Manual Of Accounting 2018

Transcription

Manual of Accounting and Financial Reportingfor Pennsylvania Local Educational Agencies(LEAs)Revised September 2021Maintained by:PA Office of the BudgetOffice of Comptroller OperationsCentral Agencies & School Finance UnitLEAs are encouraged to forward any recommendations for this manual to:RA-SchlFin@pa.gov

Table of ContentsChapter 1: Introduction . 6INTRODUCTION . 6PURPOSE . 6HISTORY . 7ORGANIZATIONS INSTRUMENTAL IN LOCAL EDUCATIONAL AGENCY FINANCIAL ACCOUNTING & REPORTING. 7GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) AND THE GOVERNMENTAL ACCOUNTING STANDARDSBOARD (GASB) . 9THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES . 10BASIC GOVERNMENTAL ACCOUNTING PRINCIPLES . 11Chapter 2: Types of Local Educational Agencies and Summary of Funding. 19TYPES OF LEAS. 19SCHOOL DISTRICTS . 19CHARTER & CYBER CHARTER SCHOOLS . 19AREA VOCATIONAL-TECHNICAL SCHOOLS . 20INTERMEDIATE UNITS . 22LEA REVENUE AND FUNDING SOURCES . 23LOCAL FUNDING . 23STATE FUNDING . 23FEDERAL FUNDING . 26MISCELLANEOUS . 26PASS-THROUGH GRANTS . 27Chapter 3: Overview of Fund Accounting. 28THE GOVERNMENT ENVIRONMENT . 28FUND ACCOUNTING. 28GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS . 29CATEGORIES AND TYPES OF FUNDS . 29GOVERNMENTAL FUNDS . 29PROPRIETARY FUNDS. 30FIDUCIARY FUNDS. 31MEASUREMENT FOCUS . 32Revised September 20211

BASIS OF ACCOUNTING . 33RECOGNITION OF NONEXCHANGE TRANSACTIONS . 35INTERFUND ACTIVITY . 38RECIPROCAL INTERFUND ACTIVITY . 38NONRECIPROCAL INTERFUND ACTIVITY . 39DUE TO/DUE FROM . 40Chapter 4 . 42GOVERNMENTAL FUND OVERVIEW . 42NATURE AND PURPOSE . 42NUMBER OF FUNDS . 42BASIS OF ACCOUNTING AND MEASUREMENT FOCUS. 42GOVERNMENTAL FUND FINANCIAL STATEMENTS . 42TYPES OF GOVERNMENTAL FUNDS . 46GENERAL FUND. 46SPECIAL REVENUE FUNDS . 52CAPITAL PROJECTS FUNDS . 53DEBT SERVICE FUNDS . 55PERMANENT FUNDS . 56Chapter 5: Proprietary Funds . 57PROPRIETARY FUND OVERVIEW . 57NATURE AND PURPOSE . 57BASIS OF ACCOUNTING AND MEASUREMENT FOCUS. 57PROPRIETARY FUND FINANCIAL STATEMENTS. 57TYPES OF PROPRIETARY FUNDS . 59ENTERPRISE FUNDS . 59INTERNAL SERVICE FUNDS . 61Chapter 6: Fiduciary Funds . 65FIDUCIARY FUND OVERVIEW . 65NATURE AND PURPOSE . 65FIDUCIARY FUND FINANCIAL STATEMENTS . 65BASIS OF ACCOUNTING AND MEASUREMENT FOCUS. 66TYPES OF FIDUCIARY FUNDS . 66Revised September 20212

TRUST FUNDS. 66CUSTODIAL FUNDS. 67Chapter 7: Investments, Inventory, and Capital Assets . 69CASH AND INVESTMENTS . 69CASH EQUIVALENTS . 69INVESTMENTS . 69INVENTORY . 71CONSUMPTION METHOD . 71PURCHASE METHOD . 71CAPITAL ASSETS . 72INFRASTRUCTURE TANGIBLE ASSETS . 73INTANGIBLE ASSETS . 73ACCOUNTING FOR CAPITAL ASSETS. 73VALUATION OF CAPITAL ASSETS . 74CAPITALIZING ASSETS AND INFRASTRUCTURE . 75DEPRECIATION OF CAPITAL ASSETS . 75MODIFIED APPROACH TO DEPRECIATION OF INFRASTRUCTURE ASSETS . 76IMPAIRMENTS OF ASSETS AND INSURANCE RECOVERIES . 77Chapter 8: Debt . 78DEBT OVERVIEW . 78SHORT-TERM OBLIGATIONS . 78LONG-TERM OBLIGATIONS . 78GENERAL LONG-TERM DEBT. 78DEBT TYPES . 78BONDS . 78ANTICIPATION NOTES . 79LEASES. 80MISCELLANEOUS ITEMS REGARDING BONDS . 81DEBT SERVICE . 81DEEP DISCOUNT DEBT . 81DEBT ISSUANCE COSTS . 82PREMIUMS AND DISCOUNTS . 82CALL PROVISIONS. 82Revised September 20213

DEBT EXTINGUISHMENTS . 82DEBT EXTINGUISHMENT USING CURRENT FINANCIAL RESOURCES . 82ACCOUNTING FOR EXTINGUISHMENTS OF DEBT USING EXISTING RESOURCES . 83DEBT REFUNDINGS . 83ACCOUNTING FOR DEBT ISSUES . 84GOVERNMENTAL FUNDS . 84PROPRIETARY FUNDS. 84REPORTING DEBT . 84Chapter 9: Financial Reporting for Pennsylvania Local Educational Agencies (LEAs) . 86FINANCIAL REPORTING OBJECTIVES . 86DEFINING THE FINANCIAL REPORTING ENTITY . 87PRIMARY GOVERNMENT . 87COMPONENT UNITS . 88JOINT VENTURES . 89DEFINED . 89REPORTING . 90OTHER TYPES OF JOINT ARRANGEMENTS . 90JOINTLY GOVERNED ORGANIZATIONS . 90POOL . 90UNDIVIDED INTERESTS IN JOINT OPERATIONS . 91COST-SHARING AGREEMENTS . 91ANNUAL FINANCIAL REPORTING PURSUANT TO GASB . 91ANNUAL FINANCIAL REPORTING FOR PENNSYLVANIA LEAS . 91THE AFR CONTAINS THE FOLLOWING: . 92TYPES OF AUDITS . 93FINANCIAL AUDITS . 93SINGLE AUDITS. 94AUDITOR GENERAL AUDITS . 94CALCULATIONS COMPLETED BY OFFICE OF COMPTROLLER OPERATIONS . 94TUITION RATE CERTIFICATION . 94ACTUAL INSTRUCTIONAL EXPENSE (AIE) . 95Chapter 10: Advanced Accounting Issues. 96ACCOUNTING CHANGES . 96Revised September 20214

CHANGE IN ACCOUNTING PRINCIPLE . 96CHANGE IN ACCOUNTING ESTIMATE . 97CHANGE IN THE REPORTING ENTITY . 98PRIOR-PERIOD ADJUSTMENTS . 98CORRECTION OF AN ERROR . 99EXTRAORDINARY AND SPECIAL ITEMS . 99DEFINED . 99CRITERIA . 99REPORTED . 100ESCHEAT PROPERTY . 100DEFINED . 100REPORTED . 100Revised September 20215

Chapter 1: IntroductionIntroductionThe State Constitution declares "The General Assembly shall provide for the maintenance and supportof a thorough and efficient system of public education to serve the needs of the Commonwealth." Tocarry out this mandate the General Assembly has established a public school system and authorizedthe Pennsylvania Department of Education (PDE) to administer school laws and assist LEAs inproviding educational programming to Pennsylvanians.The mission of the PDE is to assist the General Assembly, the Governor, the Secretary of Educationand Pennsylvania educators in providing for the maintenance and support of a thorough and efficientsystem of education. This includes ensuring proper financial reporting.Additional information on the PDE can be found at: www.education.pa.govThe Office of Comptroller Operations (OCO) is part of the Office of the Budget of the Commonwealthof PA. The OCO works with the PDE in assisting the Secretary of Education and Governor in enforcingestablished policies and standards regulating the expenditure of public funds. Within the OCO is theBureau of Accounting and Financial Management (BAFM), and within the BAFM is the CentralAgencies & School Finance Unit (CA&SF Unit). School Finance is responsible for the collection,processing, and review of the AFR-Annual Financial Report (PDE forms 2056 and 2057). Otheradministrative functions include the maintenance of a uniform accounting manual and the Chart ofAccounts and ensuring proper financial reporting in accordance with Sections 2-218 and 9-921A ofPublic School Code of 1949 (School Code), which states “ all financial accounting and reporting byPennsylvania Local Educational Agencies (LEAs - school districts, charter schools, area vocationaltechnical schools/career technology centers and intermediate units) shall be in accordance withgenerally accepted accounting and reporting standards ” Information gathered from AFRs is used tocalculate tuition rates and actual instructional expense, as well as, produce reports requested by thefederal government.Additional Information on the CA&SF Unit can be found at: www.education.pa.gov; under Teachersand Administrators/School Finances/Office of Comptroller Operations.PurposeThe Office of Comptroller Operations (OCO) has compiled this manual as a financial reportingresource, as well as, to provide a uniform and standardized framework for reporting financial data tothe state. It is essential for financial reporting to be consistent for LEAs. The manual captures andillustrates imperative accounting and financial reporting requirements of Pennsylvania publicelementary and secondary school systems in accordance with recognized generally acceptedaccounting principles (GAAP) for governmental entities and state laws and regulations.Revised September 20216

Additionally, the OCO maintains the Chart of Accounts for Pennsylvania LEAs which is provided in aseparate manual. This manual includes an account code structure that is modeled after the current,Financial Accounting for Local and State School Systems: 2014 Edition (NCES 2015-347). U.S.Department of Education, National Center for Education Statistics, Washington, DC: U.S. GovernmentPrinting Office. The Chart of Accounts coincides with the guidance provided in this manual. We haveestablished a standard account code structure that allows for the accumulation of program costs atthe level of detail the school administration chooses. The Chart of Accounts is also located on PDEsweb-site under Office of Comptroller as listed above.HistoryThe last major revision to this manual was in 2005 with an interim update issued on July 1, 2010 toreflect changes related to Governmental Accounting Standards Board (GASB) No. 54. Since 2005,there have been numerous changes to GASB Statements and the Annual Financial Report (AFR)requirements. These changes along with changing responsibilities of the CA&SFU and the increasedavailability of information on PDE’s web-site has prompted this version of the manual which focusesmore on general GASB rules and specific AFR reporting requirements.Therefore, the primary changes reflected in this manual include: Changes to the Annual Financial Report (AFR) filing requirements as described in Sections218 & 921-A of the School Code revised November 17, 2010. This change eliminated entitywide financial statements within the AFR as well Notes and the management’s discussion andanalysis.Removal of the budget chapter.GASB Statement updates, with emphasis on those Statements impacting AFR filing. Mostsignificantly:o GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources,Deferred Inflows of Resources, and Net Positiono GASB Statement No. 65, Items Previously Reported as Assets and LiabilitiesOrganizations Instrumental in Local Educational Agency FinancialAccounting & ReportingGovernmental Accounting Standards Board (GASB)The GASB is the independent organization that establishes and improves standards of accounting andfinancial reporting for United States’ state and local governments. The generally accepted accountingand reporting guidance included in this manual began with the National Council on GovernmentalAccounting, Statement No. 1, Governmental Accounting and Financial Reporting Principles, and wereadopted by the GASB in 1984 in their first pronouncement, GASB Statement No. 1.Accounting personnel should be familiar with the principles and statements issued by the GASB thatare available in its publication titled Codification of Governmental Accounting and Financial ReportingStandards.This publication and additional information on GASB can be found at: http://www.gasb.orgRevised September 20217

The National Center for Education Statistics, U.S. Department of Education (NCES)The National Center for Education Statistics (NCES) is the primary federal entity for collecting andanalyzing data related to education in the U.S. and other nations. The NCES is located within the U.S.Department of Education and the Institute of Education Sciences. The NCES fulfills a Congressionalmandate to collect, collate, analyze, and report complete statistics on the condition of Americaneducation; conduct and publish reports; and review and report on education activities internationally.The account code structure in this manual is modeled after the current Federal Accounting HandbookII, as revised, and promulgated by the NCES, U.S. Department of Education. A standard account codestructure allows for the accumulation of program costs at the level of detail the school administrationchooses, as well as provides for financial reporting in conformance with governmental accounting andfinancial reporting principles for all state and local governments, including public school systems.Additional information about the NCES can be found at: http://nces.ed.govThe Association of School Business Officials (ASBO) InternationalFounded in 1910, the ASBO International is a professional association of school businessmanagement professionals. They provide programs and services to promote the highest standards ofschool business management practices, professional growth, and the effective use of educationalresources.Additional information about ASBO International can be found at: http//www.asbointl.orgPennsylvania Association of School Business Officials (PASBO)The Pennsylvania Association of School Business Officials (PASBO) is a statewide associationdevoted to providing members with education, training, professional development and timely accessto legislative and policy news. It’s membership base covers school professionals working in finance,accounting, operations, facilities, transportation, food service, technology, communicatio

Accounting & Reporting Governmental Accounting Standards Board (GASB) The GASB is the i ndependent organization that establishes and improves standards of accounting and financial reporting for United States’ state and local governments. The generally accepted accounting and reporting gui