ETHICS IN SCHOOL FINANCE

ETHICS IN SCHOOL FINANCE

DR. LEN ELOVITZ

As chief educational officer, you have a fiduciary responsibility to insure that the district follows laws and regulations, operates efficiently, safeguarded its assets, accurately prepares and files required reports and school funds are correctly collected and expended.

Case Study #1 It has come to your attention that your high

school principal is using the funds leftover from defunct student activities as his school’s “sunshine fund” sending flowers and cards to teachers who are ill, having a baby, etc.

What course of action would you as superintendent take?

Would your actions be different he was using the funds for personal gain?

Case Study #2 School supplies representative runs into you,

the superintendent, one summer and asks if he can help you with your ordering. It seems that the district is always returning about 10% of the order for refunds.

What would you do?

Case Study #3 The auditor brings to your attention that he

came across the possibility that the district is making payments to a phantom company.

What would you do?

Other Cases 3 for 2 computer deal Instrument rentals – Supe’s daughter clarinet Staff development payments – AP clerk

cashing checks Junkets for administrators and their

paramours

ISLCC STANDARDS Standard 3: A school administrator is an

educational leader who promotes the success of all students by ensuring management of the organization, operations, and resources for a safe, efficient, and effective learning environment.

Standard 5: A school administrator is an educational leader who promotes the success of all students by acting with integrity, fairness, and in an ethical manner.

AASA Code of Ethics http://www.aasa.org/content.aspx?id=1390

2. Fulfills all professional duties with honesty and integrity and always acts in a trustworthy and responsible manner.

7. Avoids using his/her position for personal gain through political, social, religious, economic or other influences.

10. Honors all contracts until fulfillment, release or dissolution mutually agreed upon by all parties.

ASBO International

ASBO_Professional_Standards

See Page 19

SCHOOL ETHICS ACT - 1991 New Jersey School Ethics Act

State Employee Ethics Training

Fiscal Accountability Too many superintendents have been fired

because they did not pay attention to the fiscal conditions of their school district.

Some constituencies are more concerned with the finances than anything else.

The quality of the instructional program will be affected by the district’s financial health

Fiscal Integrity is Exemplified by An ongoing process of

Revenue Projection Expenditure Budgeting Budget Monitoring Auditing

Revenue Projection Awareness of Revenue sources

State Aid Federal Aid Tax base

District ratable trends Surrounding districts finances

Grants Knowledgeable Proactive Never send anything back

Alternative revenue sources Advertising Foundation

Expenditure BudgetingSuperintendents Role Evaluate economic climate - talk to the board Estimate other revenues Come up with an idea of what might fly in terms of percentage Translate into building budget base Consider enrollment projections Provide principals and other purchase center heads with their base

and budget planning forms Personnel Principal defense Compile budget Make adjustments Present to Board Get Board approval “sell” the budget Election/Board of School Estimate Pass/Fail

Budget Monitoring Monthly review Pay attention to salary accounts Time of year Encumbrances Unencumbered balances Fiscal resolutions Bill list ASK THE SBA

AUDITING A systematic procedure for verifying the the

financial operations of a school district. The purpose is to determine that property and

funds are being used in a legal and efficient way.

Rarely results in the discovery of dishonesty Helps in correcting procedural errors and as a

reporting mechanism to public

Required yearly external audit Review of citations

Comprehensive Year-end Audits Usually Include: A study of BOE minutes Verification of all monetary receipts Verification of all expenditures Review of all financial records Reconciliation of all statements and accounts Review of all subsidiary records – deeds,

insurance policies, inventories, etc. Review of student activity and other fiduciary

accounts

CAFR The Comprehensive Annual Financial Report

(CAFR) is the basis for the district’s official annual report in NJ and most other states. It should include all of the funds and account groups of the LEA. It is organized into three primary sections: 1) an introductory section, 2) a financial section, and 3) statistical section.

Receiving and Depositing Funds Most school districts in NJ are fiscally

independent

The district has control of its own budget and has custody of its own funds

Taxes are collected by municipal officials on behalf of the school district

All funds are deposited in the bank or banks designated by the BOE as its depository

Expending School Funds Authorization for the expenditure of school

funds is strictly controlled by statute and code.

In NJ, who can spend school district funds?

The Purchase Cycle PO is cut SBA approves Business Office Numbers, Bursts, distribute Vendor receives PO and Voucher Principal receives receiving copy and file copy Business Office copy is placed in circular file District receives good or services Principal signs and returns receiving copy to B.O. where it is

attached to B.O. copy in the circular file Vendor sends invoice and voucher to B.O. where it is attached to

B.O copy in the circular file When all documents are received they are placed in file for

payment At a designated time they are recorded on payment list which

generates the bill list and prints the checks The bill list is passed by BOE and checks are distributed

Purchasing and Contracts Bidding Laws – NJ Local Public Purchasing Law Title 40:11

NJ Bidding threshold $17,500

Exceptions Professional services Extraordinary unspecifiable service Insurance

Protecting School Funds Surety Bonds

Protects the district against fraud or loss Motivates officials to be businesslike in handling funds

under their jurisdiction. Types

Fidelity Public Official Contract

Guarantees the performance of a contract or obligation If a monetary loss occurs, the surety company

reimburses the board and goes after the individual or company to recover the loss.