Manual of Accounting and Financial Reporting for Pennsylvania Public Schools CHAPTER 17 TABLE OF CONTENTS 17.A. Chapter

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Manual of Accounting and Financial Reporting for

Pennsylvania Public Schools

CHAPTER 17

Unipay Cycle For State Subsidy Payments Made By The School Finance Division ____ 17.2 What Is A Unipay? _________________________________________________ 17.2 Payment Cycle ________________________________________________________ 17.3 When Can Schools Expect “Major” State Subsidy Payments? _______________ 17.3 Monthly Payment Cycle Schedule At A Glance ___________________________ 17.4 Accounting For June 1st Payments And Deductions____________________________ 17.8 What Is The PDE-2548 And Why Is It Important? ________________________ 17.8 Penn*Link Notification / Fiscal Notices _____________________________________ 17.9 What Is A Penn*Link Notification? ____________________________________ 17.9 Automated Clearing House (ACH) Payment Requirements ______________________ 17.9 What Is An ACH Payment? __________________________________________ 17.9 How And When Should Schools Report Bank Changes?____________________ 17.9 Statutory Reporting Requirements For Schools ______________________________ 17.10

Intermediate Units, School Districts, Area Vocational-Technical Schools,

Charter Schools and Special Schools _______________________________ 17.10 Certification Of The Tuition Rate And Actual Instructional Expense ______________ 17.11 Tuition Rate Certification ___________________________________________ 17.11 Actual Instructional Expense (AIE) ___________________________________ 17.12 Certified Restricted Indirect Cost and State Operational Rate __________________ 17.12 Restricted Indirect Cost Rate________________________________________ 17.12 State Operational Rate ____________________________________________ 17.15 An Overview Of Selected State Subsidies __________________________________ 17.17 Authority Rentals And Sinking Funds _________________________________ 17.17 Basic Education Funding ___________________________________________ 17.19 Early Intervention ________________________________________________ 17.20

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Chapter 17

State And Federal Funding And Reporting

17.B

Education of Migrant Laborers’ Children _______________________________17.20 Funding For Migrant Education Contracts ______________________________17.21 Homebound Instruction ____________________________________________17.21 Payments In Lieu Of Current Taxes___________________________________17.21 Public School Employees’ Retirement Contributions ______________________17.21 Pupil Transportation _______________________________________________17.22 Social Security Contributions ________________________________________17.24 Special Education _________________________________________________17.25 Tuition For Orphans And Children Placed In Private Homes________________17.26 Vocational Education ______________________________________________17.26 Federal Funds ________________________________________________________17.27 Pass-Through Grants___________________________________________________17.28

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State And Federal Funding And Reporting

Updated 5/1/05

Funding for schools within the Commonwealth flows from a number of separate appropriations. The Pennsylvania legislature appropriates the funding for both the State and some of the federal sources that are available to schools.

The State funding streams include two (2) types of funding: subsidies and grants. Subsidies are payments to schools based on formulas determined by legislation. Grants are funding streams that are competitive and may require the schools to complete applications and demonstrate a need for the funds. The School Finance Division of the Labor, Education and Community Services Comptroller’s Office (LECS) distributes state subsidy payments. State grant funding, on the other hand, may be disbursed by LECS, or may be disbursed by another Commonwealth agency such as the Department of Health or the Department of Agriculture. It is the responsibility of the school to be aware of what grant funds are available for distribution.

The same process applies to federal funding sources. Some of the federal funding sources are subsidies while others are competitive grants that require completion of applications. Some federal sources are distributed through the Commonwealth, while others are distributed to schools directly from the Federal Government.

The first section of this Chapter will focus on the state subsidies and will include detailed information about:

♦ The payment cycle for state subsidies;

♦ The notification of and various related documentation schools receive when subsidies are distributed;

♦ Direct deposit of state subsidies in the school’s bank account;

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17.2

♦ Certification of the Tuition Rate, Actual Instructional Expense, Restricted Indirect Cost Rate, and State Operational Rate; and

♦ An Overview of selected subsidies.

The second section will detail the federal funds available, where to locate information on specific grants that are disbursed through the Labor, Education and Community Services Comptroller’s Office and accounting information on the grants. This section also contains a segment on accounting for Pass-through Funds.

What Is A Unipay?

The Unipay is an accumulation of state payments due to your school and processed once in a given month.

Unipays are received on the last Thursday of each month. Social Security payments are received on the first Thursday of each month via Automated Clearing House (ACH). School Employees’ Retirement is received quarterly, approximately five (5) days before your payment is due to the Public School Employees’ Retirement System (PSERS). Some payment dates are mandated by law. Examples of these are: Basic Education Funding, Vocational Education, Special Education, Intermediate Unit Payments and School Employees’ Retirement. Other payments are processed when required paperwork is received. Examples here include: Authority Rental and Sinking Fund reimbursements and Drivers Education.

Unipay Cycle For State Subsidy Payments Made By The School Finance

Division

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When Can Schools Expect “Major” State Subsidy Payments?

Program School Code Section Payment Date Approved Private Schools / PA Charter

Schools 1377(b) Monthly Authority Rental and Sinking Funds 2574.1 and 2575 Upon Application

Basic Education Funding 2502.xx August, October, December, February, April and June 1st

Charter Schools – Nonpublic Transfers 1725(B) June

Charter Schools – Start-Up Funding 1725(A) Upon Application Drivers Education 2504.1 Upon Application

Early Intervention PL99.457 Per Contract Education of Indigent Children 2502.2 / 2509.2 Upon Application

Education of Migrant Children 205.2 / 1326 Dollar A Day Payment Based Upon Application / Contracted Payments Based on Contractual Schedule Homebound Instruction 2510.1 June

I.U. Nonpublic Services 922.1A(d) August 1st_{, October 1}st_{and February 1}st

I.U. Operating 918.A(b) July and January I.U. Special Education 2509.1 August, November and June I.U. Transportation 2509.1 August, January and June Licensed Practical Nursing 2507 September, December, March and

June

Nonpublic Schools Transportation 2509.3 December and June Payment in Lieu of Taxes 604 April

Payment Cycle

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17.4

Program School Code Section Payment Date Private Residential Rehabilitative

Institutions (PRRI) 914.1A August (Advance), Balance Due Paid When Audit Is Final School Employees’ Social Security 24 PA C.S. 8329 Monthly

School Employees’ Retirement 24 PA C.S. 8535 Quarterly

Special Education 2509.xx July, September, November, January, March and June

Technology for Nonpublic Schools 1505-A August 1st_{and February 1}st

Temporary Special Aid 2502.30 Upon Application

Transportation 2543 August, October, December, March and June

Tuition for Orphans and Children Placed

in Private Homes 1305 / 1306 June

Vocational Education 2517c August, October, December, February, April and June 1st

Monthly Payment Cycle Schedule At A Glance

- When All State Reporting Requirements Have Been Met - July

Approved Private Schools

Authority Rental and Sinking Funds Community Colleges

Intermediate Unit Operating PA Charter Schools

School Employees’ Social Security School District Special Education

Tuition for Orphans and Children Placed in Private Homes

August

Authority Rentals and Sinking Funds Basic Education Funding

Community Colleges

Intermediate Unit Transportation Intermediate Unit Special Education

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Nonpublic School Services PA Charter Schools

Private Residential Rehabilitative Institute (PRRI) Pupil Transportation

Reimbursement of Charter Schools School Employees’ Social Security Vocational Education

September

Authority Rentals and Sinking Funds Incarcerated Education

Licensed Practical Nursing PA Charter Schools

Private Residential Rehabilitative Institute (PRRI) Pupil Transportation

School District Special Education School Employees’ Social Security School Employees’ Retirement

October

Incarcerated Education Nonpublic School Services

PA Charter Schools Pupil Transportation

November

Authority Rentals and Sinking Funds Incarcerated Education

Intermediate Unit Special Education PA Charter Schools

Pupil Transportation

School District Special Education School Employees’ Social Security

December

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17.6

Basic Education Funding Community Colleges

Education Assistance Program Improvement Grants

Licensed Practical Nursing PA Charter Schools

Private Residential Rehabilitative Institute (PRRI) Pupil and Nonpublic Transportation

Reimbursement of Charter Schools School Employees’ Social Security School Employees’ Retirement Vocational Education

January

Authority Rentals and Sinking Funds Intermediate Unit Operating

Intermediate Unit Transportation PA Charter Schools

Private Residential Rehabilitative Institute (PRRI) School District Special Education

School Employees’ Social Security

February

Incarcerated Education Nonpublic School Services

PA Charter Schools

Private Residential Rehabilitative Institute (PRRI Reimbursement of Charter Schools

Tuition for Orphans and Children Placed in Private Homes Vocational Education

March

Authority Rentals and Sinking Funds Community Colleges

Education Assistance Program Licensed Practical Nursing

PA Charter Schools Pupil Transportation

School Employees’ Social Security School Employees’ Retirement

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School District Special Education Travel Vocational Education Adult Vocational Education

April

Education Assistance Program PA Charter Schools

May

Authority Rentals and Sinking Funds Education Assistance Program

Intermediate Unit Transportation PA Charter Schools

June 1st

Basic Education Funding

Intermediate Unit Special Education Vocational Education

June

Audit Adjustments / Subsidy Revisions Authority Rentals and Sinking Funds Community Colleges

Driver’s Education

Extraordinary Special Education Contingency Homebound Education

Improvement Grants Licensed Practical Nursing PA Charter Schools

Payment in Lieu of Taxes

Pupil and Nonpublic Transportation Reimbursement of Charter Schools School Employees’ Social Security School Employees’ Retirement School District Special Education

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17.8

The June 1st_{payment received by schools is the final payment due from the Basic}

Education Funding subsidy. The payment can be calculated by subtracting from the adjusted gross allocation the first five (5) payments received and deductions (current year deductions and prior year adjustments). To assist in this process, each school receives a report of Basic Education Funding Payable for the Fiscal Year, Form PDE-2548.

What Is The PDE-2548 And Why Is It Important?

The PDE-2548 details the components of the Basic Education Funding. The report shows the total allocation, the payment allocations, deduction amounts (current deduction and prior year audit adjustments), and the final June 1st payment. Account codes corresponding to functions and objects are shown by program for posting revenue and expenditures.

Letters of explanation and detailed paperwork explaining each adjustment and deduction are included with the PDE-2548 and are mailed to each school’s Superintendent just prior to the June 1st payment. It is important that the school maintain all of these forms and the associated supporting documentation in the business office to assist the preparation of the Annual Financial Report and for use by the Auditor General and independent auditors.

Provide copies of these reports to staff outside the business office if needed. For example, the original should be kept in the business office with copies sent to the program coordinators affected by year-end expenditures. If needed, replacement reports will be mailed to schools upon written request from the Superintendent.

Some examples of deductions are: Intermediate Unit Transportation, Institutionalized Children, Approved Private Schools, Private Residential Rehabilitative Institutions, Basic Education Funding overpayments, Vocational Education overpayments, and current and prior year audit findings.

A revised prior year PDE-2548 may be issued due to changes in ADMs, WADMs, Aid Ratios, AIE, Equalized Mills or prior year calculations. A summarized coversheet is provided as an attachment to the revised PDE-2548.

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What Is A Penn*Link Notification?

A Penn*Link notification is an electronic mail message in the form of a letter notifying you of any payments due to your school. The letter lists payment description, school year, account codes and actual transfer date.

It is important that schools pay special attention to any footnotes that are on the Penn*Link notification. Footnotes are added to explain payment adjustments.

Print a copy of the notification letter and maintain all copies in the business office. July and August payment notifications should be reviewed closely for revenues that should be accrued back to the prior year.

What Is An ACH Payment?

ACH stands for “Automated Clearing House.” This is different from a wire transfer. Ninety-five percent of state subsidies are paid by ACH. When verifying payments with your bank be sure to ask to speak to the ACH coordinator at the bank. Most banks have separate departments for ACH and wire payments.

How And When Should Schools Report Bank Changes?

Notify the Comptroller’s Office in writing by the first of the month to ensure that the bank change is effected by the unipay payment date. Include the new bank name, nine (9) digit ABA routing number, and your account number in your written request. Also, state whether the new account is a checking or savings account. If the account is with an investment pool such as PLGIT, PSDLAF or INVEST, please list the account number of the fund. Do not include school account number.

The Comptroller’s website www.pde.state.pa.us/school_acct contains a form that each school should complete when requesting a banking change. Click on the link to Forms and Publications to download the PDF file. The completed form should be faxed to the School Finance Division at (717) 787-3593.

**Penn*Link Notification / Fiscal Notices**

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Chapter 17

17.10

Intermediate Units, School Districts, Area Vocational-Technical Schools, Charter Schools and Special Schools

Report # Report Name Due Date

PDE-2028 General Fund Budget 15 Days after adoption of the budget. PDE-2053 Application for Restricted Indirect Cost Rate No separate report is needed from the

school. This is calculated by the Comptroller’s Office from data reported on the Annual Financial Report. PDE-2054 Intermediate Unit Administration, Summary

and Program Budgets May 1

st

PDE-2055 Intermediate Unit Contribution Schedule

Member Districts Support May 1

st

PDE-2056 Intermediate Unit Annual Financial Report October 1st

PDE-2057 Annual Financial Report (AFR) October 30th

PDE-2058 Actual Instructional Expense (AIE) No separate report is needed from the school. The AIE is calculated by the Comptroller’s Office from data reported on the Annual Financial Report. PDE-2061 Tuition Rate Calculation No separate report is needed from the

school. This is calculated by the Comptroller’s Office from data reported on the Annual Financial Report. PDE-2105 Reconciliation of Social Security and

Medicare Tax Contributions July 31

st

NOTE: Schools must complete many other forms, reports and applications. Please

contact the appropriate Commonwealth of Pennsylvania program office to request information for the specific program in which you are interested.

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Tuition Rate Certification

The LECS, Division of School Finance, will certify and issue Elementary and Secondary Tuition Rates on the form PDE-2061 each May. The legislative basis for tuition rate certification is the Pennsylvania School Code of 1949, Section 2561 and 2562. Legal questions regarding the calculation of tuition rates may be resolved by referring to these Sections. Tuition rates are based on financial information from the school’s Annual Financial Report (AFR), PDE-2057, and data included on various child accounting forms. It is important to note that federal expenditures are not included in the tuition rate calculation.

The tuition rate calculation is important because it is used by the school district to calculate charges made to other districts for educational services provided to non-resident students. These rates are also used to calculate certain state subsidies and non-cash deductions taken from the final, Basic Education Subsidy payment. These calculated rates may be the basis of tuition charges for students attending both Approved Private Schools (APS) and Private Residential Rehabilitative Institutions (PRRI).

Each school district should maintain a permanent tuition rate file. Changes to the form or procedures will be announced via Penn*Link. Updated procedures will be maintained on the Comptroller’s website.

Since all financial data is taken from the AFR, the amounts on the tuition rate should agree with those on the AFR, except for objects 220, Social Security Contributions and 230, Retirement Contributions. The PDE-2061 will utilize the school entity share of object 220 and 230 amounts reported on the AFR expenditure pages. All business administrators should be careful when completing the detailed expenditure section of the AFR to ensure accurate tuition rates for their school districts.

Elementary expenditures include kindergarten through sixth grade, while secondary expenditures include seventh grade through twelfth grade, inclusive. For example, if the district operates a middle school with grades six, seven and eight, the sixth grade expenditures must be allocated and reported as elementary expenditures and seventh and eighth grade expenditures must be reported as secondary expenditures on the AFR. Incorrect allocations could have a significant effect on the district’s elementary and secondary tuition rates.

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17.12

Actual Instructional Expense (AIE)

The Labor, Education and Community Services Comptroller’s Office, Division of School Finance will certify and issue an AIE, PDE-2058, each May. The PDE-2058 form will be mailed to all school districts with the June 1st_{payment documentation each year.}

Each school district should maintain a permanent file for these procedures and for the PDE-2058 form. Procedures will not be issued annually; however, changes to the form or procedures will be announced annually via Penn*Link. For your reference, up-to-date instructions for this form will be available on the Comptroller’s website.

The Actual Instructional Expense (AIE) calculation, PDE-2058, is defined in the Pennsylvania Public School Code of 1949 under Section 2501, paragraph (11.1). This Section has been legally interpreted and applied for state law purposes.

The Actual Instructional Expense (AIE) includes all General Fund expenses of the district except those for health services, transportation, debt service, capital outlay, homebound instruction, and outgoing transfers to community colleges and technical institutes. Deducted from this sum are the amounts received from the state for driver’s education, special class operations, vocational curriculums, area vocational-technical schools, payments of tuition by district patrons and parents, and the state and federal governments.

Restricted Indirect Cost Rate

Federal Management Circular 74-4 provides guidelines for determining and distributing costs of Federal grants and contracts. Circular 74-4 also laid the groundwork for the development of Indirect Cost Allocation Plans (ICAPS) and the applicable rates. Additional information on Indirect Costs can be found in OMB Circular A-87. The Labor, Education and Community Services Comptroller’s Office (LECS) has been given the authority by the Federal government to calculate, approve and certify indirect cost rates for the State of Pennsylvania.

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TYPES OF INDIRECT COST RATES

There are two (2) types of indirect cost rates: non-restricted and restricted. Non-restricted rates in Pennsylvania are referred to as State Operational Rates. This topic is discussed in detail in the next Section of the Manual.

Certified restricted indirect cost rates may be applied to Federally funded grants that operate under the supplement, not supplant rule. These grant expenditures are intended to supplement the school’s local expenditures, not to replace state or local funds. Examples of these grants are ESEA Title I Part A – Improving Basic Programs and ESEA Title I Part C – Education of Migratory Children. In reviewing the restrictions and regulations of each federal grant applied for by a school, it is the duty of the school to determine if the supplement, not supplant rule applies. The requirements of each grant are specified in the application.

PURPOSE

Restricted Indirect Cost Rates (RIDC) have been established to aid schools in recovering certain entity-wide costs associated with the administration of Federally funded grants. Examples of the types of costs involved are accounting, auditing and payroll processing. The use of an RIDC eliminates the labor-intensive activity of individually tracking these costs and allocating them directly to the grant. Implementation of an RIDC allows the school to assess the rate to the total expenditure of these costs and transfers the revenue as an Other Financing Source. The revenues attributed to the RIDC then become available for use by the school for any legal purpose. More information on accounting codes for the RIDC can be found on the Comptroller’s website. Access the Accounting Bulletins Section of the page to review Accounting Bulletin #1999-03 – Change in Accounting for Indirect Costs.

LIMITATIONS

A factor to be aware of when utilizing the RIDC is the imposition of limitations, which may be grant specific. Federal law may limit the amount of indirect costs, which may be recovered.

Recovery of the indirect costs is also limited to the availability of funds and individual program guidelines. If a combination of direct and indirect costs exceeds funds available, then the school will not be able to recover the total cost of the project or program.

Indirect costs may only be recovered to the extent that direct costs were incurred. In order to determine the reimbursable amount for indirect costs, the RIDC is applied to the amount of direct costs expended, not to the total grant award.

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17.14 CALCULATION OF INDIRECT COST RATES

A school must apply for a rate each year to have a certified RIDC calculated. The rate is determined from data provided on the PDE-2057, Annual Financial Report (AFR), that is submitted to the LECS Comptroller’s Office each fiscal year. To apply for a rate, the school must complete the Restricted Indirect Cost Eliminations Schedule (RICE) of the AFR. The complete procedure to certify restricted indirect costs is found on the Comptroller’s website: www.pde.state.pa.us/school_acct

COMPLETING THE RESTRICTED INDIRECT COST AND ELIMINATIONS (RICE)

SCHEDULE

The RICE schedule collects elements of the indirect cost calculation that are not collected in the expenditure section of the AFR. The RICE schedule also collects specific detailed information from three (3) functions for use in calculating the indirect cost rate: 2300 Support Services – Administration, 2500 Support Services – Business and 2800 Support Services – Central. For each of these functions, report only the allowable costs, if any, and then provide a brief description for each entry. Generally, schools may claim indirect costs for the school audit, business office, data processing and selected staff services. Refer to the procedures on the web mentioned above for assistance in identifying and claiming indirect costs.

REVIEW PROCEDURES

The LECS Comptroller’s Office will provide review, approval and information services for the RIDC for each school requesting a rate. A review of eligible costs will be performed within the Comptroller’s Office. The RICE schedule will be reviewed for compliance with LECS directives and procedures.

The LECS Comptroller’s Office processes and certifies RIDC in the spring of each year. The certified approved RIDC will then be issued to the school. In the event that the calculation for a school’s restricted indirect cost rate exceeds the legal limit of 8 percent, the Comptroller’s Office will cap the approved rate at 8 percent. The rate is in effect for one (1) fiscal year after which time a new rate will be established if the school completes the RICE Schedule the following year on the AFR. Projects that have carry over expenditures should use the RIDC that was in effect for the original project. Projects that last more than one (1) fiscal year should use the approved rate applicable for that fiscal year.

REIMBURSABLE AMOUNT

The reimbursable amount for indirect costs is calculated by multiplying the certified rate by the direct costs expended, not the total grant award. The amount for any capital outlay must be subtracted from the grant award. During the year, these amounts can be internally accumulated to the 9800 and 5400 account codes;

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however, these amounts are not reported on the AFR as a separate expenditure. These account codes should be reported on the completion reports for the grant. An example of using the RIDC follows:

Assume that an LEA received $100,000 in a fixed grant award and there will be $5,000.00 in capital outlay and the certified RIDC is 2%.

1. $100,000.00 minus $5,000.00 = $95,000.00 2. $1.00 plus .0200 = 1.0200

3. $95,000.00 / 1.0200 = $93,137.00 (The maximum amount of the grant that can be budgeted as direct costs and still have the maximum amount of indirect costs.)

4. $95,000.00 minus $93,137.00 = $1,863.00 (The maximum amount of indirect costs that could be claimed against this grant.)

Accounting entries for this transaction would be:

Cash $ 100,000.00

Revenue (Federal 8000) $ 100,000.00

To record revenue from the Federal grant.

Expenditures (Object 100, 200 etc.) $ 98,137.00

Cash $ 98,137.00

To record expenditures of the Federal grant.

State Operational Rate

The Pennsylvania Department of Education provides an Operational Rate that is applicable to selected Department administered State grant programs. This Operational Rate is similar in purpose to the Restricted Indirect Cost rate used for Federal Grant programs.

An “operational rate” is defined as: An allowance of administrative-related or indirect charges that cover costs associated with the administration of the State grant program. (Source: June 5, 1998 memorandum from Deputy Secretary for Administration, Pennsylvania Department of Education). The costs are not allocated specifically to any one (1) grant. They are the indirect organization-wide costs for performing certain functions. These costs include, but are not limited to those for the business office, personnel office, budgeting, data processing and payroll preparation. The operational rate may be charged against the grant to cover these costs. An example of this type of cost would be the data entry employee in the business office. These costs may take advantage of the applicable operational rate and may be charged against the grant.

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The “program costs” are those that are directly applicable to the operation of the grant. These costs include, but are not limited to, salaries, benefits and supplies expended for the express purpose of administering the grant. An example of this type of cost would be the administrator of the grant. The salaries of this person would be expended directly against the grant. This expenditure could not use the operational rate.

The purpose of the operational rate is to recover some of the indirect costs associated with the state grant programs; however, at no time should the operational rate jeopardize the maximum funds used for direct grant purposes.

Effective July 1, 1998, the following State-funded grant programs will be allowed an operational rate of 6 percent:

Eligible Programs

Governor’s Schools for Excellence (Includes the Regional Summer Schools for Excellence)

Comprehensive Reading

Teen Pregnancy and Parenting Education Mentoring

Safe Schools

Economic Development and Innovative Learning / Workforce Development Components of Vocational Education Programs

School To Work

Services to Nonpublic Schools

The following Grants have operational rates different from the previously mentioned Grants:

Program Operational Rate Remaining Components of Vocational Education 5% Or As Set In Law Early Intervention 8%

Adult Literacy 10%

Alternative Education Prohibited By Law Any remaining State funded grants will not change their current practices.

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Authority Rentals And Sinking Funds

When a school district undertakes a major construction project and seeks reimbursement from the Commonwealth, a process known as PlanCon is initiated. PlanCon is an acronym for Planning and Construction Workbook. It is a set of forms and procedures used to apply for Commonwealth reimbursement. The forms are designed to: (1) document a local school’s planning process; (2) provide justification for a project to the public; (3) ascertain compliance with state laws and regulations; and (4) establish the level of state participation in the cost of the project.

There are eleven steps in the PlanCon process. These eleven steps are more commonly referred to as PlanCon Part A through PlanCon Part K. Below is a list and short description of each of the parts in the PlanCon process.

PART A - PROJECT JUSTIFICATION

Provides the description of a proposed project and the justification of its need. A complete building feasibility study is also provided with this part.

PART B – SCHEMATIC REVIEW

A technical review conference of the conceptual drawings.

PART C – SITE ACQUISITION

Deals with the acquisition of land for school building projects. This part is completed only if land is acquired as part of the scope of the project.

PART D – PROJECT ACCOUNTING BASED ON ESTIMATES

Concerned with estimated projects costs. It is in this part that various “tests” of a district’s financial ability to make payments are made.

State Board of Education Regulations, Chapter 21, Section 21.51 establishes cost constraints and the Public School Code establishes requirements for public hearings on school building projects, 24 P.S. Sections 7-701.1 and 7-731. Part D also provides an estimate of state reimbursement .

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17.18 PART E – DESIGN DEVELOPMENT

A conference to review the architectural aspects of a project.

PART F – CONSTRUCTION DOCUMENTS

Provides for further refinement of the architectural aspects of the project and documentation that other state and local agency requirements have been met. The Pennsylvania Department of Education approval of Part F authorizes a district to enter into contracts.

PART G – PROJECT ACCOUNTING BASED ON BIDS

Concerned with actual bid prices. A project eligibility for reimbursement is ultimately determined at Part G. The average time frame from submission of Part A to approval of Part G is approximately one (1) year.

PART H – PROJECT FINANCING

Addresses the financing used for a project. Once Part H is approved, reimbursement on a project commences.

PART I – INTERIM REPORTING

Provides for the reporting of change orders and / or supplemental contracts during construction.

PART J – PROJECT ACCOUNTING BASED ON FINAL COSTS

The final accounting for the project.

PART K – PROJECT REFINANCING

Used if a reimbursable bond issue is refunded, refinanced or restructured.

A project is considered eligible for Commonwealth reimbursement once the school receives written approval of PlanCon Part G, Project Accounting Based on Bids. However, the school cannot apply for reimbursement until the approval of PlanCon H, Project Financing is received from the Pennsylvania Department of Education.

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Schools can receive reimbursement from the Commonwealth by completing the Application for Reimbursement for School Construction Project (PDE-2071). This form is available through the link on the Comptroller’s website.

Basic Education Funding

The largest education subsidy program that the Commonwealth administers is the Basic Education Funding subsidy. The Basic Education Funding is distributed to all of the Commonwealth’s 501 public school districts. The formula is complex, and provides a level of financial support to ensure that a minimum program of education is provided at each public school district. The Department of Education provides each school the form PDE-2548, Report of Basic Education Funding. This form lists all of the components of the formula.

The Basic Education Subsidy is distributed to schools in a total of six (6) payments. The first five (5) payments are estimates; each of the five (5) estimates equal approximately 15 percent of the school’s entitlement and are paid on the last Thursday of August, October, December, February and April. The final payment is calculated by determining the actual entitlement due and subtracting out the first five (5) payments. The final payment is paid on June 1st.

The Basic Education Funding subsidy is also utilized as a vehicle for recovering funds that schools owe the Commonwealth. This recovery is referred to as “non-cash” deductions on the PDE-2548 Form. Situations in which a school might owe the Commonwealth funds include: overpayment of current or prior year subsidies, Auditor General audit resolution, tuition recovery for students attending Approved Private Schools, Private Residential Rehabilitative Institutions, the Scranton School for the Deaf or Scotland School for Veterans Children, etc.; and school district costs for their participation in Intermediate Unit operated programs.

Sample of Basic Education Funding revenue entries are:

10-0101 Cash $ 100,000.00

10-7110-201 Equalized Subsidy For Basic Education $ 100,000.00

To record the August receipt of Basic Education Funding Subsidy.

10-0101 Cash $ 490,000.00

10-2900-595 IU Operating Expenditure 10,000.00 10-7100-201 Equalized Subsidy For Basic Education $ 500,000.00

To record the December receipt of Basic Education Funding Subsidy and recognize the IU Operating expenditure that was deducted in December.

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17.20

Early Intervention

The Early Intervention Services Act mandates that the Commonwealth provide services to disabled infants, toddlers, eligible young children and their families. The Department of Education is responsible for early intervention services to children below school entry age but above two (2) years. Currently, the funding is distributed to intermediate units and school districts based on contracts or Mutually Agreed Upon Written Arrangements (MAWA).

The Early Intervention payments are distributed to schools in a total of four (4) payments. The first payment is equal to 50 percent of the contract and is paid in September. The second and third payments are each equal to 15 percent of the contract and are paid in November and March, respectively. The final payment is equal to 20 percent of the contract and is paid in June.

A sample of Early Intervention revenue entry is:

10-0101 Cash $ 100,000.00

10-7272-272 Early Intervention $ 100,000.00

To record the September receipt of Early Intervention subsidy.

Education of Migrant Laborers’ Children

The Commonwealth distributes funds to school districts that enroll children of migrant laborers. These funds are made available to the school districts based upon the number of migrant children reported. Districts can receive $1 per day for a maximum of 40 days during the school year. The Education of Migrant Laborers’ Children payments are distributed to schools throughout the school year.

A sample of Education of Migrant Laborers’ Children revenue entry for either the dollar program or a contracted special education program is:

10-0101 Cash $ 40.00

20-7360-233 Education Of Migrant Laborers’ Children $ 40.00

To record the October receipt of Education of Migrant Laborers’ Children revenue.

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Funding For Migrant Education Contracts

Funding for the special education needs of migrant children is also provided through contracts with local educational agencies. Agencies that are awarded these contracts have the requirements to design and implement educational plans to assist the special needs children of migrant workers. All contractors are required to comply with all applicable state and federal statutes, regulations, guidelines and current state accounting practices.

Homebound Instruction

This subsidy supports instruction to students confined by temporary illness or injury and unable to attend public school. Teachers provide instruction to the homebound student. This instruction assists the student in maintaining academic goals and grade standing. The Homebound Instruction payments are distributed to schools in June.

A sample of Homebound Instruction revenue entry is:

10-0101 Cash $ 10,000.00

10-7210-231 Homebound Instruction $ 10,000.00

To record the June receipt of Homebound Instruction revenue.

Payments In Lieu Of Current Taxes

Occasionally, the Department of Environmental Protection will acquire land or property within the geographical boundaries of a school district for water conservation and / or flood prevention. When this occurs, the Department provides funding to the school district to replace the taxes lost by this acquisition. The In Lieu of Current Taxes payments are distributed to schools in April.

A sample of Payment In Lieu Of Current Taxes revenue entry is:

10-0101 Cash $ 40,000.00

10-6114 Payments In Lieu Of Current Taxes $ 40,000.00

To record the April receipt of Payments In Lieu Of Current Taxes revenue.

Public School Employees’ Retirement Contributions

The Commonwealth reimburses schools (school districts, charter schools, intermediate units and area vocational-technical schools) for a portion of the employers’ share of contributions to the Public School Employees’ Retirement System (PSERS). This

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reimbursement is received by schools on a quarterly basis, and more specifically, five (5) days prior to the requirement that the schools make payment to PSERS. The payments are made in accordance with Section 8535 of Part 24 of the Pennsylvania Consolidated Statutes.

The most recent changes to Section 8535 occurred in 1994 with the passage of Act 29. Act 29 directs each school to contribute 100 percent of the employer’s share of the retirement contribution to PSERS. The Commonwealth will then reimburse to the school on a quarterly basis a portion of their cost. The reimbursement is based on two (2) classes of employees: “existing” and “new.” An “existing” employee is one who has been employed by a public school entity, within the Commonwealth at any time prior to June 30, 1994. A “new” employee is one who is hired by a school entity after June 30, 1994 and has never worked for a public school entity. The definition of a school entity is: school district, area vocational-technical school or intermediate unit.

The basis of the payments to the Commonwealth is the school’s quarterly reports to PSERS. PSERS determines which employees are “new” and which employees are “existing” on the employee’s enrollment date with PSERS. A final payment is made on the basis of an actual accounting of the school’s total eligible retirement salaries at year-end. This final adjustment is normally made in December of each year. A sample entry of recording Public School Employee Retirement Contribution Reimbursement revenue entry is:

10-0101 Cash $ 100,000.00

10-7820-323 State Share of Retirement Contributions $ 100,000.00

To record the March receipt of the Commonwealth’s reimbursement of PSERS Contributions.

Pupil Transportation

The Commonwealth is required by Section 2543 of the Pennsylvania School Code of 1949 to reimburse the schools for transportation of children between home and school. The Commonwealth funds schools for a portion of the cost of transporting public and non-public school children. It is important that schools keep thorough records relating to the transportation costs. The funding formula related to transportation of public school children requires schools to keep accurate records of the daily number of miles a vehicle travels, the number of pupils assigned to ride that vehicle, and the actual cost or contracted cost reported on the Annual Financial Report.

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The payment schedule for pupil transportation subsidy is:

SCHOOL DISTRICTS

August Ten (10) percent of the prior year’s total reimbursement.

September October or November

Twenty (20) percent of prior year’s total reimbursement in the month following receipt of prior year’s end of year reports.

December Twenty-five (25) percent of the prior year’s total reimbursement.

March Twenty-five (25) percent, approximately, of the current year’s

estimated total reimbursement. This is calculated by subtracting the first three (3) payments from a current figure which represents eighty (80) percent of the estimated total current year’s reimbursement.

June Twenty (20) percent, approximately, of current year’s total

reimbursement. This final reconciliation payment is calculated by subtracting the total of the first four (4) payments, and any other adjustments required, from the actual current year’s total reimbursement.

NONPUBLIC TRANSPORTATION

December Fifty (50) percent, approximately, of current year’s total

reimbursement. This is calculated using preliminary current year’s reimbursement data.

June Fifty (50) percent, approximately, of current year’s total

reimbursement. This is calculated by subtracting the first payment from actual current year’s total reimbursement.

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August Fifty (50) percent of prior year’s total reimbursement.

December Twenty-five (25) percent, approximately, of current year’s total

reimbursement. This is calculated by subtracting the first payment, the prior year’s audit balance, estimated interest and other revenue from a figure which is seventy-five (75) percent of the total current year’s subsidy requested from the Commonwealth in the intermediate unit’s transportation budget.

June Twenty-five (25) percent, approximately, of current year’s total

reimbursement. This is calculated using cash flow statements submitted by the intermediate units to provide an estimate of the amount of funds needed to complete the year.

Social Security Contributions

The Commonwealth pursuant to Section 8329 of Part 24 Pennsylvania Consolidated Statutes, reimburses schools (school districts, charter schools, intermediate units and area vocational-technical schools) for a percentage, not to be less than one-half of the employer’s share of the Social Security / Medicare Tax paid per employee. Employees not covered by this agreement are those who are federally funded and any employee whose wages are covered by a third party; e.g., an insurance company. In addition, those employees who are on full-time paid leave to work for a collective bargaining unit will not be reimbursed by the Commonwealth. Act 29 of 1994 further defines the reimbursable amount due to a school.

Act 29 of 1994 establishes two (2) classes of employees: “existing” and “new.” An “existing” employee is one who was employed by a school entity within the Commonwealth anytime prior to June 30, 1994. A “new” employee is one who is hired by a school after June 30, 1994 and has never worked for a school entity. A school entity is defined as a school district, area vocational-technical school, intermediate unit or charter school.

Schools are reimbursed an estimated average state share on a monthly basis. This monthly share is based on the prior year’s wages reported on Form PDE-2105, Reconciliation of Social Security and Medicare Contributions Paid. Schools delinquent in filing Form PDE-2105 will have their subsidies held until the form is filed. The Form PDE-2105 is due by July 31st.

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Additional funds may be available during the fiscal year by reconciling the payments a school was entitled to against the actual payments the school was required to make. This reconciliation is calculated on a quarterly basis on Form PDE-339 Quarterly Reconciliation of Social Security and Medicare Tax. There is also an annual reconciliation that is calculated on Form PDE-2105.

Reimbursement to schools is based on the legislative language of Act 29 of 1994. Act 29 states that eligible “existing” employees wages are reimbursed at one-half the employer’s share, and “new” employees wages are reimbursed at the greater of one-half the employer’s share or the market value / personal income aid ratio.

A sample of Social Security Reimbursement revenue is:

10-0101 Cash $ 10,000.00

10-7810-322 State Share Of Social Security And Medicare $ 10,000.00

To record the monthly receipt of the reimbursement for the employer’s share of Social Security Reimbursement.

Special Education

Special Education programs are provided for exceptional children. The term “exceptional” includes both disabled and intellectually gifted children. School districts are required to provide special education classes for all school-aged students residing in their district. The funding formula for the school district operated special education programs is based on a factor multiplied by the average daily membership. There is also funding available for schools that experience extraordinary costs associated with special education programs, for intermediate units, and for the costs associated with the Cordero lawsuit. The payment schedule for the special education subsidy is:

SCHOOL DISTRICT FORMULA PAYMENTS

The Special Education subsidy formula payments are established by Section 2509.5 of the Pennsylvania School Code and are distributed to schools in total of six (6) payments. The first five (5) payments are estimates. Each of the five (5) estimates is approximately 15 percent of the school’s entitlement and is paid on the last Thursday of July, September, November, January and March. The final payment is calculated by determining the actual entitlement due and subtracting out the first five (5) payments. The final payment is paid on the last Thursday in June.

INTERMEDIATE UNIT PROGRAM PAYMENTS

The Intermediate Unit Program payments are distributed based on budgets that are submitted to the Pennsylvania Department of Education by the intermediate units.

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There are three (3) payments made; 50 percent in August, 45 percent in December, and the balance distributed on June 1st.

EXTRAORDINARY COST PAYMENTS

Reimbursement to schools that experience higher than usual costs associated with the education of exceptional children is distributed by the Department of Education during various months of the year. Payments are based upon application to the Department of Education.

A sample of a Special Education revenue entry is:

10-0101 Cash $ 75,000.00

10-7271-271 Special Education $ 75,000.00

To record the July receipt of Special Education subsidy revenue.

Tuition For Orphans And Children Placed In Private Homes

Section 1305 of the Public School Code of 1949 requires the Commonwealth to pay for the cost of the education of those children who are considered non-residents of the state. Such children may have been placed in private homes by court order, or by an agency having within its purview the care of neglected and dependent children. Section 1306 of the school code requires the Commonwealth to pay for the cost of education of non-resident inmates in orphan homes, correctional institutions, and other institutions if the child is considered a ward of the State. The Tuition for Orphans payment is distributed to schools in June.

A sample of Tuition for Orphans and Children Placed in Private Homes revenue entry is:

10-0101 Cash $ 1,000.00

10-7160-206 Tuition For Orphans $ 1,000.00

To record the June receipt of Tuition for Orphans and Children Placed in Private Homes revenue.

Vocational Education

Funding is provided to support vocational education programs at both the school district and vocational-technical school level. Current law provides for a proportionate reduction in secondary vocational education program funding if the amounts appropriated is less than the total subsidy payments earned by all schools in the State.

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The Vocational education Subsidy is distributed to schools in a total of six (6) payments. The first five (5) payments are estimates and are calculated by multiplying each school’s entitlement by 15 percent. These payments are issued on the last Thursday of August, October, December, February and April. The final payment is calculated by subtracting the total of the initial five (5) payments from the total of each school’s entitlement. The final payment is made on June 1st.

A sample of a Vocational Education revenue entry is:

10-0101 Cash $ 100,000.00

10-7220-240 Vocational Education Subsidy $ 100,000.00

To record the August receipt of Vocational Education Subsidy revenue.

Federal Funding available to schools can come from a number of sources. The United States Department of Education and the United States Department of Agriculture are just two (2) of the agencies involved in direct funding. The Pennsylvania Departments of Public Welfare, Education and the LECS Comptroller’s Office are just three (3) of the State agencies involved in disbursing Federal funding to schools through the State. The Federal Subsidies Section of the LECS Comptroller’s Office is responsible for processing federal grants and subsidy payments to public schools, non-public institutions, private institutions, institutions of higher education, charter schools, child and adult care centers and food and nutrition sponsors. Questions concerning federal program funding should be directed to the program office in the respective granting agency.

Grant awards are one source of funding available to schools. These awards are only available to schools that apply for the funds. Grants are very specific as to the expending of the funds and each school is held accountable for the correct usage of the money. The revenues and expenditures are coded as federal sources on the Annual Financial Report. The Pennsylvania Department of Education’s web page www.pde.state.pa.us provides comprehensive information on grants, both Federal and State. There are links provided to other related issues on the page.

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Pass-Through Grants represent money received to be further distributed to another recipient of some or all of the money received by the LEA. Prior to 1994, many governments

accounted for Pass-Through Grants by treating the grant monies as balance sheet items. This accounting treatment recognized the cash received and the “Due To” another

government and was not recognized on the school’s operating statement. GASB Statement #24 – Accounting and Financial Reporting for Certain Grants and Other Financial

Assistance – established guidelines to account for this money both for the recipient and the secondary recipients. GASB #24 specifies that grant money received and passed on

should be treated as an expenditure by the original recipient, if you have any involvement in the program. This standard became effective for Fiscal Year 1995-96.

The type of funds referenced by GASB #24 are those received by a school for the express purpose of transferring them to or spending them on behalf of a secondary recipient. It is important to note that not all money passed to another entity is pass-through money. For example, transportation services purchased from another school or tuition paid to another school would not be considered pass-through money. These expenditures should be coded to the appropriate account established in the Chart of Accounts. Likewise, if you serve merely as a fiscal agent for money received, as defined in GASB 24, an expenditure should not be recorded. This situation will be rare.

Particular notice must be taken of the impact of GASB #24 when forming a consortium to disburse Federal grant monies. The main recipient will book the total amount of the Grant and code the disbursed amounts to #2990 – Pass-Thru Funds object 899. The secondary recipient will record the revenue to account #6831 – Federal Revenue received from other Pennsylvania Public Schools or #6821 – State Revenue received from other Pennsylvania schools. Expenditures should be recorded in the appropriate subfunction / service area and funding source. These are federal expenditures and should be reported as such on the Annual Financial Report and Schedule of Expenditures of Federal Awards. Using this treatment for accounting for these funds may cause either the main recipient and / or the secondary recipient to fall within the parameters of a Single Audit if the total Federal expenditures for the year are greater than $500,000.00. Additional information on the Single Audit requirements can be found in OMB Circular A-133 and in Chapter 16 of this Manual.

More information on Pass-Through Grant accounting can be found in Accounting Bulletin #1998-01, Accounting for Pass-Through Grants and Other Shared, State and Federal Grants, which is available on the Comptroller’s website. Access the Accounting Bulletins component of the web page to find Bulletin #1998-01.

Manual of Accounting and Financial Reporting for Pennsylvania Public Schools CHAPTER 17 TABLE OF CONTENTS 17.A. Chapter