Appropriations Allotments, Encumbrances, Disbursements and Balances to encumber a sufficient amount of the proper appropriation to provide for payment when due, a permissible procedure is available to carry forward to the next budget year any amounts so encumbered which have not been liquidated as of December 31. Any such encumbrances carried forward must be for the exact amount of the purchase orders or contracts outstanding shall be carried to the same program and expenditure account in the ledger for the new budget year as that in which they appeared for the year ending December 31. These amounts when carried forward should be entered individually on each of the expenditure accounts affected and in total on the program (appropriation) account as an opening entry separate from the next annual appropriation amount. The total amount of encumbered appropriations carried forward for any fund must not exceed the fund cash balance or the available appropriation balance as of December 31 or a funding difficulty could exist during the new budget year.
Liquidation of the amounts carried forward must be made individually for each purchase order encumbered when payment of the claim is entered on the record following receipt of the items purchased. The balance of an encumbrance for a vendor's claim for payment of specific purchases found to be less than the amount of the encumbrance carried forward, may not be used to authorize payment of any other claim. Such balance must be liquidated at the time of liquidating the purchase order or contract or permitted to expire at the close of the budget year. Any amount of claim for payment that is greater than the encumbered amount carried forward must be charged against the available appropriation for the same purpose from the current budget or an additional appropriation obtained for that specific purpose.
GUARANTEED ENERGY SAVINGS CONTRACTS
Undocumented Claims:
We are still being advised of situations where a school corporation may not have provided information which would indicate that a contract complies with the Indiana Code provisions referenced below. Examples would include "stipulated savings" that are not documented by "industry engineering standards", items which were "causally connected work" but not documented by "industry engineering standards" in accordance with IC 36-1-12.5-11, or improvements that are not "causally connected" to an energy conservation measure but are greater than fifteen percent (15%) of the total value of the guaranteed energy savings contract or lack of in compliance with IC 36-1-12.5-10.
IC 36-1-12-1(e) of the Public Works Law states in part "As an alternative to this chapter, the governing body . . . may . . . enter into a guaranteed savings contract as permitted under IC 36-1-12.5."
IC 36-1-12.5-1 (a) states in part "As used in this chapter, "conservation measure": (1) means: (A) a facility alteration; (B) an alteration of a structure (as defined in IC 36-1-10-2); (C) a technology upgrade; or (D) with respect to an installation described in subdivision (2)(G) or (2)(H), an alteration of a structure or system; designed to . . . reduce energy . . . or other operating costs. . ."
IC 36-1-12.5-5 states in part "(a) The governing body may enter into . . . a guaranteed savings contract with a qualified provider to . . . reduce the school corporation's . . . energy . . . or operating costs if, after review of the report described in section 6 of this chapter, the governing body finds: (1) in the case of conservation measures . . . that the amount the governing body would spend on the conservation measures under the contract and that are recommended in the report is not likely to exceed the amount to be saved in energy consumption costs and other operating costs over twenty (20) years from the date of installation if the recommendations in the report were followed; . . . (3) in the case of a guaranteed savings contract, the qualified provider provides a written guarantee as described in subsection (d)(3)."
Repayment of Costs in Excess of Savings:
Please note IC 36-1-12.5-5 states in part "(d) An agreement to participate in a . . . guaranteed savings contract under this section must provide that: . . . (3) in the case of the guaranteed savings contract: (A) the: (i) savings in energy and . . . and other operating costs; . . . due to the conservation measures are guaranteed to cover the costs of the payments for the measures; and (B) the qualified provider will reimburse the school corporation . . . for the difference between the guaranteed savings and the actual savings . . ."
Stipulated Savings and Industry Engineering Standards:
IC 36-1-12.5-0.5 states "As used in this chapter, 'actual savings' includes stipulated savings."
IC 36-1-12.5-3.7 states in part "As used in this chapter, 'stipulated savings' are assumed savings that are documented by industry engineering standards."
IC 36-1-12.5-11 states in part "(a) A guaranteed savings contract that includes stipulated savings must specify the methodology used to calculate the savings using industry engineering standards. (b) Stipulated savings may be used for conservation measures including . . . (11) Any work that is causally connected to the energy conservation measures listed in subdivisions (1) through (10). (c) The guaranteed savings contract shall: describe stipulated savings for: (A) conservation measures; and (B) work causally connected to the energy conservation measures; and (2) document assumptions by industry engineering standards."
Non "Causally connected work":
IC 36-1-12.5-0.7 states "As used in this chapter, 'causally connected work' means work that is required to properly implement an energy conservation measure."
IC 36-1-12.5-12 states in part "(a) An improvement that is not causally connected to a conservation measure may be included in a guaranteed energy savings contract if: the total value of the improvement does not exceed fifteen percent (15%) of the total value of the guaranteed savings contract . . ."
Reports:
IC 36-1-12.5-10 states in part "The governing body shall: (1) provide to the lieutenant governor not more than sixty (60) days after the date of execution of the guaranteed savings contract: (A) a copy of the executed guaranteed savings contract; (B) the: (i) energy . . . costs; . . . before the date of execution of the guaranteed savings contract; and (C) the documentation using industry engineering standards for: (i) stipulated savings; and (ii) related capital expenditures; and (2) annually report to the lieutenant governor, in accordance with procedures established by the lieutenant governor, the savings resulting in the previous year from the guaranteed savings . . ."
Audit Exceptions:
The State Board of Accounts will take audit exception to payments not in accordance with by IC 36-1-12.5-1 et seq. The School Corporation should request repayment for payments not authorized by IC 36-1-12.5-1 et seq. in accordance with IC 36-1-12.5-5. The State Board of Accounts will request repayment of unauthorized payments which have not been reimbursed to the School Corporation by the end of the contract period.
Additionally, the State Board of Accounts will take audit exception if the School Corporation has not properly filed reports as required by IC 36-1-12.5-10.
The State Board of Accounts is also of the audit position that political subdivisions are required to comply with all grant agreements, rules, regulations, bulletins, directives, letters, letter rulings and filing requirements concerning reports and other procedural matters of federal and state agencies, including opinions of the Attorney General of the State of Indiana, and court decisions. Governmental units should file accurate reports required by federal and state agencies. Noncompliance may require corrective action.
Frequently the governing board and administrators of a school corporation elect to accept the services of an evaluation committee to make an inspection and evaluation of the curricula, building efficiency, equipment, etc. of the school corporation. We understand in some situations the committee does not charge a fee or other flat amount for such appraisal, but does require the school corporation to pay various expenses (meals, lodging, etc.) of the members of the committee while making inspection and evaluation.
IC 20-26-5-4(8) authorizes the governing body of the school corporation to employ and discharge educational and other professional consultants and such other personnel or services as the board considers necessary for school purposes and to pay the cost thereof. Therefore, we will not take audit exception to a contract for such service and the necessary expenses of the members of the committee may be paid by the school corporation.
The board may also determine the number of persons so employed or the amount of services for which contracts are awarded and determine the nature and extent of duties or services required. Expenditures for the services of such an evaluation committee should be paid from the school corporation Operations Fund.
EXTRACURRICULAR ACCOUNTS – DEPOSITORY LOCATION
IC 20-41-1-9 requires extracurricular accounts to deposit all receipts into one bank account. We have received questions on location requirements of the extracurricular depository. It is our audit position that IC 5-13-8-9 applies to ECAs, which would require the depository to be located within the territorial limits of the school corporation, except in certain instances noted in IC 5-13-8-9.
IC 5-13-8-9(a) states in part: “All public funds of all political subdivisions shall be deposited in the designated depositories located in the respective territorial limits of the political subdivisions”….
IC 5-13-8-9(c) states: “If there is no principal office or branch of a financial institution located in the county or political subdivision, or if no financial institution with a principal office or branch in the county or political subdivision will accept public funds under this chapter, the board of finance of the county and the boards of finance of the political subdivisions in the county shall designate one (1) or more financial institutions with a principal office or branch outside of the county or political subdivision, and in the state, as a depository or depositories”.
IC 5-13-8-9(e) states: “If only one (1) financial institution that has a branch or principal office in a county or political subdivision is willing to accept public funds, the board of finance for the county or political subdivision may:
- treat the financial institution that is located within the county or political subdivision as if the financial institution were not located within the county or political subdivision; and
- designate one (1) or more financial institutions to receive public funds under the requirements of subsection (c).
EXTRACURRICULAR - FACULTY/STAFF FUNDS
Our prior audit position disallowed staff funds to be accounted for in the extracurricular records. We have recently revised our opinion and we will not take exception to an extracurricular account established for staff funds such as ‘jean days’, staff vending machine proceeds, or other funds that are received for the purpose of supporting staff purchases.
This change in position does not affect our position on outside organizations, such as booster groups, parent teacher organizations etc.… There should not be any outside organizations’ funds accounted for in the extracurricular records because these groups’ funds do not meet the definition of an extracurricular fund per IC 20-41.
IC 20-41-1-7 states in part: "The treasurer has charge of the custody and disbursement of any funds . . . incurred in conducting any athletic, social, or other school function (other than functions conducted solely by any organization of parents and teachers) . . ." Therefore, activities and organizations which are not extra-curricular in nature should be responsible for their own accounting and cash handling systems. The extra-curricular account should not collect, receipt, remit, or disburse outside organization's monies.
EXTRACURRICULAR GATEWAY REPORTING
The State Board of Accounts has decided that School Corporations are required to complete an additional application on the state’s Gateway System under the requirements of IC 5-11-1-4. This application provides information that is used by the SBOA to evaluate each School Corporation and its Extra-Curricular Accounts for an appropriate level of risk that will be required by IC 5-11-1-25, effective July 1, 2015. This statute was amended by Public Law 181-2015, to require the SBOA to develop risk based examination criteria and then determine the frequency each audited entity is required to be examined based on the results of a risk based evaluation.
For this application, School Corporations are required to input information about their Extra-Curricular Accounts, including the information that is required by IC 20-41-1-3. We have designed the application so that if it is completed, then the ECA Treasurer will be able to print out the required SA-5 forms and deliver them to the School Board. The application is similar to the other Gateway Reports that School Corporations are required to complete. The School Corporation Treasurer will be listed as the “submitter” for each ECA within the School Corporation. However, if desired, the ECA Treasurer will be able to obtain a username and password to access “editor” rights. “Editor Rights” allows the ECA Treasurer to input the information into the Gateway application and print out the SA-5 forms. To assign “editor rights” schools will be asked to complete the “ECA Delegation of Authority Form” and email to the gateway help desk (gateway@sboa.in.gov).
GENERAL (STUDENT ACTIVITY) FUND
For information on the Student Activity Fund please see page 3 of chapter 6 in the Extracurricular Uniform Compliance Guidelines Manual.
The State Board of Accounts will not take exception to the use of gift cards by an extra-curricular account provided the following criteria are observed:
1. The School Board must authorize gift card purchases through a resolution, which has been approved in the minutes.
2. The purposes for which gift cards may be issued must be specifically stated in the resolution.
3. Purchase and issuance of gift cards shall be handled by an official or employee designated by the school principal.
4. The designated responsible official or employee shall maintain an accounting system or log which includes the name of the business from which the gift cards were purchased, their amounts, fund and account numbers to be charged, date the card was issued, person gift card was issued to, proof that the gift card was received by the person it was issued to, etc.
5. Gift cards shall not be used to bypass the accounting system. One reason that purchase orders are issued is to provide the fiscal officer with the means to encumber and track appropriations to provide the governing board and other officials with timely and accurate accounting information and monitoring of the accounting system.
6. Procedures for payments shall be no different than for any other claim. The school principal must approve the expenditure and supporting documents such as paid bills and receipts must be available. Additionally, any purchase or issuance of gift cards without proper documentation may be the responsibility of that officer or employee.
TRIPS BY EMPLOYEES AND OFFICIALS EXTRA-CURRICULAR TRIPS AND PAY FOR SERVICES
IC 20-26-5-4(a)(9) authorizes a school corporation to pay school employees for making certain trips during the time school is in session and to pay the expense of such necessary trips. We believe the statute also authorizes a school corporation to pay the reasonable expense of a trip made by a governing body member, if the school board adopts a resolution that such trip is in the interest of the school corporation. The subsection states in part ". . . when the governing body by resolution considers a trip by an employee of the school corporation or by a member of the governing body to be in the interest of the school corporation, including attending meetings, conferences, or examining equipment, buildings, and installation in other areas, to permit the employee to be absent in connection with the trip without any loss in pay and to reimburse the employee or the member the employee’s or member’s reasonable lodging and meal expenses and necessary transportation expenses. To pay teaching personnel for time spent in sponsoring and working with school related trips or activities."
IC 20-34-3-19 requires every pupil and teacher in any public school, while participating in certain courses or laboratories, to wear industrial quality eye protective devices. IC 20-34-3-19 states in part (b) "Eye protective devices are of industrial quality if the devise meet the standards of the American standard safety code for head, eye, and respiratory protection, Z2.1-1959, promulgated by the American Standards Association, Inc."
A. IC 20-34-3-19(a) states, "Each public school student and teacher shall wear industrial quality eye protective devices at all times while participating in any of the following courses:
(1) Career and technical education involving experience with:
(A) hot molten metals;
(B) milling, sawing, turning, shaping, cutting, or stamping of any solid material;
(C) heat treatment, tempering, or kiln firing of any metal or material;
(D) gas or electric arc welding;
(E) repair or servicing of any vehicle; or
(F) caustic or explosive materials.
2) Chemical or combined chemical-physical laboratories involving caustic or explosive chemicals or hot liquids or solids."
A good idea would be for the board of school trustees to furnish the protective devices for pupils and teachers, and all visitors to such classrooms or laboratories. The State Board of Accounts will not take audit exception to the payment for the protective devices from the general fund of a school corporation.
- F
Federal Procurement Thresholds
Financial Assistance for School Children
Financial Assistance to Non-Governmental Entities
Financial Reporting Requirements
Food Service Management Companies
Forms
Franchise or Exclusive Contracts
Please be advised that federal projects, generally, are to be administered in accordance with Indiana laws governing the local unit, in the same manner as other funds of the school corporation, as well as with federal guidelines.
A copy of the application (Grant Application) for funds bearing the approval of the administering State or Federal Agency must be retained in the accounting office of the school corporation. The form provides the categories of expenditure which have been approved for each expenditure category and becomes the basis for the accounting records and is the document to which the audited expenditures are compared. Each document authorizing an increase or requiring a decrease in the original amount approved must be retained with the original approved application to justify any changes which have been made in the amount originally recorded. A notation should be made on the grant information noting the applicable federal Assistance Listing number (formerly CFDA number) and Public Law Number.
Federal programs shall be accounted for in separate special funds, appropriately titled as applicable in the chart of accounts. When fully funded by federal sources and maintained in a separate special fund, we are not aware of any requirement that appropriations be obtained through advertising and approval of the Department of Local Government Finance. The receipts for these special funds will be identified in the proper classification of "Revenue from Federal Sources" but the disbursements will be included in the Program and Expenditure Accounts identifying the nature of the disbursement along with other disbursements of the same nature.
Those fully funded projects requiring a separate fund may have the paid claims filed separately to support all expenditures from that fund. These claims must be identified by fund and project number and be retained in the file until audited and until the applicable retention schedule indicates maintaining the record is no longer required or permission for destruction has been received through the County Commission of Public Records in your county. Copies of all reports to the State or Federal Administering Agency must also be identified with the fund and project number and retained for audit.
When a local school corporation qualifies for an indirect cost allocation on a federal project, an estimated amount shall be included as a line item on the application, but the actual amount must be calculated after the total direct cost expenditures are known. The actual total amount to be recovered for indirect costs will not be known for any project until that project is completed. A school corporation must then claim from the federal project, the allowable amount. When indirect costs are paid by the federal project, to the school corporation, the amount shall be receipted to the Operations Fund of the school corporation. The amount of each receipt or expenditure must also be posted to the proper control account.
We continue to received inquiries and complaints from taxpayers concerning certain fees being assessed by some school corporations.
The Supreme Court provided in Nagy v. Evansville-Vanderburgh School Corporation, 844 N.E.2d 481 (Ind. 2006) Where the legislature-or through delegation of its authority the State Board has identified programs, activities, projects, services or curricula that it either mandates or permits school corporations to undertake, the legislature has made a policy decision regarding exactly what qualifies as a part of a uniform system of public education commanded by Article 8, Section 1 and thus what qualifies for funding at public expense. And of course the legislature has the authority to place appropriate conditions or limitations on any such funding. 12 However, absent specific statutory authority, fees or charges for what are otherwise public education cost items cannot be levied directly or indirectly against students or their parents. Only programs, activities, projects, services or curricula that are outside of or expand upon those identified by the legislature-what we understand to be "extracurricular"-may be considered as not a part of a publicly-funded education. And thus a reasonable fee may be assessed, but only against those students who participate in or take advantage of them.
Audits of fees charged by a school corporation will be fact sensitive. However, areas which might be reviewed during an audit include: Is the fee to be charged based on a public education program mandated or permitted by the legislature or the State Board of Education? Does the Legislature provide specific statutory authority that would allow a school or school corporation to charge a fee? Does the fee relate to an extra-curricular program, activity, project, or service? Has the School Board Attorney provided written advice with specific reference and acknowledgement of Nagy v. Evansville-Vanderburgh School Corporation? Has the School Board provided approval of the fee?
The State Board of Accounts is of the audit position the following are some of the types of fees that should not be assessed, collected or receipted by a school or school corporation: Air Conditioning Fees; Instructional Fees; Bus Rider Fees for Students to Attend Classes; Fees for Payroll Positions (Nurses, Principals, Counselors, etc.)
The legislature has identified transportation of school children as a part of what would constitute a uniform system of public education in Indiana. The governing body of a school corporation is required to provide transportation under some circumstances and authorized to provide transportation for its students otherwise. The school corporation is required to establish an Operations Fund, which includes responsibilities for transportation (IC 20-40-18-8). The legislature has indicated what costs are attributable to transportation and has made provision for the funding of school transportation. The Operations Fund is the exclusive means for the payment of costs attributable to transportation. The legislature has not provided the governing body of a school corporation with the specific authority to assess, charge, or collect a school bus rider fee from the students of the school corporation. Transportation of students to and from their respective public schools are deemed a "part of a public education." Accordingly, per Nagy, the school bus rider fee is unconstitutional under Art. 8, § 1 of the Indiana Constitution.
FEDERAL AUDIT COST
If you receive Federal grants/awards that SBOA audits in accordance with the Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly called "Uniform Guidance"), a portion of the associated audit costs may be allocated to some or all grants.
Title 2 of the U.S. Code of Federal Regulations, Part 200, Section 200.425 states:
Ҥ200.425 Audit services.
(a) A reasonably proportionate share of the costs of audits required by, and performed in accordance with, the Single Audit Act Amendments of 1996 (31 U.S.C. 7501-7507), as implemented by requirements of this part, are allowable. However, the following audit costs are unallowable:
(1) Any costs when audits required by the Single Audit Act and Subpart F—Audit Requirements of this part have not been conducted or have been conducted but not in accordance therewith; and
(2) Any costs of auditing a non-Federal entity that is exempted from having an audit conducted under the Single Audit Act and Subpart F—Audit Requirements of this part because its expenditures under Federal awards are less than $750,000 during the non-Federal entity's fiscal year.
(b) The costs of a financial statement audit of a non-Federal entity that does not currently have a Federal award may be included in the indirect cost pool for a cost allocation plan or indirect cost proposal.
(c) Pass-through entities may charge Federal awards for the cost of agreed-upon-procedures engagements to monitor subrecipients (in accordance with Subpart D—Post Federal Award Requirements of this part, §§200.330 Subrecipient and contractor determinations through 200.332 Fixed Amount Subawards) who are exempted from the requirements of the Single Audit Act and Subpart F—Audit Requirements of this part. This cost is allowable only if the agreed-upon-procedures engagements are:
(1) Conducted in accordance with GAGAS attestation standards;
(2) Paid for and arranged by the pass-through entity; and
(3) Limited in scope to one or more of the following types of compliance requirements: activities allowed or unhallowed; allowable costs/cost principles; eligibility; and reporting.
We’d recommend checking with your grantor agency or agencies during the grant application process to see if any audit costs would be allowable for your specific grants. If allowed, a portion of audit costs may be able to be included into the budget for the grant.
FEDERAL PROCUREMENT THRESHOLDS
The federal OMB has issued memorandum in 2018 to announce changes to the federal thresholds raising purchases using the micro-purchases method to $10,000 and purchases under the simplified acquisition method to $250,000. Please be aware that these thresholds may not be uniform across each federal granting agency. Each federal agency is required to adopt the new thresholds for them to be officially required. We do know that the United States Department of Agriculture (USDA) has already adopted these thresholds. USDA is the grantor for school nutrition funds.
CFR 200.317 requires a grantee to follow any local policies or State requirements if procurement requirements are more restrictive than federal requirements. When deciding what procurement method you are required to use, the most stringent threshold requirements (Federal, State, or local) would apply. If you have any questions on procurement requirements of a granting agency please contact your pass-through agency.
Please remember if any reductions were made in your budget and tax levies the governing board of the school corporation shall comply with that section of the budget law found at IC 6-1.1-18-4 states "Appropriations not to exceed budget except as otherwise provided in this chapter, the proper officers of a political subdivision shall appropriate funds in such a manner that the expenditures for a year do not exceed its budget for that year as finally determined under this article."
Compliance may necessitate the reduction and revision of some program appropriations established at the meeting to adopt the budget. After the reductions have been established by the governing board for specific programs and the necessary allotments by expenditure account within each program, such reductions must be applied when the appropriations and allotments are recorded in the Ledger of Appropriations, Allotments, Encumbrances, Disbursements and Balances for the calendar year which must be done to comply with the statute referenced above.
FINANCIAL ASSISTANCE FOR SCHOOL CHILDREN
IC 20-33-5-2 requires "The department shall adopt procedures that must be followed by applicants in order for them to qualify for assistance under this chapter. These procedures must include obtaining information needed by the family and social services administration to determine if the recipient is a child who is a member of a qualifying family (as defined in IC 12-14-28-1), including the familial relationship of the child to the head of the household. The financial eligibility standard for an applicant under this chapter must be the same criteria used for determining eligibility for receiving free or reduced price lunches under the national school lunch program." IC 20-33-5-4 states "The department shall provide each school corporation with sufficient application forms for assistance under this chapter. The state board of accounts shall prescribe the forms to be used." The State Board of Accounts, based upon forms and information submitted by the State Department of Education, Division of School and Community Nutrition Programs, has prescribed School Forms 521, Application for Free or Reduced Price Meals and Other Benefits and 522, Application for Free Milk and Other Benefits. Any potential changes or recommendations should be forwarded to the State Department of Education, Division of School and Community Nutrition Programs for consideration in future revisions. Any computer applications will be considered for approval by the State Board of Accounts. IC 20- 33-5-6 states in part (b) "If the school corporation makes a determination that the parent is ineligible based on the information in the application, the school corporation shall give the parent written reasons for the denial and inform the parent of the right to request a hearing before the governing body of the school corporation or the governing body's designee. After the determination, the school corporation may bill the parent for the student's fees, but the school corporation may not take any legal action against the parent until the parent has had the opportunity to make an appeal in a hearing before the governing body of the school corporation or the governing body's designee. If the parent pays the fees based on the school corporation's determination, and after the appeal it is determined that the parent qualifies for assistance, the school corporation shall reimburse the parent."
IC 20-33-5-3 states in part "(a) If a parent of a child or an emancipated minor who is enrolled in a public school, in kindergarten or grades 1 through 12, meets the financial eligibility standard under section 2 of this chapter, the parent or the emancipated minor may not be required to pay the fees for school books, supplies, or other required class fees. The fees shall be paid by the school corporation that the child attends. (b) The school corporation may apply for a reimbursement under section 7 of this chapter from the department of the costs incurred under subsection (a). (c) To the extent the reimbursement received by the school corporation is less than the rental fee assessed for curricular materials rental fee, the school corporation may request that the parent or emancipated minor pay the balance of this amount."
FINANCIAL ASSISTANCE TO NON-GOVERNMENTAL ENTITIES
School Corporations providing financial assistance to non-governmental entities are required to notify those entities annually in writing the following information:
1) The Entity Annual Report (E-1) filing requirement established by IC 5-11-1-4 and the audit requirement established by IC 5-11-1-9;
2) The source(s) of the funding provided;
- Local and/or state funds (in the case of subsidies, contributions, or general aid),
- Federal grants passed through including the formal name of the program and CFDA number, or
- Fee for service arrangements,
3) The State Board of Accounts may request documentation to support the categorization of the financial assistance,
4) The E-1 is not to be confused with the Secretary of State’s Business Entity report, and
5) The entity may obtain additional information from the State Board of Accounts at notforprofit@sboa.in.gov.
Furthermore, this financial assistance provided is to be reported by the [INSERT UNIT TYPE] on the Annual Financial Report via Gateway.
‘Entity” is defined in IC 5-11-1-16 as “any provider of goods, services, or other benefits that is: (1) maintained in whole or in part at public expense; or (2) supported in whole or in part by appropriations or public funds or by taxation.” This includes for-profit and not-for-profit corporations, unincorporated associations, organizations, individuals, etc. Examples of non-governmental entities are volunteer fire departments, a local YMCA, youth leagues, senior citizen centers, 4-H clubs, daycare centers, health service organizations, emergency medical service organizations, community centers, historical societies, etc.
Financial assistance to non-governmental entities is defined as payments received in the form of grants (whether from local, state, or federal sources), subsidies, contributions as permitted by statute, aid, or other agreements. For more information on what constitutes financial assistance, please refer to the State Board of Accounts’ Uniform Compliance Guidelines for Examinations of Entities Receiving Financial Assistance from Governmental Sources found on the State Board of Accounts’ website at www.in.gov/sboa under Private Examiner Audits/Non-Governmental Entities Receiving Governmental Assistance/Uniform Compliance Guidelines.
Each non-governmental entity receiving financial assistance from governmental units is required to submit a Gateway financial report, the E-1, in accordance with IC 5-11-1-4(a). Information requested includes the source and use of financial assistance provided by governmental units. The entity is subject to a State Board of Accounts audit in accordance with IC 5-11-1-9 if certain funding thresholds are met.
FINANCIAL REPORTING REQUIREMENTS
For information on financial reporting requirements, please refer to the SBOA Accounting and Financial Regulatory Reporting Manual.
FOOD SERVICE MANAGEMENT COMPANIES
In our recent round of school audits, we have found that documentation has not been retained by several schools to support services provided by food service management companies. Internal controls must be established and maintained to ensure compliance with requirements related to grant agreements.
Documentation is a necessary part of an effective internal control system. Documentation relates internal control procedures to the missions and objectives of the unit, solidifies expectations, and provides an effective way to communicate the process. Management must use judgment in determining the extent of documentation needed. However, SBOA recommends the minimum documentation requirements found in the "Green Book."
Invoices received from food service management companies must be accompanied by supporting documentation. Supporting documentation consists of source documents, supportive calculations, and/or other items necessary to substantiate the accuracy and appropriateness of accounting entries. Any rebates, discounts, inventory or payable adjustments noted on an invoice must be supported by proper documentation.
We recommend schools closely review existing contracts related to food service activities and we suggest that schools require food service management companies to provide supporting documentation when an invoice is presented for payment. At a minimum supporting documentation must be presented upon request during an audit. We recommend schools contact service providers to ensure they understand what information is required to be retained and produced during an audit.
Management of the school is responsible for internal controls even in situations where services have been contracted to a third party. Internal controls can be implemented in different ways. Depending upon the amount of risk management is willing to accept, periodically sampling invoices over a certain period to ensure supporting documentation calculates to the amounts charged to the school may be an efficient way for schools to ensure requirements related to grant agreements are met.
The Indiana Department of Education (IDOE) has provided information regarding required procedures for contracting with a food service management company. For more information, contact IDOE’s School and Community Nutrition Finance Team at SCNFinance@doe.in.gov.
APPROVAL OF ACCOUNTING FORMS AND SYSTEMS
The State Board of Accounts is charged by law with the responsibility of prescribing and installing a system of accounting and reporting which shall be uniform for every public office and every public account of the same class and contain written standards that an entity that is subject to audit must observe. The system must exhibit true accounts and detailed statements of funds collected, received, obligated and expended for or on account of the public for any and every purpose. It must show the receipt, use and disposition of all public property and the income, if any, derived from the property. It must show all sources of public income and the amounts due and received form each source. Finally it must show all receipts, vouchers, contracts, obligations, and other documents kept, or that may be required to be kept, to prove the validity of every transaction. [IC 5-11-1-2]
The system of accounting prescribed is made up of the uniform compliance guidelines and the prescribed forms. A prescribed form is one which is put into general use for all offices of the same class.
Computer hardware, software and application systems can now produce exact replicas of the forms prescribed by the State Board of Accounts. An exact replica of a prescribed form is a computerized form that incorporates all of the same information as the manual prescribed form. Prescribed form replication is the preferred approach from the State Board of Accounts’ position. These exact replicas are the equivalent of the prescribed form and require no further action for the school corporation to install the form within their accounting system.
Governments are required by law to use the forms prescribed by this department. However, if it is desirable to use a form other than the prescribed manual form, that is not an exact replica; the new form must be approved by State Board of Accounts.
All forms previously approved by sending copies to State Board of Accounts and receiving a form approval letter are approved with the conditions contained with the letter. All forms previously approved by the adoption of a resolution as allowed by the School Administrator article on the Forms Approval Process, published in Volume 173, page 4 are also considered approved.
After April 1, 2014, if a government implements, consistent with the provisions of Indiana Code and Uniform Compliance Guidelines, an automated accounting system that is to be considered for approval, the responsible official is not required to maintain the prescribed forms replaced by the automated system while awaiting the approval. New forms must be in place during at least one (1) State Board of Accounts audit and must not be an element of an audit finding or audit result and comment that is responsible or partially responsible for an exception found during an audit to be considered approved. The government is responsible for placing on new forms the year of installation in the upper right corner. This reference should be similar to “Installed in ______________ School Corporation, (Year).” The School Corporation must maintain and present for audit a log of forms installed after April 1, 2014 with the year installed for all forms that replace forms prescribed by State Board of Accounts.
The government agrees to comply with the following conditions, if applicable, for any new forms installed.
1. The forms and system installed are subject to review and/or recommendations during audits of the government to ensure compliance with current statutes and uniform compliance guidelines.
2. The government shall continue to maintain all prescribed forms not otherwise covered by an approval.
3. All transactions that occur in the accounting system must be recorded and accessible upon proper request. Transactions can be maintained electronically, with proper backups, microfilmed, or printed on hardcopy. These transactions include, but are not limited to, all input transactions, transactions that generate receipts, transactions that generate checks, master file updates, and all transactions that affect the ledgers in any way. The system must be designed so that changes to a transaction file cannot occur without being processed through an application.
4. The ability must not exist to change data after it is posted. If an error is discovered after the entry has been posted, then a separate correcting entry must be made. Both the correcting entry and the original entry must be maintained.
5. If the government owns the source code, sufficient controls must exist to prevent unauthorized modification. If the government does not own the source code, the vendor shall provide representatives of the State Board of Accounts with access to all computer source codes for the system upon request for audit purposes. In addition, the vendor shall provide representatives of the State Board of Accounts with a document describing the operating system used, the language that the source code is written in, the name of the compiler used, and the structure of the data files including data file names, data file descriptions, field names, and field descriptions for the system.
6. Any receipts, checks, purchase orders, or other forms that require numbering shall be either prenumbered by an outside printing supplier or numbered by the government's computer system with sufficient controls installed in the system to prevent unauthorized generation of the form or duplication of numbers.
7. All receipts must be either in duplicate or recorded in a prescribed or approved register of receipts.
8. All checks must be either in duplicate or recorded in a register of checks generated by the computer.
9. Recap sheets for each deposit for deposit advices, if applicable, will be maintained indicating direct deposits. Individual wage assignment agreements will be kept on file to support direct deposit.
10. "Installed by __________ School Corporation, (Year)" shall be printed, in the upper right corner, on each approved form furnished by a printing supplier and, when practical, on those printed from accounting systems at the unit. Upon the installation of a new form the form will be entered on a log for this purpose with the date of installation; and the name and number of the prescribed form replaced. The log must be available for audit.
11. The government officials are responsible to ensure that forms and accounting systems installed comply with the uniform compliance guidelines for information technology services published in the School Administrator and accounting manuals. This includes ensuring that customization of the system done by the vendor for implementation at the government is done in such a manner that the system remains compliant.
12. In the event a change is required due to the passage of a State or Federal law, the government agrees to implement the change in a timely manner.
SPREADSHEET SOFTWARE UTILIZATION TO GENERATE EXACT REPLICAS OF PRESCRIBED FORMS
The Indiana State Board of Accounts prescribes the forms to be utilized in accounting systems, but does not specify the source from which the prescribed forms must be obtained. The use of spreadsheet software may, with the current capabilities of spreadsheet software, in some instances, be an acceptable method of generating exact replicas of prescribed forms.
Spreadsheets may not be utilized to replace functionality that should be an integral function of a computerized accounting system or replace a controlled document for the entry of accounting information. Examples of controlled document type of forms include forms that are required to be either prenumbered by an outside printing supplier or numbered by the accounting system with sufficient controls to prevent unauthorized generation of the form or duplication of control numbers on the forms. These forms include receipts, checks, purchase orders and material receiving documents. Additionally, spreadsheets should not be utilized to generate control documents such as ledgers, receipt registers, check registers, outstanding check lists and similar reports.
Under no circumstances is it acceptable to implement an electronic interface from spreadsheet software directly to the information files of an accounting system without being processed through the same edit and control features as are utilized to ensure the accuracy of information entered manually into the accounting system. Exact replicas of prescribed forms generated by spreadsheet software may be utilized for forms incidental to the computerized accounting system.
FRANCHISE OR EXCLUSIVE CONTRACTS
We have been advised of contracts being entered into by building principals for fees to be received for promotion of vending products. These contracts are sometimes referred to as franchise, promotional, or exclusive fee contracts.
The question of the appropriateness of these fees should be addressed by the written advice of the school corporation attorney with due consideration of whether good public policy is being observed.
Various statutory references provide the board of school trustees with the authority and responsibility for entering into contracts. IC 20-26-4-8 states, "Notwithstanding any other law, the president and secretary of the governing body of a school corporation are entitled, on behalf of the school corporation, to sign any contract, including employment contracts and contracts for goods and services. However, each contract must be approved by a majority of all members of the governing body. In the absence of either the president or secretary of the governing body, the vice president is entitled to sign the contracts with the officer who is present."
IC 20-26-5-4 states in part "In carrying out the school purposes of a school corporation, the governing body acting on the school corporation's behalf has the following specific powers: (1) In the name of the school corporation, to sue and be sued and to enter into contracts in matters permitted by applicable law."
We are of the audit position contracts should only be entered into by a board of school trustees. The board should formally determine which funds of the school corporation or of the school building (extra-curricular fund) are to receive revenues from "franchise fees" or "exclusive" contracts.
- G
Garnishment of Salaries and Wages
GARNISHMENT OF SALARIES AND WAGES
IC 24-4.5-5-105 limits the maximum amount which may be subjected to garnishment and states in part:
"(5) An employer who is required to make deductions from an individual's disposable earnings pursuant to a garnishment order or series of orders arising out of the same judgment debt (excluding a judgment for payment of child support) may collect, as a fee to compensate the employer for making these deductions, an amount equal to the greater of twelve dollars ($12) or three percent (3%) of the total amount required to be deducted by the garnishment order or series of orders arising out of the same judgment debt. If the employer chooses to impose a fee, the fee shall be allocated as follows:
(a) One-half (1/2) of the fee shall be borne by the debtor, and that amount may be deducted by the employer directly from the employee's disposable earnings.
(b) One-half (1/2) of the fee shall be borne by the creditor, and that amount may be retained by the employer from the amount otherwise due the creditor.
The deductions made under this subsection for a collection fee do not increase the amount of the judgment debt for which the fee is collected for the purpose of calculating or collecting judgment interest. This fee may be collected by an employer only once for each garnishment order or series of orders arising out of the same judgment debt. The employer may collect the entire fee from one (1) or more of the initial deductions from the employee's disposable earnings. Alternatively, the employer may collect the fee ratably over the number of pay periods during which deductions from the employee's disposable earnings are required.
(6) The deduction of the garnishment collection fee under subsection (5)(a) or subsection (7) is not an assignment of wages under IC 22-2-6.
(7) An employer who is required to make a deduction from an individual's disposable earnings in accordance with a judgment for payment of child support may collect a fee of two dollars ($2) each time the employer is required to make the deduction. The fee may be deducted by the employer from the individual's disposable earnings each time the employer makes the deduction for support. If the employer elects to deduct such a fee, the amount to be deducted for the payment of support must be reduced accordingly if necessary to avoid exceeding the maximum amount permitted to be deducted under subsection (3).
(8) A support withholding order takes priority over a garnishment order irrespective of their dates of entry or activation. If a person is subject to a support withholding order and a garnishment order, the garnishment order shall be honored only to the extent that disposable earnings withheld under the support withholding order do not exceed the maximum amount subject to garnishment as computed under subsection (2)."
The School Corporation’s 100R (Certified Report of Names, Addresses, Duties and Compensation of Public Employees) must be filed through the Gateway system. If you have not filed the 100R for 2012 you must file it as soon as possible. The 100R was due January 31, 2013. For problems or questions concerning this report please contact gateway@sboa.in.gov.
Indiana Code 5-11-13-1 (a) states:
"Every state, county, city, town, township, or school official, elective or appointive, who is the head of or in charge of any office, department, board, or commission of the state or of any county, city, town, or township, and every state, county, city, town, or township employee or agent who is the head of, or in charge of, or the executive officer of any department, bureau, board, or commission of the state, county, city, town, or township, and every executive officer by whatever title designated, who is in charge of any state educational institution or of any other state, county, or city institution, shall during the month of January of each year prepare, make, and sign a certified report, correctly and completely showing the names and business addresses of each and all officers, employees, and agents in their respective offices, departments, boards, commissions, and institutions, and the respective duties and compensation of each, and shall forthwith file said report in the office of the state examiner of the state board of accounts. The report must also indicate whether the political subdivision offers a health plan, a pension, and other benefits to full-time and part-time employees. However, no more than one (1) report covering the same officers, employees, and agents need be made from the state or any county, city, town, township, or school unit in any one year. The certification must be filed electronically in the manner prescribed under IC 5-14-3.8-7.”
The procedures for the accounting of the proceeds of the sale of a general obligation bond issue and the investment and use of same are somewhat complicated and require reference to several laws. Our article will be limited to the subject of bond issues for school construction as authorized by IC 20-48-1.
When bonds are sold, the amount of principal (face value) received shall be receipted to a Construction Fund in Receipt Account Number 5110 and deposited in a designated depository for necessary expenditure. The amount then (if desired) may be invested (please ensure arbitrage problems do not exist). Any premium on the sale or accrued interest (interest earned from date of issue or most recent prior interest payment date to the date of sale) must be receipted to the Debt Service Fund in Receipt Account Number 5120 (IC 5-1-12-2). Please do not confuse "accrued interest" with "interest earned from investment of the proceeds of the sale". Investment of the proceeds must be in accordance with the investment law as found in IC 5-13-9. Interest earned from investment of the proceeds shall be receipted to Receipt Account Number 1510 of the Construction Fund or, if the governing board so designates, to the General Fund or Debt Service Fund (IC 5-13-9-6)
When securities are purchased as an investment of Construction Fund moneys, the check is recorded in Expenditure Account Number 60300 of the Construction Fund. The amount of the check is included in the total expenditures for the day which is posted to the appropriation Control Account, the Construction Fund, and the Control of All Funds in the Fund Ledger. The amount invested or the cost of securities purchased is also entered in the Clearing Account for Investments (Account Number 8500) on the Receipts-Purchase of Investments (Number 8510) side to retain the identity of the asset and maintain the balance in your accounting records. Also set up a Register of Investments (Form 350) to provide a record of the investments and their earnings for the fund from which the investment was made (Construction Fund).
If interest is received while the security is held by the school corporation, record the amount on the Register of Investments on the same line as the investment is recorded; also, receipt the interest to Receipt Account Number 1510 of the Construction Fund (or General Fund or Debt Service Fund, if designated). Post the interest to the fund and the Control of All Funds. Deposit the interest in the designated depository.
When the investment is sold or matures, receipt the sale price to the Construction Fund and to the Control of All Funds. Record in the receipt account for the Construction Fund the purchase price of the security in Account Number 6510, Sale of Securities, and any amount received in excess of the purchase price to Account Number 1510, Interest on Investments. Also, disburse from Clearing Account 8500 by entering on the disbursements side. Sale of Investments (Number 8520) an amount equal to the purchase price of the security previously entered in Number 8510 which will reduce the balance for the overall investment transaction in the Clearing Account to zero. Record the sale on the Register of Investments on the same line as the purchase was recorded. Any amount received in excess of the purchase price will be recorded on the Register of Investments as interest received.
Indiana Code 35-44.1-1-3 states:
"(a) A public servant who knowingly or intentionally: (1) hires an employee for the governmental entity that the public servant serves; and (2) fails to assign to the employee any duties, or assigns to the employee any duties not related to the operation of the governmental entity; commits ghost employment, a Class D felony.
(b) A public servant who knowingly or intentionally assigns to an employee under the public servant's supervision any duties not related to the operation of the governmental entity that the public servant serves commits ghost employment, a Class D felony.
(c) A person employed by a governmental entity who, knowing that the person has not been assigned any duties to perform for the entity, accepts property from the entity commits ghost employment, a Class D felony.
(d) A person employed by a governmental entity who knowingly or intentionally accepts property from the entity for the performance of duties not related to the operation of the entity commits ghost employment, a Class D felony.
(e) Any person who accepts property from a governmental entity in violation of this section and any public servant who permits the payment of property in violation of this section are jointly and severally liable to the governmental entity for that property. The attorney general may bring a civil action to recover that property in the county where the governmental entity is located or the person or public servant resides.
(f) For the purposes of this section, an employee of a governmental entity who voluntarily performs services: (1) that do not: (A) promote religion; (B) attempt to influence legislation or governmental policy; or (C) attempt to influence elections to public office; (2) for the benefit of: (A) another governmental entity; or (B) an organization that is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code; (3) with the approval of the employee's supervisor; and (4) in compliance with a policy or regulation that: (A) is in writing;(B) is issued by the executive officer of the governmental entity; and (C) contains a limitation on the total time during any calendar year that the employee may spend performing the services during normal hours of employment; is considered to be performing duties related to the operation of the governmental entity."
The State Board of Accounts recommends that all public school corporations, as governmental entities, carefully maintain accurate prescribed or approved employment, service and other records for all persons employed so that documentation is available to substantiate all duties assigned and all amounts paid to each.
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Health Savings Accounts Payments
Holding Corporations
Reimbursements
HEALTH SAVINGS ACCOUNTS PAYMENTS
It has come to our attention that some units are not using payroll withholding funds to account for the employee directed Health Savings Account payments. Instead, the units make direct deposits to the Health Savings Accounts in a similar manner to the process of making net pay direct deposits to the employee’s bank account. Historically, our audit position has been to take exception to this accounting practice because all payroll transactions were not being recorded in the financial records. The State Board of Accounts has revised the audit position on this process and we will not take audit exception to amounts approved by employees being deposited directly into Health Savings Accounts without the use of a payroll withholding fund, provided the following criteria are observed:
1) Unit is following state and federal guidelines of Health Savings Accounts;
2) Reports of amounts deposited into Health Savings Accounts are produced in detail by employee for each individual payroll period and maintained for audit; and
3) Amounts deposited into Health Savings Accounts (employee and employer share) are approved by the governing board.
The Attorney General of the State of Indiana on June 15, 2001, issued Official Opinion 2001-4 concerning "Health Service Fees". The conclusion of Official Opinion 2001-4 states "Indiana Constitution Article 8 § 1 and the Indiana General Assembly provide for 'Common school systems wherein tuition shall be without charge.' Also, they include instruction and education as tuition. Therefore, a school corporation may not charge a separate fee for health services."
Reimbursements
Various occasions arise at the beginning of a construction project in which a school holding corporation will owe the school corporation certain amounts of money. The funds owed may be the result of the sale of land to the holding corporation or reimbursement for certain preliminary expenses of the project which had to be paid prior to the holding corporation receiving money from the sale of bonds.
The State Board of Accounts is of the audit position when these situations occur, the holding corporation must reimburse the school corporation as soon as the proceeds from the bonds sale have been received. We have noted that some holding corporations delay payment for the sale of land or for reimbursements until late in the project. Reimbursements should be one of the first items of business after the holding corporation receives money from the sale of bonds.
Lease Rental Payments
IC 20-40-9-1 states "As used in this chapter, "debt service" includes bonds and coupons, civil bond obligations, lease rental contracts, and interest cost on emergency and temporary loans."
IC 20-40-9-5 states "Except as otherwise provided by law, all expenditures for debt service must be paid from the fund."
IC 20-40-9-6 states "Money in the fund may be used for payment of the following: (1) All debt and other obligations arising out of funds borrowed or advanced for school buildings when purchased from the proceeds of a bond issue for capital construction. (2) A lease to provide capital construction. (3) Interest on emergency and temporary loans. (4) All debt and other obligations arising out of funds borrowed or advanced for the purchase or lease of school buses when purchased or leased from the proceeds of a bond issue, or from money obtained from a loan made under IC 20-27-4-5, for that purpose. (5) All debt and other obligations arising out of funds borrowed to pay judgments against the school corporation. (6) All debt and other obligations arising out of funds borrowed to purchase equipment."
The State Board of Accounts is of the audit position item (2) "a lease to provide capital construction," is a lease-rental agreement into which the school corporation has entered with a schoolhouse holding corporation for the express purpose of the holding corporation constructing a school building, and leasing same to the school corporation under the provisions of IC 20-47-2 and IC 20-47-3.
IC 20-47-2-20 states "A school corporation that executes a lease under this chapter shall annually appropriate from its debt service fund or general fund an amount sufficient to pay the lease rental required under the lease. The appropriation is reviewable by other bodies vested by law with such authority to ascertain that the specified amount is sufficient to meet the lease rental required under the lease. The first specific appropriation shall be made at the first budget period following the date of the execution of the lease, and the first annual appropriation must be sufficient to pay the estimated amount of the first annual lease rental payment to be made under the lease. Thereafter, the annual appropriations provided for in this section shall be made, and payments shall be made from the debt service fund."
IC 20-47-3-14 states "A school corporation that executes a lease under this chapter shall annually appropriate and pay out of the debt service fund an amount sufficient to pay the lease rental required under the lease. The appropriation and rate are reviewable by other bodies vested by law with the authority to determine that the levy is sufficient to raise the amount required to meet the rental required under the lease."
Such payments out of such funds shall be provided for in the annual budget for such funds.
IC 20-43-10-2 concerning computation and use of the honors diploma award states, “(a) A school corporation honors diploma award for a state fiscal year is the amount determined using the following formula:
STEP ONE: Determine the number of the school corporation's eligible pupils who:
(A) successfully completed an academic honors diploma program; and
(B) were receiving Supplemental Nutrition Assistance Program (SNAP) benefits, Temporary Assistance for Needy Families (TANF) benefits, or foster care services; in the school year ending in the previous state fiscal year.
STEP TWO: Determine the result of:
(A) the number of the school corporation's eligible pupils who:
(i) successfully completed a Core 40 diploma with technical honors program; and
(ii) were receiving Supplemental Nutrition Assistance Program (SNAP) benefits, Temporary Assistance for Needy Families (TANF) benefits, or foster care services; in the school year ending in the previous state fiscal year; minus
(B) the number of eligible pupils who would otherwise be double counted under both clause (A) and STEP ONE.
STEP THREE: Determine the sum of the number of eligible students determined under STEP ONE and the number of eligible students determined under STEP TWO.
STEP FOUR: Multiply the STEP THREE amount by one thousand four hundred dollars ($1,400).
STEP FIVE: Determine the result of:
(A) the number of the school corporation's eligible pupils who successfully completed an academic honors diploma program in the school year ending in the previous state fiscal year; minus.
(B) the STEP ONE amount.
STEP SIX: Determine the result of:
(A) the number of the school corporation's eligible pupils who successfully completed a Core 40 diploma with technical honors program in the school year ending in the previous state fiscal year; minus
(B) the number of the school corporation's eligible pupils who are counted under both clause (A) and STEP FIVE (A).
STEP SEVEN: Determine the result of the STEP SIX amount minus the STEP TWO amount.
STEP EIGHT: Determine the result of:
(A) the STEP FIVE amount; plus
(B) the STEP SEVEN amount.
STEP NINE: Determine the result of:
(A) the STEP EIGHT amount; multiplied by
(B) one thousand dollars ($1,000).
STEP TEN: Determine the sum of:
(A) the STEP FOUR amount; plus
(B) the STEP NINE amount.
IC 20-43-10-2(b) provides that distributions received by a school corporation as an honors diploma award may only be used for (1) staff training, program development, equipment and supply expenditures, other expenses directly related to the school corporation’s honors diploma; and (2) the school corporation’s program for high ability students. The State Board of Accounts has established accounts for the expenditures directly related to a school corporation’s academic honors diploma program (11350) and a school corporation’s program for high ability students (11355 and 12150).
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Investments
Internal Revenue Service (IRS)
IRS Private Letter Ruling – Annuity Savings to Define Contribution
The auditor independence provisions of the U. S. Government Accountability Office (GAO) are contained in its generally accepted government auditing standards (GAGAS).
The GAO issued such standards to better serve the public interest by maintaining a high degree of integrity, objectivity and independence for CPA’s, and other practitioners who audit government entities and organizations receiving government funds.
Compliance with the standard hinges on the auditor’s observance of two overarching principles and seven safeguards. The two overarching principles are critical to understanding the nonaudit service rules:
(1) Audit organizations should not provide nonaudit services that involve performing management functions or making management decisions.
(2) Firms should neither audit their own work nor provide nonaudit services in situations where the nonaudit services are significant or material to the subject matter of audits.
If the nonaudit service would violate either of the two overarching principles, then the firm would be required to make a choice between providing the service or performing the audit.
Personal, external, and organizational factors can impair auditor independence, as well as personal impairments relating to nonaudit service.
Therefore, if we arrive on the audit where records, documents, reconciliations, etc., are incomplete, or have not been completed at all, we will not be able to complete the records for you. We will however be able to consult and advise on the completion of the records.
Damage Receipts:
IC 6-1.1-18-7 states in part: ". . . the fiscal officer of a political subdivision may appropriate funds received from an insurance company if (1) the funds are received as a result of damage to property of the political subdivision; and (2) the funds are appropriated for the purpose of repairing or replacing the damaged property. However, this section applies only if the funds are in fact expended to repair or replaced the property within the twelve (12) month period after they are received." The State Board of Accounts is of the audit position these funds are considered appropriated at the time the governing body allows the claims for payment of the expense of repair or replacement.
Errors and Ommissions:
Official Opinion 80-17, issued July 25, 1980, by the Attorney General, held that a township or any other governmental entity ". . . may purchase comprehensive liability insurance for public purposes, even though the township or governmental entity neither owns nor hires vehicles at the time."
The opinion was requested as a result of a township carrying liability insurance to protect the township, officers and employees when operating their personally owned vehicles in the conduct of the business of the township.
The Attorney General cited IC 34-4-16.5-18, (now IC 34-13-3-20) a section of the Tort Claims Law, as authority to purchase the liability coverage. We are of the audit position the opinion should not be construed to mean a governmental unit is authorized to purchase or to pay the premium on liability insurance carried on an employee's personally owned vehicle. The premium may be paid only where coverage is included in the liability policy carried by the governmental entity. Such insurance may be purchased by a governmental entity only to cover the liability of the governmental entity and employees in the performance of their duties.
Furthermore, in response to questions raised concerning the propriety of paying errors and omissions insurance premiums from public funds, the State Board of Accounts requested guidance from the Attorney General's Office (Official Opinion 85-27). The advice received from the Attorney General's Office was that errors and omissions insurance does cover a portion of local official exposure over and above the tort claims act and other protections. Our audit position concurs in that errors and omissions insurance may be acquired by a school corporation as long as the coverage is for those acts or omissions falling within the official's scope of employment.
Teacher Insurance and Annuity
IC 20-28-9-18 requires the board of school trustees, upon written request of any teacher, to withhold a requested amount from the teacher’s salary and to pay that amount, in accordance with the direction of such teacher, to a designated insurance company or other agency or organization in the State of Indiana which provides, extends, supervises or pays for insurance or other protection or for the establishment of or payment on an annuity account for the teacher. Deductions for these purposes may be handled on the records of the school corporation in the same manner as other payroll deductions.
IC 20-28-9-18 further provides that if there is any dividend accruing on any policy or policies, such dividend shall be paid or credited to such teacher.
Furthermore, IC 20-28-9-18 provides the governing body upon written request of a beneficiary of the Indiana State Teacher’s Retirement Fund, may receive from such beneficiary a given amount of money to be held and paid, in accordance with the direction of such beneficiary, to an insurance company or other agency or organization in the State of Indiana which provides, extends, supervises or pays for insurance or other protection or for the establishment or payment of an annuity account. Money received from said beneficiaries for such purposes may be handled on the records in the same manner as teacher deductions. Monies so received shall be receipted to and paid from the clearing accounts without appropriation.
Finally, IC 20-28-9-18(d) states, “If less than twenty percent (20%) of the teachers employed by a governing body request payment of the amounts described in subsection (c) to a single recipient, withholding the amounts of money for insurance, dues, or other purposes is discretionary with the governing body.”
School Lunch Employees:
Compensation Insurance
Pursuant to IC 22-3-6-1, all State and political subdivisions are subject to the provisions of the Worker's Compensation Act. The Attorney General provided in Official Opinion 61 of 1949 that cooks and cooks' helpers employed for the school lunch program are eligible for benefits under the Worker's Compensation Act. We are not aware of any changes to the Opinion. IC 20-41-2-4 authorizes the governing body of a school corporation to supervise and control a school lunch program through a school lunch fund in a school corporation bank account or through an extra-curricular bank account. The employees of a school lunch program in either method are to be included in any worker's compensation policy covering school corporation employees. Payment of premium on the policy shall be made from the general fund of the school corporation; however, in the case of a school corporation whose school lunch fund is in the extra-curricular account, the school lunch fund may reimburse the school corporation general fund for the amount of the premium paid on account of school lunch employees or any part thereof, if so determined by a board of school trustees.
We recommend in school corporations where school lunch cooks and helpers are paid from an extracurricular account that provisions specifically state in the worker's compensation insurance policy that said policy includes school lunch personnel paid from an extra-curricular account.
Group Insurance.
If the school lunch program is administered through a school lunch fund in the school corporation records, the school lunch personnel would be non-instructional employees of the school corporation and would be included in any contract for group insurance as defined in IC 5-10-8-1 which the school corporation carries for employees. That portion of the premium of such insurance which is paid by the school corporation would be disbursed from the school lunch fund. IC 5-10-8-1 states in part: "(1) 'Employee' means: (A) an elected or appointed officer of official, or a full-time employee; (B) if the individual is employed by a school corporation, a full-time or part-time employee; (C) for a local unit public employer, a full-time or part-time employee or person who provides personal services to the unit under contract during the contract period; . . . "
If the school lunch program is administered through an extra-curricular account, the salaries and any employer paid group insurance premiums for the school lunch personnel will normally be paid from the school lunch fund in the extra-curricular account. IC 5-10-8-2.6 provides that a public employer has authority to contract for group insurance in relation to employees and pay a part of the cost of such insurance. IC 5-10-8- 2.6(b) states "A public employer may provide programs of group insurance for its employees and retired employees. The public employer may, however, exclude part-time employees and persons who provide services to the unit under contract from any group insurance coverage that the public employer provides to the employer's full-time employees. A public employer may provide programs of group health insurance under this section through one (1) of the following methods: (1) By purchasing policies of group insurance. (2) By establishing self-insurance programs. (3) If the local unit public employer is a school corporation, by electing to participate in the local unit group of local units that offer the state employee health plan under section 6.7 of this chapter. A public employer may provide programs of group insurance other than group health insurance under this section by purchasing policies of group insurance and by establishing self-insurance programs. However, the establishment of a self-insurance program is subject to the approval of the unit's fiscal body." An appropriation may be made in the food services function of the school corporation general fund to pay some of the cost of the school lunch program when necessary and the governing board so desires. Thus, an appropriation of general fund money may be made for salaries and wages of school lunch personnel and for a part of the cost of premium on group insurance for school lunch personnel when the program is administered in an extra-curricular account.
SELF-INSURANCE FUND ACCOUNTING
IC 20-40-12-4 states: "The governing body of each school corporation:
(1) may establish a self-insurance fund in accordance with this chapter for the purposes described in:
(A) section 5(1) through 5(3) of this chapter; and
(B) section 5(4) of this chapter as section 5(4) of this chapter applies to governing body or school employee coverage other than coverage for health care services; and
(2) shall, if the governing body elects to provide a self-insurance program to cover health care services, establish a self-insurance fund for the purposes described in section 5(4) of this chapter as section 5(4) of this chapter applies to health care services."
Uses of fund
IC 20-40-12-5 states: "The fund may be used to provide money for the following purposes:
(1) The payment of a judgment rendered against the school corporation, or rendered against an officer or employee of the school corporation for which the school corporation is liable under IC 34-13-2, IC 34-13-3, or IC 34-13-4 (or IC 34-4-16.5, IC 34-4-16.6, or IC 34-4-16.7 before their repeal).
(2) The payment of a claim or settlement for which the school corporation is liable under IC 34- 13-2, IC 34-13-3, or IC 34-13-4 (or IC 34-4-16.5, IC 34-4-16.6, or IC 34-4-16.7 before their repeal).
(3) The payment of a premium, management fee, claim, or settlement for which the school corporation is liable under a federal or state statute, including IC 22-3 and IC 22-4.
(4) The payment of a settlement or claim for which insurance coverage is permitted under IC 20- 26-5-4(15)."
Sources of fund
IC 20-40-12-6 states: "Subject to the approval of the commissioner of insurance, the governing body of the school corporation may:
(1) transfer to the fund an amount of money in the education fund or the operations fund budget;
(2) transfer money from the education fund or the operations fund to the fund;
(3) appropriate money from the education fund or the operations fund for the fund; or
(4) transfer money from the operations fund to the fund, to the extent that money in the capital projects fund may be used for property or casualty insurance."
If a school corporation desires to appropriate funds in the education fund or the operations fund for the transfer to a self-insurance fund, the funds should be budgeted in account 60100.
The funds would be recorded in the education fund or the operations fund as a transfer out (60100) and recognized in the self-insurance fund as a transfer in (5200).
Please note self-insurance funds are to be in the custody, control and responsibility of the school corporation treasurer in accordance with IC 20-26-4-1(d). Accordingly, fund numbers 1100-1110 has been designated to account for all self-insurance funds. Authorized expenditures should be made in the same manner as other school corporation expenditures.
SELF-INSURANCE – TECHNOLOGY EQUIPMENT
We have recently received questions regarding the ability to use Self-Insurance Funds to self-insure technology equipment.
IC 20-40-12-5 states: "The fund may be used to provide money for the following purposes:
(1) The payment of a judgment rendered against the school corporation, or rendered against an officer or employee of the school corporation for which the school corporation is liable under IC 34-13-2, IC 34-13-3, or IC 34-13-4 (or IC 34-4-16.5, IC 34-4-16.6, or IC 34-4-16.7 before their repeal).
(2) The payment of a claim or settlement for which the school corporation is liable under IC 34- 13-2, IC 34-13-3, or IC 34-13-4 (or IC 34-4-16.5, IC 34-4-16.6, or IC 34-4-16.7 before their repeal).
(3) The payment of a premium, management fee, claim, or settlement for which the school corporation is liable under a federal or state statute, including IC 22-3 and IC 22-4.
(4) The payment of a settlement or claim for which insurance coverage is permitted under IC 20- 26-5-4(15)." To use money from the self-insurance fund under subdivision -5(4) there must be a payment of a settlement or claim. Repairs to technology equipment don’t involve the “payment of a settlement or claim” as required by the language of IC 20-40-12-5(4).
IC 20-26-5-4(a)(15) states: “In carrying out the school purposes of a school corporation, the governing body acting on the school corporation's behalf has the following specific powers:
…(15) To purchase insurance or to establish and maintain a program of self-insurance relating to the liability of the school corporation or the school corporation's employees in connection with motor vehicles or property and for additional coverage to the extent permitted and in accordance with IC 34-13-3-20. To purchase additional insurance or to establish and maintain a program of self-insurance protecting the school corporation and members of the governing body, employees, contractors, or agents of the school corporation from liability, risk, accident, or loss related to school property, school contract, school or school related activity, including the purchase of insurance or the establishment and maintenance of a self-insurance program protecting persons described in this subdivision against false imprisonment, false arrest, libel, or slander for acts committed in the course of the persons' employment, protecting the school corporation for fire and extended coverage and other casualty risks to the extent of replacement cost, loss of use, and other insurable risks relating to property owned, leased, or held by the school corporation. In accordance with IC 20-26-17, to:
(A) participate in a state employee health plan under IC 5-10-8-6.7;
(B) purchase insurance; or
(C) establish and maintain a program of self-insurance; to benefit school corporation employees, including accident, sickness, health, or dental coverage, provided that a plan of self-insurance must include an aggregate stop-loss provision.
To use money from the Self-Insurance Fund under IC 20-40-12-5 there must be a payment of a settlement or claim. Repairs to technology equipment do not involve the payment of a settlement or claim as required by this statute. In our opinion the language in IC 20-40-12-5 and IC 20-26-5-4(a)(15) do not allow for the self-insurance fund to be used to pay for repairs to technology equipment.
Interest Investment Deposit; Receipt; Reinvestment; Disposition
IC 5-13-9-6 provides in part: "(a) All interest derived from an investment by a political subdivision or by any other local public officer under the authority granted by section 3 of this chapter shall be deposited, except as otherwise provided by law, in the general fund of the investment authority or in any other fund its governing body designates specifically or by rule, subject to the modifications and limitations in this section."
"(b) Interest from the following investments shall be receipted as follows: (1) Interest from investments of funds of a political subdivision that are traceable to United States government funds must be receipted to the fund of which they are a part, if required by federal law or regulation. (2) Interest from investments of funds controlled by court orders must be receipted to that fund unless otherwise designated by the court orders."
The following additional specific restrictions apply to school corporation investments. Any interest income derived from an investment, which includes money from the proceeds of a bond sale or Veterans’ Memorial Fund Loan in a Construction Fund, or money from a Levy Excess Fund, Repair and Replacement Fund or any special funds which include federal monies, shall be deposited to that specific fund. We do not take audit exception to the receipt of interest from investing the proceeds of a bond sale to a Construction Fund. Interest on such an investment will be receipted to the Construction Fund unless the treasurer is directed to place the interest in the Debt Service Fund to be applied toward the redemption of the bonds and coupons.
Capital Projects Earned Interest
"Interest on the money in the fund, including the fund's pro rata share of interest earned on the investment of total money on deposit, shall be deposited in the fund. However, the governing body may adopt a resolution to transfer any interest earned on money in the fund to the school corporation's general fund.” (IC 20-40-8-7)
Bonded Indebtedness
IC 5-13-9-6 states in part: “(e) Any political subdivision may apply the interest derived from the investment of the proceeds from bonded indebtedness or local tax levies to the appropriate redemption bond interest or sinking fund for the bonded indebtedness. …(g) Interest from the investment of the public funds of a political subdivision may not be paid personally or for the benefit of any public officer."
Public Deposits Insurance
"Funds deposited in deposit accounts in accordance with this chapter and interest earned or accrued on the funds are public funds and are covered by the insurance fund." (IC 5-13-9-8.5)
INTERNAL CONTROL STANDARDS
Adoption of Internal Control Standards
Indiana Code 5-11-1-27 requires the state board of accounts define the acceptable minimum level of internal control standards for political subdivision. As a result, we have completed a manual entitled “Uniform Internal Control Standards for Indiana Political Subdivisions”. The manual and the approved training materials were presented and approved by the Legislative Audit Committee. We have posted the manual to the SBOA website on a newly created page under Political Subdivisions called “Internal Control Standards” (http://www.in.gov/sboa/5072.htm). This page has a link to the manual itself and lists the approved training and the certification requirements. It also references other sources of information on internal controls. We have added the same information to each political subdivisions page on the SBOA website. Finally, you can we placed a link to the manual on the SBOA homepage under our mission statement.
Part One of the manual lists the minimum standards which include the five components of internal control and the seventeen principles. Part Two of the manual is called Approved Personnel Training Materials and also contains examples and case studies, which are not part of the minimum level of standards but do provide additional information and examples that can be used in the implementation of internal controls by the subdivision. There is a certification form for internal control training in the appendix to the manual.
We have completed a webinar that will be posted on the SBOA website this month which will provide additional training information that can be used by the political subdivision. In the past few months we have used the information during presentations at meetings we have attended. The webinar will make the information available to all employees of the subdivision. During the training we have done to date at various meetings, we have tried to be very clear that in order to retain our independence to audit political subdivisions; Generally Accepted Government Auditing Standards (the "Yellow Book") prohibits the SBOA from prescribing the actual internal control procedures to be used by a political subdivision.
By statute, after June 30, 2016, the legislative body must ensure that internal control standards are procedures are adopted and that the appropriate personnel receive training on internal controls and procedures. The fiscal officer will file a certification along with subsequent Gateway annual reports.
Internal Control Timeline
IC 5-11-1-27 requires all Indiana political subdivisions to adopt the minimum level of internal control standards developed by the state board of accounts as published in the Uniform Internal Control Standards for Indiana Political Subdivisions. Each political subdivision must adopt these standards, train appropriate personnel, and implement policies and procedures consistent with the standards. The following is a guide to fulfilling these requirements and deadlines for action.
Statutory Requirements - Uniform Internal Control Standards for Indiana Political Subdivisions (Statutory Deadline: After June 30, 2016)
Legislative Body – Uniform Internal Control Standards
1. Adopt Standards. The legislative body shall ensure that the Uniform Internal Control Standards for Indiana Political Subdivisions are adopted. We recommend adoption by ordinance or resolution.
The Uniform Internal Control Standards for Indiana Political Subdivisions are available on our website [http://in.gov/sboa/5072.htm].
2. Train Personnel. The legislative body shall ensure that personnel, as defined in statute, receive training concerning the Uniform Internal Control Standards for Indiana Political Subdivisions.
Approved training materials are located in Part Two of the Uniform Internal Control Standards for Indiana Political Subdivisions; the Video Presentation materials in Section One accompany the Internal Control Webinar located on our website at http://in.gov/sboa/5072.htm.
Training by each employee should be documented on the Internal Control Training Certification Form located in the Appendix to the Uniform Internal Control Standards for Indiana Political Subdivisions. Retain this documentation for audit.
Please note that training is an ongoing process as new employees are hired.
Fiscal Officer – Uniform Internal Control Standards
1. Certify Adoption of Standards. The fiscal officer shall certify in writing that the Uniform Internal Control Standards for Indiana Political Subdivisions have been adopted.
2. Certify Training of Personnel. The fiscal officer shall certify in writing that the personnel, as defined in statute, have received the required training.
3. Submit Two Certifications with Annual Financial Report in 2017. Both the Adoption of Standards Certification and the Training of Personnel Certification shall be filed electronically with the state board of accounts at the same time as the annual financial report is filed.
Ongoing Requirements - Implementation of Internal Control Policies and Procedures
Management - Responsibility to Implement Internal Control Policies and Procedures
The term “management” is defined for each unit of government in the Introduction section of the Uniform Internal Control Standards for Indiana Political Subdivisions.
After June 30, 2016, management should document in writing the specific internal control policies and procedures required for use in each department of the unit. Examples of such policies and procedures are contained in Part Two Section 2 of the Uniform Internal Control Standards for Indiana Political Subdivisions.
The implementation of internal control policies and procedures is an ongoing process. We recommend that management start by documenting procedures already in place and evaluating those policies and procedures in light of the five components of internal control. If any of the five components is missing, true internal control is not achieved. An effective implementation of Internal Control is a process and requires regular evaluation and adaptation for changes affecting your office. Over time controls may be added, deleted, or adjusted as necessary.
Collective Bargaining Agreement
Indiana Code 20-29-6-19 states: "Not later than fourteen (14) business days after the parties have reached an agreement under this chapter, the school employer shall post the contract upon which the parties have agreed on the school employer's Internet web site."
Superintendent’s Contract
Indiana Code 20-26-5-4.3 states:
"(a) At least seven (7) days before a contract for employment is entered into by a governing body and a school superintendent, the governing body shall hold a public meeting on the proposed contract at which public comment is heard. The governing body is not required to disclose the identity of the candidate for superintendent at the public meeting.
(b) Notice of the meeting on the proposed contract shall be given in accordance with IC 5-3-1 and posted on the school corporation's Internet web site.
(c) The notice provided in subsection (b) must:
(1) state that on a given day, time, and place the governing body will meet to discuss and hear objections to and support for the proposed contract; and
(2) set forth the details of the proposed contract, including the actual monetary value of the contract, benefits, and any additional forms of compensation for each year of the contract.
(d) A governing body shall post the provisions of an employment contract that the governing body enters into with a superintendent of the school corporation on the school corporation's Internet web site."
Contract Provisions for Certain Employees
Indiana Code 20-26-5-4.7 states:
(a) This section does not apply to a:
(1) superintendent of a school corporation; or
(2) certificated employee (as defined in IC 20-29-2-4) that is represented by an exclusive representative (as defined in IC 20-29-2-9) under IC 20-29.
(b) The superintendent shall post the provisions of an employment contract that the school corporation enters into with a certificated employee on the school corporation's Internet web site."
INVESTMENTS
IC 5-13-11 concerning Investment Cash Management Systems, provides for a system in which a depository manages the investment practices of a school corporation. The governing body and investing officer of a school corporation may contract with a depository for the operation of an investment cash management system.
The contract must:
(1) be in writing;
(2) provide for the investment of funds by the depository with the approval of the investing officer;
(3) provide that the depository keep those records concerning the investment cash management system that the political subdivision would maintain for audits by the State Board of Accounts;
(4) provide that investments will be made in accordance with this article;
(5) provide that the depository may invest funds in the same investments and for the same terms as the treasurer of state may invest funds of the state under this article;
(6) not have a term of more than two (2) years; and
(7) be awarded under the bidding provisions of IC 5-22.
If no designated depository whose principal office or branch is located within the political subdivision will provide an investment cash management service permitted in IC 5-13-11, then the contract for an investment cash management service must be awarded as provided by IC 5-13-8-9(c). If the investment cash management service contract is awarded to a financial institution whose principal office or branch is located outside the political subdivision, then the recipient of the contract does not constitute a designated depository of the political subdivision for the purposes of investment under IC 5-13-9-3 unless it meets the limitations of IC 5-13-9-4 or IC 5-13-9-5, but does constitute a depository under IC 5-13 for all other purposes.
The contract may provide for the depository to assess a service charge for management of the investment cash management system. The amount of the charge must be stated in the contract. The contract may provide for the depository to assess a service charge for its management of the investment cash management system. The service charge may be paid by direct charge to the deposit or other account or in any other manner that subtracts the service charge from interest earned on the funds in the deposit or other account. The depository shall furnish the political subdivision with at least one (1) report each month of transactions concerning the investment cash management system. The depository shall credit any interest or other accretion from an investment to the investment account of the political subdivision. The interest or accretion becomes a part of the principal in that account.
IC 5-13-11-2.5 provides a contract may be renewed under this chapter if the county board of finance for a county subject to IC 5-13-7-1 or the fiscal body of a political subdivision and the investing officer of the political subdivision agree with the depository to renew the contract under the same terms or better terms as the original contract. The term of a renewed contract may not be longer than the term of the original contract, and the contract may be renewed any number of times.
Extracurricular Account Investments
IC 20-41-1-9 concerning the school extracurricular account provides in part: "(b) The money in the school extracurricular account may be invested under the conditions specified in IC 5-13-10 and IC 5- 13-10.5 for investment of state money. However, investments under this section are at the discretion of the principal. The interest earned from any investment may be credited to the school extracurricular account and need not be credited proportionately to each separate extracurricular fund. The interest earned from the investment may be used for any of the following: (1) A school purpose approved by the principal. (2) An extracurricular purpose approved by the principal. (c) Amounts expended under this section for the purposes described in this section are in addition to the appropriation under IC 20-26-5- 4(3)."
The State Board of Accounts is of the audit position that for accounting purposes a necessity exists to establish an Investment Income Fund in the extracurricular account records to which any earnings may be receipted and from which expenditures are made. A dual control will also be necessary to be kept instead of the usual single control for the extracurricular account. One control will be used to record the transactions of the checking account, and another will be used to account for the investment from the total monies on deposit. The balances of these two controls when added together must equal the total of the balances of all the individual extracurricular funds at all times.
Purchases of equipment and other items which become part of the school facilities, educational supplies, and other items which may be purchased from the stated funds are the direct responsibility of the school board. Therefore, the specific equipment type items must be approved by the board before being purchased from the Investment Income Fund.
Since the School Board is the employing authority in a school corporation and IC 20-41-1-4 does provide in part concerning extracurricular expenditures, ". . . All expenditures of the funds are subject to review by the governing board of the school corporation", the school board shall have a policy for all buildings concerning whether investments should be by fund or within an Investment Income Fund as provided herein.
Official Opinion No. 82-13 as issued by the Attorney General on August 30, 1982 concluded that local units of government may invest any and all available funds under their control in repurchase agreements with any financial institution under certain provisions of IC 5-13-1-2 (now IC 5-13-9).
We suggest you review IC 5-13-9-3 and the Opinion with the attorney for the school corporation and with administrators of your local depositories. We would also suggest that you consider the possible uninsured nature of these investments under the State's Public Deposits Insurance Fund. We also recommend the repurchase agreement should: (1) Vest title of the securities in the name of the school corporation; (2) Describe the specific securities acquired; and, (3) Represent a safekeeping receipt for the securities so acquired.
IC 5-13-9-3 concerning repurchase agreements states:
"(a) As used in this section, "repurchase agreement" means an agreement:
(1) involving the purchase and guaranteed resale of securities between two (2) parties; and
(2) that may be entered into for a fixed term or arranged on an open or a continuing basis as a continuing contract that:
(A) operates like a series of overnight repurchase agreements;
(B) is renewed each day with the repurchase rate and the amount of funds invested determined daily; and
(C) for purposes of this article, is considered to have a stated final maturity of one (1) day.
(b) Each officer designated in section 1 of this chapter may enter into, with any funds that are held by the officer and available for investment, repurchase agreements:
(1) with depositories designated by the state board of finance as depositories for state deposits under IC 5-13-9.5; and
(2) involving the political subdivision's purchase and guaranteed resale of any interest-bearing obligations:
(A) issued; or
(B) fully insured or guaranteed; by the United States, a United States government agency, an instrumentality of the United States, or a federal government sponsored enterprise.
The depository shall determine daily that the amount of money in this type of agreement must be fully collateralized by interest-bearing obligations as determined by their current market value. The collateral for this type of agreement is not subject to the provisions of section 2(c) of this chapter.
(c) If the market value of the obligations being held as collateral falls below the level required under subsection (b) or a higher level established by agreement, the depository shall deliver additional securities to the political subdivision to make the agreement collateralized to the applicable level. The collateral involved in a repurchase agreement entered into under this section is not subject to the maturity limitation provided in section 5.6 of this chapter.
(d) A political subdivision may invest in repurchase agreements without entering into a contract under IC 5-13-11 for an investment cash management system.”
IC 5-13-9-2 states in part (d) "The investing officers of the political subdivisions are the legal custodians of securities under this chapter. They shall accept safekeeping receipts or other reporting for securities from: (1) a duly designated depository as prescribed in this article; or (2) a financial institution located either in or out of Indiana having custody of securities with a combined capital and surplus of at least ten million dollars ($10,000,000) according to the last statement of condition filed by the financial institution with its governmental supervisory body. (e) The state board of accounts may rely on safekeeping receipts or other reporting from any depository or financial institution."
IRS PRIVATE LETTER RULING – ANNUITY SAVINGS TO DEFINED CONTRIBUTION
The annuity savings account components of the Teachers Retirement Funds, both the 1996 and Pre-1996 plans, and Public Employees Retirement Fund pension plans were redefined as “defined contribution” effective January 1, 2018. Those governments issuing GAAP financial statements, rather than regulatory/cash basis only financial statements, will need to inform financial statement preparers of this change as it affects the disclosures required by generally accepted accounting principles (GAAP) prescribed by the Governmental Accounting Standards Board (GASB) in the Notes to the Financial Statements. Repeating disclosures about these defined contribution components obtained from prior year’s financial statements without updating them to reflect their new definition may result in a modified Independent Auditor’s Report.
Steps to ensure financial statement disclosures meet the minimum requirements prior to auditors requesting them for review during the audit may include:
- Reviewing how these plans are described in the latest State of Indiana’s Comprehensive Annual Financial Report available on the State Board of Accounts’ website taking into account that the local government’s perspective of these plans will be different from the State’s perspective.
- Reviewing the applicable GASB pronouncement (GASB 68) and the codification of all authoritative GAAP for state and local governments via the Governmental Accounting Research System (https://gars.gasb.org/) to identify what disclosures are required.
- Using a publicly available checklist such as one from the Government Finance Officers Association (https://www.gfoa.org/sites/default/files/GFOAGeneralPurposeChecklist.pdf).
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Leased Vehicles and Mileage Expense
Loans
The State Board of Accounts is of the audit position that regarding purchasing a computer or any other equipment from public funds, the school board has the right to enter into a rental with option to purchase agreement if the rental charge is fair and reasonable.
However, before such an agreement is entered into, there must be a sufficient appropriation balance available for payment of the current year's rental charge. The agreement should not obligate the school corporation for payment of rental beyond the current year's appropriation. Provision may be made in the agreement for renewal for succeeding years by rental payments subject to appropriations being available.
If the original gross cost of the equipment (without consideration of any trade-in) exceeds one hundred fifty thousand dollars ($150,000) the purchasing agency must comply with IC 5-22-7 of the "Public Purchases Law", (certain exceptions exist). IC 5-22-7 includes advertising for the bids and by awarding with reasonable promptness by written notice a contract to the lowest responsible and responsive bidder. Only by awarding a contract pursuant to IC 5-22 would the school corporation have authority to purchase the equipment at a later date. A lease-purchase agreement will often contain an option to purchase at the end of the lease term for nominal consideration or no additional consideration.
The State Board of Accounts is of the audit position specifications should be in accordance with all of the provisions of IC 5-22-5-1 et seq. IC 5-22-5-3 states "A specification must do the following: (1) Promote overall economy for the purposes intended. (2) Encourage competition in satisfying the governmental body's needs."
The specifications for the equipment must be recognized standard specifications to allow competitive bidding and should provide for the bidder to quote the total purchase cost, the rental charge to be made, and the percentage of the amount of the rental charge that will be credited toward the purchase cost should the school corporation exercise the option to purchase. Any interest or carrying charges must be made a part of the original bid price without specific reference made thereto.
Compliance with the above requirements will allow the purchasing agency to exercise the option to purchase at any time a sufficient appropriation for equipment is available.
If a proposal is made to trade in used equipment on the new equipment to be purchased under a rental with option to purchase agreement, the trade-in value of the old equipment must be applied on the rental charge to the extent of the amount allowed on the used equipment by the successful bidder. The allowance should not be deducted from the price of the new equipment and the net price used as the basis for determining lease payments. If the trade-in allowance exceeds the current year's rental charge, the school corporation should dispose of the used equipment in the manner required by IC 5-22-22-1 et seq. or by other statutorily authorized procedures.
LEASED VEHICLES AND MILEAGE EXPENSE
We have received questions concerning the position of the State Board of Accounts in relation to the leasing of automobiles by a school corporation and the provision for paying mileage expense for use of an employee's personal automobile when used on school corporation business.
IC 20-26-5-4(5) authorizes the governing body of the school corporation to lease an automobile or automobiles as the school board ". . . considers necessary for school purposes." (Our Emphasis) The State Board of Accounts is of the audit position determination of the necessity must be made by the school board. The school board may assign such vehicle to any school corporation officer or employee for use on school business as deemed necessary. The school corporation, for a school corporation owned or leased automobile, may furnish the necessary gasoline, oil, tires, repairs, etc., to maintain the automobile in a satisfactory condition for operation on the streets, roads and highways. If the automobile is leased, the fuel, repair and maintenance programs should be defined in the lease agreement. Sufficient insurance should be carried by the school corporation to protect the school corporation in relation to public liability, property damage, casualty loss and other coverage as the attorney for the school corporation may advise.
IC 20-26-5-4(9) states in part "Notwithstanding the appropriation limitation in subdivision (3), when the governing body by resolution considers a trip by an employee of the school corporation or by a member of the governing body to be in the interest of the school corporation, including attending meetings, conferences, or examining equipment, buildings, and installation in other areas, to permit the employee to be absent in connection with the trip without any loss in pay and to reimburse the employee or the member the employee's or member's reasonable lodging and meal expenses and necessary transportation expenses."
Accordingly, if the school board of a school corporation deems the situation advantageous to the school corporation from a business point of view to not furnish a vehicle for use in conducting the business affairs of the school corporation, individuals may be reimbursed by way of mileage allowance claim, for using personally owned vehicles in conducting school corporation business. The school corporation, in such instance, should not pay any of the expenses of fueling, operation or maintenance of the employee's automobile; only the mileage allowance for the miles driven in conducting the business affairs of the school corporation is permissible. The mileage allowance for actual miles traveled are to be paid at the rate per mile established by the school board and must be properly itemized on Mileage Claim, General Form 101.
Rates are computed on a yearly basis based upon the statutorily authorized increase allowed by IC 5-3-1-1(b)(4). A newspaper, locality newspaper, or qualified publication may, effective January 1 or any year increase the basic charges by not more than 2.75% of the basic charges that were in effect during the previous year. The computed rates for legal advertising can be found on the School page, under ‘Resources’.
We have had many questions about book fairs and library fundraisers. A determination should be made and documented as to what the money raised will be spent on. If the money is going to be used for student activities outside the classroom, like incentive awards, we would not take exception to accounting for the money in an Extra Curricular Account. If the proceeds are to be used to provide library books, subscriptions, media equipment etc..., then the proceeds should be remitted to the school corporation and ran through the corporation’s records.
Our opinion is that transactions that involve providing assets for the School Library should be recorded in the School Corporation records. We would not take exception to the ECA ledger temporarily receipting the money into the ECA funds, but it should then be turned over to the Corporation Treasurer before it is spent on books, magazines, etc.
“… all disbursements for educational purposes must be made from school corporation funds and not from extra-curricular funds. (See General Fund, Student Activity Fund and Investments and Investment Income Fund) These include disbursements for building equipment, repairs and maintenance; educational and library materials, supplies and equipment; meeting and conference expense of employees; copiers; and, the repair and maintenance of same. Curricular and extra-curricular, though associated, are totally separate functions and each has a purpose and authorizing statute and must be treated separately.” (Accounting and Uniform Compliance Guidelines Manual for Extra Curricular Accounts – Chapter 6)
ACCOUNTING FOR SCHOOL BUS LOANS
Approvals IC 20-46-7-8.5 states in part "(a) Notwithstanding any other provision, review by the department of local government finance and approval by the department of local government finance are not required before a school corporation may issue or enter into bonds, a lease, or any other obligation, if the school corporation: (1) after June 30, 2008, makes a preliminary determination as described in IC 6-1.1-20-3.1 or IC 6-1.1-20-3.5 or a decision as described in IC 6-1.1-20-5; or (2) in the case of bonds, leases, or other obligations not subject to IC 6-1.1-20-3.1, IC 6-1.1-20-3.5, or IC 6-1.1-20-5, adopts a resolution or ordinance authorizing the bonds, lease rental agreement, or other obligations after June 30, 2008. (b) A school corporation is not required to obtain the approval of the department of local government finance before the school corporation may repay from the debt service fund any loans made after June 30, 2008, for the purchase of school buses under IC 20-27-4-5."
General Obligation Bond
IC 20-27-4-4 provides "If a school corporation requires funds to purchase a school bus for cash, the school corporation may borrow the necessary funds by issuing general obligation bonds. The bonds shall be issued in the same manner as other general obligation bonds. However, the bonds may not extend for more than six (6) years."
Loans
IC 20-27-4-5 states "(a) If a school corporation requires funds to purchase a school bus for cash, the school corporation may, instead of issuing general obligation bonds, negotiate for and borrow funds or purchase the school bus on an installment conditional sales contract or a promissory note secured by the school bus. (b) To effect a loan, the school corporation shall execute a negotiable note or notes to the lender. The notes may not extend for more than six (6) years and are payable at the same times and in the same manner as provided for security agreements in section 2 of this chapter. (c) Before a note described in this section is executed, an appropriation for the amount of the purchase price of the school bus and any incidental expenses connected with the purchase or the loan, must be made in the same manner as other appropriations are made, except that the amount of the appropriation is not limited by the amount of funds available at the time of the loan or purchase or by the amount of funds to be raised by a tax levy effective at the time of the loan. (d) A petition to borrow, a notice to taxpayers, or other formality is not necessary to borrow funds under this section except as specifically provided in this chapter."
Upon delivery of the buses, the proceeds of the loan must be obtained from the lending institution, receipted to the General Fund or School Bus Replacement Fund (Account 5460) and deposited in the bank upon which the check will be drawn for payment. The check payable to the vendor will be recorded in General Fund Expenditure Account 27400 of the 27000 Appropriation classification.
Indiana Bond Bank
IC 20-27-4-7 provides "Notwithstanding any other provision of this chapter, a school corporation may negotiate and enter into loans, security agreements, or leases with the Indiana bond bank for the acquisition and financing of a school bus."
Manner Of Purchase
IC 20-27-4-6 states "(a) The purchase of a school bus shall be made in the same manner as provided by law for the purchase of school supplies by a school corporation. (b) If a school bus is purchased under a security agreement, the required notice to bidders or solicitation of bids must set: (1) the length of time the security agreement shall run; and (2) the terms of the security agreement, including the security agreement price and interest rate. (c) The low bid for a security agreement shall be determined by adding to each bidding price the net interest cost and then comparing the totals of the price and interest on each bid. Any difference between the cash and the security agreement prices may not be considered a charge under section 2 of this chapter. Instead, a separate statement of each price shall be made to enable the governing body to determine the advisability of purchasing a school bus under a security agreement." Please see IC 5-22
Repayment
IC 20-27-4-2 states "A security agreement under this chapter may not run for more than six (6) years. The agreement must be amortized in equal or approximately equal installments, payable on the first day of January and July each year. The first installment of principal and interest must be due and payable on the first day of July next following the collection of a tax that was levied after execution of the security agreement."
If approved as previously mentioned, arrangements for repayment of the loan may be made by way of appropriations in the Debt Service Fund on the annual budget. The first installment of principal and interest shall be due and payable on the first day of July next following the collection of a tax which was levied after execution of the loan. Notes issued shall not extend for a period of more than six (6) years. Payments for the loan principal must be recorded in Expenditure Account 52400, School Bus Loans, of the Debt Services Appropriation (Account 50000). We will not take audit exception to repayments which are appropriated and paid from the Operations Fund. The expenditure must be posted to the fund in which the appropriation was included and to the Control of All Funds.
Appropriations
IC 20-27-4-3 states "Before a security agreement is executed, an appropriation for the amount of the purchase price must be made. The appropriation is made in the same manner as any other appropriation, except that the amount of the appropriation is not limited by the amount of funds available at the time of the execution or the amount of funds to be raised by a tax levy effective at the time of the execution. A petition to borrow, a notice to taxpayers, or other formality is not necessary, except: (1) as specifically provided in this chapter; and (2) as may be required by law for the issuance of general obligation bonds."
INDIANA BOND BANK – TAX ANTICIPATION WARRANTS
We are of the audit position that Indiana Bond Bank transactions should be recorded in the records. Accordingly, receipts should be issued for the amount of the tax anticipation warrant, checks issued for repayment of the amounts borrowed should be charged for securities purchased, etc. Additionally, the Treasurer's Daily Balance of Cash, Depositories and Investments, (General Form 361), and Register of Investments (General Form 350) should contain a record of each transaction.
Please note all receipts, checks and records should contain notations that these transactions are in accordance with the Bond Bank Tax Anticipation Warrants issued and note where the securities are held by reference to the safekeeping receipt that you are to receive. Also, please ensure that interest income is properly receipted into the records through the normal accounting system.
Finally, we understand the Indiana Bond Bank will provide guidance concerning any potential arbitrage requirements, and if the entire amount available is not drawn by a school corporation, the residual amount will be sent to a school corporation to be used to repay the total amount of the advance
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Membership Dues in Organizations
Mileage Rates – State and Federal
It has come to our attention that there is confusion in regard to the application of IC 5-11-1-27(j) and IC 5- 11-1-27(l).
IC 5-11-1-27(j) states in part: “All erroneous or irregular material variances, losses, shortages, or thefts of political subdivision funds or property shall be reported immediately to the state board of accounts. For all material variances, losses, shortages, or thefts, the state board of accounts shall: (1) determine the amount of funds involved and report the amount to the appropriate government and law enforcement officials…”
It is in regard to this section that the State Examiner issued State Examiner Directive 2015-6, which allows School Corporations to determine the own materiality threshold at which they are to report to us variances, losses, shortages, or thefts.
In addition to subsection (j), IC 5-11-1-27(l) states in part: “A public officer who has actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds or assets of the public office, including: (1) information obtained as a result of a police report; (2) an internal audit finding; or (3) another source indicating that a misappropriation has occurred; shall immediately send written notice of the misappropriation to the state board of accounts and the prosecuting attorney serving in the area governed by the political subdivision.” For this portion of the statute, there is no materiality threshold.
It is our position that application of the materiality threshold is for those unintentional variances, losses, and shortages that occur in the course of business that are due to misapplication of processes or act as an indicator that the appropriate process is not in place. Either way, upon discovery the school corporation would take corrective action. The materiality threshold would also apply to “theft” by someone outside of the school corporation’s employ, with again the appropriate actions taken by the school corporation.
All instances of misappropriation (intentional personal misuse) of the School Corporation funds or assets by an official or employee must be reported to the State Board of Accounts. Materiality thresholds do not apply.
The memo below was issued on January 7, 2016, and offers additional guidance in regards to the materiality threshold:
Memo on Considerations for Materiality Policies
To aid in the creation and implementation of a materiality policy as discussed in State Examiner Directive 2015-6, the State Board of Accounts assembled the following suggestions that each School Corporation should consider.
Each materiality policy should include the following:
1. Designation of a person (or position) to which all irregular variances, losses, shortages, and thefts are reported. Multiple individuals may be designated if each individual follows the overall materiality policy. For example, a county clerk, county treasurer, and county auditor could be designated for occurrences within their respective offices, as long as the county-wide policy is followed by each designee.
2. Establishment of two dollar thresholds at which point the designated person will report the incident to the State Board of Accounts. The thresholds should be for (1) incidents involving cash and (2) incidents involving all other (non-cash) assets. Incidents involving cash will likely have a lower dollar threshold.
3. Creation of an outline of steps that will be taken upon receipt of such a report. Such steps may include:
a. logging-in all reports into a spreadsheet that is permanently maintained by the political subdivision;
b. confirming the dollar amount of the variance, loss, shortage, or theft;
c. evaluating the report against the established dollar thresholds, and sending a letter to the SBOA when the report exceeds the threshold;
d. investigating the cause of any variance, loss, shortage, or theft;
e. implementing corrective actions or internal control procedures to correct the cause(s) of the variance, loss, shortage, or theft; and
f. maintaining copies of relevant documentation, resolution of incidents, and any report to the State Board of Accounts in a centralized data folder.
4. Acknowledgment of Ind. Code § 5-11-1-27(l), which requires public officials who have actual knowledge of or reasonable cause to believe that here has been a misappropriation of public funds to immediately send written notice of the misappropriation to the State Board of Accounts and the prosecuting attorney.
As a reminder, if a political subdivision does not develop a policy on materiality, then the threshold is $0.00 and the political subdivision must report all irregular variances, losses, shortages, and thefts to the State Board of Accounts.
We have received inquiries concerning providing of meals for school corporation employees (school food program, in-service meetings, etc.).
IC 20-26-5-4(3) provides in part the authority for a board of school trustees: "To appropriate from the school corporation's general fund (before January 1, 2019) or the school corporation’s operations fund (after December 31, 2018) an amount, not to exceed the greater of three thousand dollars ($3,000) per budget year or one dollar ($1) per pupil, not to exceed twelve thousand five hundred dollars ($12,500), based on the school corporation's ADM of the previous year (as defined in IC 20-43-1-7), to promote the best interests of the school corporation through: A) the purchase of meals…”
IC 20-26-5-4(9)) concerning travel and meals provides in part: "Notwithstanding the appropriation limitation in subdivision (3), when the governing body by resolution considers a trip by an employee of the school corporation or by a member of the governing body to be in the interest of the school corporation, including attending meetings, conferences, or examining equipment, buildings, and installation in other areas, to permit the employee to be absent in connection with the trip without any loss in pay and to reimburse the employee or the member the employee's or member's reasonable lodging and meal expenses and necessary transportation expenses…”
A school corporation may be able to, in a public meeting, pass a resolution (for instance concerning potential situations not listed in the two paragraphs above), for accomplishing something for which specific statutory authority is not known to exist (Home Rule IC 20-26-3). Additionally, a policy letter from the United States Department of Agriculture (in regards to the food service program) states in part, "...Meals served to adults who are directly involved in the operation and administration of the school nutrition programs may, at the discretion of the school food authority, be furnished at no charge. As such, their cost may be fully attributed to and supported by the non for profit food service operation. Meals served to these adults may not be claimed for reimbursement or counted towards the donated foods entitlement. The determination of individuals, positions involved, and the degree to which their services are attributed to the non for profit food service program operations is left to State and local officials."
Numerous important public policy questions could be raised if a school board were to pass a resolution providing for free meals for adult school corporation employees, i.e., the free meal might place a burden on the financing of the food service program by requiring students and other adults to fund the cost of free meals for nonpaying adults; students and parents being required to file an application for free or reduced priced meals when employees are not required to do so; potential income tax considerations, Operations fund deficits, (when providing meals other than a school food program) etc.… Therefore, a school board should be informed if the board is considering passing a resolution, that a public policy decision needs to be made and that any appearance of impropriety is a local policy for which a school board must accept all responsibility.
A school board's resolution regarding free meals should include (other than meals of employees in accordance with IC 20-26-5-4) each position eligible to receive the free meal. School Lunch Forms require a daily accounting of meals provided by individual for the school food program. (See Form SF-1, School Food Service Certification of Meals provided Per Home Rule). Other meals provided (other than the school food program) may require additional accounting. The Internal Revenue Service and State Revenue Department should also be contacted for written guidance on any possible reporting implications.
In-service meetings sometimes pertain to various Federal or State funded programs and accordingly could have various additional restrictions.
Several States impose limitations on how schools may use Medicaid dollars, but Indiana does not. In the case of Medicaid reimbursements for covered IEP services, the state portion of every payment belongs in tuition support, as does the 3% of the remaining federal portion of the total payment per IC 12-15-1-16 to offset the Medicaid Adjustment shown on the district’s basic grant monthly distribution. The remaining dollars are unrestricted federal money which may be used however the district chooses. The Medicaid Administrative Claiming (MAC) reimbursements are 100% unrestricted federal funds. Below we have provided a slide from our trainings that summarizes the types of Medicaid reimbursements and how they should be classified on the Schedule of Expenditures of Federal Awards. This is a change from prior guidance we have provided.
Previous guidance stated that only if the school used a contractor to provide the services for Individualized Education Programs (IEP) would the expenditures appear on the SEFA. Current guidance is regardless of how the IEP services are provided the expenditures should appear on the SEFA. We are not expecting school corporations to open prior grant schedules and adjust the amounts entered for Federal Medicaid Reimbursements. It is possible during an audit and adjustment may be proposed to the SEFA, but an audit exception would not be taken.
MEMBERSHIP DUES IN ORGANIZATIONS
IC 20-26-5-8 states:
"(a) The governing body of a school corporation may appropriate necessary funds to provide for membership of the school corporation in state and national associations of an educational nature that have as the associations' purpose the improvement of school governmental operations.
(b) A school corporation may participate through designated representatives in the meetings and activities of the associations. The governing body of the school corporation may appropriate the necessary funds to defray the expenses of the representatives in connection with the meetings and activities."
Please note IC 20-26-5-8 provides only for membership of the school corporation, as an institutional or corporate membership.
IC 20-26-5-18 provides authority for a school corporation to join and associate with groups of other school corporations within Indiana in regional school study councils to examine common school problems and exchange educational information of mutual benefit. Dues paid shall be paid from the school corporation Operations Fund. This membership is also an institutional or corporate membership of the school corporation.
STATE AND FEDERAL MILEAGE RATES
The State mileage rate is set by the Indiana Department of Administration. You can view the current mileage rate at their website.
The Federal mileage rate is set by the IRS and can be found at their website. Please note that different federal grants may impose additional restrictions.
MINUMUM WAGE AND OVERTME PROVISIONS
Your attorney should be consulted concerning the federal minimum wage and overtime provisions of the Fair Labor Standards Act applicable to school corporations. The Act generally exempts professionals from coverage and teachers are expressly included in that category with certain exceptions. However, office personnel, maintenance workers, cafeteria workers, bus drivers and others have been included.
The overtime pay issue has required the State Board of Accounts to prescribe form 99c, Employee’s Weekly (work period) Earnings Record (Form 99c) which is designed to meet the record keeping requirements of the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA). The form should be maintained for employees who are not exempt from FLSA and who are not on a fixed work schedule when the governmental unit pays other than weekly.
School corporations should constantly be aware of all of the areas of employment in the school corporation where overtime right attaches and establish a system to accurately record hours worked.
IC 20-26-5-4 now states in part ". . . the governing body . . . has the following specific powers . . . To appropriate from the school corporation's general fund an amount, not to exceed the greater of three thousand dollars ($3,000) per budget year or one dollar ($1) per pupil, not to exceed twelve thousand five hundred dollars ($12,500), based on the school corporation's previous year's ADM, to promote the best interests of the school corporation through: . . . (B) provision for expenses incurred in interviewing job applicants; . . ."
We would not take audit exception to a school corporation paying the expense of moving a successful applicant, their family and personal property from a prior residence to a new location in or near the school corporation by passing a resolution in accordance with IC 20-26-3-1 et seq. (based on a claim being filed with supporting documentation, i.e. receipts, etc.)
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TEACHER AIDES AND OTHER NON-INSTRUCTIONAL EMPLOYEES
The General School Powers Act, (IC 20-26-5-4) provides authority in the specific powers of the governing body. Subsection (8) states in part: "To do the following: (A) Employ, contract for, and discharge superintendents, supervisors, principals, teachers, librarians, athletic coaches (whether or not they are otherwise employed by the school corporation and whether or not they are licensed under IC 20-28-5), business managers, superintendents of buildings and grounds, janitors, engineers, architects, physicians, dentists, nurses, accountants, teacher aides performing noninstructional duties, educational and other professional consultants, data processing and computer service for school purposes, including the making of schedules, the keeping and analyzing of grades and other student data, the keeping and preparing of warrants, payroll, and similar data where approved by the state board of accounts… and other personnel or services as the governing body considers necessary for school purposes. (B) Fix and pay the salaries and compensation of persons and services described in this subdivision that are consistent with IC 20-28-9-1.5. (C) Classify persons or services described in this subdivision and to adopt a compensation plan with a salary range that is consistent with IC 20-28-9-1.5. (D) Determine the number of the persons or the amount of the services employed or contracted for as provided in this subdivision. (E) Determine the nature and extent of the duties of the persons described in this subdivision."
We are not aware of a statutory requirement for a written contract for the salary of each teacher aide performing noninstructional duties. The governing board may wish to enter into a written contract with these teacher aides and has permissive authority to do so. We also are not aware of a statute requiring a written contract with non-instructional employees except IC 20-27-8-8 which requires a written contract with non-instructional employees who are assigned as school bus drivers to drive School Corporation owned school buses. If a contract is not entered into, then the non-instructional position and the salary/wage should be included on the Salary Resolution/Schedule that is approved by the School Board.
IC 20-30-15-6 states "(a) When public schools are not in session, a governing body may employ personnel to supervise the following: (1) Agricultural education club work. (2) Industrial education club work. (3) Home economics education club work. (4) Music activities. (5) Athletics. (b) Activities described in subsection (a) must be open and free to all individuals of school age residing in the attendance unit of the school corporation that is paying all or part of the cost of the activity." Our Emphasis
IC 20-30-15-7 states "An individual employed under this chapter shall enter into a contract with the governing body for the period of employment. The contract must contain the following terms: (1) The amount of work to be performed. (2) The kind of work to be performed. (3) The length of the period of employment. (4) The rate of compensation agreed on by the employee and the governing body. (5) The total amount to be paid. A contract entered into under this section is not a teaching contract or an extension of a teaching contract. An individual with a teaching contract during periods when school is not in session may not be employed under this chapter for any period included in the teaching contract."
We have recently had inquiries about non-session extracurricular camps. IC 20-30-15-6 states that the nonsession activities must be “…open and free…” to all individuals. If a camp charges a fee when school is not in session, it is our audit position that the school should not be running this camp and an outside organization should be running the camp. An outside organization’s financial activity should not be recorded in the school records because those funds do not meet the definition of an extracurricular fund per IC 20-41. We have seen where coaches donate proceeds to the school at the end of the camp. This is not required and is a decision to be made by the outside organization.
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Other Post-Employment Benefits
Overdrawn Reimbursable Grant Fund Balances
School corporations should be aware a school corporation is included in the definition of "public agency" in IC 5-14-1.5-2.
IC 5-14-1.5-3 allows that except as provided for executive sessions, all meetings of the governing body must be open at all times for the purpose of permitting members of the public to observe and record them. A secret ballot vote may not be taken at a meeting. Also, if another statute allows for an electronic means of communication for a meeting to be conducted, then it does not violate this section.
IC 5-14-1.5-4 states "(a) A governing body of a public agency utilizing an agenda shall post a copy of the agenda at the entrance to the location of the meeting prior to the meeting. A rule, regulation, ordinance, or other final action adopted by reference to agenda number or item alone is void. (b) As the meting progresses, the following memoranda shall be kept: (1) The date, time, and place of the meeting. (2) The members of the governing body recorded as either present or absent. (3) The general substance of all matters proposed, discussed, or decided. (4) A record of all votes taken, by individual members if there is a roll call. (5) Any additional information required under section 3.5 or 3.6 of this chapter or any other statute that authorizes a governing body to conduct a meeting using an electronic means of communication. (c) The memoranda are to be available within a reasonable period of time after the meeting for the purpose of informing the public of the governing body's proceedings. The minutes, if any, are to be open for public inspection and copying."
IC 5-14-1.5-5 states, “(a) Public notice of the date, time, and place of any meetings, executive sessions, or of any rescheduled or reconvened meeting, shall be given at least forty-eight (48) hours (excluding Saturdays, Sundays, and legal holidays) before the meeting. This requirement does not apply to reconvened meetings (not including executive sessions) where announcement of the date, time, and place of the reconvened meeting is made at the original meeting and recorded in the memoranda and minutes thereof, and there is no change in the agenda.
(b) Public notice shall be given by the governing body of a public agency as follows:
(1) The governing body of a public agency shall give public notice by posting a copy of the notice at the principal office of the public agency holding the meeting or, if no such office exists, at the building where the meeting is to be held.
(2) The governing body of a public agency shall give public notice by delivering notice to all news media which deliver an annual written request for the notices not later than December 31 for the next succeeding calendar year to the governing body of the public agency. The governing body shall give notice by one (1) of the following methods, which shall be determined by the governing body:
(A) Depositing the notice in the United States mail with postage prepaid.
(B) Transmitting the notice by electronic mail, if the public agency has the capacity to transmit electronic mail.
(C) Transmitting the notice by facsimile (fax).
(3) This subdivision applies only to the governing body of a public agency of a political subdivision described in section 2(a)(2), 2(a)(4), or 2(a)(5) of this chapter that adopts a policy to provide notice under this subdivision. Notice under this subsection is in addition to providing notice under subdivisions (1) and (2). If the governing body adopts a policy under this subdivision, the governing body of a public agency shall give public notice by delivering notice to any person (other than news media) who delivers to the governing body of the public agency an annual written request for the notices not later than December 31 for the next succeeding calendar year. The governing body shall give notice by one (1) of the following methods, which shall be determined by the governing body:
(A) Transmitting the notice by electronic mail, if the public agency has the capacity to send electronic mail.
(B) Publishing the notice on the public agency's Internet web site at least forty-eight (48) hours in advance of the meeting, if the public agency has an Internet web site.
A court may not declare void any policy, decision, or final action under section 7 of this chapter based on a failure to give a person notice under subdivision (3) if the public agency made a good faith effort to comply with subdivision (3). If a governing body comes into existence after December 31, it shall comply with this subsection upon receipt of a written request for notice. In addition, a state agency (as defined in IC 4-13-1-1) shall provide electronic access to the notice through the computer gateway administered by the office of technology established by IC 4-13.1-2-1.
(c) Notice of regular meetings need be given only once each year, except that an additional notice shall be given where the date, time, or place of a regular meeting or meetings is changed. This subsection does not apply to executive sessions.
(d) If a meeting is called to deal with an emergency involving actual or threatened injury to person or property, or actual or threatened disruption of the governmental activity under the jurisdiction of the public agency by any event, then the time requirements of notice under this section shall not apply, but:
(1) news media which have requested notice of meetings under subsection (b)(2) must be given the same notice as is given to the members of the governing body; and
(2) the public must be notified by posting a copy of the notice according to subsection (b)(1).
(e) This section shall not apply where notice by publication is required by statute, ordinance, rule, or regulation.
(f) This section shall not apply to:
(1) the department of local government finance, the Indiana board of tax review, or any other governing body which meets in continuous session, except that this section applies to meetings of these governing bodies which are required by or held pursuant to statute, ordinance, rule, or regulation; or
(2) the executive of a county or the legislative body of a town if the meetings are held solely to receive information or recommendations in order to carry out administrative functions, to carry out administrative functions, or confer with staff members on matters relating to the internal management of the unit. "Administrative functions" do not include the awarding of contracts, the entering into contracts, or any other action creating an obligation or otherwise binding a county or town.
(g) This section does not apply to the general assembly.
(h) Notice has not been given in accordance with this section if a governing body of a public agency convenes a meeting at a time so unreasonably departing from the time stated in its public notice that the public is misled or substantially deprived of the opportunity to attend, observe, and record the meeting.”
OTHER POST-EMPLOYMENT BENEFITS (OPEB)
IC 36-1-8-17.5 was amended by P.L. 158-2020. The agency responsible for collecting information for Other Post-Employment Benefits has been changed to the State Board of Accounts. This information will be collected in the Annual Financial Report (AFR) in Gateway instead of the Other Post-Employment Benefits application in the Department of Local Government and Finance’s gateway portal.
We will be updating the Gateway User Guide and the AFR itself to provide clearer guidance.
The following definitions are useful when discussing OPEB.
- OPEB - benefits (such as death benefits, life insurance, disability, and long-term care) that are paid in the period after employment and that are provided separately from a pension plan and healthcare benefits(medical, dental, vision, hearing, and other health-related benefits) paid in the period after employment whether provided separately from a pension plan or through a pension plan. Does not include termination benefits or termination payments for sick leave. Termination benefits are inducements offered by employers to active employees to hasten the termination of services, or payments made in consequence of the early termination of services. Termination benefits include early-retirement incentives, severance benefits, and other termination-related benefits
- OPEB plan - arrangements through which OPEB is determined, assets dedicated for OPEB (if any) are accumulated and managed, and benefits are paid as they come due.
- Active employees – Individuals employed at the end of the reporting or measurement period, as applicable
- Inactive employees - Individuals no longer employed by an employer in the OPEB plan or the beneficiaries of those individuals. Inactive employees include individuals who have accumulated benefits under the terms of an OPEB plan but are not yet receiving benefit payments and individuals currently receiving benefits.
- Covered payroll - The payroll on which contributions to an OPEB plan are based.
The OPEB benefit is frequently the ability of inactive employees to remain on the plan that active employees participate in. In this case there is only one plan. The information requested by the AFR is for the plan as a whole and is not limited to only that portion applicable to inactive employees.
Frequently, inactive members pay the full premium for coverage leading many to believe the former employer is not contributing to the OPEB plan. Often the premium for both active and inactive employees is a blended premium meaning the premium was based on the pool of all active and inactive employees. When this is done, the premium is higher than it would have been if inactive employees had been excluded from the pool as they are often older and more costly then active employees. This increase in the premium is called the implicit rate subsidy, in other words everyone (including the employer) is paying more because the inactive employees were included in the blended premium calculation. A review of plan documents and/or a discussion with the plan administrator or insurance agent will need to be done to determine if the employer is contributing to the OPEB plan through an implicit rate subsidy in those cases where inactive members are planning the full premium to participate in the plan.
The contribution rates expressed as a percentage of covered payroll being requested are not the percentage of the premium each participant, participant group, or the School is paying. They are calculations you must perform.
- For the Employer, you must divide the total amount of contributions for the year from the School by the covered payroll for the year
- For Plan Members you must divide the total amount of contributions/premiums for the year from all plan members, both active and inactive by the covered payroll for the year.
If you have a plan in which there are no active members, such as an old plan that is closed to new participants, you would have no covered payroll and the resulting percentage for this calculation would be zero.
OVERDRAWN REIMBURSABLE GRANT FUND BALANCES
A memo from IDOE dated July 29, 2011 states in part: ". . . Effective July 1, 2010, the IDOE began reimbursing based on actual expenditures. Additionally, the IDOE began reimbursing two times per month rather than the previous monthly cash advance. . . . In response to 31 CFR 205.12(b)(5) and a current A-133 audit by the State Board of Accounts, the IDOE must immediately begin reimbursing on actual expenditures only as originally stated in the memo dated May 3, 2010. IDOE will continue to accept and process reimbursement forms two times per month. Requests for reimbursement should be submitted by the 1st and the 15th of each month."
The change in IDOE reimbursement policies will likely cause a school corporation’s grant funds to be overdrawn at various times during the fiscal year. The State Board of Accounts will not take exception to overdrawn reimbursable grant funds if the reason they are overdrawn is a timing issue. The negative fund balance should not be more than the outstanding reimbursement claim(s) that have been sent to IDOE. Exceptions will be taken if the School Corporation is not filing for reimbursements in a timely manner. The State Board of Accounts believes that this situation would be a control/record keeping issue and not a timing issue.
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Payments
To Bank of Compensation Due Employees
Promotion Expense of School Corporation
Self-Certification of Micropurchase Threshold Above $50,000
PAYMENTS
Deposits on Behalf of Local Employees
IC 5-10-9-2 provides that an employee of a school corporation may make a written request that any compensation due the employee from the school corporation be deposited to the employee's account in a bank or trust company. Upon receipt of the request, the officer responsible for making the disbursements (Treasurer of School Corporation) may, instead of drawing a check to the requesting employee: (1) Draw a check in favor of the bank or trust company named in the request for the credit of the employee; or (2) In the event more than one employee of the school corporation designates the same bank or trust company, draw a single check in favor of the bank or trust company for the total amount due the employees and transmit the check to the bank or trust company identifying each employee and the amount to be deposited in each employee's account.
IC 5-10-9-3 provides that payment by a school corporation of a check properly endorsed and drawn in accordance with IC 5-10-9 constitutes full payment for the amount due the employee. The amount to be sent to the bank is the "net" pay for the employee. A copy of each report sent to a bank or trust company must be retained on file with the corresponding payroll claim in the school business office for reference and audit purposes. When a "direct deposit" system is used in the payroll process, the balance of the payroll process would not change except that each employee not receiving a payroll check must be provided a non-negotiable statement of earnings and deductions (Deposit Advice) for each payroll period. Recap sheets for each depository, if applicable, should be maintained indicating direct deposit. Individual wage assignment agreements should be kept on file to support direct deposits.
Payment of Foreign Exchange Teachers
IC 20-28-6 provides the basic contract requirements. IC 20-28-10-3 concerns sabbatical leaves of absence for teachers in the public schools of Indiana and states "(a) A school corporation may grant a teacher, on written request, a sabbatical for improvement of professional skills through: (1) advanced study; (2) work experience; (3) teacher exchange programs; or (4) approved educational travel. (b) After taking a sabbatical, the teacher shall return for a length of time equal to that of the sabbatical leave." When considering all provisions of the above-referenced statutes, the State Board of Accounts is of the audit position a governing board may grant a teacher a sabbatical leave of absence for participation in the exchange program and may grant that teacher compensation in an amount the governing board determines whether or not the school corporation is reimbursed by another employer whom the teacher may serve while on the sabbatical leave. If the teacher fails to return to the school corporation of employment after the sabbatical leave, for a period of time equal to that of the sabbatical leave, such teacher would be subject to refunding to the school corporation any compensation accepted from the school corporation while on the sabbatical leave of absence.
Payment of Bonds
IC 20-48-1-3 states, "(a) Bonds authorized by this article and IC 20-26-1 through IC 20-26-5 must be payable in the amounts and at the times and places determined by the governing body. (b) Bonds issued for the funding of judgments or for the purchase of school buses shall mature not more than five (5) years from the date of the bonds. Bonds issued for other purposes must mature not more than twenty-five (25) years from the date of the bonds. (c) The governing body may provide that principal and interest of the bonds are payable at a bank in Indiana and may also be payable at the option of the holder at another bank designated by the governing body, either before or after the sale. (d) The governing body may pay the fees of the bank paying agent and shall deposit with the paying agent, if any, within a reasonable period before the date that principal and interest become due sufficient money for the payment of the principal and interest on the due date."
A governing body if so desiring may by resolution, designate a bank or banks or trust company as paying agents. On or within a reasonable period before the due date for each bond redemption or interest payment the school corporation treasurer may deposit with the paying agent sufficient funds to meet such bond redemption and interest payments , which requires the establishment of an account at the designated bank and for monthly bank statements of the condition of the account. The statement may be rendered at the same time as other monthly bank statements and shall enclose (properly cancelled and with the date of the cancellation) the bonds and (coupons if applicable), paid during that month. The procedures will allow the bookkeeper to match the bonds and (coupons if applicable), paid and returned by the bank with the balance of the fund at the bank. Also the bookkeeper can post to the Bond Register (Form 53) those bonds and (coupons if applicable), paid each month by the bank so that the Bond Register will be currently and accurately posted at the close of each month.
Payment of any fees due the paying agent must be supported by an itemized accounts payable voucher properly filed and allowed by the governing body.
School corporations may also issue "bonds, notes, evidences of indebtedness, or other written obligations" in fully registered or book entry form." These types of obligations may have as registrar or paying agent the issuing entity, a bank or trust company, or securities depository corporation. The bank or trust company need not be depository bank under IC 5-13, and need not be located within the State of Indiana.
Notwithstanding any other provision of law, registers or registration books or transfer records for bonds, notes, evidences of indebtedness, or other written obligations of any entity are not public records, but are only for the use of the entity, any trustee, fiduciary, paying agent, registrar, co-registrar, or transfer agent. A trust department of a bank having possession of these records shall not disclose them to a bond department, commercial department, subsidiary of the bank, or subsidiary of the parent corporation of the bank.
Registrars of bond issues shall keep a register of ownership of bonds.
Since the paying agency or registrar shall keep a register to ownership of bonds and all bonds and coupons shall be paid when becoming due, we see no reason for the governmental unit to duplicate those same records maintained by the paying agent or registrar by keeping a bond register. There should be no unpaid outstanding matured bonds or coupons (if applicable).
PETTY CASH FUNDS
Public Law 233-2015, SEA 500 was a two hundred page law that attempted to reduce regulations on school corporations. Buried in the law it repealed IC 20-40-13 that gave schools the ability to establish and maintain a Petty Cash fund for small or emergency expenses. However, it appears that under IC 36-1-8-3 all political subdivisions have the ability to establish a Petty Cash fund. Schools meet the definition of political subdivisions for this Article. The repealed statute had restrictions and requirements that the general political subdivisions statute does not include. Schools will no longer be restricted to a $500 maximum amount and they will no longer have to file monthly reports with the School Board.
POLICING SCHOOL CROSSINGS
The Office of the Indiana Attorney General has consistently held police agencies of civil units primarily responsible to provide for the safety of the inhabitants on the streets and highways. The matter was also a topic of discussion in Official Opinion 38 of 1954 as well as in an Administrative Advisory Letter dated April 4, 1986.
An Assistant Attorney General provided in an unofficial opinion issued on March 20, 1958, that a school corporation does not have the authority to engage in public safety separately and could not do so jointly with a civil city or town. The unofficial opinion provided that public safety is a function of the civil municipality and not of a school corporation.
IC 36-9-12-4 provides authority for cities and towns in using the funds collected from parking meters to pay the cost of purchase, maintenance, operation, repair and all other costs of providing school crossing protective facilities.
The above items are the basis for our audit position that the providing of school crossing guards would be the responsibility of the municipal or county government that has jurisdiction over public safety of the roads the students would be crossing.
A school corporation could be precluded from proceeding under "Home Rule", as the responsibility has been given to other specific units of government. However, if a determination could be made that funds were not available by the municipal unit to provide for crossing guards, and if the School Board, with written advice of the School Corporation Attorney passes a "Home Rule" resolution stating their policy and desire to provide crossing guards, then the State Board of Accounts would not take exception to the school corporation providing the crossing guards.
PREGNANCY LEAVE – ADVANCE PAYMENTS
We have received questions regarding maternity leave for school teachers. Indiana Code 20-28-10-5 states:
“(a) A teacher who is pregnant may continue in active employment as late into pregnancy as the teacher wishes, if the teacher can fulfill the requirements of the teacher's position.
(b) Temporary disability caused by pregnancy is governed by the following:
(1) A teacher who is pregnant shall be granted a leave of absence any time between the commencement of the teacher's pregnancy and one (1) year following the birth of the child, if the teacher notifies the superintendent at least thirty (30) days before the date on which the teacher wishes to start the leave. The teacher shall notify the superintendent of the expected length of this leave, including with this notice either:
(A) a physician's statement certifying the teacher's pregnancy; or
(B) a copy of the birth certificate of the newborn;
whichever is applicable. However, in the case of a medical emergency caused by pregnancy, the teacher shall be granted a leave, as otherwise provided in this section, immediately on the teacher's request and the certification of the emergency from an attending physician.
(2) All or part of a leave taken by a teacher because of a temporary disability caused by pregnancy may be charged, at the teacher's discretion, to the teacher's available sick days. However, the teacher is not entitled to take accumulated sick days when the teacher's physician certifies that the teacher is capable of performing the teacher's regular teaching duties. The teacher is entitled to complete the remaining leave without pay. However, the teacher may receive compensation for the pregnancy leave under a collective bargaining agreement or, if the teacher is not represented by an exclusive representative, by governing body policy.
This section allows for collective bargaining agreements to include compensation procedures for a teacher on pregnancy leave if negotiated into the agreement. However, schools are not able to pro-rate amounts agreed upon in the employment contracts or to pay employees before returning to work. We are of the audit position that these payments would be considered advance compensation. Advance payments are disallowed as noted in Chapter 1 of the Accounting and Uniform Compliance Guidelines Manual for Indiana Public School Corporations.
PROCUREMENT CARDS
We have received inquiries concerning the potential use of "procurement cards". We understand some of the intended benefits of procurement cards are to add controls as to where purchases can be made; limit values of each purchase; prevent overspending the budget items; institute parameters on purchases; possibly reducing paperwork; etc.
The State Board of Accounts will not take exception to the use of procurement cards by a governmental unit provided the following criteria are observed:
(1) The governing board must authorize procurement card use through an ordinance or resolution, which has been approved in the minutes.
(2) Issuance and use should be handled by an official or employee designated by the board.
(3) The purposes for which the procurement card may be used must be specifically state in the ordinance or resolution.
(4) When the purpose for which the procurement card has been issued has been accomplished, the card should be returned to the custody of the responsible person.
(5) The designated responsible official or employee should maintain an accounting system or log which would include the names of individuals requesting usage of the cards, their position, estimated amounts to be charged, fund and account numbers to be charged, date the card is issued and returned, etc.
(6) Procurement cards should be used in conjunction with the accounting system.
(7) Payment should not be made on the basis of a statement or a procurement card slip only. Procedures for payments should be no different than for any other claim. Supporting documents such as paid bills and receipts must be available. Additionally, any interest or penalty incurred due to late filing or furnishing of documentation by an officer or employee should be the responsibility of that officer or employee.
(8) If properly authorized, an annual fee may be paid.
(9) Procurement cards shall not be used to procure cash advances at "ATM" machines or as a debit card.
(10) (A) An audit trail must exist for all transactions. (B) An audit trail must also exist for changes made by an "administrator" such as card parameters, etc..
(11) Access to transactions in accordance with the Public Records Law, IC 5-14-3-1 et seq. as appropriate must be assured.
(12) Procurement card agreements should not contain references to debt.
(13) Governmental units need to have available (if applicable) a copy of "SAS 70" audits of a sponsoring bank.
PROMOTION OF SCHOOL
IC 20-26-5-4(a)(3) states the governing body of a school corporation has the authority, "To appropriate from the school corporation’s general fund an amount, not to exceed the greater of three thousand dollars ($3,000) per budget year or one dollar ($1) per pupil, not to exceed twelve thousand five hundred dollars ($12,500), based upon the school corporation's ADM of the previous year (as defined in IC 20-43-1-7) to promote the best interests of the school corporation through: (A) the purchase of meals, decorations, memorabilia, or awards; (B) provision for expenses incurred in interviewing job applicants; or (C) developing relations with other governmental units.”
PROPERTY TAX ADVANCES
Please be advised of the availability of a property tax distribution advance to help avoid overdrawn funds and cash flow problems. IC 5-13-6-3 states in part:
"(b) Every county treasurer who, by virtue of the treasurer's office, is the collector of any taxes for any political subdivision wholly or partly within the county shall, not later than thirty (30) days after receipt of a written request for funds filed with the treasurer by a proper officer of any political subdivision within the county, provide to the county auditor the amount available for distribution, as certified for each semiannual distribution under IC 6-1.1- 27-2. The county auditor shall advance to that political subdivision a portion of the taxes collected before the semiannual distribution. The amount advanced may not exceed the lesser of:
(1) ninety-five percent (95%) of the total amount collected at the time of the advance; or
(2) ninety-five percent (95%) of the amount to be distributed at the semiannual distribution.
(c) Upon notice from the county treasurer of the amount to be advanced, the county auditor shall draw a warrant upon the county treasurer for the amount. The amount of the advance must be available immediately for the use of the political subdivision.
(d) At the semiannual distribution all the advances made to any political subdivision under subsection (b) shall be deducted from the total amount due any political subdivision as shown by the distribution.
(e) If a county auditor fails to make a distribution of tax collections by the deadline for distribution under subsection (b), a political subdivision that was to receive a distribution may recover interest on the undistributed tax collections under IC 6-1.1-27-1."
PUBLIC PURCHASES
State Contracts
We often receive inquiries regarding to how a school corporation can purchase supplies utilizing a State contract.
IC 4-13-1-1 states in part, (c) ". . . the following entities may, with the consent of the commissioner of the department of administration, use the services of the department:… (4) A political subdivision, as defined in IC 36-1-2-13."
IC 5-22-10-15(b) states, "A purchasing agent for a political subdivision may purchase supplies if the purchase is made from a person who has a contract with a state agency and the person's contract with the state requires the person to make the supplies or services available to political subdivisions, as provided in IC 4-13-1.6 or IC 5-22-17-9."
IC 5-22-17-9 states, "A contract entered into by a state agency may require the contractor to offer to political subdivisions the services or supplies that are the subject of the contract under conditions specified in the contract."
Please call the Department of Administration at 317-233-3901 for more information.
Computer Systems
The purchase of a computer system (hardware and software) is subject to the Public Purchases Law (IC 5-22-1-1 et seq.) A purchasing agent may make a special purchase of data processing contracts or license agreements for: (1) software programs; or (2) supplies or services, when only one (1) source meets the using agency's reasonable requirements. (IC 5-22-10-7) Other provisions within IC 5-22-10 may be applicable.
Special Purchases
We often receive inquiries concerning our audit position regarding pubic purchases for unusual situations.
The State Board of Accounts encourages the bidding and quote procedures whenever possible to help ensure receiving competitive pricing for governmental units. However, IC 5-22-10-1 provides "Notwithstanding any other provision of this article, a purchasing agent may make a purchase under this chapter without soliciting bids or proposals."
Supply purchases are a possibility for consideration of the special purchase provisions of IC 5-22- 10-1 et seq. However, we are of the audit position, school corporations should obtain the written position of the school corporation attorney as to which section of IC 5-22-10 might be applicable to any particular situation. An example might be the school corporation attorney advises IC 5-22-10-15 is applicable. IC 5-22-10-15 states "(a) A purchasing agent may purchase supplies if the purchase is made from a person who has a contract with a federal agency and the person's contract with the federal agency requires the person to make the supplies available to the state or political subdivisions. (b) A purchasing agent for a political subdivision may purchase supplies if the purchase is made from a person who has a contract with a state agency and the person's contract with the state requires the person to make the supplies or services available to political subdivisions, as provided in IC 4-13-1.6 or IC 5-22-17-9."
The written position of the school corporation attorney should then be attached to the completed Special Purchase Contract File List Form and retained and for audit as a public record.
SELF-CERTIFICATION OF MICROPURCHASE THRESHOLD ABOVE $50,000
IDOE and USDA have made School Food Authorities (SFA) aware that they may self-certify a micro-purchase threshold up to $50,000. To increase the micro-purchase threshold above $50,000 requires permission from the school’s cognizant agency.
Per 2 CFR 200.320(a)(1)(IV), Program operators choosing to self-certify must prepare and include a justification for the choice. The self-certification must include a justification, clear indication of the threshold, and supporting documentation of any of the following:
- A qualification as a low-risk auditee, in accordance with the criteria in 2 CFR 200.520;
- Note: Schools that are audited on a biennial basis cannot qualify as a low-risk auditee per 2 CFR 200.520(a). Schools that are audited on an annual basis may qualify as a low-risk auditee and document this to support the written justification to increase the threshold.
- An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or
- For public institutions, a higher threshold consistent with State law.
- Note: IC 5-22-8-2 applies to any purchase of supplies less than $50,000. “A purchasing agent may make a purchase under small purchase policies established by the purchasing agency or under rules adopted by the governmental body.” However, IC 5-22-8-1(b) still applies, “purchase requirements may not be artificially divided as to constitute a small purchase under this chapter” IC 5-22-6-1 applies to services. “The purchasing agency of a governmental body may purchase services using any procedure the governmental body or the purchasing agency of the governmental body considers appropriate.” There is no dollar threshold in the IC for purchases of services. Additionally, IC 5-22 does not apply to public works projects, the thresholds contained there would not support a justification to increase the threshold for those types of expenditures of public funds. IC 36-1-12-3 covers the requirements for public work projects of local governments.
To clarify, a unit wishing to self-certify must provide documentation to support one of the three options listed above to be included with their justification for a higher threshold. As a reminder, 2 CFR 200.320 requires non-Federal entities to have and use documented procurement procedures consistent with 2 CFR 200.318, 200.319, 200.320, and State or local laws and regulations. This is reflective of changes made to Uniform Guidance effective 11/12/2020 for most federal grants, except for HHS grants. Local units of government cannot apply the updates to procurement regulations retroactively, their written procurement policies would have to be updated and procurements going forward would be affected.
PUBLIC RECORDS - ACCESS
Please contact the Office of the Indiana Public Access Counselor, at 1-800-228-6013 or their website https://www.in.gov/pac/ if questions arise concerning access to public records or meetings.
The following was provided by the Indiana Commission on Public Records in response to an inquiry made with the Indiana Public Access Counselor "As I understand your questions, a bank/payroll vendor will be serving as an agent for an Indiana governmental unit regarding access to public records and compliance with records retention.
The bank/vendor would thus be required to maintain the checks, bank statements, payroll records, etc. for the same period as the agency. The bank/vendor may well hold the information, but the obligation remains with the agency to provide access upon request, not the bank or vendor. The agency further has the obligation to provide access to the materials throughout the required retention. In the case of cancelled checks/warrants they are currently required to be maintained for 6 (six) years after the completion of the State Board of Accounts Audit. Payroll records are dependent upon the type."
PUBLIC WORKS
Projects Under $150,000
IC 36-1-12-4.9 provides "(a) This section applies to a public work for the routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property if the cost of the public work is estimated to be less than one hundred fifty thousand dollars ($150,000). (b) The board may award a contract for public work described in subsection (a) in the manner provided in IC 5-22." We will not take audit exception to expenditures for projects under $150,000 that maintain the existing condition of the asset or restore the asset to normal operating efficiency and which might qualify as routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property under IC 36-1-12-4.9. Included in our audit position could be expenditures for the replacement and repair of elevators, flooring, ceiling, tile, bathroom fixtures, windows, sidewalks, parking lots, and roofs which would not be part of another public works project. Additionally, the costs associated with reconfiguring the interior of offices (additions/deletions of wiring for electrical outlets, lighting, data lines, and telephones, cubicle walls, etc) and reconfiguring offices with movable walls which would not be part of another public works project, could be considered. Not included would be additions to the structure, reconfiguring offices with permanent walls, change of purpose of an area that involves substantial addition or removal of plumbing or gas lines (adding a kitchen area or bathroom), addition of elevator shafts, parking lots and other like changes to the interior or exterior that involve changes to the structural integrity of the building or improvements to real property, etc. or expenditures for which a determination has been made of the applicability of other provisions of the Public Works Law, IC 36-1-12-1 et seq. Our audit position is with the assumption a determination has been made by the governmental unit in a public meeting of the applicability of IC 36-1-12-4.9 to the proposed public works project.
Retainage
IC 36-1-12-14 applies to public work contracts in excess of two hundred thousand dollars ($200,000) for projects other than highways, roads, streets, alleys, bridges and appurtenant structures situated on streets, alleys and dedicated highway rights-of-way. IC 36-1-12-14 also applies to projects of a school holding corporation or company qualifying under IC 20-47-2 or IC 20-47-3 or any other lease-back arrangement containing an option to purchase, notwithstanding the statutory provisions governing those leases.
Contract Provisions
IC 36-1-12-14(b) states: "A board that enters into a contract for public work, and a contractor who subcontracts parts of that contract, shall include in their respective contracts provisions for the retainage of portions of payments by the board to contractors, by contractors to subcontractors, and for the payment of subcontractors. At the discretion of the contractor, the retainage shall be held by the board or shall be placed in an escrow account with a bank, savings and loan institution, or the state as the escrow agent. The escrow agent shall be selected by mutual agreement between board and contractor or contractor and subcontractor under a written agreement among the bank or savings and loan institution and:
(1) the board and the contractor; or
(2) the subcontractor and the contractor.
The board shall not be required to pay interest on the amounts of retainage that it holds under this section."
Amount of Retainage
IC 36-1-12-14(c) states: "To determine the amount of retainage to be withheld, the board shall:
(1) withhold no more than ten percent (10%) nor less than six percent (6%) of the dollar value of all work satisfactorily completed until the public work is fifty percent (50%) completed, and nothing further after that; or
(2) withhold no more than five percent (5%) nor less than three percent (3%) of the dollar value of all work satisfactorily completed until the public work is substantially completed. If upon substantial completion of the public work minor items remain uncompleted, an amount computed under subsection (f) shall be withheld until those items are completed."
Investments
IC 36-1-12-14(d) states: "The escrow agreement must contain the following provisions:
(1) The escrow agent shall invest all escrowed principal in obligations selected by the escrow agent.
(2) The escrow agent shall hold the escrowed principal and income until receipt of notice from the board and the contractor, or the contractor and the subcontractor, specifying the part of the escrowed principal to be released from the escrow and the person to whom that portion is to be released. After receipt of the notice, the escrow agent shall remit the designated part of escrowed principal and the same proportion of then escrowed income to the person specified in the notice.
(3) The escrow agent shall be compensated for the agent's services. The parties may agree on a reasonable fee comparable with fees being charged for the handling of escrow accounts of similar size and duration. The fee shall be paid from the escrowed income. The escrow agreement may include other terms and conditions consistent with this subsection, including provisions authorizing the escrow agent to commingle the escrowed funds with funds held in other escrow accounts and limiting the liability of the escrow agent."
Performance Bond
IC 36-1-12-14 (e) states: "Except as provided by subsections (i) and (h), the contractor shall furnish the board with a performance bond equal to the contract price. If acceptable to the board, the performance bond may provide for incremental bonding in the form of multiple or chronological bonds that, when taken as a whole, equal the contract price. The surety on the performance bond may not be released until one
(1) year after the date of the board's final settlement with the contractor. The performance bond must specify that: a modification, omission, or addition to the terms and conditions of the public work contract, plans, specifications, drawings, or profile;
(2) a defect in the public work contract; or
(3) a defect in the proceedings preliminary to the letting and awarding of the public work contract; does not discharge the surety."
IC 36-1-12-14 (g) states: "Actions against a surety on a performance bond must be brought within one (1) year after the date of the board's final settlement with the contractor."
IC 36-1-12-14 (h) states: "This subsection applies to public work contracts of less than two hundred fifty thousand dollars ($250,000). The board may waive the performance bond requirement of subsection (e) and accept from a contractor an irrevocable letter of credit for an equivalent amount from an Indiana financial institution approved by the department of financial institutions instead of a performance bond. Subsections (e) through (g) apply to a letter of credit submitted under this subsection."
Substantial Completion
IC 36-1-12-14 (f) states: "The board or escrow agent shall pay the contractor within sixty-one (61) days after the date of substantial completion, subject to sections 11 and 12 of this chapter. Payment by the escrow agent shall include all escrowed principal and escrowed income. If within sixty-one (61) days after the date of substantial completion there remain uncompleted minor items, an amount equal to two hundred percent (200%) of the value of each item as determined by the architect-engineer shall be withheld until the item is completed. Required warranties begin not later than the date of substantial completion."
- A qualification as a low-risk auditee, in accordance with the criteria in 2 CFR 200.520;
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Retirement Fund Deductions - Teachers
Retirements/Severance Benefits
Indiana Code IC 36-1-8-5.1 states:
"(a) A political subdivision may establish a rainy day fund by the adoption of:
(1) an ordinance, in the case of a county, city, or town; or
(2) a resolution, in the case of any other political subdivision.
(b) An ordinance or a resolution adopted under this section must specify the following:
(1) The purposes of the rainy day fund.
(2) The sources of funding for the rainy day fund, which may include the following:
(A) Unused and unencumbered funds under: (i) section 5 of this chapter; (ii) IC 6-3.5-1.1-21.1; (iii) IC 6-3.5-6-17.3; or (iv) IC 6-3.5-7-17.3.
(B) Any other funding source: (i) specified in the ordinance or resolution adopted under this section; and (ii) not otherwise prohibited by law.
(c) The rainy day fund is subject to the same appropriation process as other funds that receive tax money.
(d) In any fiscal year, a political subdivision may, at any time, do the following:
(1) Transfer any unused and unencumbered funds specified in subsection (b)(2)(A) from any fiscal year to the rainy day fund.
(2) Transfer any other unobligated cash balances from any fiscal year that are not otherwise identified in subsection (b)(2)(A) or section 5 of this chapter to the rainy day fund as long as the transfer satisfies the following requirements:
(A) The amount of the transfer is authorized by and identified in an ordinance or resolution.
(B) The amount of the transfer is not more than ten percent (10%) of the political subdivision's total annual budget adopted under IC 6-1.1-17 for that fiscal year.
(C) The transfer is not made from a debt service fund.
(e) A political subdivision may use only the funding sources specified in subsection (b)(2)(A) or in the ordinance or resolution establishing the rainy day fund. The political subdivision may adopt a subsequent ordinance or resolution authorizing the use of another funding source.
(f) The department of local government finance may not reduce the actual or maximum permissible levy of a political subdivision as a result of a balance in the rainy day fund of the political subdivision.
(g) A county, city, or town may at any time, by ordinance or resolution, transfer to:
(1) its general fund; or
(2) any other appropriated funds of the county, city, or town; money that has been deposited in the rainy day fund of the county, city, or town."
money that has been deposited in the rainy day fund of the county, city, or town."
We understand some school corporations are offering buy-out plans to staff to encourage early retirement. Some of these buy-out plans may anticipate expenditures far into the future, in some cases five years or longer.
The State Board of Accounts is of the audit position school corporations should be in compliance with IC 20-42-4-1 which states "This chapter applies to a school corporation that: (1) after June 30, 2001, establishes a retirement or severance plan that will require the school corporation to pay postretirement or severance benefits to employees of the school corporation; or (2) includes in a collective bargaining agreement or other contract entered into after June 30, 2001, a provision to increase: (A) the benefit; or (B) the unfunded liability; under a retirement or severance provision that will require the school corporation to pay postretirement or severance benefits to employees of the school corporation." And IC 20-42- 4-2 which states "(a) A school corporation must fund on an actuarially sound basis the postretirement or severance benefits that will be paid to employees under a plan, an agreement, or a contract described in section 1(1) of this chapter or an increase described in section 1(2) of this chapter. (b) A school corporation must place the assets used to fund on an actuarially sound basis the postretirement or severance benefits in a separate fund or account, and the school corporation may not commingle the assets in the separate fund or account with any other assets of the school corporation."
TEACHER RETIREMENT FUND DEDUCTIONS
IC 5-10.2-3-2 states: "(a) Subject to IC 5-10.2-2-1.5, as used in this section, "compensation" means: (1) the basic salary earned by and paid to the member; plus (2) the amount that would have been a part of the basic salary earned and paid except for the member's salary reduction agreement established under Section 125, 403(b), or 457 of the Internal Revenue Code. (b) Except in cases where: (1) the contribution is made on behalf of the member; or (2) a retired member of the Indiana state teachers' retirement fund may not make contributions during a period of reemployment as provided in IC 5-10.2-4-8(d); each member shall, as a condition of employment, contribute to the fund three percent (3%) of the member's compensation. (c) Except as provided in IC 5-10.2-4-8(d), a member of a fund may make contributions to the member's annuity savings account in addition to the contributions required under subsection (b). The total amount of contributions that may be made to a member's annuity savings account with respect to a payroll period under this subsection may not exceed ten percent (10%) of the member's compensation for that payroll period. The contributions made under this subsection may be picked-up and paid by an employer as provided in subsection (d). (d) In compliance with rules adopted by each board, an employer, under Section 414(h)(2) of the Internal Revenue Code, may pick-up and pay the contributions under subsection (c), subject to approval of the board and to the board's receipt of a favorable private letter ruling from the Internal Revenue Service. The employer shall reduce the member's compensation by an amount equal to the amount of the member's contributions under subsection (c) that are picked-up by the employer. Each board shall by rule establish the procedural requirements for employers to carry out the pick-up in compliance with Section 414(h)(2) of the Internal Revenue Code. (e) A member's contributions and interest credits belong to the member and do not belong to the state or political subdivision."
IC 5-10.2-3-3 states: "(a) This section does not apply to a member of the Indiana state teachers' retirement fund who is reemployed more than thirty (30) days after the member's retirement in a position covered by the Indiana state teachers' retirement fund. (b) Members' contributions, other than members' contributions paid on behalf of a member, shall be deducted from their compensation even if the net compensation to the member is less than the statutory minimum. (c) The payment of a member's compensation minus the deduction constitutes a complete discharge of all claims for services rendered by the member during the period covered by the payment, except the claim for benefits under this article."
IC 5-10.2-4-3 states in part: "(d) Subject to IC 5-10.2-2-1.5, "annual compensation" means: (1) the basic salary earned by and paid to the member plus the amount that would have been part of that salary but for: (A) the state's, a school corporation's, a participating political subdivision's, or a state educational institution's paying the member's contribution to the fund for the member; or (B) the member's salary reduction agreement established under Section 125, 403(b), or 457 of the Internal Revenue Code; and (2) in the case of a member described in subsection (c) and for years of service to which IC 5-10.4-5- 7 does not apply, the basic salary that was not paid during the year but would have been paid to the member during the year under the member's employment contracts, if the member had not taken any unpaid leave of absence to serve in an elected position. The portion of a back pay award or a similar award that the board determines is compensation under an agreement or under a judicial or an administrative proceeding shall be allocated by the board among the years the member earned or should have earned the compensation. Only that portion of the award allocated to the year the award is made is considered to have been earned during the year the award was made. Interest on an award is not considered annual compensation for any year. (e) Compensation of not more than two thousand dollars ($2,000) received from the employer in contemplation of the member's retirement, including severance pay, termination pay, retirement bonus, or commutation of unused sick leave or personal leave, may be included in the total annual compensation from which the average of the annual compensation is determined, if it is received: (1) before the member ceases service; or (2) within twelve (12) months after the member ceases service."
The State Board of Accounts will not take audit exception if the contributions are made and reported to the fund as the payroll is made. All deductions for the regular teachers’ contract do not have to be made prior to June 30. If teachers are paid during July and August, the applicable checks may be written in July and August and the necessary deduction for teacher retirement made at that time. These amounts would be reported on and remitted with the applicable reports along with amounts deducted from summer school contracts and the beginning of the regular contracts for the succeeding school year. Accounting for the teacher's earnings on a contract basis is still required." All payments of salary and wages must be identified on the accounting records so they may be associated with a particular contract.
Retiring teachers may wish to have all payments related to their regular contract, for the fiscal year of employment, paid and reported prior to June 30 for retirement benefit purposes. Service on the contract must have been completed prior to payment and June 30.
IC 20-28-9-19 states "(a) If a governing body of a school corporation agrees to a retirement, savings, or severance pay plan with a teacher or with an exclusive representative under IC 20-29, the benefits may be paid to: (1) the teacher who is eligible under a negotiated retirement, savings, or severance pay plan; or (2) in the case of the teacher's death: (A) the teacher's designated beneficiary; or (B) the teacher's estate, if there is no designated beneficiary. Payments may be made in a lump sum or in installments as agreed upon by the parties or to a savings plan established under IC 5-10-1.1-1(2). (b) Notwithstanding IC 6-1.1-20, the payments under this section shall be made from the general fund of the school corporation and may be made for a period exceeding one (1) year."
IC 5-10.2-4-3 limits the amount of severance pay that may be included in the annual compensation when determining the average annual compensation for use as a factor in the formula for calculating retirement benefits. IC 5-10.2-4-3 provides in part (e) "Compensation of not more than two thousand dollars ($2,000) received from the employer in contemplation of the member's retirement, including severance pay, termination pay, retirement bonus, or commutation of unused sick leave or personal leave, may be included in the total annual compensation from which the average of the annual compensation is determined, if it is received: (1) before the member ceases service; or (2) within twelve (12) months after the member ceases service."
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Sabbatical or Sick Leave for Teachers
School Lunch
STATUTORIAL LEAVES FOR TEACHERS
Leaves - Generally
IC 20-28-10-1 provides that a school corporation may grant a teacher a leave of absence and states, “(a) A school corporation may grant a teacher a leave of absence not to exceed one (1) year for: (1) a sabbatical; (2) a disability leave; or (3) a sick leave. (b) The school corporation may grant consecutive leaves to a teacher. (c) A school corporation may grant partial compensation for a leave in an amount the school corporation determines. However, if a teacher on a sabbatical serves an employer that agrees to reimburse the school corporation in whole or in part of the amount of the teacher's regular salary, the school corporation may grant full or partial compensation. (d) A teacher who is pregnant shall be granted a leave of absence for the period provided in and subject to section 5 of this chapter. (e) Except where a contract is not required under IC 20-28-7.5 in a situation that occurs before or after the commencement of leave, the teacher and the school corporation shall execute a regular teacher's contract for each school year in which any part of the teacher's leave is granted. (f) The teacher has the right to return to a teaching position for which the teacher is certified or otherwise qualified under the rules of the state board.
IC 20-28-10-2 continues on to provide additional requirements for a leave of absence and states, “(a) Except as provided in section 1 of this chapter, rights existing at the time a leave commences that arise from a teacher's: (1) status as a professional or established teacher; (2) accumulation of successive years of service; (3) service performed under a teacher's contract under IC 20-28-6-8; or (4) status or rights negotiated under IC 20-29; remain intact. (b) During a leave the teacher may maintain coverage in a group insurance program by paying the total premium including the school corporation's share, if any, attributable to the leave period. The school corporation may elect to pay all or part of the cost of the premium as an adopted or negotiated fringe benefit to teachers on leave. (c) During a leave extending into a part of a school year, a teacher accumulates sick leave under IC 20-28- 9-9 through IC 20-28-9-12, or a salary schedule of the school corporation that provides greater sick leave, in the same proportion that the number of days the teacher is paid during the year for work or leave bears to the total number of days for which teachers are paid in the school corporation. (d) Except as provided in section 1 of this chapter, during a leave of a probationary teacher, the period of probationary successive years of service under a teacher's contract that is a condition precedent to becoming a professional or established teacher under IC 20-28- 6-8 is uninterrupted for that teacher. However, this probationary period may not include an entire school year spent on leave. (e) All or part of a leave granted for sickness or disability, including pregnancy related disability, may be charged at the teacher's discretion to the teacher's available sick days. However, the teacher is not entitled to take accumulated sick days when the teacher's physician certifies that the teacher is capable of performing the teacher's regular teaching duties. The teacher is entitled to complete the remaining leave without pay.”
Sabbatical Leaves
IC 20-28-10-3 states, " (a) A school corporation may grant a teacher, on written request, a sabbatical for improvement of professional skills through: (1) advanced study; (2) work experience; (3) teacher exchange programs; or (4) approved educational travel. (b) After taking a sabbatical, the teacher shall return for a length of time equal to that of the sabbatical leave."
Sickness or Disability Leaves
IC 20-28-10-4 states, "(a) A school corporation may place a teacher, with or without written request, on a disability or sick leave not to exceed one (1) year. (b) A teacher placed on a disability or sick leave without a written request is entitled to a hearing on that action under IC 20-28-7.5."
Pregnancy Leaves
IC 20-28-10-5 states, “(a) A teacher who is pregnant may continue in active employment as late into pregnancy as the teacher wishes, if the teacher can fulfill the requirements of the teacher's position. (b) Temporary disability caused by pregnancy is governed by the following: (1) A teacher who is pregnant shall be granted a leave of absence any time between the commencement of the teacher's pregnancy and one (1) year following the birth of the child, if the teacher notifies the superintendent at least thirty (30) days before the date on which the teacher wishes to start the leave. The teacher shall notify the superintendent of the expected length of this leave, including with this notice either: (A) a physician's statement certifying the teacher's pregnancy; or (B) a copy of the birth certificate of the newborn; whichever is applicable. However, in the case of a medical emergency caused by pregnancy, the teacher shall be granted a leave, as otherwise provided in this section, immediately on the teacher's request and the certification of the emergency from an attending physician. (2) All or part of a leave taken by a teacher because of a temporary disability caused by pregnancy may be charged, at the teacher's discretion, to the teacher's available sick days. However, the teacher is not entitled to take accumulated sick days when the teacher's physician certifies that the teacher is capable of performing the teacher's regular teaching duties. The teacher is entitled to complete the remaining leave without pay. However, the teacher may receive compensation for the pregnancy leave under a collective bargaining agreement or, if the teacher is not represented by an exclusive representative, by governing body policy.”
Please visit the Department of Revenue website at http://www.in.gov/dor/3650.htm for information pertaining to numerous items of interest to school corporations, including, but not limited to Sales Tax. Any questions concerning the information included therein should be directed to the Department of Revenue.
SCHOOL LUNCH
Although the preferred method of accounting for a school food and nutrition program is through a School Lunch Fund (School Food Service Fund) in the school corporation account, authority is provided to account for the program in an extra-curricular account or accounts. (IC 20-41-2-4) Accounting for school lunch in the extracurricular account is with the provision that, " . . the governing body of the school corporation shall approve the amount of the bond of the treasurer of the extracurricular account in an amount the governing body considers sufficient to protect the account for all funds coming into the hands of the treasurer of the account." (IC 20-41-2-6)
A School Lunch Fund shall be maintained for either method. The ledger maintained (school corporation or extra-curricular) is determined by which method the school board elects to use.
An accounting system and the necessary forms for maintenance are prescribed by the State Board of Accounts. Maintaining forms properly for your program should provide the information necessary to prepare monthly federal reimbursement claims, quarterly financial reports, etc.
Effective internal controls of cash receipts and meals served are built into the system by using one of several methods. The methods are the use of properly maintained and approved class rosters, prenumbered meal tickets, and cash registers. Computerized cash systems could be used after submission and review by the State Board of Accounts. All cash register systems must be equipped with identification keys to indicate: (1) paid student meals; (2) reduced price student meals; (3) free student meals; (4) adult meals; (5) a la carte sales and other categories the school corporation may wish to identify and as required by the accounting system. The register must have locked-in audit tapes and non-resettable totals for each category. If any type of cash register system is used, the cashier is accountable for the cash registered on that machine when totaled and checked out.
If meal tickets are used, the tickets are issued to each ticket seller in prenumbered blocks. Each ticket seller is charged with the value of the tickets issued and must either turn in money or unused tickets to discharge his liability. A receipt must be issued to each ticket seller for the money deposited with the Treasurer. If a daily ticket is used, it is collected at the serving line; however, if the ticket is for multiple days, it is punched at the serving line as that day’s meal is served.
All methods to account for the cafeteria operation require that the person responsible for collecting and reporting the money received for meals be different from the person responsible for counting and reporting the number of meals served. Under no circumstances should all duties be vested in the treasurer or any other single individual.
The Certification of Meals Provided Per Home Rule, Form SF-1, is a daily record of meals provided free (or at less than normal price) in accordance with written school board policy other than the students who qualify for free or reduced price meals or milk as documented on School Forms 521 or 522. The total number provided as documented on SF-1 is carried forward to the appropriate column on SF2A.
School Food Form SF-2, Daily Record of Cash Received, categorizes cash receipts on a daily basis and should be totaled monthly. School Food Form SF-2A, Daily Record of Meals/Milk Served, records daily the number of meals/milk served and should be totaled monthly and will be a source of information for preparation of the monthly claim for federal reimbursement.
School Food Form SF-3, Cash Disbursements and Fund Balance, is used to record on a daily basis the disbursements of the School Food Service Program and together with the SF-2 acts as the source information for the calculation of the fund balance as shown on the SF-3. The disbursement categories Service Area Direction and Food Preparation and Dispensing are defined as:
Service Area Direction. Activities pertaining to directing and managing the food service program for the school corporation.
Food Preparation and Dispensing. Activities concerned with preparing and serving the food and beverages associated with the food service program which includes operating kitchen equipment, preparing food, cooking, serving food, cleaning and storing dishes and kitchen and lunch room equipment.
Form SF-4, Ledger of Receipts, Disbursements and Balances is the form on which the monthly totals of forms SF-2 and SF-3 are accumulated and posted. Form SF-4 provides a composite annual accounting for the overall school food service program of the school corporation.
Form SF-5, Ticket Control, shall be used only in those systems using the meal ticket method of control. Persons charged with selling tickets are responsible for the value of the tickets issued to them.
Form SF-6, Equipment Inventory, shall be used to take a complete physical inventory in each school of all equipment on hand at the close of each school year. A copy of this annual inventory shall be kept on file in the office with the school food service records.
Form SF-7, Food Inventory, is designed for use in taking a complete physical inventory in each school of all food items each month. Separate sheets shall be used for each category inventoried; such as USDA donated commodities, meat, fruit, vegetables, staples, frozen foods, etc.
Forms SF-1, SF-2, SF-2A, and SF-3 shall be maintained on a daily basis and totaled monthly. The monthly totals are a source of information for preparation of the claim for federal reimbursement, the quarterly financial report, etc. If a separate accounting of the receipts or disbursements from each school in the corporation is desired, separate forms may be maintained for each school.
SCHOOL LUNCH PROGRAM – ECA RECORDS
IC 20-41-1-2 allows the school lunch program to be established as a separate fund apart from any other school corporation fund. IC 20-41-2-4 also provides the authority to account for the program in an extracurricular account or accounts. The ledger maintained for the school lunch program (either at the School Corporation or extracurricular level) is determined by which method the school board elects to use.
We have provided guidance that the preferred method of accounting for a school food and nutrition program is through a School Lunch fund in the school corporation records, but we would not take audit exception to the program being accounted for in an extracurricular account or accounts as the statute permits. It is our position that the school corporation would be allowed to account for the School Lunch Program through individual extracurricular accounts by building or a separate extracurricular account encompassing all school lunch financial activity. The decision on how the school lunch program is accounted for would be made by the school board. If the school board chooses to account for the program in an extracurricular account or accounts the school board shall approve the amount of the official bond of the treasurer of the extracurricular account in an amount determined sufficient to protect the account for all funds coming into the custody of said treasurer in accordance with IC 20-41-1-6.
Regardless of the method the school board chooses to account for the program, those charged with governance and management must adopt internal control policies and procedures, and establish and implement controls to ensure the proper receipting, disbursing, recording, and accounting for the financial activities of the School Lunch Program. We have historically allowed School Corporations to submit a separate ECA Risk Report in Gateway, required by IC 5-11-1-4, if the school board has elected to account for their School Lunch program as a separate extracurricular account.
An extracurricular account is required to have treasurer in charge of the custody and disbursement of extracurricular funds. The treasurer could be the superintendent, clerk, or a member of the faculty appointed by the superintendent or the principal per IC 20-41-1-5.
It is our audit position that IC 20-41-1-2 does not limit ECAs to be accounted for at each individual building.
School Meal Charge Policies and Collection of Delinquent Meal Payments
Local Meal Charge Policies
On July 8, 2016, the USDA issued Memo 46-2016 providing requirements and guidance for school food authorities (SFA) to institute and communicate a meal charge policy. The memo states, “Because all students in participating schools may receive reimbursable meals, all SFAs must have a policy in place for children who are participating at the reduced or paid rate, but either do not have money in their account or in hand to cover the cost of the meal at the time of service.” It is required that students and their parents or guardians must be informed about how students who pay the full or reduced price cost of a reimbursable meal are impacted by having insufficient funds on hand or in their account to purchase a meal.
The memo includes a deadline of July 1, 2017 for all SFAs to have established and communicated their written meal charge policy. The memo provides guidelines for what can be included in the meal charge policy: (1) allowing students to charge all types of available reimbursable meals; (2) offering alternate meals; (3) impose a limit on charges; (4) allow neither meal charges nor offer alternate meals. School also have the ability to make the meal charge policy throughout the entire School Corporation or it can vary based on student grade levels. In addition to including situations when a meal is charged, the policy must include the steps taken for collecting delinquent meal charge debt, if allowed.
SP 46-2016: Unpaid Meal Charges: Local Meal Charge Policies, http://www.fns.usda.gov/unpaid-meal-chargeslocal-meal-charge-policies
Collection of Delinquent Meal Payments
On July 8, 2016, the USDA issued Memo 47-2016 clarifying the processes of designating delinquent debt that has been determined to be uncollectable as bad debt and obtaining assistance to offset bad debt losses. The memo defines “delinquent debt” as debt that is considered collectable and efforts are being made to collect it. Since, the amount owed is still considered collectable, then it should remain part of the Prepaid School Lunch fund (8400). The memo allows for delinquent debt to be carried over from school year to school year. It also, states that SFAs must make a reasonable effort to collect delinquent debts and expenses incurred while attempting to collect are allowable uses of the School Nutrition Program grant.
The memo defines “bad debt” as debts which have been determined to be uncollectable. It goes on to say once amounts are classified as bad debts that they must be written off and taken as an operating loss. 2 CFR 200.426 states, “Bad debts (debts which have been determined to be uncollectable), including losses (whether actual or estimated) arising from uncollectable accounts and other claims, are unallowable. Related collection costs, and related legal costs, arising from such debts after they have been determined to be uncollectable are also unallowable.” Therefore, School Nutrition Program grant funds cannot be used cover the costs of writing off bad debt. The operating loss must be absorbed by using non-Federal funds. Transfers to the Prepaid School Lunch fund (8400) to cover bad debts may be made from the General fund (100), special funding from State or Local grants, funding received from school or community organizations, or other donations. USDA has also provided a Q&A memo on unpaid meal charges that includes the following:
#11. If a child graduates or moves to a new school district, may the SFA use funds remaining in the child’s account to cover meal charge debt accrued by other students?
When a child leaves the district or graduates, SFAs must attempt to contact the child’s household to return any funds remaining in the student’s account. However, SFAs may encourage families that are not approved for free or reduced price meals to donate the funds remaining in their account rather than receiving a refund when their child leaves the school. These funds could be used to cover unpaid meal charges that were uncollectable.
SP 47-2016: Unpaid Meal Charges: Clarification on Collection of Delinquent Meal Payments, http://www.fns.usda.gov/unpaid-meal-charges-clarification-collection-delinquent-meal-payments
SP 57-2016: Unpaid: Guidance and Q&A, http://www.fns.usda.gov/unpaid-meal-charges-guidance-and-qas
When a student puts money into their individual meal account, it should not be considered income to the child nutrition program until that student goes through the lunch line and charges a meal to their account. Therefore, while money is in the student’s individual account, the balance should not be included in Fund 800 School Lunch. A school should set up a clearing account with the fund number of 8400 Prepaid School Lunch Accounts, which is included in Chapter 4 of the State Board of Accounts Uniform Compliance Guidelines for Indiana Public School Corporations. When a student brings in a deposit the receipt should be recorded to fund 8400 using receipt account 1630 Special Functions. After the student has charged meals, you should disburse the amount charged from 8400 using expenditure account 31900 Other Food Services and receipt this into fund 800 using the Food Services receipt accounts 1611-1623 at the time established in a written school policy to ensure accurate monthly reporting. At this point the receipts are considered program income and should be included on any reports that are required to be completed. Also, on a monthly basis it is required that the balance of the 8400 fund be reconciled with the total of the individual meal accounts.
State Distributions – Electronic Fund Transfers School Lunch
We understand from the Division of School and Community Nutrition Programs, Indiana Department of Education (IDOE) that the Auditor of State requires school food distributions be made to one bank account at the school corporation central office. Accordingly, please account for school food receipts and subsequent distributions to individual school buildings, if applicable, as provided below.
School lunch reimbursements should be receipted to School Lunch Fund 0800 by using appropriate Receipt Accounts in the 4290 series. Disbursements to the individual buildings would be charged to expenditure account, 31500, Distribution of School Lunch Reimbursements.
Consequently, in preparation of the Form 9 report, the school corporation treasurer will need to take steps to ensure that all individual school buildings school lunch receipts and disbursements are added together for inclusion in the Form 9 report, and that the receipts and expenditures are not added twice.
Therefore, school corporations with extra-curricular school lunch funds will only report on the Form 9, the total receipts and disbursements of the individual schools and not report the reimbursement received through the State which is transferred to the school buildings.
We have been advised some school corporations are charging administrative salaries such as portions of principals, assistant principals, treasurers, salaries etc., to the school lunch fund.
Many administrative positions have duties and responsibilities that are broad and overlapping and encompass everything that goes on in the school corporation or school building. Therefore, we have consistently been of the audit position that these expenses are normally considered operating expenses properly charged to the general fund in accordance with IC 20-40-2 for the operation of the school corporation and not to the school lunch fund.
Some positions have been formally established by boards of school trustees, through job description, duties assigned, title, salary schedules, etc., as school food related (for example Assistant Principal Food Service Director). IC 5-11-9-4 requires in part ". . . records be maintained showing which hours were worked each day by officers and employees . . . employed . . . in more than one (1) position by the same public agency . . ." We will not take audit exception, in these situations (other than positions excluded by statute or for which the Department of Education has expressed concerns), to direct school food related employees having direct school food related expenses being paid from the school lunch fund if a cost allocation system based upon auditable statistics is established tracking costs attributable to the school food program and therefore payable from the school lunch fund. The use of time cards, time logs, or other means of accumulating auditable statistics upon which to base costs would have to be maintained. The time spent on such programs by persons serving in more than one program area must be specific if costs are to be separated. These costs cannot be accurately maintained on a percentage basis and requires the use of one of the methods mentioned above to provide auditable statistics and should cover all program areas in which a person serves or for which the service, materials, supplies, etc., are provided.
Other positions with multiple school food related responsibilities could be compensated in part from the school lunch fund, assuming compliance with all of the aforementioned. Additionally, we can review during an audit for reporting consistencies in those situations, i.e., the accounting and charging of indirect costs based upon time records to the other applicable funds besides the school lunch fund, for these and other positions. However, we must emphasize a school corporation also has a responsibility to ensure conflicts do not exist with the charging of any indirect costs for any of the aforementioned, if applicable.
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PAYMENT OF TUITION FEES FOR TEACHERS
Our attention is directed upon occasion to an isolated provision adopted by boards of school trustees or other governing bodies for reimbursing teachers for tuition fees and the cost of books for college and university courses. These courses are attended to meet requirements for professional improvement. The cost of any college course taken by teachers, whether during summer vacation or by evening extension classes during the period schools are in session, is the financial obligation of the teacher. The same applies to other employees of the school corporation. However, a school corporation could consider the provisions of IC 20-26-3-1 et seq., home rule, and we could so note accordingly in an audit report.
A school corporation which utilizes these provisions must consider carefully the fiscal impact, since IC 20- 29-6-3 expressly states that: “ . . . a contract that provides for deficit financing is void to that extent . . .”
Currently, the prescribed method for the documentation of transfers between funds in the Uniform Compliance Manuals states that a warrant should be issued, charged to the original fund, payable to the unit and the amount should be receipted into the new fund to provide an adequate audit trail for these transfers. These procedures were developed for manual record keeping and are still prescribed for all manual ledgers and tracking. However, we realize many accounting software programs are available that allows a transfer between funds that may also provide an adequate audit trail for the transfer. We have taken a new audit position that we will not take exception to an electronic transfer on the ledger if there is an adequate audit trail to support the transfer transaction. If a unit prefers to use a ‘paper check’ to document transfers, we would also not take audit exception. In either case, the unit needs to have sufficient internal controls over the transactions to provide accuracy. The unit should be able to provide a report of all transfers during the year from each issuing fund to the receiving fund and document that transfers in equal transfers out. It is important that the method for documenting transfers be applied consistently to provide an accurate report on transfers.
Agreements
School corporations should be aware of the option available for transfers between school corporations (please note, not cash transfers) as provided in IC 20-26-11-13 which states in part, "(h) Instead of the payments provided in subsection (b), the transferor corporation or state owing transfer tuition may enter into a long term contract with the transferee corporation governing the transfer of students. The contract may: (1) be entered into for a period of not more than five (5) years with an option to renew; (2) specify a maximum number of s t u d e n t s to be transferred; and (3) fix a method for determining the amount of transfer tuition and the time of payment, which may be different from that provided in section 14 of this chapter."
IC 20-26-11-13 also states in part, “(i) A school corporation may negotiate transfer tuition agreements with a neighboring school corporation that can accommodate additional students. Agreements under this section may: (1) be for one (1) year or longer; and (2) fix a method for determining the amount of transfer tuition or time of payment that is different from the method, amount, or time of payment that is provided in this section or section 14 of this chapter."
Children of School Corporation Employees
We are often asked if a school corporation may provide a special benefit by allowing children of employees who do not live within a school corporation's boundaries to attend school without paying transfer tuition.
Effective July 1, 2010 Public Law 30, Senate Enrolled Act 252 amended IC 20-26-11-6 to provide in part (b) "A transfer may be accepted regardless of whether, as a condition of the transfer, the transferee school requires the requesting parents or student to pay transfer tuition in an amount determined under the formula established in section 13 of this chapter for the payment of transfer tuition by a transferor school corporation. However, if the transferee school elects to charge transfer tuition, the transferee school may not offset the amounts described in section 13(b) STEP TWO (B) through section 13(b) STEP TWO (D) of this chapter from the amount charged to the requesting parents or student. (c) When the transferee school elects to charge tuition to the requesting parents or student, the tuition determined under subsection (b) must be paid by the parents or the student before the end of the school year in installments as determined by the transferee corporation. (d) Failure to pay a tuition installment that is agreed to by the parents or student and the transferee school corporation is a ground for exclusion from school. (e) If the transferee school elects not to charge transfer tuition to the parents or student under this section, the transferee school may not charge transfer tuition or fees to the transferor school."
Students are permitted to attend school in the school corporation of legal settlement without charge for tuition in accordance with the Indiana Constitution, Article 8, Section 1. We are of the audit position school corporations should very carefully consider uniformity and potential taxation issue concerns if waiving transfer tuition only for select groups.
Foreign Exchange Students
IC 20-26-11-10 provides in part "(b) A foreign student visiting in Indiana under any student exchange program approved by the state board is considered a resident student with legal settlement in the school corporation where the foreign exchange student resides. The student may attend a school in the school corporation in which the family with whom the student is living resides. A school corporation that receives a foreign student may not be paid any transfer tuition. The school corporation shall include the foreign student in computations to determine the amount of state aid that it is entitled to receive."
Out of State Students
On September 12, 2011 the Indiana Department of Education released a memo providing clarification of IC 20-26-11-6. Below is information from that memo.
School corporations may accept students who do not have legal settlement in Indiana under their local policy. However, please note the following:
- Students cannot be counted for ADM
- Students must be charged full unsupported tuition
- Students must be charged tuition, and may not attend without paying tuition
Official Opinion 74 of the Indiana Attorney General, issued in 1953, concluded there is no statutory authority for payment of a fixed amount of travel allowance to public employees and that a public employer may not reimburse an employee for travel expense which is, in fact, not incurred by the employee. Also, there is no authority for a travel allowance to be paid without regard to the number of miles, if any, actually traveled.
Therefore, the State Board of Accounts is of the audit position that a fixed amount for travel allowance should not be paid. The prescribed method is to reimburse the employee for travel on the basis of a claim filed on Mileage Claim, Form 101, for reimbursement at the rate per mile as established by the local board of school trustees for all employees of the school corporation.
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UNEMPLOYMENT CLAIMS
Each unemployment claim received should be carefully reviewed to make sure that the claim is proper. Protests should be filed when considered necessary.
According to the Indiana Department of Workforce Development Unemployment Insurance Employer Handbook (Revised 1/10/2020), page 47 and 48:
“Whenever an individual files an initial claim for benefits, their last employer and all of their base period employers are notified and asked to verify the reason for the claimant’s unemployment. This notifies the organization that its experience account may be charged. Employers that have elected to participate in the State Information Data Exchange System (SIDES) or SIDES E-Response can respond to these notices electronically. SIDES allows employers to exchange UI separation information with DWD electronically...If the organization is not signed up for electronic notice and response (SIDES), it may then use state form 640P to protest a claimant’s eligibility for benefits. The information the organization provides on this form could affect the claimant’s eligibility or any charges to the employer’s experience account for benefits paid. Form 640P is available online at www.in.gov/dwd/2465.htm.
Employers have a duty to prevent unemployment benefits from being paid if the claimant is not entitled to receive benefits. To prevent benefits from being paid in error, the organization must respond electronically, or submit Form 640P, if a former employee seeking unemployment benefits is unemployed because that person:
- Quit voluntarily or was absent for unknown reasons
- Was discharged for just cause (see Section VII)
- Was discharged for gross misconduct (see Section VII)
- Is not entitled to ANY pay or benefits from the organization;
- Is ineligible for any reason listed in this handbook.”
For purposes of the Unemployment Compensation System, IC 22-4-8-2(i)(1) and (2) defines employment to include service performed -“(1)…by an individual in the employ of this state or any of its instrumentalities (or in the employ of this state and one (1) or more other states or their instrumentalities) for a hospital or eligible postsecondary educational institution located in Indiana.
(2)… by an individual in the employ of this state or a political subdivision of the state or any instrumentality of the state or a political subdivision, or any instrumentality which is wholly owned by the state and one (1) or more other states or political subdivisions…
However, service performed…as the following is excluded:
(A) An elected official.
(B) A member of a legislative body or of the judiciary of a state or political subdivision.
(C) A member of the state national guard or air national guard.
(D) An employee serving on a temporary basis in the case of fire, snow, storm, earthquake, flood, or similar emergency.
(E) An individual in a position which, under the laws of the state, is designated as: (i) a major nontenured policymaking or advisory position; or (ii) a policymaking or advisory position the performance of the duties of which ordinarily does not require more than eight (8) hours per week.” - V
We have previously been provided the Division of School and Community Nutrition of the Department of Education policy regarding vending machines which states in part that vending machines containing foods of minimal nutritional value cannot be sold in the food service area during the breakfast and/or lunch periods. These foods (carbonated beverages, candy, etc.) may however be sold outside the food service area during meal periods. The policy also provided that the sale of competitive foods (which meet certain nutritional requirements) may, at the discretion of the state agency and school food authority, be allowed in the food service area during the breakfast or lunch periods only if the income from the sale of such foods accrues to the benefit of the nonprofit food service or the school or student organizations approved by the school.
The Division of School and Community Nutrition policy allows the school food authority to determine where the income from the sale of competitive foods shall go in conformity with the above policy.
The State Board of Accounts is of the audit position that as long as the Division of School and Community Nutrition policy allows for a choice that the decision of which fund the vending revenue is to be accounted for in should be in accordance with the following:
1. The proceeds should accrue to that group's extra-curricular fund if a particular student group or organization manages the vending function.
2. The proceeds may go to the athletic fund if the vending in question is located at athletic events and managed by athletes or athletic department individuals.
3. The proceeds should go to the School Lunch Fund or the Extra-Curricular General Fund, Student Activity Fund or Concession Fund for the benefit of all students and spent consistent with page 6-3 of the Accounting and Uniform Compliance Guidelines manual for Extracurricular Accounts if no particular student group manages the vending function.
The Board of School Trustees should document their preference in the board minutes.
The possibility exists that an Audit Result and Comment may appear in a report if the School Lunch Fund fiscal status is adversely affected by the policy.
Indiana Code 20-26-4-1(d) describes the duties of a treasurer of a school corporation. A treasurer, in addition to serving as the official custodian of all funds of the school corporation and being responsible for the proper safeguarding and accounting for all such funds, must issue an official receipt for any money received and deposit such money in accordance with the laws governing the deposit of public funds. The treasurer also has the responsibility to issue all warrants in payment of expenses lawfully incurred on behalf of the school corporation, but, except as otherwise provided by law, shall issue such checks only after proper allowance or approval by the governing body. No allowance or approval shall be required by the governing body for amounts lawfully due in payment of indebtedness or in payment of amounts due the State of Indiana, the United States Government or their agencies and instrumentalities.
The governing body of each public school corporation shall conduct an annual screening test of the visual acuity using the modified clinical technique described in IC 20-34-3-12(a), of all children enrolled in, or transferred to the either kindergarten or first grade; third grade; fifth grade; and eighth grades; and all other school children suspected of having a visual defect. Records of all tests shall be made and continuously maintained in order to provide information useful in protecting, prompting, and maintaining the health of school children. IC 20-34-3-12 also provides that the State Board of Health and the State Board of Education shall adopt joint rules and regulations concerning vision testing equipment, qualifications or vision testing, personnel, and criteria for failure and referral based upon accepted medical practice standards. IC 20-34-3-2 provides objection procedures concerning any testing, examination, immunization or treatment required. An objection will not exempt a child from any testing required unless made in writing, signed by the child’s parent and delivered to the child’s teacher or other school administrator who might order the test. The expense of such testing is payable from the Operations fund of a school corporation.
Many other health measure requirements may be found in IC 20-34-3. These include medical inspection of school children, provision for appointments of school physicians and nurses, immunization history of students, test for tuberculosis, sickle cell anemia, lead poisoning, audiometer tests, and aids information.
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WIND FARMS (TURBINES) INVESTMENTS
We have received inquiries and criticisms regarding school corporations entering into agreements to invest in what are sometimes referred to as "Wind Farms (Turbines)".
Please be advised IC 20-26-3-7 concerning school corporation home rule and unavailable powers provides in part "A school corporation does not have any of the following powers: (1) Powers expressly prohibited of a unit under IC 36-1-3-8." IC 36-1-3-8 states in part (a) ". . . a unit does not have the following: . . . The power to invest money, except as expressly granted by statute." Therefore, the State Board of Accounts is of the audit position a school corporation is limited to investments as expressly authorized by IC 5-13-9-1 et seq. IC 5-13-9-1 states in part "(b) . . . in addition to any other statutory power to make investments, each fiscal officer of any political subdivision . . . under the guidelines established, respectively, . . . by the . . . fiscal body . . . may invest any funds held by each in accordance with this chapter." We are not aware of any provisions within IC 5-13-9 which would authorize investments in "Wind Farms (Turbines)".
Investments should only be made in accordance with statute. Expenses related to any unauthorized investments may be the personal obligation of the responsible official or employee. Losses related to investments and investment procedures which are not authorized by statute may be the personal obligation of the responsible official or employee.
The possibility might exist a school corporation could construct "Wind Farms (Turbines)" on school corporation property to be self-sufficient for energy needs. However, construction of "Wind Farms (Turbines)"would be fact sensitive, to be reviewed on a case-by-case basis. Items to be considered could include, has the school corporation constructed more "Wind Farms (Turbines)" than needed to be self-sufficient for energy needs?, etc...
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Commodities Inclusion on Federal Expenditure Schedules
Grant Reporting on Gateway Annual Report
STATE BOARD OF ACCOUNTS YEAR END REPORTING
Report of Names, Addresses, Duties and Compensation of Public Employees (Annual Personnel Report - Form 100R) (IC 5-11-13)
Every school corporation shall during the month of January of each year prepare, make, and sign a certified report, correctly and completely showing the names and business addresses of each and all officers, employees, and agents in their respective offices, and the respective duties and compensation of each with the state board of accounts.
The report must indicate whether the school corporation offers a health plan, a pension, and other benefits to full-time and part-time employees. The report must be filed electronically through the State Gateway.
This report is a public record which shall be open to public inspection and examination. A school official who fails to file this report commits a Class C infraction and is subject to removal for neglect of duty.
The total compensation paid to all employees of the school corporation for the previous year should be reported. This includes part time, temporary, and seasonal employees. If a W2 was required to be issued, that person should be listed on the report. IRS Publication 15 has guidelines for determining if someone is an employee or a contractor. Elected officials, including board members, should be included.
For 2013, the school official must print and sign an Attestation Statement that certifies that the data is accurate to the best of their knowledge and belief. This must be mailed to our office within five days of submitting your report via Gateway. If you resubmit your report, you must print, sign and mail a new attestation form.
Correspondence regarding the report will be sent to the email address on file in the State Gateway. If there has been a change in school official or email address please send an email to annualreport@sboa.in.gov requesting an update of the school corporation's contact information.
COMMODITIES INCLUSION ON FEDERAL EXPENDITURE SCHEDULES
School Corporations are required to complete the Gateway Annual Report, which contains a section on federal grant information. We received lots of questions about how to calculate the amount of Non-Cash Assistance, or commodities, for the Child Nutrition Cluster programs. We have received better information to on how to calculate the amount of commodities to include on the Gateway schedule. The prior instructions were to review the totals at the top of the Food Distribution Program screen (red Xs). However, it has been determined that the summation of the individual detailed transactions is the appropriate way to calculate the non-cash assistance amounts (green arrows).
After you have logged in to IDOE’s School Nutrition portal (scnweb.doe.state.in.us), you will click the green puzzle piece labeled “Food Distribution Program” and click continue at the bottom of the Welcome page. You select the program year and then you click “Summary Menu” near the top of the next page. Click “R/A Summary” and then search for your school corporation’s name. This will take you to the School Corporation’s page and you will want to go to the “Entitlement” tab. When you get to the entitlement tab you will add the individual amounts detailed in the “Entitlement Used”, “No Charge Used”, and “Bonus Used” columns that were allocated during the audit period. The sum will be included in the School Lunch Program grant on the Gateway Annual Report and in CFDA# 10.555 on the Federal Expenditure Schedule.
GRANT REPORTING ON GATEWAY ANNUAL FINANCIAL REPORT
We have received many inquiries about the correct information that needs to be reported in the Grant section of the Gateway Annual Financial Report. The information that you input into this section will be used during your next audit to compile the Schedule of Expenditures of Federal Awards (SEFA). The main question we have gotten is what to include in the receipts and disbursements columns. For most grants you will simply include the actual receipts and disbursements from your records for the period covered. Your selection in the “Grant Type” column will dictate to our SEFA macro which column to pull for inclusion on the SEFA, receipts for reimbursement grants and disbursements for advance grants. For schools there are two exceptions that we know of for the Child Nutrition Cluster grants and the Special Education grants.
Child Nutrition Cluster grant activity is recorded in the School Lunch fund, 800, along with other program transactions. Therefore, you should input into the receipt column only the federal grant reimbursements that you have actually received from July to June. In most cases, it is hard to segregate which expenses are attributable and paid for federal expenses and which expenses are paid or partially paid with local dollars. Therefore, our suggestion is to use a federal in, federal out theory. Meaning that the first money you use to pay for expenses was the federal grant money that you received. So, for the period you would include the same amount in the disbursements column as you did in the receipts column. I would also remind you that many schools participate in the commodities program. So, you would have to obtain an amount that you would input into the “Amount of Federal Noncash Assistance for the Year” column. To get the commodities information you will have to access the School Nutrition portal (scnweb.doe.state.in.us). After you have logged in, you will click the green puzzle piece labeled “Food Distribution Program” and click continue at the bottom of the Welcome page. You select the program year and then you click “Summary Menu” near the top of the next page. Click “R/A Summary” and then search for your school corporation’s name. This will take you to the School Corporation’s page and you will want to go to the “Entitlement” tab. When you get to the entitlement tab you will add the amounts in the following columns “Entitlement Used”, “No Charge Used”, and “Bonus Used”. The sum will be included in the School Lunch Program grant line.
For the schools that participate in a Special Ed Cooperative, we have been made aware of some additional information that will probably change how Special Ed grant funds have been reported in the past. We met with IDOE officials and learned that the grant awards for the past few years have actually been given to member schools and not any Special Ed Co-Ops. Therefore, our opinion is that for a school’s SEFA to be correct, they would have to include the Special Ed grant money on their schedule and not a Co-Op schedule. We have been told that local Co-Op relationships are handled in a number of different ways throughout the state. Here are three basic relationships that we are aware of and how to handle including the Special Ed grants in your grant section.
1. Grants are awarded to member schools, a Co-Op is named the fiscal agent, and all grant reimbursements are sent to Co-Op. Schools pay Special Ed program expenses like salaries, and equipment and apply for reimbursement to the Co-Op. The Co-Op reimburses the member school, who records the receipt in a Special Ed fund. Since all the receipts and disbursements are included in the member school’s records, then they would just include those amounts in their grant section.
2. Similar to situation #1 where the member school pays expenses and receives reimbursements from the Co-Op, but the Co-Op retains an administrative fee from the grant funds. The Co-Op should allocate how much of the administrative fee retained is attributable to each member school. The allocation could be based on the local agreement, percentage of total grant awards for the member schools, percentage of students served for each member school, etc. As long as there is a reasonable basis for the allocation, IDOE has indicated they do not have an issue. For the grant section, each member school would have to add the reimbursements they received to their allocation of the administrative fee the Co-Op provided.
3. In this situation grants are awarded to member schools, a Co-Op is named the fiscal agent, and all the grant reimbursements are sent to the Co-Op. The difference is that the Co-Op pools all the money and pays for the expenses of the Special Ed programs. Because both receipts and disbursements are running through the Co-Op, the member schools do not show any Special Ed transactions in their records. So, the Co-Op with have to do a similar allocation as mentioned in #2, but it will have to be based on all the grant reimbursements and expenses for the period. They should provide the member schools with their total allocation and that is what each member school should include in the grant section of their Gateway AFR.
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