April 2011 FAR Financial Accounting and Reporting Coding

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April 2011 FAR (Financial Accounting and Reporting) Coding System: – Mandatory Account Codes for

April 2011 FAR (Financial Accounting and Reporting) Coding System: – Mandatory Account Codes for School Districts, ESCs, and Open Enrollment Charter Schools – Interpreting a General Ledger Copyright© Texas Education Agency 2011 1

FAR Account Codes • Overview of Financial Accountability System Resource Guide (FASRG) • Basis

FAR Account Codes • Overview of Financial Accountability System Resource Guide (FASRG) • Basis for FAR (Financial Accounting and Reporting, Module 1 of FASRG) • Basic Code Composition – – – – – Fund Code (Net Asset Code for nonprofit charters) Function Code Object Code Optional Codes 1 and 2 Organization Code Fiscal Year Code Program Intent Code Optional Code 3 Optional Codes 4 and 5 Copyright© Texas Education Agency 2011 2

FAR Account Codes • Codes for Shared Service Arrangements (SSAs) • Codes for Open

FAR Account Codes • Codes for Shared Service Arrangements (SSAs) • Codes for Open Enrollment Charter Schools (chartered by a nonprofit organization) (Special Supplement) Copyright© Texas Education Agency 2011 3

FAR Account Codes • Learn how to interpret a General Ledger and Payroll Journal

FAR Account Codes • Learn how to interpret a General Ledger and Payroll Journal Copyright© Texas Education Agency 2011 4

Overview of FASRG • Financial Accountability System Resource Guide – Version 14. 0 –

Overview of FASRG • Financial Accountability System Resource Guide – Version 14. 0 – January 2010 • Applies primarily to school districts and ESCs • http: //www. tea. state. tx. us/index 4. aspx? id= 1222 Copyright© Texas Education Agency 2011 5

FASRG • 11 Modules: – Module 1 – Financial Accounting & Reporting (FAR) and

FASRG • 11 Modules: – Module 1 – Financial Accounting & Reporting (FAR) and FAR Appendices – Module 2 – Budgeting – Module 3 – Purchasing – Module 4 – Auditing – Module 5 – Site-Based Decision Making Copyright© Texas Education Agency 2011 6

FASRG – Module 6 – Accountability – Module 7 – Data Collection & Reporting

FASRG – Module 6 – Accountability – Module 7 – Data Collection & Reporting – Module 8 – Management – Module 9 – State Compensatory Education – Module 10 – Special Supplement – Charter Schools – Module 11 – Special Supplement – Non-profit Charter School Chart of Accounts Copyright© Texas Education Agency 2011 7

Financial Accounting and Reporting (FAR) Module 1 of FASRG • Establishes requirements for school

Financial Accounting and Reporting (FAR) Module 1 of FASRG • Establishes requirements for school districts and ESCs to maintain proper budgeting and financial accounting and reporting systems • Also applies to open enrollment charter schools that are chartered by a university or local government (separate supplement for nonprofit charters – See Modules 10 and 11) • Ensures uniformity in government accounting • Derived from GAAP (Generally Accepted Accounting Principles) Copyright© Texas Education Agency 2011 8

Special Supplement to FAR Nonprofit Charter School Chart of Accounts • Establishes requirements for

Special Supplement to FAR Nonprofit Charter School Chart of Accounts • Establishes requirements for open enrollment charter schools operated by a nonprofit organization/corporation • Ensures uniformity in nonprofit accounting • Derived from GAAP Copyright© Texas Education Agency 2011 9

Basis for FAR Module 1 of FASRG • TEC requires school districts to adopt

Basis for FAR Module 1 of FASRG • TEC requires school districts to adopt and install a standard school fiscal accounting system – The Special Supplement requires charter schools to adopt a standard financial accounting structure • Accounting documents and records must be audited annually by an independent auditor – TEA Division of Financial Audit staff are responsible for reviewing the independent audits • A budget, itemized in detail according to classification and purpose of expenditure, must be prepared annually by each school district, ESC, and charter school and filed through PEIMS (after adopted by the local board) – The budget must contain, at a minimum, the budget for the General Fund, Food Service Fund, and Debt Service Fund. May contain budgets for other funds, such as grant funds, at their Copyright© discretion 10 Texas Education Agency 2011

Basis for FAR/Special Supplement • Outlines accounting principles and policies adopted by the SBOE

Basis for FAR/Special Supplement • Outlines accounting principles and policies adopted by the SBOE which are official rules • Constitutes minimum budgeting, accounting, auditing, and reporting requirements for school districts and charter schools Copyright© Texas Education Agency 2011 11

Federal Basis for FAR • Standards for Financial Management Systems • 34 CFR §

Federal Basis for FAR • Standards for Financial Management Systems • 34 CFR § 80. 20 - state and local governments • 34 CFR § 74. 21 – nonprofit organizations • State must expend account for grant funds in accordance with State laws and procedures Copyright© Texas Education Agency 2011 12

Federal Basis for FAR • Fiscal control and accounting procedures for States and its

Federal Basis for FAR • Fiscal control and accounting procedures for States and its subgrantees as well as cost-reimbursement contractors sufficient to: – Permit preparation of reports – Permit tracing of funds to a level of expenditures adequate to establish that funds have not been used in violation of the applicable program statutes and regulations Copyright© Texas Education Agency 2011 13

Federal Basis for FAR • Financial management system standards: – Financial reporting – Accurate,

Federal Basis for FAR • Financial management system standards: – Financial reporting – Accurate, current, complete disclosure of financial results – Accounting records – Adequately identify the source and application (use) of funds – awards, obligations, unobligated balances, assets, liabilities, expenditures, and income Copyright© Texas Education Agency 2011 14

Federal Basis for FAR – Internal Control – Maintain effective control and accountability of

Federal Basis for FAR – Internal Control – Maintain effective control and accountability of all cash, property, and other assets and ensure property is used solely for authorized purposes – Budget Control – Compare expenditures to budget – Allowable Cost – Follow applicable federal cost principles, program regulations, and terms of grant in determining reasonableness, allowability, and allocability of costs Copyright© Texas Education Agency 2011 15

Federal Basis for FAR – Source Documentation – Accounting records supported by source documentation

Federal Basis for FAR – Source Documentation – Accounting records supported by source documentation – Cash Management – Procedures to minimize time from requesting funds to disbursement of funds (no more than 3 business days) • Awarding agency may review adequacy of financial management system prior to award or during the award Copyright© Texas Education Agency 2011 16

Accounting Principles and Policies in FAR • Accounting and Reporting Capabilities – Must be

Accounting Principles and Policies in FAR • Accounting and Reporting Capabilities – Must be able to: – Present fairly and with full disclosure the financial position and results of financial operations of the funds and account groups in accordance with GAAP – Determine and demonstrate compliance with finance-related legal and contractual provisions. Copyright© Texas Education Agency 2011 17

Accounting Principles and Policies in FAR • Fund Accounting Systems: – Organized and operated

Accounting Principles and Policies in FAR • Fund Accounting Systems: – Organized and operated on a fund basis – a selfbalancing set of accounts • Fund Types: – Governmental Funds: • General Fund – all except those required to be accounted for in another fund – local funds • Special Revenue Fund – specific revenue sources that are restricted for specific purposes – grants – Others Copyright© Texas Education Agency 2011 18

Basis of Accounting • Accounting records reflect revenues and expenditures • By fund source/fund

Basis of Accounting • Accounting records reflect revenues and expenditures • By fund source/fund code • Budgets are the legal authority for expenditures • Encumbrance accounting – amount committed to or reserved for a future expenditure • Liquidate encumbrances Copyright© Texas Education Agency 2011 19

FAR Account Codes • Basic Code Composition – – – – – Fund Code

FAR Account Codes • Basic Code Composition – – – – – Fund Code (Net Asset Code for nonprofit charters) Function Code Object Code Optional Codes 1 and 2 Organization Code Fiscal Year Code Program Intent Code Optional Code 3 Optional Codes 4 and 5 Copyright© Texas Education Agency 2011 20

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Copyright© Texas Education Agency 2011 21

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Fund Code • Mandatory 3 -digit fund code used for all financial transactions (net

Fund Code • Mandatory 3 -digit fund code used for all financial transactions (net asset code for nonprofit charters) – 100 – 199 General Fund (Local funds and Foundation School funds) (nonprofit charters use 199 for fundraising proceeds rather than for state funds) – 200 – 289 Special Revenue (Federal grants) – 290 – 379 Special Revenue (Federal grants to SSAs) – 380 – 429 Special Revenue (State funded grants) (nonprofit charters use 420 for FSP) – 430 – 459 Special Revenue (State funded grants to SSAs) – 460 – 499 Special Revenue (funds from local sources) Copyright© Texas Education Agency 2011 23

Function Code • Mandatory 2 -digit code that identifies the purpose of the transaction/expenditure

Function Code • Mandatory 2 -digit code that identifies the purpose of the transaction/expenditure – represents a general operations area and groups together related activities – used in educating students • Ex: – – 10 – Instruction and Instructional-Related Services 20 – Instructional and School Leadership 30 – Non-instructional support services for students 40 – General administrative support services Copyright© Texas Education Agency 2011 24

Object Code • Mandatory 4 -digit code identifying the nature and object of an

Object Code • Mandatory 4 -digit code identifying the nature and object of an account – several kinds of object codes • Expenditure/Expense Object Codes – always begin with a “ 6” – expenses are classified by the major object classes according to the types of items purchased or services obtained Copyright© Texas Education Agency 2011 25

Class/Object Codes • 6100 – Payroll Costs • 6200 – Professional and Contracted Services

Class/Object Codes • 6100 – Payroll Costs • 6200 – Professional and Contracted Services • 6300 – Supplies and Materials • 6400 – Other Operating Costs • 6500 – Debt Service • 6600 – Capital Outlay • 6620 – Building Purchase, Construction or Improvements • (nonprofit charters use 15 XX for 6600 and 6620) Copyright© Texas Education Agency 2011 26

Optional Codes 1 and 2 • Optional 2 -digit code used to provide special

Optional Codes 1 and 2 • Optional 2 -digit code used to provide special accountability at the local level if there is need to account for information not otherwise provided in the mandatory chart of accounts – local chart of accounts to be used uniformly in accounting system – Ex: optional code to further break down expenditures into more detail beyond class/object code Copyright© Texas Education Agency 2011 27

Organization Code • Mandatory 3 -digit code that represents a group of employees who

Organization Code • Mandatory 3 -digit code that represents a group of employees who are obligated to complete a specific responsibility – 2 types – Campus code – Administrative or other code – ex: superintendent’s office, school board, etc. – mandated for certain functions Copyright© Texas Education Agency 2011 28

Campus Codes • 001 – 040 High school campuses • 041 – 100 Junior

Campus Codes • 001 – 040 High school campuses • 041 – 100 Junior High/Middle School Campuses • 101 – 698 Elementary School Campuses • 699 - Summer school and intersession • 700 – Administrative or Other • 998 or 999 – costs not clearly attributable Copyright© Texas Education Agency 2011 29

Fiscal Year Code • Mandatory 1 -digit code – use last digit of school

Fiscal Year Code • Mandatory 1 -digit code – use last digit of school year • Ex: 2007 -2008 school year is represented with “ 8” • Should reflect that number for duration of project, even though it may span multiple school years Copyright© Texas Education Agency 2011 30

Program Intent Code • Mandatory 2 -digit code used to account for cost of

Program Intent Code • Mandatory 2 -digit code used to account for cost of instruction and other services directed toward a particular need of a specific set of students – the student group toward which the services are directed Copyright© Texas Education Agency 2011 31

Program Intent Code • • • 11 – Basic Educational Services 21 – Gifted

Program Intent Code • • • 11 – Basic Educational Services 21 – Gifted and Talented 22 – Career and Technology 23 – Services to students with disabilities 24 – Accelerated Education (for at-risk students) 25 – Bilingual and Special Language Programs • 30 – Title I, Part A Schoolwide Activities • 31 – High School Allotment • 91 – Athletics Copyright© Texas Education Agency 2011 32

Optional Code 3 • Optional 1 -digit local code to provide more detailed accountability

Optional Code 3 • Optional 1 -digit local code to provide more detailed accountability at the local level if needed for management purposes – not reported through PEIMS – may be used for any purpose school chooses • Suggested but not mandatory: – A – Pre. K – B - K – C – Grade 1 Copyright© Texas Education Agency 2011 33

Optional Codes 4 and 5 • Optional 2 -digit code to provide local coding

Optional Codes 4 and 5 • Optional 2 -digit code to provide local coding as desired or needed • Example of suggested uses: – Tracking multiple projects within one fund – ex: district receives both Title II D Educational Technology formula funds and discretionary funds – 2 different grant projects under one fund code – Providing instructional costs by grade level – Providing detailed instructional costs by subject area Copyright© Texas Education Agency 2011 34

SSAs • Shared Service Arrangement (SSA) – an agreement between two or more entities

SSAs • Shared Service Arrangement (SSA) – an agreement between two or more entities that provides services for the entities involved - when school districts and/or service centers find it advantageous to share personnel or services • In grant application, must identify SSA fiscal agent and member districts • Must retain shared services agreement on file for audit purposes Copyright© Texas Education Agency 2011 35

SSAs • 3 financial arrangements: – Fiscal agent retains 100% of the funds and

SSAs • 3 financial arrangements: – Fiscal agent retains 100% of the funds and provides services to member districts from funds retained – Fiscal agent flows partial funds to member districts and retains partial funds to provide services to member districts – Fiscal agent flows 100% of funds to member districts, except possibly funds to administer SSA • SSA fund codes different from regular fund codes Copyright© Texas Education Agency 2011 36

Nonprofit Charter Schools • Special Supplement to FAR • Same fund codes (except they

Nonprofit Charter Schools • Special Supplement to FAR • Same fund codes (except they are called net asset codes and have a couple of exceptions) • Same class/object codes, except no 6600 Capital Outlay – for grant application budget and expenditure reporting purposes, they will identify Capital Outlay/Assets on 6600/15 XX Copyright© Texas Education Agency 2011 37

Interpreting a General Ledger • At a minimum should include: – Complete account code

Interpreting a General Ledger • At a minimum should include: – Complete account code (15 digits minimum, beginning with 3 -digit fund code (or net asset code for nonprofit charters) – Type of transaction (i. e. , general journal (GJ), check (CK), encumbrance (EN), etc. ) – Transaction reference # (check # or PO#) – Transaction date – Vendor name – Brief description of transaction – Budgeted amount (amount appropriated) – Obligated amount (encumbered) – Amount expended – Account balance Copyright© Texas Education Agency 2011 38

Interpreting a Payroll Journal • At a minimum should include: – Complete account code

Interpreting a Payroll Journal • At a minimum should include: – Complete account code (15 digits minimum, beginning with 3 digit fund code (or net asset code for nonprofit charters) – Employee’s full name – Employee’s SSN or Employee Number – Pay period dates – Pay date – Net earnings – Gross salary and other income – Deductions – Check date – Check number Copyright© Texas Education Agency 2011 39