School Financial Leadership Study Guide PDF 2024

1 School Financial Leadership D023 Study Guide for the Objective Assessment Unit 1 – Introduction – N/A Unit 2 – School Funding Source Module 1: Public Funding Vocabulary: - Finance- the management of...

1 School Financial Leadership D023 Study Guide for the Objective Assessment Unit 1 – Introduction – N/A Unit 2 – School Funding Source Module 1: Public Funding Vocabulary: - Finance- the management of large amounts of money, especially by governments or large companies.: "the firm's finance department". - Funding- money provided, especially by an organization or government, for a particular purpose - Enrollment- The action of enrolling or being enrolled - Revenues- income, especially when of a company or organization and of a substantial nature - Expenditures- the action of spending funds - Reauthorization- the act of giving something or someone official permission to do something again, or renewing the authority, legal power, or right of something - Allocation- the action or process of allocating or distributing something. - Taxation- the levying of tax - Mill levy- The mill levy is the "tax rate" that is applied to the assessed value of a property. - Bonding- Bonds can be issued by companies or governments and generally pay a stated interest rate.  2 -The market value of a bond changes over time as it becomes more or less attractive to potential buyers. -Bonds that are higher quality (more likely to be paid on time) generally offer lower interest rates. -Bonds that have shorter maturities (length until full repayment) tend to offer lower interest rates. - Equitable- fair and impartial - Disparity- the difference in level or treatment, especially one that is seen as unfair - Fairness- impartial and just treatment or behavior without favoritism or discrimination - Yield- produce or provide Content: 1. Historical progression of school finance a. Emphasis on Local Responsibility i. The period of local district financial responsibility, with little or no assistance from the state ii. used to be local or church iii. rate bills or tuition iv. problem in equity b. Early Grants and Allocations i. The period of emerging state responsibility, with the use of flat grants, subventions, and other non-equalizing state allocations to local districts  3 ii. state to supplement local tax revenues to provide acceptable programs c. Emergence of the Foundation Program Concept i. The emergence of the Strayer-Haig concept of a foundation program (minimum program) ii. -Each local district would levy the amount of local tax that was required in the richest district of the state to provide a foundation, or minimum, program. The rich district would receive no state funds; the other districts would receive state funds necessary to provide the foundation program. d. Refinement of the Foundation Program Concept i. The period of refinement of the foundation program concept ii. -use of flat grants iii. -question to take money from wealthy districts to equalize e. Power Equalization i. "Power" or "open-end" (shared costs) equalization practices ii. 20th century f. Shift of Emphasis and Influence, and Special Needs Funding i. The shift of emphasis and influence, and funding for special need ii. economic factors influenced (wars, terrorist attacks, natural disasters, fluctuating prices in energy, had to rethink budget and safety of schools g. Focus on Adequacy  4 i. A focus on adequacy in education finance ii. -court cases iii. -sufficient funding is needed to meet state laws, standards, and requirements, and must be constitutionally enforceable iv. -CCSS 2. Financial disparity- Income inequality is a leading cause of inequality in societies, and it can have a significant impact on education: a. Access to education i. Students from lower-income families may have limited access to quality education. For example, only about 51% of lower-income students enroll in college compared to 89% of students from well-off families. b. Quality of education i. Students from lower-income backgrounds may receive a lower-quality education due to limited resources. This can include fewer qualified educators or inadequate school facilities. c. Socioeconomic gap i. High-income families often provide their children with better educational opportunities, such as private schools, advanced tutoring sessions, and specialized educational services. d. Earnings gap  5 i. The earnings gap between workers with a Bachelor's or more advanced degree and workers with a high school diploma has been widening. e. Intergenerational inequality i. Children of the rich are more likely to do better in school and attend the best colleges. f. Income inequality is a complex issue that can be impacted by many factors, including education, gender, race, and region. 3. Sources of Funding a. Federal i. The federal government's contribution to education funding is about 8% of the total budget for public schools. The remaining balance is funded by state and local governments. ii. The federal government's contribution to education funding has increased in recent years. In 2022, federal funds made up about 14% of total education funding, which was double the amount from 2019. b. State i. State governments use formulas to distribute funds to school districts. These funds are used to cover basic education costs, such as teacher salaries and instructional materials. c. Local  6 i. Local taxes, such as property taxes, generate the bulk of school funding. 4. ESEA/ESSA – what, when, historical progress, etc. i. What – Elementary & Secondary Education Act. Contains 8 Titles. ii. When – Passed in 1965 and reauthorized in 2015. 1. A major piece of federal legislation that provides federal direction to education and federal funds for schools, first passed in 1965. 2. Replaced no child left behind act 3. Ensures opportunity for all students Who is served and for what purpose? b. Title I – i. authorized federal aid to local school districts for the education of disadvantaged and low-income children for supplementary education and related services. ii. -four separate formulas that distribute funds to states and local school districts: Basic, Concentration, Targeted, and Education Finance Incentive Grant (EFIG) iii. -held accountable (Highly qualified teachers, CCSS, performance/assessment standards) c. Obama-student gain scores i. Title I – A: Improving Basic Programs Operated by Local Educational Agencies  7 ii. Title I – B: provides funding for state assessments iii. Title I – C: authorization for the Migrant Education Program (MEP). The MEP's goal is to help migratory children graduate high school and meet academic standards while reducing the impact of educational disruptions iv. Title I – D: a federal program that provides funds to improve educational services for children and youth who are neglected, delinquent, or at-risk d. Title II- Preparing, Training, and Recruiting High-Quality Teachers, Principals, and Other School Leaders e. Title III- Language Instruction for English Learners and Immigrant Students f. Title IV- 21st Century Skills 5. IDEA a. Part B- the section of the law that governs how special education and related services are provided to school-aged children with disabilities b. Part C- Infants and Toddlers with Disabilities c. Part D- National Activities to Improve Education of Children with Disabilities 6. Race to the Top a. Race to the Top was a federal program that offered funding to schools in a competitive manner based on their efforts to increase rigor and conformity to the priorities of the program.  8 7. Carl D Perkins Career and Technical Education Act a. a federal law that aims to improve career and technical education programs 8. Payments in Lieu of Taxes a. Amounts paid by one government in place of property taxes they are not required to pay. Generally occurs when a jurisdiction contains a substantial amount of facilities of other governments; for example, when the federal government makes payments to a local school district in lieu of property taxes it would be required to pay on a military base within the district if federal property were not tax-exempt. 9. Activity funds a. What are activity funds? Activity funds are established to direct and account for monies used to support cocurricular and extracurricular student activities. i. cocurricular activities are any kinds of school-related activities outside the regular classroom that directly add value to the formal or stated curriculum. Cocurricular activities involve a wide range of student clubs and organizations. ii. Extracurricular activities encompass a wide variety of other district-directed activities, typified by organized sports and other nonacademic interscholastic competitions b. Where do they come from? Government Accounting Standard Board c. How are they processed? How are they used?  9 i. School activity funds are processed in a variety of ways, including: 1. Approval: The school board approves the establishment of each activity fund. The school board also determines how the funds are spent and which programs receive support. 2. Collection: Funds are often collected through cash. 3. Accounting: Activity funds are accounted for on the same fiscal year basis as other school district funds. 4. Auditing: Activity funds are subject to internal and external audits. 5. Checks: Pre-numbered checks are used to disburse funds from the activity fund checking accounts. 6. Purchase orders: A campus administrator must pre-approve purchase orders before the school can obligate itself. 7. Travel authorization: A teacher, coach, or other responsible party must request travel authorization and funding in advance. The principal or superintendent must approve the request. 8. Inventory: Inventory that is not saleable should be returned to the vendor for credit, sold at a reduced price, or disposed of as determined by the principal. 9. Clearing funds: Clearing funds are used to record transactions for programs that the school is accountable for,  10 but does not own the money in. All money received in the fund during the year must be paid out during the year. ii. The school's principal is usually responsible for all student activity funds within the school. 10. Capital funding a. What are capital funds? i. funding used to expand or renovate a building, purchase major equipment or construct a new facility b. Where do they come from? 1. pay as you go 2. building reserve fund 3. bonding c. How are they used? i. for infrastructure 11. Bonding a. What is a bond? i. Most common ii. Complicated with lawyers and accountants iii. District has a credit rating iv. "Like a mortgage" v. This leads to inequities in that wealthy schools can get low-interest bonds, and low-income schools get high-interest bonds b. What is it used to fund?  11 i. Issue bonds to pay for buildings c. How? i. Take the revenue from the bonds and build the building and then the people who invested will get the money back with interest on it d. Why would a district need a bond? i. to raise money for capital projects, such as building new schools, renovating existing schools, and buying materials, textbooks, and computers. 12. Taxation systems – overview: a. Tax Base: The tax base is the taxable value of the items or objects being taxed. The major tax bases include property, income, sales, and privilege. b. Tax Rate: The tax rate is the tax price applied to the base or item being taxed. c. Tax Yield: The tax yield is the levy or amount of revenue that is raised from taxing. 13. Income Tax: Individual income is derived from salaries, dividends, sale of assets, interest, and gains. There are both individual and corporate income taxes. An advantage of using income as a measure of economic well-being is that it can be measured and taxed over a specific period of time. 14. Property Tax: a. levied against the owner of real or personal property for individuals and businesses.  12 b. -Real property is not readily movable; it includes land, buildings, and improvements. It is usually classified as residential, industrial, agricultural, commercial, or unused (vacant). c. -Personal property is movable; it consists of tangibles (such as machinery, livestock, crops, automobiles, jewelry, and recreational vehicles) and intangibles (such as money, stocks, and bonds) d. -first kind of tax used in schools; still the most common 15. Sales Tax- a levy imposed on the selling price of certain goods and services. It is generally applied at the retail level rather than on wholesale operations. If food and other necessities are subject to a sales tax, the tax becomes regressive (taking more from those with less income). The sales tax is used most often at the state level of government although it is sometimes applied at the county and city levels. It produces large amounts of revenue and is one of the most transparent ways to collect taxes, but its use without exclusion of necessary goods and services tends to overburden poor families.; largest single state tax source; ⅓ of all state revenue 16. Excise Tax- a tax on the production or sale of a good i. tobacco and alcohol 17. Severance Tax- taxes on the separation of natural resources from their environment. 18. Other Funding a. Lotteries- a large-scale gambling game organized to raise money for a public cause  13 b. Private Foundations- To provide tax benefits for donors, most of these foundations have been established as nonprofit corporations under Internal Revenue Service section 501(c). In so doing, they are required to become separate entities with separate boards and out of the jurisdiction of local boards of education. True to their purpose, most of the foundations provide support to educational endeavors. c. School-Business Partnerships- mutually beneficial agreements between schools and businesses to improve the education experience for students. They can involve a variety of activities and resources and can be established between a single school and business, or between multiple agencies. 19. Federalism and the Historical Role of the Federal Government a. US Department of Education i. Cabinet-level statues in 1979. ii. Headed by a secretary appointed by the president and approved by the Senate. b. US Constitutional Role- However, the 10th Amendment reserves the power to govern education to the states. States and local districts are primarily responsible for education, including establishing schools and colleges, developing curricula, and determining enrollment and graduation requirements. c. Block Grants- given from the federal government to state and local governments for broad programs. Their use could be identified for  14 education or to fight poverty, for example. Then, the state and local governments determine how to use the funds. d. Categorical Aid- money granted by the federal government to state and local governments, with strict limitations on how it is to be spent. The money can only be received if the state or local government complies with certain regulations. e. General Aid- A generic classification used by the GASB to refer to all funds other than proprietary and fiduciary funds. The General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds are the types of funds referred to as governmental funds. f. ESEA (ESEA, NCLB, ESSA)- The Every Student Succeeds Act (ESSA) replaced the NCLB and reauthorized the ESEA. ESSA's main goal is to ensure that public schools provide a good education and are accountable for student learning and success. g. IDEA- The Individuals with Disabilities Education Act is a piece of American legislation that ensures students with a disability are provided with a Free Appropriate Public Education that is tailored to their individual needs. h. Race to Top- a federal program that offered funding to schools in a competitive manner based on their efforts to increase rigor and conformity to the priorities of the program. i. Carl D Perkins Career and Technical Education Act- CTE  15 j. Payments in Lieu of Taxes- Amounts paid by one government in place of property taxes they are not required to pay. Generally occurs when a jurisdiction contains a substantial amount of facilities of other governments; for example, when the federal government makes payments to a local school district in lieu of property taxes it would be required to pay on a military base within the district if federal property were not tax-exempt. 20. Local Control – current, erosion, and impacts 21. Funding Formulas – types, how calculated, compare/contrast a. Foundation Grants- Most Popular b. Guaranteed Tax Base (Power Equalization)- the state revenue source used to equalize property tax bases across districts by supplementing BASE tax levy dollars to ensure all districts meet BASE funding levels. c. Centralized School Finance (FTE)- Often misunderstood to mean Full-Time Employees, in school finance FTE stands for Full-Time Equivalent. Regarding the people employed at a district, it is the ratio of a person works out of the 40 possible hours in a workweek. Someone working 60 hours a week would be 1.5 FTE, and someone working 10 hours a week would be.25 FTE. In higher education, FTE relates to a student’s class load, where full-time maybe 14 hours of classwork per week and a student enrolled ½ time would be considered.5 FTE. 22. Educational Choice  16 a. Open Enrollment- This option allows parents to send their children to a public school within their school district. Interdistrict open enrollment allows parents to send their children to a public school of their choice in surrounding school districts. b. Magnet Schools- Public schools that focus on particular disciplines or areas, such as fine arts or science c. Dual/Concurrent Enrollment- Both dual enrollment and concurrent enrollment provide the chance to earn college credit while in high school, bypassing otherwise required course or degree requirements (specific requirements vary by institution) d. Charter Schools- Charter schools are funded in a variety of means depending upon the state they are located in, how they are chartered, and how they are managed. Funding sources for charter schools may include, but are not limited to, public dollars through district support, grants, loans, donations, tuition, or federal funding. e. Vouchers- Also known as school vouchers, they are government educational funds that are given directly to public school students (vs. to the school, school district, or larger administrative body) so that students using these vouchers may attend the schools of their choice, public or private, instead of the public school for which they are zoned. f. Tax Credits and deductions- Parents are allowed a tax credit to offset some expenses incurred by sending their child to a private school. Other tax credits and deductions allow individuals and corporations to redirect  17 tax dollars to scholarship-granting organizations, which in turn redistribute these contributions to students in the form of private school scholarships. g. Home Schooling- as instruction primarily received in the home or family unit, directed by the parent, without government funding. 23. Charter Schools 24. Home Schooling 25. Education Vouchers 26. Tax Credits Module 2: Alternative Funding Vocabulary - Nontraditional o 1. fees and user charges (school lunch, textbook rentals, transportation passes) o 2.gaming revenues o 3. private resources (grants, gifts, donations) o 4. changing public school structure (charter) o 5. tax expenditures - Equity- the state or quality of being just, fair, or impartial; fair and equal treatment; something that is fair; the money value of a property above and beyond any mortgage or other claim - Grants-  18 o the state or quality of being just, fair, or impartial; fair and equal treatment; something that is fair; the money value of a property above and beyond any mortgage or other claim o Pre-Award Phase - Funding Opportunities and Application Review o Award Phase - Award Decisions and Notifications o Post Award - Implementation, Reporting, and Closeout Content: 1. Nontraditional sources of funding 2. Types of Grants a. Flat Grants- i. These grants usually delivered a uniform amount of funds per pupil, funds per teacher, or percentage grants. They were provided as a form of relief to local taxpayers, with no real intent of providing equalization. b. Equalizing Grants i. Equalization grants are financial transfers between governments to help reduce disparities in public service quality and fiscal capacity. These grants are intended to address imbalances that can arise due to differences in wealth, population, and cost of service provision. c. Block Grants i. Block grants are federal funds earmarked for specific state or local programs.  19 ii. A block grant is supported by federal funds but administered by state or local governments, the thought being local authorities are better suited to handle local issues. iii. Such programs are often meant to improve social welfare programs. iv. Most block grants, therefore, support public housing, health, or other social services. v. Opponents of block grants claim that they are a waste of taxpayer dollars and are often misspent. d. Categorical Grants i. A categorical grant is a sum of money given by the federal government to state and local governments for specific purposes, with strict guidelines on how to spend it ii. Categorical grants differ from block grants, which can be used for more general purposes and are not subject to as many administrative conditions or oversight. iii. Categorical grants are also known as conditional grants. They can be a way for the federal government to influence state and local governments by offering money in exchange for compliance with their requirements. e. General Aid  20 i. state aid which may be used by the recipient district in financing the general educational programs of the district. Its use is not limited to any specific program, purpose or target population. f. Land Grants i. Purpose ii. Land grants were established to provide practical education to the working class, including farmers and engineers. The goal was to improve the skills of the common man and contribute to economic development. iii. History iv. The first Morrill Act of 1862 granted federal land to states to establish public institutions. The states sold the land to raise funds for the institutions. The Equity in Educational Land-Grant Status Act of 1994 granted land grant status to tribal colleges and universities. v. Institutions vi. There are more than 70 land-grant institutions in the United States. Some well-known land-grant schools include Cornell University, Purdue University, Ohio State University, and the University of Illinois. vii. Mission viii. Land-grant institutions have a threefold mission: ix. Provide access to higher education x. Cultivate practical fields like agriculture and engineering  21 xi. Contribute to economic development xii. Services xiii. Land-grant institutions also provide community extension services, such as the Cooperative Extension Service, which partners with the U.S. Department of Agriculture to share research results. 3. Grant lifecycles a. Application i. Pre Award: The first grant stage begins when funders establish and develop a funding program and announce funding opportunities. From there, they’ll advertise their grant awards to invite proposals from communities that align with their mission. For grantmakers, the pre-award stage involves creating clear guidelines for applications and collecting and reviewing applications. b. Receiving/Award i. In the next phase of the grant lifecycle, grantors and funding agencies will decide which organizations receive the awards and provide the funds through three primary steps: ii. iii. Notification: Grantmakers will notify all applications of whether their applications have been approved. If your organization receives the grant, you’ll move on to the next steps in the process. iv. Grant agreement document: Before your agency receives any funds for your new program or project, you must work with the  22 grantor to clearly outline the legal terms and conditions of your agreement and finalize the award with both parties signing the document. It’s wise to have legal counsel review the details of the agreement to ensure your agency has the bandwidth to meet expectations, including all deadlines, activities, and deliverables. v. Distribution of funds: Once you and the grantor have completed and signed the agreement, your organization will receive the funds. From the moment the grantor disburses the funds, it’s necessary to start tracking your spending and any other details that correspond with your grant agreement. c. Spending of Funds i. The post-award stage is the longest of the three grant lifecycle stages. After distributing the award, the funder will ensure compliance with the agreed terms through reporting or periodic audits, interviews and visits. Remember that every grant and granting agency will handle the post-award stage differently, but it’s best to always be prepared by properly tracking your budget, providing proof of how your agency uses the funds and staying on track with obligations. d. Audit- i. Audits are a key part of the grant management life cycle, along with final reporting. The grant management life cycle has three main stages: pre-award, award, and post-award.  23 ii. To prepare for audits and final reporting, grant administrators should: iii. Keep detailed records of all project activities, spending, and outcomes iv. Be ready to show how the project was successful and how grant funds were used effectively 4. Other Funding a. Lotteries- i. a large-scale gambling game organized to raise money for a public cause b. Private Foundations i. Most of these foundations have been established as nonprofit corporations under Internal Revenue Service section 501(c) to provide tax benefits for donors. In doing so, they are required to become separate entities with separate boards and out of the jurisdiction of local boards of education. True to their purpose, most of the foundations support educational endeavors. c. School-Business Partnerships i. School-business partnerships are collaborative agreements between schools and businesses that can benefit both parties: ii. Benefits for schools 1. Schools can gain access to resources like funding, materials, mentorship, and real-world experiences. Students  24 can learn about careers, and teachers can gain new experiences to incorporate into their teaching. 5. Fundraising- a. School fundraising is a way to raise money to support a school's budget and provide resources for students. Funds are used to cover a variety of needs, including supplies and equipment, enrichment programs, extracurricular activities, and scholarships. Module 3 – Contemporary Issues of School Vocabulary: - Equity- In finance, equity is the value of an owner's interest in a property after subtracting debts, such as mortgages. It can also refer to common stock in a corporation. To calculate a company's shareholder equity, subtract the total liabilities from the total assets - Inequity- can result in a lack of opportunities for better standards of living and stable financial futures, and political and social upheavals. - Mill (millage)- A way property tax is often expressed in which the number of mills, or thousandths of a dollar, are charged per $1000 of assessed value. - Assessed Valuation- the dollar value assigned to a home or other piece of real estate for property tax purposes. It takes into account the value of comparable properties in the area, among other factors. In many cases, the assessed value is calculated as a percentage of the fair market value of the property. - Socio-Economic Status (SES)  25 o a multidimensional construct that describes a person's economic and sociological standing. It's based on a number of factors, including: income, education, employment status, occupational prestige, and subjective perceptions of social status and social class. o SES is a consistent predictor of a wide range of outcomes, including health, and is often described as low, medium, or high. People with lower SES tend to have less access to resources, which can lead to poorer health outcomes. o SES can be measured at different levels, such as the individual, community, or societal level. For example, to measure how a new policy affects poverty, researchers might look at the number of people living below the federal poverty threshold before and after the policy takes effect. o While SES is a useful tool for defining and measuring societal challenges, there is no agreed upon definition of SES. Content: 1. Funding Inequity- Funding inequity, also known as funding disparities, is when different educational institutions receive unequal amounts of financial resources. This can lead to significant differences in the quality of education and resources available to students. 2. Equity- equity is an ownership interest in property that may be offset by debts or other liabilities. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets owned.  26 3. Assessed Valuation per Pupil- Assessed valuation per pupil, also known as the foundation figure or per-pupil allotment, is the amount of money a state estimates is needed to educate a child without special needs for one year. The General Assembly assigns this dollar figure. 4. Assessed Valuation per Capita- Assessed value takes into account the overall quality and condition of the property, local property values, square footage, home features, and market conditions. Many of these factors are derived from real estate data for the property's neighborhood and the surrounding area. 5. Income Tax- Individual income is derived from salaries, dividends, sale of assets, interest, and gains. There are both individual and corporate income taxes. An advantage of using income as a measure of economic well-being is that it can be measured and taxed over a specific period. 6. Wealth Tax- A wealth tax is a tax on an entity's holdings of assets or an entity's net worth. This includes the total value of personal assets, including cash, bank deposits, real estate, assets in insurance and pension plans, ownership of unincorporated businesses, financial securities, and personal trusts. 7. Types of School Choice a. Education Savings Accounts- Education savings accounts give families access to public per-pupil funds so they can use them to pay for tuition to private schools, homeschooling supplies, curriculum materials, and educational therapy services. b. School Vouchers- Also known as school vouchers, they are government educational funds that are given directly to public school students (vs. to  27 the school, school district, or larger administrative body) so that students using these vouchers may attend the schools of their choice, public or private, instead of the public school for which they are zoned. c. Tax-Credit Education Savings Accounts- Tax-credit ESAs allow taxpayers to receive full or partial tax credits when they donate to nonprofit organizations that fund and manage parent-directed K-12 education savings accounts. Families may use those funds to pay for multiple education-related expenses, including private school tuition and fees, online learning programs, private tutoring, community college costs, higher education expenses and other approved customized learning services and materials, and roll over unused funds from year to year to save for future educational expenses. d. Tax-Credit Scholarships- These programs incentivize individuals and businesses to donate to nonprofit organizations that provide private school scholarships to eligible students. In exchange for their donations, donors receive a tax credit from the state—ideally a 100%, dollar-for-dollar credit. e. Individual Tax Credits and Deductions- i. Individual tax credits and deductions allow parents to receive state income tax relief for approved educational expenses, which can include private school tuition, books, supplies, computers, tutors and transportation. f. Charter Schools- Charter schools are funded in a variety of means depending upon the state they are located in, how they are chartered, and  28 how they are managed. Funding sources for charter schools may include, but are not limited to, public dollars through district support, grants, loans, donations, tuition, or federal funding. g. Magnet Schools- Public schools that focus on particular disciplines or areas, such as fine arts or science h. Inter/Intra-District Public School Choice- referred to as open enrollment, inter- and intra-district choice laws allow families to choose traditional public schools other than the ones the government assigned based on their ZIP Codes. i. Homeschooling- an alternative form of education for children outside of public or private schools, typically within their own homes. j. Hybrid Homeschooling- an educational model where students split their time between homeschooling and a traditional classroom setting. k. Online Learning- allows students to work with their curriculum and teachers over the internet—in combination with, or in place of, traditional classroom learning. Online schools can be public or private. i. Families may also use some educational choice options, such as ESAs and vouchers, to pay for online and virtual schooling. l. Microschooling- is the reimagining of the one-room schoolhouse, where class sizes are usually fewer than 15 students of varying ages, and the schedule and curriculum is tailored to fit the needs of each class. m. Town Tuition- allows students who live in towns that don’t have district public schools to receive their per-pupil education tax dollars to pay tuition  29 at a neighboring town’s public school or a private school of their choice—sometimes even across state lines for families who live close to state borders. i. This type of school choice functions much like a school voucher, and only a handful of rural states in the Northeast use it. n. Personal Learning and Learning Pods i. unique to every child. As an example, some students might use ESA or course choice programs to mix courses from public schools with privately tutored classes at home, online courses, special education therapies, and a work-study internship. ii. Some families have formed pods where small groups of children are taught a tailored curriculum at home by parents, tutors or hired teachers. iii. For some, learning pods can be used to supplement their public school education, too. The possibilities are endless, especially as new innovations in learning continue to emerge. 8. Education Vouchers- Vouchers give parents the freedom to choose a private school for their children, using all or part of the public funding set aside for their children’s education. a. Under such a program, funds typically expended by a school district would be allocated to a participating family in the form of a voucher to pay partial or full tuition for their child’s private school, including both religious and non-religious options.  30 9. Tax Credits a. An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. Unit 3 – Module 4 – The Budgetary Process Vocabulary: - Budget- The process through which annual federal spending and revenue determinations are made. - Liabilities- Amounts owed to creditors/others. owed on loans, accounts payable, wages, taxes, and other debts - Assets- Anything of value that is owned include concrete items such as cash, inventory and property and equipment owned, as well as marketable securities (investments), prepaid expenses and money owed to you (accounts receivable) from payers. - Expenditures- an expense; the amount needed to be paid out - Revenues- income, especially when of a company or organization and of a substantial nature. - Fund Financial Statement- A fund financial statement (FFS) is a series of statements that provide detailed information about a government's funds: o Major funds: Reported individually o Non-major funds: Reported in the aggregate  31 o Fiduciary funds: Financial information is reported o FFS are used to report information about a government's primary government, including its blended component units. - Balance Sheet- A financial statement that reports assets, liabilities, and owner's equity on a specific date. Content: 1. Budgetary Process a. 1. Tentative budget prepared and presented to the Board b. 2. Tentative budget accepted and put on public display c. 3. Summaries of tentative budget prepared d. 4. Budget revisions made e. 5. Superintendent and Board prepared for a budget hearing f. 6. Board formally passes that budget g. 7. Budget submitted to the state department of education h. 8. The budget takes effect on 1st day of the fiscal year i. 9. Budget is evaluated (including budget amount vs. actual amount) 2. Components of a Budget -A budget in education can include many components, including: a. Funding sources: These can include state and federal funding, local property taxes, private contributions, grants, and donations. b. Goals and priorities: These should align with the school's vision, purpose, and strategic plans.  32 c. Forecasted revenue and expenses: This includes estimating income from tuition, grants, donations, and government funding. d. Resource allocation: This involves allocating resources to the most important areas while eliminating waste. e. Monitoring and adjustment: The budget should be monitored and adjusted as needed. f. Internal controls: These ensure that appropriations and expenditures comply with caps. g. A strong budget is important for ensuring the success of an educational program, school, or district. It can help educators, administrators, and stakeholders make informed decisions and advance their mission. 3. Liabilities v Assets a. Assets are things that a company owns or controls, while liabilities are what a company owes to others: i. Assets- Tangible or intangible things that add value to a company. Examples include equipment, inventory, computers, and vehicles. ii. Liabilities- What a company owes to others, such as loans, tax obligations, and accounts payable. Liabilities can also be legal or regulatory risks or obligations. 4. Types of Budgets a. Line-Item Budgeting- Line-item budgeting is the most common approach used in schools because of its simplicity and focus on control. With this strategy, the budget is developed based on historical expenditures and  33 revenue data. Funding is determined by the previous year's allocation, with possible adjustments for inflation, enrollment fluctuations, cutbacks, and other similar influences. The line-item categories of revenues and expenses are mutually exclusive; revenue and expense items must fit into only one category and be submitted for approval. i. Easy to prepare, organized, less flexible, does not consider outcome of school goals b. Performance Budgeting i. budgeting that takes into account the outcomes of government programs c. Program and Planning Budget Systems i. budget requests are summarized in terms of a few broad programs rather than in the intricate detail of line-item expenditures. For educational budgeting purposes, the chief thrust is on identifying the fundamental objectives of the school and then relating all program expenditures back to these objectives. This conceptual framework includes the practices of explicitly projecting the long-term costs of programs and evaluating different program alternatives that may be used to reach long-term goals and objectives. d. Zero-Based Budgeting  34 i. Assume you're starting from scratch when budgeting. Each expenditure must be justified in terms of the new goals and action plans. 1. -bottom up 2. -involvement of faculty and staff 3. -use every few years e. Site-Based Budgeting i. The superintendent gives you "X" amount of $. Principals work with stakeholders and might even break up departments give them $ amounts and tell them to create their own budgets. Takes less time and decisions put into stakeholder hands. f. Outcome-Focused Budgeting i. has become increasingly more outcome-focused as a result of the No Child Left Behind Act and subsequent ESEA waiver requirements. In addition, competition for limited resources has created the need to ensure a more effective and efficient use of resources at all levels of the educational system. Similar to the PPB method, the outcome-focused budgeting approach links the allocation of resources to outcomes, assigning resources to those programs or activities that best meet the school's goals and objectives. g. TQM Budgeting  35 i. a management philosophy that focuses on satisfying customers through empowering employees to be an active part of continuous quality improvement 5. Best Practices in School Budgeting- a. to maintain often, align priorities and resources with performance goals 6. Activity Funds a. Activity funds are established to direct and account for monies used to support cocurricular and extracurricular student activities. i. -cocurricular activities are any kinds of school-related activities outside the regular classroom that directly add value to the formal or stated curriculum. Cocurricular activities involve a wide range of student clubs and organizations. ii. -Extracurricular activities encompass a wide variety of other district-directed activities, typified by organized sports and other nonacademic interscholastic competitions. 7. Expenditures v Revenues v Programs 8. Codes: Fund, Function, and Object – what are budget codes? a. t is helpful to be able to track an individual expenditure by all three of these methods—object, function, and program, and in the future perhaps by educational strategy at the school level. In addition, it is often helpful to track expenditures by the location where the expenditure is made. Locations usually include the schools in the district, the central office, and other areas and subareas as determined by the district.  36 i. Hundreds- object codes ii. Thousands- function codes 9. Strategic Budget Planning – what and why? a. Strategic budgeting is a long-term financial planning process that helps organizations achieve their goals by aligning their budgets with their strategic initiatives: b. Goal-oriented i. Strategic budgets are based on an organization's long-term goals and objectives, rather than just the current fiscal year. c. Forward-looking i. Strategic budgeting involves forecasting future financial needs and allocating resources to meet them. d. Resourceful i. Strategic budgets help organizations prioritize investments and optimize cash flow. e. Adaptable i. Strategic budgets can be adjusted in real-time based on up-to-date data Unit 4 – Module 5 – School Accounting and Applications Vocabulary: - Accounting  37 o the process of consolidating financial information to make it clear and understandable for all stakeholders and shareholders. The main goal of accounting is to accurately record and report an organization's financial performance. - Balance Sheet o Assets = Liabilities + Owner's Equity - Budget o an estimate of income and expenditure for a set period of time - Asset o Anything of value that is owned ▪ -include concrete items such as cash, inventory and property and equipment owned, as well as marketable securities (investments), prepaid expenses and money owed to you (accounts receivable) from payers. - Liability o Finance: moneys owed; debts or pecuniary obligations ( assets ). o Accounting: liabilities as detailed on a balance sheet, especially in relation to assets and capital. - Liquidity o the ease with which an asset, or security, can be converted into ready cash without affecting its market price. Cash is the most liquid of assets, while tangible items are less liquid. The two main types of liquidity are market liquidity and accounting liquidity.  38 - Expenditure o the act of spending or using money; an amount of money spent Content: 1. Types of funds a. Governmental Funds i. General 1. General fund refers to revenues accruing to the state from taxes, fees, interest earnings, and other sources which can be used for the general operation of state government. ii. Special Revenue 1. Special revenue funds are established by a government to collect money that must be used for a specific project. 2. Municipalities generally budget money into a general fund, capital fund, "rainy day" fund, and special revenue fund. iii. Debt Service funds 1. provided to account for the revenues, other financing sources, other financing uses, and the related expenditures for long-term debt. This includes accounting for bond principal, interest, and other debt-related expenditures. iv. Capital Projects funds 1. used to account for the financial resources used for the acquisition or construction of major state-owned capital  39 facilities and for capital assistance grants to local governments and public authorities. b. Proprietary Funds i. Sometimes referred to as income-determination, business-like, or commercial-type funds of a state or local government. Examples are enterprise funds and internal service funds. c. Fiduciary Funds i. The trust and agency funds used to account for assets held by a government unit in a trustee capacity or as an agent for individuals, private organizations, other government units, or other funds. 2. Types of accounting – what, why, compare/contrast a. Encumbrance Accounting i. Most common, created to ensure we don't spend same money twice b/c of a delay 1. (a) encumbrances outstanding at year-end should be disclosed in the notes to the financial statements or by reservation of fund balance and (b) the subsequent year's appropriations should provide authority to complete these transactions. 2. Where appropriations do not lapse at year-end, or only unencumbered appropriations lapse, encumbrances outstanding at year-end should be reported as reservations  40 of fund balance for subsequent-year expenditures based on the encumbered appropriation authority carried over. b. Cost Accounting i. Cost accounting has two primary values: (1) It provides information for in-school choices and decisions in the expenditure of funds and (2) costs for the same services can be compared with those of other schools. c. Accrual Accounting i. the method of accounting that recognizes revenue when it is earned and matches expenses to the revenues they helped produce 1. -less common, happens at district level 2. -only used with things like school store 3. Object Codes – what, how used, why a. It is helpful to be able to track an individual expenditure by all three of these methods—object, function, and program, and in the future perhaps by educational strategy at the school level. In addition, it is often helpful to track expenditures by the location where the expenditure is made. Locations usually include the schools in the district, the central office, and other areas and subareas as determined by the district. i. Hundreds- object codes ii. Thousands- function codes  41 4. Governmental Accounting Standards Board (GASB) – what, when, and responsibilities/impacts a. creates accounting handbook b. The GASB’s mission is to establish and improve governmental accounting and financial reporting standards that provide the public with the information it needs to make decisions assess accountability and educate stakeholders about those standards. Setting high-quality standards requires the input and involvement of the GASB’s diverse stakeholders. 5. Comprehensive Annual Financial Report – what and why? a. a collection of financial statements for a government entity, such as a state or municipality. It provides a detailed overview of the entity's financial health, including its balance sheet, expenditures, and revenues. The ACFR is prepared in accordance with the Governmental Accounting Standards Board's (GASB) accounting requirements and audited by an independent auditor. 6. Balance Sheets – what and how to read a. NOTE: Be able to interpret data from a balance sheet – See Sample Balance Sheet in Course Tips b. NOTE: Be able to apply scenarios to balance sheets (i.e. cuts, changes to budget allocations, etc.) 7. Flow of funds through the system – requisition < encumbrance < expenditure a. Define i. Requisition  42 1. a demand for goods, usually made by an authority ii. Encumbrance 1. Most common, created to ensure we don't spend the same money twice b/c of a delay 2. (a) encumbrances outstanding at year-end should be disclosed in the notes to the financial statements or by reservation of fund balance and (b) the subsequent year's appropriations should provide authority to complete these transactions. 3. Where appropriations do not lapse at year-end, or only unencumbered appropriations lapse, encumbrances outstanding at year-end should be reported as reservations of fund balance for subsequent-year expenditures based on the encumbered appropriation authority carried over. iii. Expenditure 1. an expense; the amount needed to be paid out b. NOTE: Recognize where funds are at different stages of the flow process c. NOTE: Identify a location of funds from a description. d. NOTE: See Sample Balance Sheet in Course Tips 8. Generally Accepted Accounting Practices (GAAP) a. The standards and rules that accountants follow while recording and reporting financial activities. Module 6 – Audits  43 Vocabulary: - Audit o examination of a company's financial records, such as the income statement, balance sheet, and cash flow statement. Audits can help uncover fraud or inaccurate tax returns. Content: 1. Audit process – what and why a. An audit of educational institutions is a thorough examination and assessment of their financial records, operations, and compliance with relevant regulations and standards. It aims to ensure transparency, accountability, and efficiency in the institution's financial and administrative practices. The audit helps identify any irregularities, risks, or areas for improvement, providing recommendations for corrective actions and enhancing the institution's overall performance. 2. Types of Audits a. Internal i. An internal audit is an independent review of a company's processes, systems, and procedures to evaluate and improve operations. Internal audits are performed by professionals who are well-versed in the company's culture, systems, and processes. b. External i. an independent review of an organization's financial statements, records, and internal controls by a third party. The purpose of an  44 external audit is to ensure the accuracy and effectiveness of an organization's financial management, and to identify areas for improvement c. State i. A state audit is an examination of a state government's financial operations, public agencies, and local governments. State auditors are responsible for a variety of tasks, including: ii. Financial reporting: Producing the state's Annual Comprehensive Financial Report (ACFR) to illustrate the state's financial condition d. Federal i. The FAC facilitates Federal oversight of entities expending federal money. The FAC accomplishes this goal, as it is often the sole source of Single Audit information for federal agencies. In addition, public examination/exploration of Federal grants is facilitated by making audit information publicly accessible.