801.4 - Governmental Accounting Practices and Regulations

The board recognizes its fiduciary responsibility to oversee the management of district funds in keeping with the district’s vision, mission, and goals. To achieve this purpose, the board may engage in learning about the financial needs, operations, and requirements of the district as appropriate for the board’s understanding of the district’s financial position. The board also commits to engaging in annual financial goal setting for the district based upon measurable data and projections for the district.

GENERAL FUND BUDGET
District accounting practices will follow state and federal laws and regulations, Generally Accepted Accounting Principles (GAAP), and the uniform financial accounting system provided by the Iowa Department of Education. As advised by the district’s auditor, determination of liabilities and assets, prioritization of expenditures of governmental funds, and provisions for accounting disclosures shall be made in accordance with governmental accounting standards.

The district shall prepare an annual three-year general fund budget forecast that includes estimates of unspent authorized budget (spending authority). The estimates shall be prepared utilizing scenarios for likely Supplemental State Aid (SSA) rates and enrollment projections. The projections shall include estimates of property tax rates and income surtax rates, if applicable.

The treasurer shall report to the board as to actual revenue and expenditures for the month and year-to-date as compared to budgeted revenues and expenditures and compared to historical revenues and expenditures (both in dollar amounts and percentages) for each fund maintained by the district. The treasurer shall provide context with respect to current year variances between budgeted and historical revenues and expenditures.

The board will establish and review financial goals and fiscal management performance measures annually and publish in the minutes. The district will measure whether these goals were obtained as of June 30, but only after completion of the Certified Annual Report due September 15th each year.

FINANCIAL METRICS
The district is committed to the following financial metrics:

  1. Solvency Ratio: Maintaining a combined unassigned and assigned general fund balance that is at least 7% of annual revenue (actual or anticipated). Prior to setting the current year’s cash reserve levy and before staffing and other spending decisions are finalized, the district will take reasonable steps to achieve a total general fund balance at least equal to its unspent authority. This enables the district to cash flow its legal spending limit.
     
  2. Unspent Authority: Maintaining an unspent authority balance of not less than 7% and not more than 35% of that year’s annual expenditures. The current year’s projected balance will be discussed with the board before staffing and other spending decisions are finalized for the succeeding year. The district will measure attainment of these goals as of June 30th, but only after completion of the Certified Annual Report.

MODIFIED SUPPLEMENTAL AMOUNT
The district may request from the School Budget Review Committee (SBRC) additional modified spending authority where it may be available for items such as:

  • Special education deficit balances
  • Advances to support increasing enrollment
  • Budget guarantee
  • Open enrollment not on prior year count
  • Support for students identified as English Language Learners (ELL)
  • At risk/dropout prevention programming
  • Initial staffing associate with opening new buildings or programs
  • Any other lawful purpose

The board shall provide a resolution to approve the maximum request authorized.

Any award of modified supplemental amount will be levied as a cash reserve based on the recommendation of the superintendent in coordination with the treasurer and approved by the Board of Directors, consistent with its annual financial goals and the fiscal performance measures.

FUND BALANCE REPORTING
In the Governmental Accounting Standards Board (GASB) Statement No. 54, the board identifies the order of spending unrestricted resources applying the  highest level of classification of fund balance – restricted, committed, assigned,  and unassigned – while honoring constraints on the specific purposes for which  amounts in those fund balances can be spent. Formal board action is required to establish, modify, and/or rescind a committed fund balance. The resolution will state the exact dollar amount. In the event the board chooses to make changes or rescind the committed fund balance, formal board action is  required.

The board authorizes the superintendent [or designee] to assign amounts to a  specific purpose in compliance with GASB 54. An “assigned fund balance”  should also be reported in the order of spending unrestricted resources but is not  restricted or committed.

Financial reporting for the balances of the district’s governmental funds is based on Governmental Accounting Standards Board (GASB) Statement 54, Fund Balance Reporting and Governmental Fund Types Definitions. Fund balance refers to the difference between assets and liabilities in the governmental funds balance sheets. GASB 54 established a hierarchy that is based on “the extent to which the government is bound to honor constraints on the specific purpose for which the amounts in those funds can be spent.”

The governmental funds can have up to five fund balance classifications. The classifications are defined below from most to least restrictive.

  1. Nonspendable Fund Balance: Includes amounts that cannot be spent  because they are either not in spendable form, or legally or contractually  required to be maintained intact. This includes items not expected to be  converted to cash, including inventories and prepaid expenses. It may  also include other property acquired for resale and the principal of a  permanent fund.
  2. Restricted Fund Balance: Should be reported when constraints placed on  the use of resources are either externally imposed by creditors, grantors,  contributors, or laws or regulations of other governments; or imposed by  law through constitutional provisions or enabling legislation. This includes  “categorical balances.”
  3. Committed Fund Balance: Reflects specific purposes pursuant to  constraints imposed by formal action of the board. Such constraints can  only be removed or changed by board action.
  4. Assigned Fund Balance: Reflects amounts that are constrained by the government’s intent to be used for specific purposes but meet neither the restricted nor committed forms of constraint. Unless the amount is  negative, the assigned fund balance is the residual classification for the  governmental funds other than the general fund. If the amount is  negative, then the residual amount is shown as unassigned.
  5. Unassigned Fund Balance: Is the residual classification for the general fund only. As noted above, if a negative residual amount exists in other  governmental funds, then the amount is reported as unassigned.

It is the responsibility of the superintendent [or designee] to develop  administrative regulations implementing this policy. It is also the responsibility of  the superintendent [or designee] to make recommendations to the board  regarding fund balance designations.

Adopted: 12/13
Reviewed: 12/18
Revised: 5/15; 1/22; 3/25; 10/26
Legal Reference (Code of Iowa): §§ 257.7, 31; 279.8
IASB Reference: 701.04, 701.05, 701.05-R(1)