1. Where do I report that? Coding Correctly to Maximize Funding (and other important monitoring measures)
Matthew Przywara
School District of Lancaster
Chief Financial & Operations Officer
Laura Cowburn
Columbia Borough School District
Asst. to Superintendent Business Services
3/9/2012
PASBO-2012

2. Purpose of Seminar Maximizing revenues (limiting expenses) through:
Accurate records
Verifying data
Common errors
The emphasis is on ACCURACY of data to obtain proper financial results
The purpose of this seminar is not to “cook the books” or manipulate data. It is intended to make you aware of how inaccurate data may be hurting your subsidy and revenues, and some of this may not be found in an audit as an “error”. The idea is to make you aware of as much information as we can in 45 minutes related to data that you should be monitoring in some way. The emphasis is on ACCURACY of data – from all sources, not just your own.
3/9/2012
PASBO-2012

3. Aid Ratio Personal Income Data Market Value Data
Department of Revenue Act 80 Report
Market Value Data
Trend of the State Tax Equalization Board Data
The MV and PI and combined MV/PI Aid ratios drive a significant amount of the funding in Pennsylvania to school districts. It is used to compare and contrast the “wealth” of the area. Market Value has a weight in the formula of 60% and Personal Income is weighted at 40%. This is the first problem with the formula, but it is what it is.
Personal income data is dependent on taxpayers filing the Pennsylvania Income Tax return and identifying the school district code on the forms so that the income reported can be accumulated for school district “wealth” calculations. The Act 80 report distributed in January – February lists the taxpayers that have a residence in your district (or that believe they do). The accuracy of this data can be challenged.
Market Value in history – the amount of “property” that you own – has always been considered the major indicator of wealth. Now, with so much land and property being “inherited,” all it means is, if you “sold” your house you might have wealth. Market Value is harder to challenge, but districts should trend this data to identify anomalies. The Market Value is calculated by the State Tax Equalization Board and some have challenged the calculations and won.
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4. How important is it to check the Act 80 Revenue Report for a school district
Columbia disclaimed 5% of the individual that listed the district on their 2009 personal income tax.
Without knowing, for this example, the assumption is West Shore did not review the Act 80 Revenue Report.
Fictional White Rose S.D.
For this example, the data from an actual school district which I have renamed the “White Rose School District” is being used. It was chosen because the actual data results in a .38 aid ratio. The data is much larger than the Columbia Borough School District, but proportionally the same issues may be occurring. Columbia does scour the Act 80 report. Using the same criteria and choosing a school with an aid ratio close to the 40% threshold used in adjusting the Index – it helps to prove the point of going through this effort. The 40% index was used because of the threshold that exists in Act 1, but many other thresholds exist in other funding formulas, so the same type of inaccuracy could change other subsidies or grants as well.
For the purpose of this example, the White Rose School District, being so large, doesn’t take the time to review the Act 80 report.
Columbia residents (living in the district) all have Columbia addresses. Columbia addresses are NOT all Columbia Borough School District residents.
The White Rose SD boundaries are a little irregular too, and they are very close to the edges of Dauphin County. What is the chance that every taxpayer knows they live in the White Rose SD – or do they live in Northern York, Northeastern York, Dover, or a Dauphin County school district?
3/9/2012
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5. Hypothetical – Personal Income AR
WHITE ROSE SCHOOL DISTRICT
Actual
Possible adjusted
Data Year
(2009)
Fiscal Aid Ratio Year
Market Value
$ 3,840,779,000
Personal Income
$ 1,565,407,363
$ 1,400,000,000
$ 165,407,363
WADM 9,
MV per WADM
$ ,944.18
PI per WADM
$ ,974.11
$ ,802.62
State MV/WADM
$ ,646
State PI/WADM
$ ,551
MVAR
0.3931
PI/AR
0.3609
0.4285
MV/PI AR
0.3803
0.4073
2000 Population Estimate
57,960.00
If disclaimed
Median Household income
$ ,500.00 5%
Disclaim 5%
2,877
might have qualified for
Act 1 Adjustment
Columbia Borough School District typically disclaims about 4-5% of the addresses listed on the Act 80 report. Yes, it takes time to do this, but a week of a clerk doing this activity ($30,000 salary/benefits = about $15 per hour = or roughly $600 a week) could save thousands if it corrects a MV/PI aid ratio that is used in a subsidy formula.
So, the current MV/PI Aid Ratio for White Rose School District is Disclaiming 5% might get them about $165,000,000 of Personal Income that would shift to the appropriate school district. Based on a median household income of $57,500, that would mean around 5% of tax returns with that amount of income reported (imagine if it’s more) could result in a change in MV/PI Aid Ratio to .4073
For school districts with a market value/personal income aid ratio (MV/PI AR) greater than , the value of their index is adjusted upward by multiplying the base index by the sum of 0.75 and their MV/PI AR. For example, if the base index is 1.7% and the school district's MV/PI AR is , the school district's adjusted index is 1.7% x ( ) = 2.3%.
In this case, White Rose’s index for is 1.7% - the base index. At .4073, the school district’s adjusted index is 1.96%. At a school tax rate of 11.78, the index currently provides of a mill increase. The hypothetical new rate would allow of a mill increase.
Using a .80 Common Level Ratio on the $3,840,779,000, the estimated assessed value of the White Rose SD is $3,072,623,200. With a collection rate of 95%, the collectable assessed value is $2,918,992,040 – which means one mill = $2,918,992.
That additional index could allow another mills or $89,320 before the use of using the Referendum Exceptions. That could save a staff position or provide more curriculum materials.
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6. Market Value
Market value has been defined by the Pennsylvania State Supreme Court:
“the price in a competitive market a purchaser, willing but not obligated to buy, would pay an owner, willing but not obligated to sell, taking into consideration all the legal uses to which the property can be adapted and might reasonably be applied.”
Many factors are considered in arriving at the fair market value of property. One very important
consideration is the highest and best use of the property in question. It is not only the present use of a
property that affects its value, but all of the uses including the highest and most profitable use to which the land is adaptable and available. The possible demand for such use affects the market value. Highest and best use, then, “is that use of a property that will generate the highest net return to the property over
a reasonable period of time.” Highest and best use of property must be supported by the following
criteria; the use must be:
² Legally permissible;
² Physically possible;
² Financially feasible; and
² Maximally productive.17
The courts have recognized that “economic reality” factors also influence real property values.
So, essentially, the established Market Value is not just sales data – but could be influenced by other factors.
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7. Assessment Appeals
Although the county board of assessment may not reassess an existing property because it has recently been sold, the sale of a property may alert a taxing district, such as a school district, to appeal the assessment based on the sales price. Taxing districts have the same right of appeal as property owners with regard to real property assessments.
This right was upheld by the Commonwealth Court in In re Springfield School District 26 and Vees v. Carbon County Board of Assessment Appeals.27
A common level ratio is established to determine the assessed value as a percentage of the established Market Value. An assessment, then, is a percentage of the market value of the property – or so it is now generally applied. When a taxpayer purchases a property, they can appeal the assessed value if they believe the actual “market value” of the property has dropped from the base year. 100,000 market value at 80% CLR = $80,000 assessment. Appraisers appraise the house at a rate of $90,000 as fair market value. Taxpayer appeals. The CLR of 80% is applied to the $90,000 – and the taxpayer now has a $72,000 assessed value – LOSS OF REVENUE TO THE SCHOOL DISTRICT.
Presenting contradictory testimony related to these assessments could reduce or eliminate the impact. A certified appraisal would have to be done at the District’s cost showing a different market valuation.
However, in an improving economy – which we hope to find soon – market values may start to increase. In that instance the reverse activity can occur – the school district can appeal the assessment. This could generate increased tax revenue.
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8. Market Value Trend
Auditor General Jack Wagner Announces Audit of State Tax Equalization Board HARRISBURG, Pa., July 23, Auditor General Jack Wagner said today that the Department of the Auditor General will conduct a special performance audit of the State Tax Equalization Board. Wagner said he received requests from several legislators and taxpayers asking him to conduct an audit of the board because of concerns over inaccurate market values of taxable real property being calculated by the board, which could have resulted in taxpayers facing inaccurate and exorbitant property tax increases. The State Tax Equalization Board was established as an independent board by the general assembly in 1947 to ensure equitable distribution of tax funds among the state’s school districts. The board came under scrutiny recently after it was determined that the board provided miscalculated market values totaling over $300 million to at least four central Pennsylvania school districts. Wagner is also concerned that additional school districts across the state may have received incorrect calculations from the board.
The question right now is – how accurate are STEB values. If you are in a school district that equalizes taxes – that is, uses the market values to determine tax rates – you will immediately notice something wrong with the market values in the adjustment year.
I had two counties equalized using market value. Example. Market value of County 1 is $100,000. Market value of County 2 is $100,000. Tax revenue is billed based on a shared split. Adjustment year – Market Value of County 1 is $105,000. Market value of County 2 is $50,000. Taxes are now split Taxes jump way up on County 1 and actually go down in County 2. I contacted STEB. A month later County 2’s Comptroller commented that the STEB auditors were in reviewing their numbers.
In a one County school though – you need to monitor this.
If you are in a school district that equalizes taxes, bad data will immediately be noticed. But all schools should trend their market value.
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9. Trending Market Value
Data Year
(2006)
(2007)
(2008)
(2009)
Fiscal Aid Ratio Year
Market Value
$ ,528,100
$ ,908,100
$ ,714,200
$ ,045,600
10.67%
0.13%
8.30%
-0.21%
State MV/WADM
$ ,776
$ ,578
$ ,994
$ ,646
13.66%
2.65%
12.70%
1.95%
This is Data for the Columbia Borough School District.
The “base year” is 2005 – Lancaster County reassessment. Every other year is an “estimated” year or an “actual” year based on County submitted data as modified by other factors.
There should not be significant “swings” except in the even data years. But there should never be a significant “negative” swing amount in the even data years unless there was a total loss of some significant property.
Market value in a generally normal or consistent economy should not drop by 50%. That just doesn’t make any sense.
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10. Actual Instructional Expense
Data comes from the AFR
Detailed calculations are on the FAI under Reports
AFR data is reduced by:
New capital outlay (710,720,750 objects)
Reporting non-capital items, such as supplies, in 750 rather than 610 will reduce the AIE
Actual Instructional Expense is used in a number of subsidy calculations as well. On one hand, many use this number to compare the “spending” of a school on instruction. Depending on the philosophy – spending more in one district compared to another may be a good thing or a bad thing. But it does establish a rank of the spending in your district on instruction – costs associated with educating students.
This starts with your overall AFR data in 1000, 2000 and Then, there are amounts removed from particular subfunctions, and amounts added from 4000, and 5000 sub-functions, as applicable.
The Manual of Accounting describes 600 Supplies as “amounts paid for material items of an expendable nature, that are consumed…” such as forms, paper, pencils, and other supplies of relatively low unit costs.
Software that is used for one year or less – consumable in nature – belongs in 618.
751 is used for Non-Capital Equipment defined as “equipment expenditures that have a useful life that extends beyond the current fiscal period but does not meet your School’s Board approved capitalization policy.
INCONSISTENT ACCOUNTING ISSUES - When a purchase is made for a microscope at $125, it would not meet the threshold of $5,000 for our capitalization policy, but it has a useful life of more than one year. If this is recorded to 610, it is NOT eliminated. If this is recorded in 751, it IS eliminated. What about a basketball? To a phys. Ed. Teacher, that is a piece of “equipment.” Do you use 610 or 751? Does the “relatively low cost” comment in 610 drive your decision or does the “consumable” comment drive your coding decision?
How many of you go to this level of accounting? It could make a big difference on your AIE.
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11. Actual Instructional Expense (cont.)
AFR data is reduced by:
Health Services
Reporting special needs nurses to 1000 rather than 2400 inflates the AIE
Vocational Education
Reporting non-approved vocational courses in 1300 rather than 1100 reduces the AIE
TIP – USE APPROPRIATE ACCOUNT CODES – not District developed alternate codes in function/object combinations.
Health Services functions are eliminated from the 2000 Function. If you are charging one-on-one nursing for a special needs student to 1200 rather than to 2400, those costs would remain in your AIE.
Vocational Education of 1300 is adjusted based on some costs calculated by the Comptroller’s Office. I was informed that the calculation is not one that the school district could calculate. But – if you are using 1300 for instruction that is NOT approved, this could impact your AIE rate.
3/9/2012
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12. Tuition Rate Breakdown of elementary/secondary must be accurate
K – 6 is Elementary
7 – 12 is Secondary
Prorating a Middle School Grades 6-8
Is that accurate?
Could more actual expenses be tracked separately for Grade 6? (especially if an enrollment bubble)
The elementary and secondary breakdown of expenditures is important so that when your district receives a payment based on a tuition rate, it is supporting the appropriate costs for the grade level of the tuition student.
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13. Tuition Rate
Tuition Rate – different from Actual Instructional Expense
Columbia
Tuition Rates
Elementary - $ 9,677.71
Secondary - $11,103.30
Actual Instructional Expense
Per WADM $ 8,095.30
Per ADM $14,244.79
Charter School tuition
Non-special student $ 9,779.75
Special Education student $22,939.67
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14. Vocational Education
Reimbursement is provided for the following vocational programs: agriculture education, distributive education, health occupations education, home economics education (gainful), business education, technical education, trade and industrial education, or any other occupational-oriented program approved by the Secretary of Education.
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15. Nurse Services One school nurse for every 1500 students
Total of students INCLUDES non-public and private schools served by the district
Full-day CTC students are NOT included in the reimbursement count.
Half-day CTC students ARE included (count both home and away time)
IU students housed in the District buildings ARE included in the count.
All students FTE that a District nurse would tend to for medical purposes are counted.
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16. Charter Schools PDE-363 – “eliminating” Federal What does this mean???
“School Districts may include the federal portion of expenditure sub-functions that are not described in 24 PS A(a)(2) in the Deductions from Total Expenditures as provided for on the PDE-363.”
What does this mean???
3/9/2012
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17. Charter Schools Back of PDE-363 - Deductions
Most functions state “(Federal only)”
1200 is eliminated entirely
But added back for Special Education on front
(May eliminate “Federal of Sub-function…”)
Federal IDEA expenditures – eliminate
Other “federal”?
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18. Charter Schools (cont.)
School District of Residence
Taxpayers don’t know their school district of residence, so – what are parents indicating to Charter Schools?
No verification process mandated
Need to obtain accurate address information to verify
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19. Charter Schools FORM – “Based on budgeted expenditures”
INSTRUCTIONS – “Based on the most updated version of the General Fund Budget or the most currently available expenditure data for the school year immediately preceding.”
Use AFR data
Important to finalize prior fiscal year accruals/deferrals prior to August 31.
On the form it states: Based on budgeted expenditures, but that does not mean you must use your “budget.” In the instructions it clarifies to use the most updated version of the General Fund Budget or the most currently available expenditure data. Using the prior year ACTUAL EXPENDITURES is generally lower that your budget – unless you have a deficit situation. It is also more ACCURATE data. The key is to complete as much audit preparation – meaning, accruals, deferrals, adjustments, etc., to your financial information PRIOR TO August 31, so you can complete the PDE-363 on time. You do have the ability to “correct” the PDE-363, but only if the change exceeds 5% of the original submission in tuitions. So, if something extraordinary is found, there is an opportunity to adjust.
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20. Bonds and Plan Con Plan Con Part H – Project Financing
Establishes the base for the
Temporary Reimbursable Percentage
0.5% Reduction
Plan Con Part J – Project Accounting Based on Final Costs
Must be filed within three years of final payments
Establishes the Permanent Reimbursable Percentage
WHY WAIT THREE YEARS?
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21. Bonds and Plan Con (cont.)
Plan Con Part K – Project Refinancing
Reimbursement stops until Plan Con Park K is approved
Will be issued a NEW lease number and new %
Have PDE Application for Reimbursement completed and ready to go.
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22. Bonds and Plan Con Delays in submission of PDE-2071 Remember –
MVAR/CARF of the YEAR OF THE PAYMENT or could delay processing
Time forms to the bank – marked TIME SENSITIVE
Submit forms ASAP to improve cash flow
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23. State will pay the District Tuition Rate (considerably higher).
Child Accounting
Foster Children (Section 1305)
Parents in District + Foster Home in District = Report as: Resident student (just like any other student)
Parents out of District + Foster Home in District =
Report as: Non-resident Foster Child
Result:
State will pay the District Tuition Rate (considerably higher).
Nonresident Children Reporting issues:
Section 1305 Foster Children: Each year school districts should assess their student population for children for are foster students. There are a couple of rules that must be followed here. First, if the child’s parents live in your district and the foster home where the child is residing is also in your district than this child must be reported as a resident child and the state will pay you subsidy for educating the child like any other resident student. However, If the parents live outside your district and the child is placed in a foster home within your district, this child should be reported as a non-resident foster child and the state will pay you your tuition rate which is considerably higher.
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24. Child Accounting (cont.)
Institutionalized Children (Section 1306)
Wards of State – PDE pays tuition rate
Must have appropriate supporting documentation
Placed in your district – parents are out of district
Non-resident: Report home district to PDE
PDE pays home district subsidy; home district pays your district tuition rate
Use Form PDE 4605 to establish home district
Placed in district – parents in district
Reported as a regular student – receive subsidy
Section 1306 Institutionalized Children: If you have an institutionalized children’s home located within your school district, you will be considered the host district and will be responsible for the education of the children who are placed in that home within your district. Essentially there are three items here that can have a tremendous affect on subsidy. First, children who are placed in the institutionalized home who are wards of state, should be reported to PDE as such and PDE will pay your tuition rate instead of subsidy which is a much higher amount. In order to qualify, you must have paperwork indicating that the parental rights have been terminated or paper work that indicates that the child is in the custody of an agency such as Children and Youth Services. Secondly, Children who are placed in the institutionalized home whose parents reside in a district outside of yours should be reported as nonresident students where you will identify to PDE the home district of residency. PDE will then pay subsidy to the home district and in return, the home district will pay you your tuition rate. To qualify for this a determination of residency form PDE 4605 should be send to the home district so that they can acknowledge the student. Finally, if a student that is placed in the institutionalized children’s home has parents who are residents of your district, those student should be reported as regular resident students (just like the students who attend your schools) and the state will pay you subsidy.
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25. Child Accounting (cont.)
Institutionalized Children (Section 1306) Special Education supplemental services: P/T, O/T, Speech, other significant services Not part of child accounting reporting – so: Bill to the District of Residency Bill to PDE if Ward of State
In the case where nonresident students who are institutionalized in a home within your district who are receiving special education services, occupational / physical therapy, and other significant services, these charges can be billed back to the district of residency or in the case of a child who is a ward of state, these charges can be billed to the state in a separate transmittal other than the child accounting reporting process.
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26. Child Accounting (cont.)
990 Mandatory Hours of Instruction
Deduction for subsidy per day or per hour if not met
½ day CTC + ½ day SD
Total for instructional hours of both must reach 990 in order not to be penalized. Travel time does NOT count.
Coordination with CTC instructional schedule is critical
Not providing mandated instructional hours and days for a group of students (by grade level or program) results in subsidy reduction that is calculate by PDE by subsidy per day or subsidy per hour reduction.
Career and Vocational education students who participate in half day programs must still make the 990 hours of total instruction between both programs (Vocational and Home Time) in order not to be penalized.
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27. Child Accounting (cont.)
Truant Students
Do not withdraw if actively pursuing truancy action
Result: eligible for subsidy instead of withdrawing them
Policy of unexcused days – 10 and withdraw*
Holding for more unexcused days can negatively affect the average daily attendance for things like NCLB
Students who may be truant may stay on your rolls (eligible for subsidy instead of withdrawing them) as long as you are actively pursuing truancy action against them.
If a resident student is hospitalized, incarcerated, or placed in an educational setting outside of your district, those students must have their entry/withdrawal records updated to reflect the gap in time that they received educational services outside of the district. The home district will receive a Determination of Residency Form PDE 4605, asking for an acknowledgement. If the district acknowledges the student, the district will be billed for the out of district educational services provided. However, the home district must check to make sure that the servicing district gave credit for membership days of education to the home district so that the home district receives the subsidy.
*CBSD Policy
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28. Transportation Factors Included in the Subsidy Financial Driven
STEB Market Value
Market Value Aid Ratio
Pupil Driven
Public Students Transported (Includes Charter)
Includes Hazardous
Non-Public Students Transported
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29. Transportation Factors Included in the Subsidy (cont’d) Cost Driven
LEA Owned
Outside Contractor
Fare Based
Vocational Schools
Depreciation
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30. Transportation Subsidy in question What does this mean for the future?
SAEBG for Budget
What does this mean for the future?
Can no longer hang our hats on estimating a CPI increase
Transportation decisions will take a different approach
Allocation of resources will be based on educational needs
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31. Thank You & Questions
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