Accounting Manual for School Activity Funds 2011 V 1.0 Edition

Transcription

1 Accounting Manual for School Activity Funds 2011 V 1.0 Edition Office of the Chief Financial Officer 200 East North Avenue, Room 403B Baltimore, MD 21202

2 Foreward The purpose of this manual is to communicate the appropriate guidelines and to facilitate the proper management for the administration and control of School Activity Funds. Proper management of School Activity Funds is an enormous responsibility and needs to be treated as such. The City Schools staff continues to appreciate the efforts made by Principals and their designated assignees as they complete the important task of recording and managing School Activity Fund transactions.

3 Table of Contents Regulations... 1 Accountability Statement... 4 Accounting System... 5 Procedures... 7 Glossary... 14

4 Regulations Purpose of Funds School Activity Funds should promote the general welfare of all the students and facilitate the normal extracurricular activities of the school. Projects which produce or disburse funds in support of school activities must contribute directly to the educational experience and/or morale of the students and may not conflict with or supplant the instructional program. Definition School Activity Funds are generated by non-instructional activities within a school, such as school stores, publications, social and athletic events, etc. The term school funds means all monies coming into and leaving the school s possession excluding General Funds, Grant Funds and Cafeteria Funds. Internal Control Procedures The most important principle in establishing a sound system of internal controls is adequate segregation of duties, so that no one person controls all aspects of a transaction. The involvement of two or more persons in each transaction discourages dishonesty and encourages accuracy, because each person acts as a check and balance on the work performed. Proper segregation of duties should be established so that cash receipt, check disbursement, record-keeping, and reconciliation functions are not performed by the same individual. While the Principal may assign the daily operational process to a qualified employee, the ultimate responsibility lies with the Principal. This internal control principle is particularly important in the handling of cash. Some requirements, as discussed later in this policy, include two independent signatures on checks, issuance of pre-numbered collection receipts whenever cash is received and independent monthly reconciliation of the bank account using SafBooks Loss, Theft or Robbery of School Activity Funds Any loss, theft or robbery of cash receipts, including checks or other items with monetary value, shall be promptly reported by telephone, by the Principal or their designated assignee, to the Office of the Chief Academic Officer, Baltimore City School Police, the Office of Legal Counsel and the Office of Internal Audits. A confirming to all parties must follow the verbal report. Outstanding Balances Any school activity funds not expended during the fiscal year shall rollover to the next fiscal year. Termination of Club, Organization, or Activity Whenever a student club or organization disbands or a specific student activity is completed, any funds remaining in the school activity special fund shall rollover to the school activity general fund. Proper documentation recording the transfer of funds, signed by a representative of the organization being terminated and by the school s Principal, must be maintained on file. Page 1

5 School Bank Deposit Accounts with Balances over $100,000 It is the responsibility of the Principal to ensure that funds on deposit have the collateral to back them. The Federal Deposit Insurance Corporation (FDIC) insures accounts up to $100,000. If deposited amounts cause the account balance to exceed $100,000 per institution, the bank should be contacted and requested to issue additional collateral to secure funds which exceed the FDIC $100,000 limits. Vending Machines Schools may not operate vending machines without the prior approval of the Chief Operating Officer. School Closing or Change of Principal Prior to the date the school is scheduled to be closed, the bank account must be closed by the Principal. Sufficient funds must be left in the account to clear outstanding checks and bank charges. A bank reconciliation must be prepared by the school s Principal or their designated assignee as of the date the account is closed. Additionally, reconciliation between the bank account balance and the balances in the school activity fund s SafBooks ledger accounts must be prepared. Residual funds from closed schools shall be distributed on the basis of the number of students going to each receiving school. Inventories of the items held for resale should, to the extent feasible, be returned to the vendor for credit, given to the receiving schools, or disposed of in accordance with the instructions of the Chief Academic Officer. When an existing school changes Principal, the school s Principal or their designated assignee shall reconcile all bank account balances prior to departure. Signature cards for all accounts must be set up with the names of the successor Principal and other designated signors. Usage Restrictions School Activity Funds cannot be used to circumvent Board policies, procedures, rules and/or current City Schools practices. In addition, School Activity Funds must be used in accordance with The Code of Maryland Regulations (COMAR) and Generally Accepted Accounting Principles (GAAP). For example: Students cannot be charged for items that should be provided by City Schools as part of the instructional program. Schools are prohibited from borrowing funds from a lending institution, vendor, or others. School Activity Funds are not to be used for games of chance, even if the purpose of such games is to raise funds for educational related purposes. Schools are prohibited from entering into a lease-purchase agreement with a third party. City Schools Procurement office serves as the designated agent for City Schools for any potential lease purchase arrangement. Employees with instructional responsibility shall not tutor, for compensation, any student whom he or she is currently teaching. An employee may not accept any gift whose acceptance would tend to impair impartiality and independence of judgment or would give the appearance of doing so. All gifts given to a school will become the property of City Schools. School property cannot be sold to another school, individual, organization, etc. This includes property that has been purchased with School Activity Funds, Budgeted Funds or donations. School Activity Funds cannot be used for personal loans to employees. Page 2

6 School records cannot be used to record any personal transactions of employees A rubber stamp facsimile of an authorized signature must not be used on any document relating to School Activity Funds. \ Use of ATM/Debit cards is prohibited Cash withdrawals are prohibited Records Retention And Disposal Retention: Schools are required to maintain records in accordance with the Maryland State Department of Education (MSDE) retention policies. Disposal: Any financial records that contain bank account numbers or any confidential documents must be shredded once the approved retention period has expired. Sales Tax (Exemption And Remittance) Sales Tax Exemption: The State of Maryland - Comptroller of the Treasury issues tax exemption certificates to governmental agencies. Therefore, schools are not required to pay sales tax when purchasing items for instructional or operational purposes within the school. This includes all educational materials, office supplies and equipment, supplies used in fund-raising activities, etc. The vendor must be furnished with the City Schools Tax Exemption Certificate Number when purchasing such items for the school. It should be noted that items that are subject to sales tax include, but are not limited to: flowers; hospitality gifts; and faculty/social expenses through the Faculty account. A copy of City Schools Tax Exemption Certificate can be obtained from the Accounts Payable office. Sales Tax Remittance: The sale of items to individuals is a transfer of ownership to the individual from City Schools. Therefore, the school is responsible for remitting the tax it collects on the amount of gross sales. The organization must collect the tax on sales to anyone, including members, students and beneficiaries, whether or not the item is donated or is sold at or below cost. Every school having taxable sales must have a retail sales tax number. To obtain a retail sales tax number, the school must contact the State of Maryland - Comptroller of the Treasury. The period of remittance for each school is determined by the State of Maryland - Comptroller of the Treasury, depending on the amount of taxable sales. Every school with a retail sales tax number must file a return for every period, even if the school does not have any taxable receipts for that period. Instructions for completing the Sales Tax Remittance Form are included in front of the coupon book, issued by the State of Maryland - Comptroller of the Treasury. Once the sales tax report is completed by the Principal or their designated assignee, the Principal must review the report and approve by signing and dating the report. The school must maintain a photocopy of the report for subsequent audit verification. The school must then submit the report to the State of Maryland Comptroller of the Treasury with payment for sales taxes collected for the period. It is important to remember the distinction between the ownership of the item in determining the taxable status of the sale: Page 3

7 Non-taxable - the school is using its available School Activity Funds to make purchases on behalf of the students for use in the school. Ownership transfers to City Schools. Taxable - the school is purchasing the materials for resale. Ownership transfers to the buyer at the time of sale. References: Internal Revenue Code (IRS) Code of Maryland Regulations (COMAR) Annotated Code of Maryland, Sections of Article 81 State of Maryland - Comptroller of the Treasury - Compliance Division Taxable Vs. Non-Taxable: This is a limited listing of taxable and non-taxable examples. Taxable School Store sales Vending Machine sales (soda and candy) Yearbook sales Educational materials and supplies that are sold to an individual Uniforms (Physical Education and school-wide) Most fund-raiser sales (i.e., t-shirts and candy) Individual baked goods (i.e. cupcake, slice of pie, etc.) Non-taxable Some fund-raiser sales (i.e., coupon books, whole baked goods, pizza kits) If the school makes sales of tangible personal property, which would have been taxable if sold over-thecounter, there is a 6% tax on the gross receipts from those sales. Refer to the Maryland Sales & Use Tax Tip Number 8. Accountability Statement Principal: The Principal of the school is directly responsible for the administration and accounting of the School Activity Funds. In addition, the Principal is responsible for providing appropriate oversight to maintain adequate internal control. The Principal of the school is responsible for developing and implementing the corrective actions necessary to address audit findings. The Principal is responsible for ensuring that adequate cross-training of employees exists to enable the school's records to be maintained on a current basis regardless of vacation, extended illness or employee turnover. The school Principal shall assume responsibility for the business management functions of the local school finances such as budget preparation, maintaining sound accounting practices, authorizing expenditures, establishing methods of handling cash funds, local fund-raising activities, and reporting expenditures to parents and students Internal Audit: The Office of Internal Audits is responsible for the ongoing audit of the activity of all funds, including School Activity Funds. The purpose of an internal audit of School Activity Funds is to determine that School Activity Funds and cash accounting practices are managed in accordance with the School Page 4

8 Activity Funds Policy. Any inconsistencies noted during the audit are presented to the Principal in a Draft Audit Report for his/her corrective action. A final Audit Report with the findings and corrective action plan is distributed to Executive Management and the Board. Accounting System Introduction City Schools has a fiduciary responsibility to safeguard all funds. All monies collected by school employees and by student treasurers shall be receipted, accounted for and directed, without delay, to the proper location of deposit. All revenue must be accounted for in accordance with Generally Accepted Accounting Principles (GAAP), Board Policy and Rules, and the Accounting Manual for School Activity Funds. City Schools has a fiduciary responsibility to accurately account for the disbursement of all funds, based on properly authorized documents. Therefore, all expenditures must be supported by adequate documentation (i.e., check request form and accompanying vendor s invoice) from the requestor. All expenditure documentation must contain approvals by the designated administrative personnel in accordance with Generally Accepted Accounting Principles (GAAP); Board Policy; and The Accounting Manual for School Activity Funds. Effective January 1, 2010, by directive of the CEO, all City Schools are required to use the Safbooks Accounting Software as the official record keeping system for School Activity Funds. The school s Principal and / or other designated staff should be trained in the use of Safbooks. Training is provided on the 2 nd Friday of each month at PDC from 1:00pm to 4:00pm. Employees may sign up for training at: Classes are limited to 20 employees and are filled on a first come basis. Questions related to training in the use of Safbooks should be directed to the School s assigned Network Business liaison. The Safbooks system is used to record, classify and summarize the school s financial information for School Activity Funds. It is an automated accounting system that was designed to be convenient and easy to use, to be flexible, to increase accuracy and to increase the efficiency of recording and reporting activity in School Activity Funds. Basis Of Accounting All financial transactions are recorded on a cash basis by authorized school personnel. Types Of School Activity Funds Asset Accounts: Asset accounts are used to record economic resources which are owned by the school and are expected to benefit future operations. Cash accounts are the only asset accounts for School Activity Funds. Page 5

9 General Accounts: The funds in the general type of accounts are for the direct and/or indirect benefit of the student body. The general accounts types consist of, but are not limited to, the following specific accounts: General School account; Discretionary account; School Store account; and Field Trip accounts. Special Accounts: The funds in the special type of accounts are restricted for the benefit of a particular group. In this regard, monies flowing through these accounts are restricted to the completion of specific objectives or functions within the school. The special type of accounts consist of the following specific account groups: Departmental accounts (Art, Music); Operational accounts; and Organizational accounts (Clubs). Chart Of Accounts For Safbooks: Segment # 1 - xx 10 Revenue 20 Void 30 Expense Segment # 2 xxxx 4000 Pre-K and Kindergarten st Grade nd Grade rd Grade th Grade th Grade th Grade th Grade th Grade th Grade th Grade th Grade th Grade 5000 Event Clubs 7000 Vending Machines 9999 Other Segment # 3 xxx Segment 3 determined by each school individually Page 6

10 Procedures General: A. All monies collected by school employees and by student treasurers shall be immediately taken to the school s Principal or their designated assignee for recording and deposit. The school s Principal or their designated assignee shall issue a pre-numbered collection receipt for all monies received. The school s Principal or their designated assignee has responsibility for safeguarding undeposited receipts prior to deposit. The area where the undeposited monies are kept should be restricted to designated personnel only. Deposits should be made daily. Undeposited monies should not be left overnight in schools. B. The school s Principal has the responsibility for ensuring that the procedures for handling School Activity Funds are adhered to by students and staff. The procedures should include, but not be limited to: 1. All Faculty and Staff members are required to remit all money collected to the Principal or their designated assignee daily. 2. Proper segregation of duties should be established so that no one individual controls all aspects of a transaction. Proper documentation must be completed and submitted by the faculty or staff member remitting the money. A Receipt Summary may be used as a detailed listing of money received from individual students by the person (teacher/staff) collecting the money. The receipt summary will accompany the money, for which a prenumbered collection receipt will be issued for the aggregate amount. C. Undeposited cash receipts must never be used to make purchases, payments, or to cash checks. D. Funds collected for activities that take place after school hours must be secured in the school s locked safe. E. Deposits must be recorded on the check stub of the checkbook. A running balance must be maintained on the check stub. Cash Receipts: A. The Principal or their designated assignee must immediately prepare a pre-numbered receipt in triplicate when money is received. 1st Copy: Present to party from whom the money is received. 2nd Copy: Attach to corresponding deposit slip for recording the receipts in Safbooks. 3rd Copy: File in numerical sequence with the school s financial records. B. Each receipt must contain the following information: Name from whom the money was received; Date the funds were received; Total amount received - in numeric form; Total amount received - in alpha (written) form; Dollar amount of drafts, money orders, checks and cash for the receipt; A Receipt Summary may be used as a detailed listing of money received from individual students by the person Page 7

11 (teacher/staff) collecting the money. The receipt summary will accompany the money, for which a pre-numbered collection receipt will be issued for the aggregate amount. Description (or purpose) of the source of funds, i.e., destination of field trip, type of fundraiser, etc.; Indication of taxable revenue; Account name and number to which the funds are to be receipted and deposited; Name and signature/ initials of the person collecting the money. C. All receipts must be prepared and then posted in sequential order in Safbooks. D. Receipts must be maintained with the corresponding deposit ticket and the sum of these receipts must equal the total of the corresponding deposit. All receipts and deposits must be verified to Safbooks and reconciled to the bank statement. E. E. Receipts must not be altered. If an error occurs when completing a receipt, the word VOID must be written on the receipt. All voided receipts must be recorded, posted and maintained in numerical sequence for audit verification. F. All monies collected must be adequately safeguarded prior to deposit. The undeposited money must be kept in a locked bank bag or locked cash box in a restricted area with restricted access. Deposits: A. Cash (i.e., currency, checks, postal and express money orders, etc.) received must be properly safeguarded and deposited promptly and intact. B. Checks must be restrictively endorsed, to the credit of the school, immediately upon receipt. In this regard, a rubber stamp containing the school's name, account number, and "FOR DEPOSIT ONLY" should be utilized. C. The school s method of transporting the deposit to the bank should consider the risk of exposure to loss. If possible, the school should vary the time of the trip to the bank, the route taken, and the person making the trip. The container used to transport the deposit to the bank should be inconspicuous and changed from time to time. D. The use of the bank's night depository is sometimes necessary for prompt deposit. E. A copy of the deposit slip, authenticated by the bank, must be obtained for every deposit, verified for accuracy and retained by the school with the school s financial records. F. Undeposited collections must never be used for making payments or cashing personal and payroll checks. NSF Checks: A. The Principal or their designated assignee has the responsibility to contact the payor when a deposited check is subsequently returned by the bank because of insufficient funds on deposit. The NSF check must be accounted for by posting the check and applicable charges to the NSF account. Page 8

12 The school can charge the payor for the bank service charges and a nominal amount for expenses incurred for the collection of fees (ex. postage). B. When collection is made a receipt must be written and a separate deposit slip must be prepared reflecting the amount of the returned check and the bank service charges. This receipt must be posted to the NSF account. C. A journal voucher must be prepared if it is determined that the recovery of monies or the replacement of a returned check is not possible. This transfer of funds is posted to the school's records by the Principal or their designated assignee, after authorization by the Principal. The posting of unrecovered funds should be transferred from the original source of funds. D. An individual, independent of the cash receipts and disbursements process, should verify that all monies recorded on pre-numbered collection receipts in the receipt book were subsequently deposited the same day collected. The amounts recorded on the pre-numbered collection receipts must agree with the amounts on the validated deposits slips. The verification must be documented by signature. Disbursements: A. All expenditures must be reviewed and approved by the Principal. All expenditures are required to be supported by an approved check request form and Vendor s invoice. B. Checks must have two independent signatures from designated personnel. C. All disbursements must be made by check, except for Petty Cash transactions. D. The school must pay bills within 30 days and take discounts, if applicable. E. The school must investigate checks which have been outstanding for three months or longer. F. The check stub is the basis for maintaining the actual balance in the checkbook. G. A running balance must be maintained on the check stub. H. Undeposited cash receipts must not be used to make payments or to cash checks. I. Disbursements must be used to directly fund non instructional school activities which benefit student education and morale. J. Sales tax must not be paid on disbursements applicable to instructional or operational purposes. K. Checks should not be issued for personal use. Page 9

13 L. Pre-numbered checks imprinted with the school s name are to be used for disbursement. They should be kept in a secured place in order to prevent theft or duplication. It is preferred to use checks which are prepared with a duplicate copy. M. Checks must not be pre-signed and left blank (e.g., payee, amount, date) under any circumstances. N. Use of ATM/Debit cards is prohibited. O. Cash withdrawals are prohibited. P. Voided checks must be marked VOID, recorded in the journal and maintained in the check book for audit verification. Check Vouchers: A. CHECK VOUCHERS MUST ALWAYS BE SUPPORTED BY APPROPRIATE DOCUMENTATION, such as vendors' invoices or store receipts. Payments must not be made from vendors' statements without supporting invoices or receiving documentation. B. Check Vouchers must contain three signatures: Requesting personnel; The person receiving materials/services; and The Principal. C. Check Vouchers must contain the appropriate information: Check number; Check date; Amount of check; Payee; Account name and number debited; and Explanation of expenditure. Journal Entries: A journal entry may be used to: Record adjustments Transfer funds between accounts. Record transactions noted on the bank statement which were not previously recorded (i.e., bank service charges, miscellaneous deposits). When posting journal entries to Safbooks the debit amount must always equal the credit amount. All journal vouchers must be reviewed and approved by the Principal. All journal vouchers are required to be supported by adequate documentation and/or explanation including the signature of the Principal or their designated assignee. Page 10

14 A. JOURNAL VOUCHERS MUST BE SUPPORTED BY APPROPRIATE DOCUMENTATION AND/OR EXPLANATION. B. All journal vouchers must be approved by the school s Principal. C. All journal vouchers must be systematically numbered. The designated numbering system includes the last two digits of the fiscal year, a hyphen, followed by a sequential number (01 to the last number needed). For example, the first journal voucher for fiscal year 2009 would be and the tenth journal voucher would be D. All journal vouchers must contain the following: number of journal voucher; date of journal voucher; school name; account number debited; account name debited; amount of debit; account number credited; account name credited; amount of credit; description or explanation; signature of the Principal; and signature of the Treasurer/Business Manager. Reports: The Safbooks software is capable of generating revenue and expenditure queries based on the cash receipts and check disbursements journal entries recorded. All monthly Safbooks reports must be maintained with the school s financial records. (The Safbooks user manual explains the revenues and expenditures queries and reports.) Monthly Bank Reconciliation Report A Bank Reconciliation Report must be prepared monthly utilizing the Safbooks Software. A hard copy of the Bank reconciliation must be printed and given to the Principal for his/her review and approval. The Bank Reconciliation must be signed and dated by the preparer. Bank Reconciliation Report: The purpose of this report is to assure that all entries have been posted correctly by the bank and the school. This report also lists the outstanding checks as of the end of that month. The GRAND TOTAL on this report represents the checking account and this amount must be reconciled to the running balance in the checkbook. The General Ledger account balance must always be reconciled with the balance per the current bank statement. This must be done by the required deadline for each month. Any adjustments to the school's records as a result of this reconciliation must be made promptly. The Bank Reconciliation must be reviewed, signed and dated by the preparer ( i.e., Treasurer/Business Manager) and the Principal and maintained on file for audit. The signed Bank Reconciliation and the bank statement for the months of June and December must be sent to the office of the CFO before the end of the succeeding month. Page 11

15 Trouble Shooting Tips For Preparing The Monthly Bank Reconciliation The following is a list of reports that will assist in preparing the Bank Reconciliation. These reports can be generated from Safbooks: A. Check Register B. Revenue Detail Report C. Revenue Summary Report D. Prior month s Bank Reconciliation E. Current month Bank Statement The following processes/procedures should be followed in reconciling the bank account: 1. Verify bank charges on the current month bank statement (if any) are recorded on the current month Daily Transaction Journal in the Cash Out column. 2. Verify NSF checks on the current month bank statement (if any) are recorded on the current month Daily Transaction Journal in the Cash In column as a NEGATIVE. 3. Verify interest income on current month bank statement (if any) is recorded on the current month Daily Transaction Journal in the Cash In column. 4. Verify debit or credit memos on current month bank statement (if any) are recorded on the current month Daily Transaction Journal in the Cash Out or Cash In column, as appropriate. 5. Verify all canceled checks cleared on the bank statement for the correct amount. 6. Verify the amount written on the check cleared the bank for the same amount. If there is an error between the amount of the canceled check and the bank statement, this is a bank error and the bank must be contacted for a correction. 7. Verify the amount written on all canceled checks matches the amount posted to Safbooks. Compare the amount of each canceled check to the amount posted to Safbooks using the previous month s Bank Reconciliation and the current month s Daily Transaction Journal. 8. Verify the amount that the check was written for matches the amount it was posted for (on the previous month s Bank Reconciliation or current month s Daily Transaction Journal). 9. If there is a difference between the amount of the canceled check and the posted amount, this is a bookkeeping error. Option (a) or (b) must be used to correct the posting error: a. Previous month check (on previous month Bank Reconciliation) - An adjusting entry must be made in the Expenditure file for the difference between the posted and cleared amount. Depending on whether the check was posted over or short, option (i) or (ii) must be used to correct the posting error: i. If the amount posted to your Safbooks books is larger than the amount written on the check, the entry for the difference would be a check posted over. ii. If the amount posted to your books is less than the amount written on thecheck, the entry for the difference would be a check posted short. The difference must be posted as a POSITIVE entry to the Expenditure File. b. Current month check (on current month Daily Transaction Journal) - Go into the Expenditure File and EDIT (F2) the appropriate check posted with the wrong amount. Change the amount to the correct amount (cleared bank) in the total check amount and Page Down to change the amount in the box as well INSERT to store the changes. 10. Verify all deposits cleared the bank on the Bank Statement for the correct amount. error and the bank must be contacted for a correction. 11. Verify all deposits are posted to the Daily Transaction Journal for the correct amount. Page 12

16 12. Compare the bank s deposits to the receipts posted to the Daily Transaction Journal using the current month s daily Transaction Journal and the current month s bank statement. 13. The group of receipts for each deposit should match the deposit on the Bank Statement. Any of the receipts that have not been deposited to the bank at the end of the month should be marked on the Bank Reconciliation as a Deposit in Transit or Outstanding Deposit. 14. Any other differences in receipts on the Daily Transaction Journal and deposits on the bank statement are probably due to bookkeeping (posting) errors. To correct the bookkeeping error go into the Revenue File and EDIT (F2) the appropriate deposit and Page Down to change only the amount of the receipt(s). INSERT to store the changes. 15. Review all current month receipts to make sure they are all posted. 16. Review all current month checks to make sure they are all posted. 17. If there is an additional check within the canceled checks that was not on either the previous month s Bank Reconciliation or current month s Daily Transaction Journal, determine if this check was a voided check due to being lost/old in a previous month. If so, the lost/old check that was voided in a previous month must be posted again in the current month Expenditure File. School Activity Fund Reports and Reconciliations Principal or their designated assignee of schools that receive school activity funds must complete the school activity fund and reconciliation reports for the periods ending December 31 and June 30 of each year. for all schools that have a bank account for school activities, the Principal or their designated assignee are required to submit a school activity fund semi-annual report for the period July 1 through Dec 31 and January 1 through June 30 for each year. The required reports consist of the "SafBooks Reconciliation" and the "Bank Statement" for the required periods. These reports must be printed and signed by the Principal and submitted to the Fiscal Management section in the Office of the Chief Financial Officer, (200 E. North Ave, Rm. 403 Baltimore, MD or fax to ) within 30 days of the period ending date. All notices and changes will be conveyed through the appropriate notification method, i.e. City School Inside. Page 13

17 Glossary Account A descriptive heading under which are recorded financial transactions that are similar in terms of a given frame of reference, such as purpose, object, or source. Accountability The state of being obliged to explain one s actions, to justify what one does. Accounting System The methods and records established to identify, assemble, analyze, classify, record and report transactions and to maintain accountability for the related assets and liabilities. Account Number (Coding) A system of numbering accounts in such a manner that the symbol used quickly reveals certain required information. Assets The entire property owned by a school as a result of past transactions or events. Audit The systematic collection of the sufficient, competent evidential matter needed to attest to the fairness of management s assertions in the financial documents and financial statements, or to evaluate whether management has efficiently and effectively carried out its responsibilities. The auditor obtains this evidential matter through inspection, observation, inquiries at the site and confirmations with third parties. Audit Finding A weakness in internal controls or an instance of noncompliance with applicable laws and regulations that is presented in the audit report in conformity with Generally Accepted Governmental Auditing Standards (GAGAS) and Generally Accepted Auditing Standards (GAAS). Balance Report A monthly report prepared to determine if the mechanics of the recording and posting operations have been carried out accurately. The balance report consists of a listing of all accounts and their monthly beginning balances, monthly activity and the monthly ending balances. The account balances are then used as a basis for preparing the financial statements. Bank Charges Charges recorded by the bank against the depositor s balance for such items as bank services, printing checks, non sufficient fund (NSF) checks, etc. The depositor may not be aware of these charges until receipt of the bank statement. Bank Reconciliation A schedule prepared at the end of each month explaining any differences between the bank s and the school s records of cash. Bank Statement A copy of the bank s account with the school. Batch An accumulation of transactions which, as a group, is controlled during the input process. A batch is used only to control input and for reference. For example, receipts must be batched with their corresponding deposit. Each transaction in a batch is accounted for separately in the system. Receipts or checks may be recorded in batches to ensure numerical accountability. Page 14

18 Cash Currency, checks, postal and express money orders on hand or on deposit with an official or agent designated as custodian of cash and bank deposits. Any restrictions or limitations as to its availability should be indicated. Cash Basis A basis of accounting under which transactions are recognized only when cash is received or disbursed. Chart Of Accounts A system of assigning account names and numbers used by BCPS that indicates the purpose/nature of the account. Check A bill of exchange drawn on a bank and payable on demand. Check Voucher A document which authorizes the payment of money and indicates the account(s) to be charged. Current Practice Current industry standards accepted and applied by BCPS, but not formally adopted by the Board of Education. Daily Transaction Journal A monthly report, which is date driven, listing monthly activity posted to the financial system. The monthly activity posted to the financial system consists of receipts, disbursements and journal entries. Deficit (1) The excess of the liabilities of a fund over its assets; or (2) The excess of expenditures over revenues in an accounting period. Departmental Accounts Accounts whose funds are primarily derived from PTA donations, transfers from the General School Account and/or charges to students. Any cash balance remaining at the close of the fiscal year will remain in the individual department's account. Deposit In Transit End of month deposits of cash recorded on the depositor s books in one month which are received and recorded by the bank in the following month. Disbursements Payments made from school funds. Discretionary Account An account which consists of unrestricted funds which have been obtained from sources other than students. Examples of such funds are unrestricted donations from the PTA or the faculty. Such funds may be used for any purpose for which General School Account money is used, but, in addition, they may be used in situations where the use of the General School Account funds may be questionable, since those funds come from students. However, the expenditures must be either a direct or indirect benefit to the students. Double Entry A system of bookkeeping requiring that for every entry made to the debit side of an account or accounts, an entry or entries be made for an equal amount to the credit side of another account or accounts. Page 15

19 Expenditure A decrease in net financial resources resulting from the present or future use of net current assets. Fiscal Period Any period at the end of which the school determines its financial condition and results of its operations and closes its books. The fiscal period for all schools is July 1 through June 30. Funds A sum of money or other resources set aside for specific activities of the school. The fund accounts constitute a separate, complete entity and all of the financial transactions for the particular fund are recorded in them. Fund Balance The excess of the assets of a fund over its liabilities and reserves. Generally Accepted Accounting Principles (GAAP) Uniform minimum standards and guidelines for financial accounting and reporting. General Accounts The funds in the general type of accounts are available for any authorized purpose which will benefit the student body of the school. These accounts consist of, but are not limited to, the General School account, the Discretionary account and Field Trip accounts. All money generated by students, that is not specifically designated or restricted, must be posted to these accounts. General School Account An account which consists of unrestricted funds which have been obtained from both students and other sources. Examples of such funds are unrestricted donations from the PTA or the faculty and funds which come from students. The expenditures must be of direct benefit to the students. Internal Control A plan or organization under which employees' duties are so arranged and records and procedures so designated to insure effective accounting control over assets, liabilities, revenues, and expenditures. Procedures to be followed are definitely laid down and such procedures call for proper authorizations by designated officials for all actions to be taken. Inventory A detailed list or record showing quantities, descriptions, values, and frequently, unit prices of property on hand at a given time. A physical inventory is the actual count of the items. Investments Securities or other property held for the production of revenue in the form of interest, dividends, rentals or lease payments. Invoice An itemized statement of merchandise shipped or sent to a purchaser, consignee, etc., listing the quantity, value or prices, and charges assessed. Journal Entry The process of entering transactions, which are not a result of a cash receipt or disbursement, into the general journal. A journal voucher is required and the entry is entered into the ledger from the voucher. Page 16

20 Journal Voucher A paper or form used to authorize entries into the bookkeeping system for financial transactions for which no other authorizations, such as deposit slips, check vouchers, invoices, etc., are available. Lease PURCHASE AGREEMENT Contractual agreements that is termed a lease, but in substance is a purchase contract. Loss Decrease in equity (net assets) from transactions of an entity and from all other events and circumstances affecting the entity during a period. NSF Check (Non Sufficient Funds) Check Receipted To School Activity Funds (From Student, Parent, Teacher, Outside Organization, Etc.) That Has Been Returned Because Funds Are Not Available From That Individual s Bank Account. Refer To The Appropriate Procedures For Recording And Collecting NSF Checks. Operational Funds Funds that are restricted for the benefit of a particular group or activity. These funds are primarily derived from charges of user fees, fund raisers and/or sales of supplies and materials. Any fund balance remaining at the close of the fiscal year must be transferred to the General School Account, after payment of outstanding bills. Organizational Funds Funds that are restricted for the benefit of a particular group or activity. These funds are primarily derived from PTA donations, fund raising projects, dues and/or admission fees. Any fund balance remaining at the close of the fiscal year will remain in the individual organization s account, unless otherwise specified. Outstanding Checks Checks written by the depositor are recorded when written, but may not be recorded ( cleared ) by the bank. Oversight Responsibility Includes, but is not limited to, delegation of authority, designation of management tasks, ability to significantly influence operations and accountability for fiscal matters. Post Date The month and day an accounting transaction is actually posted to the system s files. Posting The act of transferring to an account in a ledger the data, either detailed or summarized, contained in a book or document of original entry. Profit An excess of revenues over expenditures. Receipts This term, unless otherwise qualified, means actual cash received, regardless of its nature. Reconciliation Process of explaining, usually with the preparation of a schedule, the differences in financial balances. Reimbursements Repayments of amounts remitted on behalf of another party. Page 17