1. 2002-03 BUDGET Department of Education Division of Finance November 28, 2001

2. 2002-03 BUDGET Key Revisions/Enhancements l Cap Banking l New Buildings SGLA l Tuition Calculation l Required Maintenance Amount l Budgeting for Capital Projects

3. 2002-03 BUDGET CAP BANKING Ability to Incorporate Unused Spending Authority from 2001-02 Budget in 2002-03 or 2003-04 Budget (ability to increase tax levy above cap without a separate proposal)

4. Cap Banking - Calculation 1.Calculate Total Spending Authority (MPNB) from 2001-02 Budget = MPNB Before SGLAs (preloaded amount into 01-02 from state aid = 3% or CPI over prior year net budget) + Eligible Enrollment SGLA + Eligible Transportation SGLA + Eligible Special Ed SGLA + Eligible Capital Outlay SGLA + Eligible New Buildings SGLA

5. Cap Banking - Calculation 2.Calculate Net Budget from 2001-02 Budget Certified for Taxes 3. 2001-02 Banked Cap = MPNB - Net Budget Certified for Taxes

6. Cap Banking - Software l New Report on Unused Spending Authority, or Banked Cap, from 2001-02 Budget l New Request Screen for Banked Cap l New Line in Report of MPNB plus SGLAs l No Change to the Net Budget Cap Worksheet

7. 2002-03 BUDGET NEW BUILDINGS SGLA Increase Cap for Opening a New School Facility for Educational Purposes (includes additions) in the Budget Year

8. New Buildings SGLA l Costs include: l New Salaries/Benefits l Materials, Supplies, and Equipment l Other Costs: Insurance, Utilities, and Energy l New SGLA Data Entry Screen similar to SD14 for transportation

9. 2002-03 BUDGET TUITION CALCULATION Automatic Calculation Included in 2001-02 and will be Enhanced in 2002- 03 to Allow Optional Part II Allocation of Costs by Program.

10. 2002-03 BUDGET REQUIRED MAINTENANCE BUDGET AMOUNT (M1) Budget in 02-03 in EITHER Required Maintenance Appropriation Accounts (261) or the Maintenance Reserve (10-606)

11. Required Maintenance Definitions Based on Division of Facilities & Transportation Guidance l Required Maintenance (261) - Maintains Useful Life l Routine Maintenance (262) - Janitorial and Custodial (cleaning and inspecting) l Capital Maintenance (Fund 12) - Extends Useful Life (Eligible for EFCFA Funding)

12. Required Maintenance Budget Amount l 2002-03 Budget Guidelines will be updated (minor) based on facilities guidelines l For Additional Guidance on Whether Planned Maintenance Activities are Routine, Required (M2) or Capital…. Ask Your DOE Facilities Contact

13. Required Maintenance Maintenance Accounts l Establish 261-XXX Accounts by School Facility by 02-03 l Expenditures for Required Maintenance Activities are recorded in four accounts 261-100: Salaries 261-420: Cleaning, Repair and Maintenance Services 261-610: Supplies 261-800: Other Objects

14. Required Maintenance Expenditures l Auditor verification of annual expenditures beginning in 02-03 l Review of classification of expenditures and documents to support the school level expenditures for 261 l Random testing of POs/Vouchers l Salaries split between custodial and required maintenance need “task specific documentation”

15. 2002-03 BUDGET BUDGETING FOR CAPITAL PROJECTS Overarching policy under EFCFA is the requirement for approval of local funding (local support) needed to implement the capital projects in the LRFP

16. Budgeting for Capital Projects N.J.A.C. 6A:26-3.7 requires local $ approval in the budget, referendum, or through capital reserve withdrawals according to the regulations.

17. Budgeting for Capital Projects Planning Needed To Secure Local $ Approval for Non-Referenda Capital Projects Excerpt from Final Approval Letters “...no school facilities project shall be constructed unless the local support amount has received approval as set forth in N.J.A.C. 6A:26-3.7”

18. Budgeting For Capital Projects What and Where Do I Budget in 02-03? For non-referendum projects planned for implementation in 02-03.

19. Budgeting For Capital Projects l Capital Outlay (Fund 12) via unrestricted general fund revenue or capital reserve withdrawal OR (at district option) l Deposit into Capital Reserve for withdrawal during yr by board resolution upon project approval

20. Budgeting For Capital Projects When Capital Outlay? Option for all Capital Projects (school facilities eligible for EFCFA $ or “other capital projects” not eligible for EFCFA $) as detailed by project on SD 4 Necessary for “Other Capital Projects” Pros + Receive Specific Project Approval + Can transfer $ among approved projects Cons – Receive Cap Adjustment only for increases over 01-02 capital outlay budget

21. Budgeting For Capital Projects When Capital Outlay? New Option for 02-03 If budgeting estimated local share of School Facilities Projects in Capital Outlay, have option to budget directly into new transfer line to capital projects fund (detailed by project on SD 4) 12-000-400-932 Current Capital Outlay Transfer to Capital Projects

22. Budgeting For Capital Projects When Capital Reserve? Option for School Facilities Projects (eligible for EFCFA $) for withdrawal during yr by board resolution upon project approval. Pros + Entire Deposit Outside of Cap + Deposits not project specific and can withdrawal by board reso local $ of Final Eligible Costs (FEC). + Remaining balances outside excess surplus calc Cons – Can only withdrawal during yr (unbudgeted) by board reso up to 110% of local $ of FEC.

23. Budgeting For Capital Projects Critical Questions to Guide Budgeting Options 1.Is it a School Facilities Project or an “Other Capital Project”? 2.If a school facilities project, does it, or is it expected to, include excess costs?

24. Budgeting For Capital Projects Q - What about transfer of Surplus during the year? l With LRFP process, should be little if no unforeseen capital project needs. l But, still if unforeseen projects are identified: l Capital reserve for unplanned school facilities projects (upon DOE project & EDA grant approval) l Surplus (up to 1%) for unplanned “other capital projects” (upon DOE project approval)

25. 2002-03 BUDGET SCHEDULE Part I - Week of January 14 (no later than January 18) Part II - Two Days After State Aid Release

26. 2002-03 BUDGET Capital Reserve Accounts and EDA Grants October 19, 2001 Guidance

27. Funding Options/Approval for Local Support Referendum Project No Change from Current Practice Non-Referendum Project Planning Required to Ensure Local $ Approval l Benefit of EFCFA - Overall Better Capital Project Cost Estimates

28. Funding Options/Approval for Local Support l See Handout l Options Depend Upon: l Pre-Award or Post-Award l Non-Referendum or Referendum l School Facilities Project (SFP) or Other Capital Project

29. Funding Options/Approval for Local Support Handout - Key Points DOE LRFP Approval & Capital Project Approval Local $ Approval For Referenda Projects, Spending is Limited to the Total Authorized Amount & Funding Sources Identified in the Referendum Change Orders Funded within Referendum Authorized Amount 5% Min. Contingency on all Contract Awards

30. Funding - School Facilities Projects l Handout - Main Revenue Sources Non-ReferendumReferendum* EDA Grant * Budgeted Capital Outlay* Bond Proceeds * Capital Reserve* Other Local $ in Withdrawal Referendum Q

31. Funding - School Facilities Projects Referenda Projects Options are the Same Bound by Authorized Amount

32. Funding - School Facilities Projects Referenda Projects Pre-Award & Post-Award Same Options Pre-Award Post-Award Grant/Bond Proceedsx x Other local $ if specifically identified with amts in Ref Qx x (surplus, capital reserve, interest etc.)

33. Funding - School Facilities Projects Referenda Projects If Bids > Authorized Referenda Amount Same Options 1. Rebid 2. Negotiate 3. Ask Voters for Additional $ 4. Apply to Commissioner for Surplus Transfer under N.J.S.A. 18A:22-8.2

34. Funding - School Facilities Projects Option to Charge Pre-Referendum Costs to the General Fund

35. Funding - School Facilities Projects Referenda Projects N.J.S.A 18A: 22-8.2 Application to Commissioner to Transfer Surplus * Analysis of Corrective Actions * Detailed Cost/Budget Analysis to Support Need * County Superintendent recommendation no further Alternative Actions can be made * Facilities recommendation that the project is within FES

36. Funding Options/Approval for Local Support Non-Referenda Projects Planning Needed To Secure Local $ Approval Excerpt from Final Approval Letters “...no school facilities project shall be constructed unless the local support amount has received approval as set forth in N.J.A.C. 6:23A-2.7...”

37. Funding Options/Approval for Local Support l N.J.A.C. 6:23A-2.7 requires local $ approval in the budget, referenda, or capital reserve withdrawals according to the regulations. l In proposed regulations (adoption Sept 01) changes were incorporated to provide greater flexibility within the overall EFCFA requirement of local funding approval.

38. Funding Options/Approval for Local Support l Changes in Proposed Regulations for non- referendum programs l Can seek approval in annual budget prior to determination of final eligible costs l Budget into capital reserve or capital outlay l Surplus (up to 1% or $50,000 whichever is greater) to fund “other capital projects” (projects not eligible for or seeking EFCFA $) during the year l Capital Reserve l Withdrawal for Local $ of Final Eligible Costs

39. Funding - School Facilities Project l Handout - Non- Referenda Projects Pre-Award Post-Award Budgeted Capital Outlay l Reallocation among approved x x capital projects is OK Capital Reserve of 110% of Local $ of final eligible costs x x Surplus up to 20% of Contract Award for Allowable Change Orders x

40. Example Non-Referendum Project Final Eligible Costs $500,000 Estimated Local $ (60%) $300,000 (cap outlay) EDA Grant (40%) $200,000 Lowest Bid $525,000 ----------------------------------------------------------------------------------------------------------------------------- Q - How Award? A- * Negotiate or Rebid * Capital Reserve Withdrawal up to $30,000 (110% * $300,000 = $330,000 - $300,000 = $30,000) * Reallocate from Budgeted Capital Outlay Q- Once Awarded How Fund $10,000 change order? A- * Approp surplus of up to 20% of Bid Award

41. Funding - Other Capital Projects Other Capital Projects l Handout - Shaded are differences Voter Approval of Local $ l No State Share l Capital Reserve Use Difference l Surplus Use of 1% of budget by board resolution

42. Accounting for School Facilities Projects l EDA Grants $ and Associated Local $ Accounted for in Capital Projects Fund l Referendum & Non-Referendum Projects l One Exception -- some EDA Grants Received Under Retro Provision

43. Exception Completed Retro Projects l For Capital Projects fully funded locally (no- referendum) & completed in 00-01, record retro grant in fund that originally funded project Original $Retro Grant If capital outlay Record as Misc Unrestricted State Aid If part or all ECPA Record as Misc Unrestricted State Aid with transfer to Fund 20 of proportionate share of project paid from ECPA

44. Exception Completed Retro Projects DOE encourages reimbursed monies received from EDA for completed capital outlay retro projects to be deposited into capital reserve in 01-02 or to be used as tax relief in 02-03.

45. Accounting for School Facilities Projects l Referendum Projects - No Change l Bond Proceeds, EDA Grant and Local $ in Approved Ref Q recorded in Fund 30 l Transfer local $ Upon Referendum Approval l GAAP Technical Manual on Capital Projects for reference

46. Accounting for School Facilities Projects l EFCFA Referendum Projects - l Unexpended Balances Must be used to Reduce Outstanding Principal Amount at the earliest call date or to annually reduce the debt service principal payments

47. Accounting for School Facilities Projects l Non-Referendum Projects l Transfer Local $ to Fund 30 upon execution of grant agreement  Budgeted Capital Outlay  Capital Reserve Withdrawal (110% of local $ of FEC) l Unexpended balances transferred to General Fund upon project completion

48. Capital Reserve Accounts Deposits??? Withdrawals??? Transfers???

49. Capital Reserve Accounts DepositsWithdrawals* Budget Time (outside cap) (required for other capital projects, excess costs, “old” capital reserve $) * Board Resolution* Board Resolution - 110% unbudgeted FB or local $ of FEC anticipated excess FB ------------------------------------------------------------------------------------------------------------------------------------------------------------------ l Funds used to implement capital projects in LRFP l Funds can be transferred to debt service

50. Capital Reserve Accounts At No Time Can the Total Amount in the Capital Reserve Account Exceed the Total Local $ Needed to Implement the Capital Projects in your LRFP. Max Amount Adjusted Annually in QAAR

51. Capital Reserve Accounts Technical Guidance l DOE to Issue Revised Chapter in GAAP Technical Manual l Provide Examples of Entries for Each Activity, e.g. l Transfer of Surplus to Reserve l Withdrawal to Capital Outlay/Capital Reserve l Record Budget Amount

52. Capital Projects Management Questions