Part XLI. Bulletin 1929―Louisiana Accounting and Uniform Governmental Handbook Chapter Purpose of Handbook 1




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Table of Contents

Title 28

EDUCATION

Part XLI. Bulletin 1929―Louisiana Accounting and Uniform Governmental Handbook

Chapter 1. Purpose of Handbook 1

§101. Introduction 1

Chapter 3. The Account Classification Structure 1

§301. Explanation/General Information 1

Chapter 5. Fund Classifications 2

§501. Explanation/General Information/ Introduction/Overview 2

§503. Governmental Funds 2

§505. Proprietary Funds 3

§507. Fiduciary Funds 3

Chapter 6. Measurement Focus and Basis of Accounting 3

§601. Explanation/General Information/ Introduction/Overview 3

§603. Fund Financial Statements—Reporting of Expenditures/Expenses 4

§605. Types of Expenditures and Accounting Treatments 4

§607. Expenses 5

§609. Government-wide Statements―Reporting of Expenditures 5

Chapter 7. Classification of Revenues and Other Sources of Funds 6

§701. Revenue Codes 6

Chapter 9. Classification of Expenditures and Other Uses of Funds 13

§901. Object Codes 13

§903. Function Codes 20

Chapter 11. Classification of Balance Sheet Accounts 31

§1101. Assets and Other Debit Codes 31

§1103. Liabilities and Other Credit Codes 32

§1105. Fund Balance Codes 34

§1107. Definition―Supplies vs. Equipment 35

Chapter 13. Personnel Requirements 35

§1301. Minimum Requirements for Lead School Business Administrator/Chief Financial Officer/Business Manager (Local School Districts and Charter Schools) 35

Chapter 15. Expenditure Requirements 36

§1501. Seventy Percent Expenditure Requirement 36


Title 28

EDUCATION

Part XLI. Bulletin 1929―Louisiana Accounting
and Uniform Governmental Handbook


Chapter 1. Purpose of Handbook

§101. Introduction

A. The primary purpose of the Louisiana Accounting and Uniform Governmental Handbook for local school boards is to serve as a vehicle for program cost accounting at the local and state levels.

B. The Louisiana State Department of Education has a responsibility to provide and interpret comprehensive statistics about the condition of education in the state. In addition, it has congressional mandates to publish fiscal data as well as to provide statistical data that can be used by local school boards to improve their activities.

C. The Louisiana Accounting and Uniform Governmental Handbook attempts to produce comprehensive and compatible sets of standardized terminology for use in education management and reporting. The following basic criteria were used in selecting items and classifications for inclusion in this publication.

1. The items, accounts, and categories of information should provide the basic framework fundamental to a comprehensive financial management system.

2. The guidelines should serve all sizes and types of school systems.

3. The categories of accounts should be both contractible and expandable, enabling all school systems to adapt them to support various financial management information systems.

4. Data elements should be added into needed categories for purposes of reporting and comparing at the local, state and federal levels.

5. The guidelines should conform to generally accepted accounting principles. Governmental funds should be accounted for using the modified accrual basis of accounting; proprietary and fiduciary funds should be accounted for using the accrual basis.

6. The guidelines should include the categories necessary to provide full disclosure of financial information.

7. The categories included should provide an adequate audit trail.

D. The local school board is the organization most likely to use the account classifications described here. However, the Louisiana State Department of Education is, most likely, the direct user. Both will derive direct benefits as acceptance and use of these guidelines spread among local school boards. The resulting increased uniformity of accounting records in use at the local level will make financial data assembled at the state and federal levels more comparable and meaningful.

E. While this publication includes a complete listing of classifications and standard terminology, it is not all-inclusive, specifically, it does not provide the information listed below.

1. methods and procedures for recording financial data (such as how to record entries in journals and ledgers);

2. methods and procedures for reporting financial data (such as actual preparation of financial reports from the ledgers);

3. methods and procedures for utilizing financial data (such as budgeting and making decisions about the financial position of the local school board).

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 26:462 (March 2000), amended LR 36:1505 (July 2010).

Chapter 3. The Account Classification Structure

§301. Explanation/General Information

A. This publication provides for classifying three basic types of financial activity: revenues and other sources of funds; expenditures and other uses of funds; and transactions affecting the balance sheet only. For each type of transaction, the specific account code is made up of a combination of classifications called dimensions. Each dimension describes one way of classifying financial activity. The dimensions applicable to each type of transaction are:



Revenues

Expenditures

Balance Sheet

Fund

Fund

Fund

Source

Object

Balance Sheet Accounts




Function



B. The purpose and uses of each of these dimensions are described below. The chart of accounts for each of these dimensions is shown later in this handbook.

1. Fund―a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources. It also contains all related liabilities and residual equities or balances, or changes therein. Funds are established to carry on specific activities or to attain certain objectives of an LEA according to special legislation, regulations, or other restrictions.

2. Source―permits segregation of revenues by source. The primary classification differentiates local, state and federal revenue sources.

3. Object―the service or commodity bought. There are nine major object categories: Salaries, Employee Benefits, Purchased Professional and Technical Services, Purchased Property Services, Other Purchased Services, Supplies, Property, Other Objects, and Other Uses of Funds.

4. Function―the activity for which a service or material object is acquired. The functions of an LEA are classified into five broad areas: Instruction, Support Services, Operation of Non-Instructional Services, Facilities Acquisition and Construction Services, and Other Uses.

5. Balance Sheet Accounts―these classifications correspond to those items normally appearing on the balance sheet in three areas: assets and other debits; liabilities and other credits; and fund balance.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 26:462 (March 2000), amended LR 36:1506 (July 2010), LR 37:1382 (May 2011).

Chapter 5. Fund Classifications

§501. Explanation/General Information/ Introduction/Overview

A. Governmental accounting systems should be organized and operated on a fund basis. Unlike a private business, which is accounted for as a single entity, a governmental unit is accounted for through separate funds, each accounting for designated assets, liabilities and fund or other balances. Therefore, from an accounting and financial management viewpoint, a governmental unit is a combination of several distinctively different fiscal and accounting entities, each having a separate set of self-balancing accounts and functioning independently of other funds. Each fund must be so accounted for that the identity of its resources, obligations, revenues, expenditures, and fund balances is continually maintained.

B. The various activities of a government are not typically considered to form a homogeneous whole. Instead, a governmental entity is considered to comprise a number of separate fiscal entities known as "funds." Such funds are established to segregate specific activities or objectives of a government in accordance with special regulations, restrictions, or limitations. Thus, in governmental accounting, the accounting entity is each individual fund, not the overall government organization.

C. Funds used by governmental entities are classified into three broad categories: governmental, proprietary, and fiduciary.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 26:462 (March 2000), amended LR 36:1506 (July 2010).

§503. Governmental Funds

A. Governmental Funds are funds through which most functions are typically financed. Governmental funds are accounting segregations of financial resources. Their measurement focus is on the determination of short-term financial position and on the changes in short-term financial position (sources, uses, and balances of financial resources), rather than on net income determination. To achieve this current financial resource focus, the modified accrual basis of accounting is used. This measurement focus is unique in that generally only current expendable financial resources are accounted for in the governmental fund category. Capital assets, non-current assets, deferred charges and long-term debt are not accounted for within these funds. Within the governmental funds category are the five fund types described below.

1. The General Fund. This is the chief operating fund of the school district. It is used to account for all financial resources of the school district, except those required to be accounted for in another fund. A district may only have one general fund.

2. Special Revenue Funds. These funds are used to account for specific revenue sources that legally may be expended only for specific purposes. Special revenue funds are not used for amounts held in trust or for resources that will be used for major capital projects. Some examples of special revenue funds are:

a. Federal Revenue

i. NCLB Funds―all revenue related to the No Child Left Behind (NCLB) including all parts.

ii. Special Education Funds―all revenue relating to the Individuals with Disabilities Education Act (IDEA) and all related parts.

iii. Other Federal Revenue―used to account for all other federal revenue, including, for example, Adult Education, Career and Technical Education, and Headstart.

b. Other Revenue

i. School Food Service Funds―all revenue, federal, state, or local related to the Child Nutrition Programs including School Lunch, School Breakfast, After School Snacks, Catering, and Nutrition Education.

ii. Other Special Revenue―All state and/or local revenue specifically dedicated for a purpose.

3. Capital Projects Funds. This fund is used to account for major capital acquisitions or construction. These funds are not used for construction financed by proprietary or trust funds. A separate Capital Projects Fund is usually established when the project exceeds a single fiscal year, when the financing sources are provided by more than one fund, or when the capital asset is financed by specifically designated resources.

4. Debt Service Funds. This fund is used to account for the accumulation of resources to pay the principal and interest on general long-term debt. A Debt Service Fund may be used for each obligation; however, it should be established only if legally required or if resources are being accumulated to meet future payments. When obligations are paid, on a current basis, by the General Fund or by a Special Fund, there is no need to create a Debt Service Fund unless legally required to do so.

5. Permanent Funds. This fund is used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the school district’s programs.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6 (A) (10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 26:463 (March 2000), amended LR 27:1684 (October 2001), LR 36:1506 (July 2010).

§505. Proprietary Funds

A. A Proprietary Fund is used to account for activities that are similar to activities that may be performed by a commercial enterprise. The measurement focus is on the determination of net income, financial position, and changes in financial position and therefore the basis of accounting is full accrual. This measurement focus and basis of accounting, similar to that found in the private sector, is based on the flow of economic resources; it requires the reporting of all assets and liabilities associated with a particular activity, including capital assets and long-term assets and liabilities. Within the proprietary fund category are two fund types.

1. Enterprise Funds―used to account for operations when one or both of the following conditions exist:

a. operations are financed and operated in a manner similar to a private business enterprise, where the intent of management is that the costs (expenses, including depreciation) of providing goods or services to the public on a continuing basis are financed or recovered primarily through user charges;

b. management has decided that the periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes.

2. Internal Service Funds―used to account for the financing of goods or services provided by one department or agency to other departments or agencies within the governmental unit, or to other governmental units, on a cost-reimbursement basis. Thus, the objective of an Internal Service Fund is not to make profit, but rather to recover over a period of time the total cost of providing the goods or services. Examples include funds used to account for certain employee benefits, risk management and fleet or facility usage.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 26:463 (March 2000), amended LR 36:1506 (July 2010).

§507. Fiduciary Funds

A. Fiduciary Funds are used to account for assets when a governmental unit is functioning either as a trustee or as an agent for another party; they are commonly referred to as trust and agency funds.

1. Trust Funds. These funds are used to account for assets held by a school district in a trustee capacity for others (e.g. members and beneficiaries of pension plans, external investment pools, or private purpose trust arrangements) and therefore cannot be used to support the school district’s own programs. Trust funds are generally accounted for on the economic resources measurement focus and the accrual basis of accounting. Trust funds include pension trust funds, investment trust funds, and private purpose trust funds (as described below).

a. Pension Trust Funds. This fund is used to account for resources that are required to be held in trust for members and beneficiaries of defined benefit pension plans, defined contribution plans, other post employment benefit plans, or other benefit plans. Typically, these funds are used to account for local pension and other employee benefit funds that are provided by a school district in lieu of or in addition to any state retirement system.

b. Investment Trust Funds. This fund is used to account for the external portion (i.e., the portion that does not belong to the school district) of the investment pools operated by the school district.

c. Private Purpose Trust Funds. This fund is used to account for other trust arrangements under which the principal and income benefit individuals, private organizations or other governments.

2. Agency Funds. This account is used for funds that are held in a custodial capacity by a school district for individual, private organizations or other governments. Agency funds may include those used to account for student activities or taxes collected for another government.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 26:463 (March 2000), amended LR 36:1507 (July 2010).

Chapter 6. Measurement Focus and Basis of Accounting

§601. Explanation/General Information/ Introduction/Overview

A. The information provided in this Section was extracted from the Financial Accounting for Local and State School Systems: 2009 Edition, released by the U.S. Department of Education.

B. Traditionally, the majority of governmental financial information has been maintained and reported in fund financial statements on the modified accrual basis of accounting (or the accrual basis for business-type activities). GASB Statement 34 established additional reporting (the government-wide statements) that represents a major shift in the focus and content of governmental financial statements. Collecting and reporting the additional financial information required by the government-wide statements adds to the complexity of financial reporting activities and has significant implications for the traditional focus and basis of accounting used in governmental financial statements.

C. The government-wide financial statements consist of a statement of net assets and a statement of activities and are prepared using the economic resources measurement focus and the accrual basis of accounting. Thus, revenues are recognized in the accounting period in which they are earned and become measurable, without regard to availability, and expenses are recognized in the period incurred, if measurable. (City, parish, and other local school systems annually submit audited basic financial statements which include government-wide and fund financial statements to the Louisiana Legislative Auditor’s Office.)

D. Governmental fund financial statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become available and measurable, and expenditures are recognized in the period in which the fund liability is incurred, if measurable, except for unmatured interest on general long-term debt, which should be recognized when due (GASB 2005a). Proprietary fund financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. (City, parish, and other local school systems are required to submit an Annual Financial Report (AFR) to the Department of Education each year. Table I of the AFR is based on fund financial statements.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 36:1507 (July 2010).

§603. Fund Financial Statements—Reporting of Expenditures/Expenses

A. Expenditures. GASB Codification Chapter 1600.116 defines expenditures as decreases in net financial resources. In governmental funds, the recognition of expenditures occurs in accordance with the modified accrual basis of accounting. Expenses incurred in proprietary funds are recognized using the accrual basis of accounting. Therefore, significant differences exist between the recognition of expenditures in governmental funds and the recognition of expenses in proprietary funds.

B. In governmental funds, expenditures are usually recognized in the accounting period in which the goods or services are received and the liability for payment is incurred, However, in instances in which current financial resources are not reduced as a result of the incurrence of a liability, an expenditure is not recorded. A common example is the liability for compensated absences (e.g., employee sick and vacation pay). Such liabilities result from current services received from employees; however, the payment of the liabilities usually does not occur until a future date. As a result, compensated absences relating to employees whose salaries are accounted for in governmental funds are not recorded as expenditures and liabilities of the fund until the due date for payment of the compensated absences. GASB Interpretation No. 6 clarifies the guidance for recognizing certain liabilities and expenditures in governmental funds, including general long-term indebtedness, such as compensated absences. The matured portion of long-term indebtedness, to the extent it is expected to be liquidated with expendable available financial resources, should be recorded as a fund liability and expenditure. The unmatured portion of the long-term indebtedness represents a general long-term liability to be presented in the government-wide financial statements.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 36:1507 (July 2010).

§605. Types of Expenditures and Accounting Treatments

A. The major types of expenditures are operating, capital, debt service and intergovernmental charges described as follows.

1. Operating expenditures for governmental agencies include a wide range of expenditures. Often, the largest portion relates to payroll and related employee benefits. The modified accrual basis of accounting requires that proper accruals be made for the amount of unpaid salaries and related benefits earned at year-end, because these liabilities will be paid early in the next reporting period. (The other types of operating expenditures should be accounted for in the same manner, with the recording of a liability when the goods or services are received and necessary accruals made at year-end.)

2. Capital expenditures relate to the acquisition of capital assets. Such expenditures may be recorded in the general fund, special revenue funds, or capital projects funds, depending on the source of funding. Purchases of personal property, such as furniture and equipment, are usually recorded as expenditures in the general fund if they are financed from operating budgets or in the general fund or special revenue funds if they are financed from grants. Major projects, such as the construction of a school building financed by the proceeds of debt, should be accounted for in a capital projects fund. Costs associated with acquiring capital assets in governmental funds are recorded as capital outlay expenditures when the liability is incurred, usually on receipt of the related asset.

3. Debt service expenditures represent the payment of principal and interest needed to service debt. Such payments are usually recorded as expenditures in the debt service fund on the due date. The general fund may also be used if a debt service fund is not required. The modified accrual basis of accounting provides that accruals for interest are not usually allowed. When funds have been transferred to the debt service fund in anticipation of making debt service payments shortly after the end of the period (no more than 30 days), it is acceptable to accrue interest and maturing debt in the debt service fund in the year the transfer is made. This option is available only if monies are legally required to be set aside in a debt service fund and if used on a consistent basis.

4. Intergovernmental charges relate to the transfer of resources from one school district to another, to or from other local governments, or to or from the state. Examples of such charges include contracted instructional services between public schools, other local governments, or state-operated schools and certain transfers of resources associated with state and local funding (e.g., incremental costs associated with wealth redistribution). Such expenditures are accounted for in the general fund using the modified accrual basis of accounting. Payments between school districts and fiscal agents of cooperative services arrangements (e.g., joint instructional or servicing agreements) are also considered intergovernmental charges.

B. In addition, transfers result in the reduction of a fund’s expendable resources, but they are not classified as expenditures. A transfer is a legally authorized movement of monies between funds in which one fund is responsible for the receipt of funds and another fund is responsible for the actual disbursement. In a transfer, the disbursing fund records the transaction as “other financing uses” of resources, and not as an operating expenditure, whereas the fund receiving the transfer does not record the receipts as revenue, but rather as “other financing sources” of funds.

AUTHORITY NOTE: Promulgated in accordance with R.S. 17:6(A)(10).

HISTORICAL NOTE: Promulgated by the Board of Elementary and Secondary Education, LR 36:1508 (July 2010).

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