AFR – Summary of Common Reporting Errors
During the review of the 2018-2019 FY AFRs, several common reporting errors were identified.
Please review the items listed below when preparing to close your books to avoid making similar errors during the completion of your 2019-2020 FY AFR.
Item 1 - Student Transportation Subsidy 7311
Many schools are misreporting Student Transportation Subsidy amounts, often due to misinterpretation of the Audit Confirmation report.
- The Audit Confirmation report available on FAI is strictly a cash disbursement report, and only includes cash payments distributed within the fiscal year. The amounts displayed on the report are not "revenue" amounts applicable to that fiscal year.
- The transportation subsidy historically has a shortfall every year which results in two payments being disbursed in August. One is applicable to the current fiscal year, and the other is a balance due amount for the previous year.
- Please ensure the revenue reported under code 7311 reflects the revenue earned, rather than the cash received during the fiscal year. The 7311 revenue amount referenced in AFR validation 30501 will reflect the subsidy amount that should be accounted for as revenue for the fiscal year.
Item 2 - Capital Reserve Fund Issues
Capital Reserve Fund #32: It has become evident that an increasing number of schools are unfamiliar with the Municipal Code restrictions on the creation, funding, and use of this type of fund.
- The Capital Reserve Fund #32 is considered a Capital Projects fund type, however the Municipal Code imposes additional restrictions which must be adhered to. The Comptroller’s Office is not in a position to approve unallowable transactions if or when such issues are discovered on the AFR.
- Allowable sources of funding are: Transfers from the General fund of either surplus money at the end of the fiscal year or surplus appropriations throughout the year, and interest earnings of the fund itself.
- Unallowable sources of funding include items such as: Transfers from any fund other than the General fund, any type of debt proceeds, proceeds from the sale of assets, donations/contributions, and any other State or Federal funding.
- The only allowable uses are: Capital improvements, replacement of and additions to public works and the deferred maintenance thereof, purchase or replacement of school buses, and debt service payments.
- Transfers out of Fund #32 are not allowable.
Item 3 – Bond Issuance Costs
Bond issuance costs should be coded to account 2390-810 rather than within any 5000 function. Per GASB #65 - Debt issuance costs, except any portion related to prepaid insurance costs, should be recognized as an expense in the period incurred.
Item 4 - Function 4000 Unallowable in Special Revenue Funds
The AFR currently allows data entry in expenditure function 4000 within the Special Revenue funds. Per GASB Statement 54, special revenue funds may not be utilized for capital project costs.
Please be advised that beginning with the 2019-2020 fiscal year AFR, function 4000 will not be available for data entry within any of the special revenue funds, Funds 21-29.
If your school currently or anticipates recording expenditures in this manner, please discuss this guidance with your auditor to make any adjustments necessary prior to completion of the 2019-2020 fiscal year.
Item 5 - Elementary/Secondary/Federal Split of Expenditures
Expenditures are frequently found to be allocated and reported incorrectly within the elementary, secondary, and federal categories. This error is especially common in the case where a building such as a middle school houses grade levels within both the elementary and secondary categories.
- Elementary expenditures – should include costs for students in grades K-6
- Secondary expenditures – should include costs for students in grades 7-12
- Federal expenditures – should include only those costs that are funded with Federal funds. If an expenditure is related to a federal program, but is not funded with federal revenue, that expenditure should be reported as elementary or secondary.
Item 6 - Special and Extraordinary Items
Please be sure to review items you have recorded as special or extraordinary items and be sure they meet the requirements as set by GASB Statement 34. Please work with your auditors to make this determination.
- Extraordinary Items: transactions or other events that are both unusual in nature and infrequent in occurrence
- Special Items: significant transactions or other events within the control of management that are either unusual in nature or infrequent in occurrence
- From GASB Codification 2400.143-149: Items should be presumed to be ordinary and usual unless the evidence clearly supports classification as a special or extraordinary item.
- Unusual in nature – should possess a high degree of abnormality and be clearly unrelated or only incidentally related to the typical activities of the government taking into account the environment in which the government operates.
- Infrequency of occurrence - should be an event or transaction that would not reasonably be expected to recur in the foreseeable future, taking into account the environment in which the government operates.
Item 7 - Proper Use of 2360 and 2380
The AFR must include expenditures in both Function 2360 and 2380.
- Function 2360 is to be completed with the expenditures directly related to the duties applicable to a Chief School Administrator - overall LEA administration.
- Function 2380 should be completed with the expenditures directly related to the duties applicable to a Principal - specifically building administration.
- If one individual fills both of these roles, or additional roles at the school, the expenditures should be prorated to all applicable functions.
- When schools receive administrative services as part of a management contract, the contract must be reviewed to identify the functional nature of those services, and the contact costs are to be allocated and reported in the most applicable expenditure codes.
- Function 2390 should not be used to account for any management contract costs or administrative services that can be recorded more accurately within another function.
Item 8 - Signature Documents
- In order for your AFR to be approved, both the Accuracy Certification Statement and Audit Certification must be signed and submitted.
- The documents require two separate signatures from the Board Secretary and the Chief School Administrator.
- If any changes are made to your AFR, a newly signed Accuracy Certification Statement is required for approval.
- Audit Certifications must be submitted no later than December 31st.
Item 9 For Intermediate Units ONLY - Revenue Recognition
Some confusion has been noted in the account codes utilized by Intermediate Units to report revenue.
- 6947 – Payments received from the State that were withheld from your member districts for educational services
- 6948 - Payments received directly from your member districts for educational services
- 6944 - Payments received from other Pennsylvania LEAs for educational services
- 6969 – This account should not be used for coding any receipts from a Pennsylvania school.