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FISCAL MANAGEMENT
The PREMISE
Public funds come from taxes. The local board is the body elected by the taxpayers to see that these funds are managed properly. The board may delegate administration of these funds to the superintendent and school councils, but it is ultimately responsible for ensuring that taxpayers’ dollars are used wisely and prudently. Fiscal management is more than the passing of a tax rate and the subsequent approval of a budget. It is seeing that the proper programs are funded, that purchasing procedures are followed resulting in the best product for the cost, that funds are invested in a manner that assures the best return, that assets are properly insured, and generally that all funds are properly managed. And most importantly, that the budget adopted by the board is followed and not exceeded without the board’s permission.
This chapter examines how boards of education can meet their statutory responsibility of adopting a balanced budget that reflects the philosophy of the community and how they can also hold accountable those responsible for administering the budget – superintendents, principals, and school councils.
BUDGET DEVELOPMENT
The local board, through its policies, has a responsibility to develop a budgeting process that includes planning and reporting to the community. There is an inherent connection between financial resources and how they are allocated, and the district's ability to provide a quality education to students.
State statutes give local boards control over public school funds. KRS 160.290 Section (1) states: "Each board shall have control and management of all school funds and all public school property of its district and may use its funds and property to promote public education. Each board shall exercise generally all powers prescribed by law in the administration of its public school system, appoint the superintendent of schools, and fix the compensation of employees."
The board takes action on three types of budget documents during a year:
To accomplish this, it’s essential for the board to have a planned process for developing the budget and a method for involving the staff and community in that process. The following format and timeline provide an example of a process for planning, involvement, and most importantly, communication of the process to the public. Board members are to receive copies of all documents mentioned. Examples of some document formats are included as attachments. Boards should require that these, or similar, documents be made available to the public. Those with an asterisk require official board action. The format and timeline should be widely publicized in the district – for employees, parents, community leaders and interested citizens – so that they are aware of how they can give input.
TIMELINE
End of 1st school month Official student enrollment and staffing ratios for the current school year are recorded at each school site. Information is forwarded to the superintendent. (Attachments 11-1A and 11-1B) The cost of personnel makes up the lion’s share of the budget. Since boards are legally responsible for budgeting funds and represent the taxpayers, they should always know the district’s staffing ratios.
Principal presents to teacher and parent groups, or the school council in SBDM schools, enrollment projections and assessment of current program and support services, and an analysis of facility and maintenance needs.
September School and district comprehensive planning teams begin needs assessment (see Attachment 11-2).
Sept. – Dec. District planning team works closely with school planning teams in identifying district-wide needs that result from the planning process. The district planning team may also supplement needs identified by schools and the district.
October 10 The superintendent gives each principal updated enrollment projections for the next five years for each school site. (Attachment 11‑3)
December 31 Draft district needs assessment presented to the board.
Revenue projections for the school district for the next year should be presented to the board by this date so the board may consider needs to be funded. The method of calculating SEEK funding is included in Attachment 11‑4. SEEK, an acronym for Support Educational Excellence in Kentucky, is the primary source of state funding provided to districts. It is a formula by which state funds are distributed to school districts, aimed at ensuring that all students in the state will receive equitable funding regardless of socioeconomic differences. Board members should not overly concern themselves with how these calculations are made, but should understand where and how the funds are generated. The board should expect the administration to estimate any major increases or decreases in SEEK funding and that information should be presented to the board. The board should be cautious in case the state reduces SEEK funding to districts for the current or following year
Other revenue projections should be presented to the board at this time for the second major area of revenue for school districts: local taxes in the form of property taxes and permissive taxes (utility, excise, and/or occupational). The superintendent can make ballpark estimates of the increase in assessment and the new growth expected by contacting the property valuation administrator (PVA). The PVA can usually supply more accurate figures in the spring.
January 15 Superintendent presents the District Draft Budget, including estimated salary increases, to the board. This will be difficult to do in years when the legislature’s biennial budget sessions occur because the General Assembly usually does not finalize the state’s budget until early April. The Draft Budget should be presented to the board in a narrative format that allows for summaries of expenditures. (Attachment 11-5)
School board reviews district priorities along with the educational plan for each school site.
January 31* School board establishes revenues and expenditures for the next school year. The board reviews the Draft Budget.
March 1* Board makes preliminary allocations to school councils (Attachment 11‑6, which also explains the board’s responsibilities in the allocation system for staff positions). Allocations take into account recommendations of the comprehensive planning committee.
The board is required to have a policy that describes how positions are allocated. The policy should state that the notification to schools shall include the formula used in determining the allocation. The formula should be revisited annually during the budget process and amended as needed, but any changes must be made by March 1. Attachment 11-7 provides examples of staffing formulas.
Allocations should be detailed and by category. The board should describe expenditures in instruction that are districtwide.
Any recommendation by the superintendent for the demotion of administrator(s) must be made to the board. The process must begin early enough to allow for completion by May 15.
March 1 Principal begins working with parent and teacher groups to develop the school budget (needs assessment developed earlier).
March 31 School council adopts its financial plan (working budget). Plan is presented to the superintendent.
April 15 School council budgets are presented to the board for review. The purpose of the review is to provide information for subsequent allocations and for the benefit of community awareness. The board allocates funding to councils in broad categories and does not have the authority to alter the council budget.
School improvement plans are presented to the board for review.
April 30 Superintendent must notify certified staff of non‑renewal of limited contracts.
May -June* Superintendent must provide written notification of reduction in responsibilities and/or reduction in salary to affected certified employees not later than 90 days before the first student attendance day of the next school year.
May 30* Tentative Working Budget, as adopted by the board, must be submitted to KDE by May 30. It is an updated version of the Draft Budget and must include a minimum of a 2 percent contingency.
May 31st * Any “Section 7” allocations must be made to school councils. Section 7 allocations are funds remaining to be allocated to councils after all other general fund budget obligations are met.
June-July* Not later than 45 days before the first student attendance day of the succeeding school year, the superintendent must give notice to each teacher who holds a contract valid for that year, stating the best estimate as to the salary to be paid the teacher during the year.
July 15* Board sets tax rates. This date will vary due to the date that tax rates, based on the assessments of the property valuation administrator, are certified by the state and forwarded to the district.
July 25* The district must submit its annual financial report and group code report balance sheet, approved by the board, to the Department of Education, Division of School Finance.
September 15 Adjustments of certified and classified allocations due to increases in salary schedules, salary adjustments, or increases or decreases in enrollment must be made by September 15.
Adjustments in allocations for instructional supplies, materials, travel and equipment as well as “Section 7” distributions, may be made at the end of the second school month, based on changes in average daily attendance and projected funding for SEEK.
September 30* Working Budget, as adopted by the board, must be submitted to the Department of Education, Division of School Finance, not later than September 30.
Following adoption of the Working Budget by the board, copies are forwarded to the state board of education for approval. The budget may be disapproved and returned to the local district for necessary changes if found to be out of balance, or if provisions are not made for retirement of bonds, etc.
BUDGET BREAKDOWN
Every board member should have a grasp of the programs and operations of a school district. Many variables interplay to shape the product – the education of students – of the district. Of these, the budget is the single most important document in the district as it reflects the district's direction, priorities, and philosophy. To have a grasp of the programs and operations, members must have a basic understanding of budget documents. MUNIS The State Board of Education requires districts to use the Municipal Information System (MUNIS) for fund accounting. MUNIS provides comprehensive financial reporting options, most of which are beyond what is needed for oversight by the board or the general public. This is not to say that the comprehensive reports should not be made available to board members or the general public upon request. However, it is essential that other documents be developed that can easily be understood by all.
The major purpose of fund accounting is to provide a way to segregate financial resources and to ensure that the segregated resources are used only for their intended purposes. MUNIS accomplishes this through a double-entry accounting system. MUNIS has a very complicated coding system. It is not necessary (or advisable), for board members to memorize the coding system. The descriptions given in this chapter are summaries of the coding system, which also don’t need to be memorized. The summaries are included to assist in the understanding of MUNIS. It is important, however, to always know the fund account under review. The fund account (budget) will be listed at the top of the MUNIS printout. For example, General Fund (1), where the (1) is the digit designating the general fund.
MUNIS provides for seven different fund accounts (budgets). The seven fund accounts are the general fund, special revenue funds, capital outlay fund, building fund, technology fund, construction fund, and school food service fund. Each fund is a separate group of accounts with its own revenues, expenditures, assets, liabilities, and fund balances. Each has detailed records of revenues and expenditures, a record of all transactions, and a balance sheet that summarizes the transactions.
Brief descriptions of these fund accounts are given below:
(1) The General Fund – This is the fund to which the board should direct the greatest attention. The General Fund includes all financial resources except those that are required to be spent for specific purposes and are required to be in separate funds for accounting purposes.
(2) Special Revenue Funds – This fund account includes those financial resources that are required to be spent for specific purposes. State funds placed here include allocations for extended school services, preschool, family resource and youth service centers, gifted and talented grant, and professional development. Federal programs also are included in this fund. These include grants distributed by the U.S. Department of Education such as Title I grants for the disadvantaged, school improvement grants, special education grants, vocational and adult education, drug and alcohol prevention, and impact aid.
(310) Capital Outlay Fund – The SEEK program provides $100 per pupil for the Capital Outlay Fund. Expenditures are limited primarily to direct payment of construction costs and debt service for facilities.
(320) Building Fund – Proceeds from the Facilities Support Program of Kentucky (FSPK), both state and local revenue, are deposited in this fund. Expenditures are limited to debt service on facility bond issues, new facilities, and major renovations of existing facilities as listed in the district’s approved facility plan.
(350) Technology Fund – Revenue from the state allotment for the Kentucky Education Technology System (KETS) and the local match are deposited in this fund. Expenditures are limited to those identified and approved in the district technology plan.
(360) Construction Fund – Revenue and expenditures for ongoing construction projects should be processed in this fund. Revenue from a bond sale for construction of a school is deposited here and the payments to the contractor, architect, etc., are made from this fund.
(51) School Food Service Fund – All receipts and expenditures for the school food service operations of the district are processed through this fund.
In summary, the General Fund is the fund used for normal expenditures in the district, such as paying salaries, providing transportation, maintaining buildings, and purchasing supplies and equipment. Special revenue funds are accounts for revenue received that must be spent on specific programs. Capital outlay, building, and construction funds are where revenue for building construction and/or payment of bond issues is deposited. The technology fund is for technology, and the school food service fund contains school food service operations receipts and expenditures.
QUESTIONS
v I don’t understand the difference between the capital outlay fund and the building fund. Don’t they both have to do with paying for buildings?
Yes. They both have to do with paying for buildings. The basic difference is the source of funds as described in the preceding section.
v May funds be transferred from the general fund to the capital outlay fund?
The $100 per student from SEEK is received directly into the capital outlay fund. The district may also transfer additional funds into capital outlay. However, if they are transferred into the capital outlay fund they cannot be moved back into the general fund.
v May funds be transferred from the general fund to a special revenue fund?
Yes. But they may not be transferred back into the general fund.
v Who makes budget transfers?
Only the board may make transfers from one fund to another, or from one line item to another line item within the budget. Board policy may give the superintendent authority to move funds within a designated range.
DISTRICT MONTHLY BUDGET REPORT
MUNIS can provide very detailed district spending reports. However, it is recommended that the board request the summary report of general fund revenue and expenditures presented in Attachment 11-8.
The summary report divides receipts into the following major categories:
111X Ad valorem taxes – Includes the different classes of property taxes. This includes real property tax, personal property tax, public service real property tax, public service property tax, and unmined minerals tax.
1121 Sales or use tax – Includes utilities taxes.
1131- 1192 Income taxes – Includes occupational license tax, penalties and interest on taxes, omitted property tax, and excise tax.
1280 Revenue in lieu of taxes -- Payment of sums of money instead of taxes.
13XX Tuition – Revenue from individuals, private sources and other districts for education provided by the district.
14XX Transportation fees – Revenue from individuals, private sources, or other districts for transporting students to and from school and school activities.
15XX Earnings on investments – Interest earned or rental income from property held for investment purposes.
1911-1991 Other local revenue – Includes building rental, bus rental, contributions/donations, non-government reimbursements, textbook sales and rental, refunds of prior year expenditures, miscellaneous revenue and transcript fees.
3111 SEEK funding – This is the major source of funding for districts. Only that portion of SEEK provided by the state is included here.
3121-3129 Other state funding – Includes state funding/reimbursement for vocational travel, vocational transportation, district vocational school, bus driver training substitute teacher salary, professional development, audit, and transportation reimbursement for Kentucky School for the Blind and Kentucky School for the Deaf.
3130 Out of district reimbursement – Reimbursement for students not residing in the district who are placed in the district by an authority.
3200 Restricted state funds – Revenue from state monies, recorded as grants or reimbursement of expenses, which must be used for a categorical or specific purpose.
4100 – 4800 Federal funds – revenue from federal sources.
5000 – 5342 Other compensation – Includes sale of bonds, compensation for loss of assets, and interfund transfers.
The summary report divides expenditures into the following major categories:
1000 Instruction – This code includes salaries of all teachers and classroom assistants of any type (clerks, graders, teaching machines, aides, etc.) that assist in the instructional process. It also includes expenditures for supplies and equipment used in the classroom.
2100 Student support services – Activities designed to improve the well-being of students and to supplement the teaching process. Includes pupil attendance, social workers, guidance counselors, physical and mental health services, psychological testing, speech pathology and audiology, and special education-related services such as physical therapy and occupational therapy.
2200 Instructional staff support services – Activities that help the instructional staff teach. Includes staff activities for planning, developing, and evaluating the process of providing learning experiences for students. Includes supervisors of instruction, instruction and curriculum development, professional development, highly skilled educators and Commonwealth School Improvement. Educational media activities (school library, audiovisual, educational television, and computer assisted instruction) also are coded here.
2300 District Administration Support Services – Activities of establishing and administering policy for the district operations. Includes the board of education, the board secretary, board treasurer, cost of tax assessment and collection, and activities concerning system-wide staff relations, including contractual negotiations with staff. It also encompasses the activities performed by the superintendent, deputy, associate, and assistant superintendents in directing and managing affairs of the district, and includes all personnel and materials in the office of the superintendent. Activities of the office of assistant superintendents are coded here unless the activities can be coded to supervision of a specific service area. For example, assistant superintendent for finance would be coded under business support services. Activities and programs developed and operated system-wide for bettering school and community relations are coded here.
2400 School administration support services – Activities of administrative responsibility for a school. Includes activities performed by the principal, assistant principals, and other assistants in generally directing and managing the operation of a school. Also included is the work of clerical staff in support of teaching and administration. Activities relating to school council members in the performance of council duties, such as travel, supplies, printing and training, are coded here.
2500 Business support services – The fiscal and internal services necessary for operating the district. Includes the activities of employees who direct and manage the fiscal aspects of the district. Includes acquisition of supplies, furniture, equipment, and materials used in schools or school operations; receiving, storing, and distributing supplies, furniture, equipment, materials, and mail; and printing and publishing (in a district-run print shop) administrative publications such as annual reports, school directories and manuals. Also included are centralized services for duplicating school materials such as school bulletins, newsletters, and notices.
2600 Plant operation and maintenance -- Activities related to keeping the physical plant (buildings, grounds, and equipment) open, comfortable, safe for use, and in effective working condition.
2700 Student transportation – Activities related to transporting students to and from school, as provided by state and federal law, including field trips and trips to school activities.
2800 Central office support services – Activities that support other instructional and support services such as conducting and managing programs of planning, research, development and evaluation. Also includes disseminating educational and administrative information to students, staff, managers, and the general public through direct mailing, news media or personal contact.
3100 Food service operations – Activities related to providing food to students and staff in the schools. This service includes preparing and serving lunches, snacks, or any regular or incidental meals in connection with school activities and any other food delivery activities.
3200 Enterprise operations – Activities that are financed and operated in a manner similar to private business, where the stated intent is that costs are recovered primarily through user charges. (Most districts would not have items coded here.)
3300 Community service operations – Activities related to providing community services to students, staff or community participants. Family resource/youth service centers are coded here. Other examples are operation of a community education program, a recreation program for the elderly, or a child-care center for working mothers.
3900 Other non-instructional services – Any other non-instructional activities not described in the 3000 series.
4000 Facilities acquisition and construction services – Activities related to acquiring land and buildings, remodeling buildings, additions to buildings, initial installations or extension of service systems or other built-in equipment, and site improvement. The activities of architects and engineers are coded here.
5000 Other -- This function is for transactions not properly classified as revenues or expenditures, but still requiring budgetary or accounting control. These include principal and interest payments for debt service and certain transfers of money from one fund to another. (Principal and interest payments are used only in the Debt Service Fund)
MONTHLY GROUP CODE REPORT
The Monthly Group Code Report places general fund revenues and expenditures in the categories described above. KSBA suggests that boards review this report monthly. In some cases, this report can allow board members to use the report’s year-to-date column to keep track of the status of revenues or expenditures. It is also recommended that a column for encumbrances be included.
MUNIS also can track the expenditures of units and schools. MUNIS allows SBDM allocations and expenditures to be monitored monthly. Although the board might not want this level of detail to be reported monthly, it can be valuable to the superintendent, and the board might request quarterly reports. The superintendent should keep the board informed of any council overspending its allocation. Major areas that can be tracked include the regular instruction program, athletic department, the guidance department, professional development, media center (library) services, the principal’s office, special education, school council activity, and operations and maintenance.
THE BOARD’S BUDGET RESPONSIBILITIES
1. Ensure the development of a budget calendar. The preceding format and timeline are examples.
2. Review property assessments. The superintendent should review the property assessments each year and compare them to previous years. The property valuation administrator should be contacted if there is a discrepancy.
3. Ensure that the appropriate tax rate has been established.
4. Examine the costs of tax collection by the sheriff. The board should require a written contract with the sheriff for tax collection. The agreement should include the cost of collection, format for reporting collection of taxes (real, tangible, personal, franchise), amount of taxes, date submitted, and method and time of payment, and collection fee charged by the sheriff. The collection fee should not be deducted from the sheriff's payment to the district. A check should be written to the sheriff only after the sheriff submits an invoice detailing the costs for collection. The Kentucky Constitution allows the sheriff to charge only the cost incurred in the collection of taxes to a maximum of 4 percent. The 4 percent figure is a maximum and not an automatic entitlement. The sheriff is entitled to payment only for his/her cost. The local board has the authority to audit the sheriff’s school tax accounts. (Bell County Bd. of Education v. Lee, 239 Ky.)
5. Examine the percentage of delinquent taxes collected by the county attorney. Is the proper effort being made?
6. Ensure the budget includes funds to correct deficiencies and needed changes.
7. Make sure that the staff and the community have an opportunity for input into the budget.
8. Make sure that there is competitive bidding of depository and investments. The board should enter into a written agreement with its depository. The agreement should address not only securities pledged by the depository, but also terms that outline exactly how interest will be calculated monthly on all investments. The superintendent should develop and present an investment report to the board each month as a part of the monthly financial report.
9. Approve all salaries for extended days and extra service. The board should require that a list for itself and the public of all employees on extended employment and those receiving additional funds for extra service.
10. Know how the salary schedules compare with surrounding districts and the average teacher salary of the state.
11. Project the impact of the salary schedule over several years.
12. Know how much is being expended on administration.
13. Know the teacher-pupil ratio in each school at each grade level.
14. Be aware of the history of past expenditures and receipts. Know if there has been a general decrease in the year-end fund balances over the past three years.
15. Project enrollments over the next five years. Be aware of the impact of increasing or decreasing enrollments.
16. Ensure that payments for F.I.C.A., taxes, teacher retirement, insurance, etc., are being made when due.
17. Ensure that there is security and integrity of the check writing and issuance process. Does the board allow the superintendent to issue checks prior to payday? Are any checks issued prior to board approval?
18. Have a report of checks written on the petty cash account made available to the board monthly.
19. Ensure that receipts are recorded daily and kept up to date.
20. Ensure that a uniform system of internal accounting is followed. One way to do this is to carefully review the district’s annual audit and accompanying management letter.
21. Know if the district is involved in pending litigation that could adversely affect its financial health.
QUESTIONS
v May the superintendent expend funds for items not in the board-adopted budget?
No. The superintendent must spend funds as allocated in the district budget. This does not mean that the board is involved in day-to-day purchasing decisions. Funds are allocated in the budget in broad categories, such as replacement parts for maintaining equipment, for example. The superintendent or designee makes the decision as to the equipment that needs to be purchased.
v Is the superintendent required to spend all the money allocated in a budget code?
No. However, the board may direct the superintendent to make a purchase.
v May the school council expend funds differently than allocated in the district budget?
The district budget incorporates the school budgets submitted by the councils. However, because boards may not designate where council funds are expended, councils may spend funds outside the codes where they are appropriated. Councils may not exceed their total appropriation.
v Can the board adopt a budget item that is not recommended by the superintendent?
Yes. The superintendent prepares a budget for the board to consider. The board may, within the available revenues, make appropriations in the budget. However, the board should have sound, defensible reasons for funding items not recommended by the superintendent.
v May a board exceed its budget expenditures?
KRS 160.550 states that the superintendent may not recommend, and the board may not vote for, any expenditure that exceeds the income and revenue for the year shown on the budget adopted by the local board and approved by the state board. There are two exceptions: where the expenditure is for a purpose for which bonds have been approved, and where the state has declared an emergency for the district. The attorney general further stated (in OAG 79-464) that the law intends for school districts to begin each fiscal year with a balanced budget.
v If a district becomes a deficit district due to overspending by the superintendent, will board members be held responsible?
Yes. The school board, along with the superintendent, is responsible for the district budget. Failure to discover that information presented to the board by the superintendent or business officer is erroneous may result in a charge of malfeasance, even though most board members are laymen in detailed finances.
v Must the local board approve all spending?
The district can only spend funds appropriated by the board. Failure of the board to monitor the budget can result in the board having little say in the direction of programs.
SCHOOL ACTIVITY ACCOUNTS
School activity accounts are those accounts kept at the schools. They are separate from the board allocation to the school council. Revenue is received and checks for expenditures are written on these accounts at the school. MUNIS is not used for school activity accounts. Receipts from athletic contests, concessions sales, school fund raisers, sale of book store items such as paper and pencils, school club accounts and the like are kept in these accounts. The principal has primary responsibility for control. However, the board of education is responsible for oversight of school activity funds and is responsible for any debt the school council may incur.
The following are some practices for keeping tabs on school activity funds.
1. Ensure that internal accounts are kept in one bank account. The board should get monthly financial reports of school accounts. Copies of the reports should be retained at the central office and be made available to the public.
2. Ensure that there are formal agreements with depositories. The board should approve the agreements.
3. Ensure that school accounts are interest bearing.
4. Ensure that accounts are reconciled monthly. The board should check to make sure all accounts are in the black. Monthly financial reports made to the board should include reconciliation.
5. Ensure that a uniform system of internal accounting is used. There should be one person responsible for keeping the books at each school. Entries should be made as soon as possible following the transaction. That person should only make entries and debits.
6. Ensure that a purchase order system is used.
7. Ensure that tickets are used for athletic events.
8. Ensure that drink machine receipts are properly reconciled to expenditures.
9. Ensure that salaries are not paid from school accounts, particularly not athletics coaches. All salaries must be approved by the board and must be paid through the board's payroll accounts. The board should have the superintendent certify that salaries are not being paid by schools.
10. Ensure that the board gets a monthly report of checks written on the petty cash account of each school.
11. Approve all school fundraisers.
THE COUNCIL'S ROLE
By regulation (702 KAR 3:245), categorical funds are exempt from the council allocation formula and are under the authority of the district. Councils should, however, be involved in the planning of the budget of categorical programs.
FUND MANAGEMENT
The board should examine the segregation of duties of finance personnel and should closely examine the Orders of the Treasurer (invoices to be paid). The board should ensure that legal advertisement dates are being met for bidding for depositories. INVESTMENTS AND BANKING SERVICES
Investment practices should ensure maximum yield, with consideration given to cash availability and protection of taxpayers’ dollars. State law requires the superintendent to appoint a finance officer who is responsible for the district’s cash, investment and financial management. The finance officer may be the superintendent. Banking services should be procured competitively, through a bid process using a Request For Proposal (RFP). The board should forward the RFP to competing financial institutions. Whether the RFP will be forwarded to financial institutions outside the county is a decision to be made by the board.
The proposals submitted should be opened and read publicly at a designated time and place. The district should evaluate the proposals and select the financial institution based on determined criteria. Following is a list of possible criteria:
Investment of Surplus Funds
Any funds that are temporarily in excess of operating needs should be invested. The board may have an agreement with its depository to invest surplus funds there, or it may “shop around” for the best interest rate.
The board should receive, at a minimum, a monthly report showing the amount of funds invested, the type of investment (CD, treasury bill, repurchase agreement, etc.), the length of investment, the interest rate received, and the name of the financial institution where the funds are invested.
PURCHASING
The failure of boards and superintendents to pay attention to purchasing services, materials and supplies can create tremendous problems for a school district. Taxpayers have, and should have, high expectations that their money is being spent wisely. Boards have the responsibility and authority to set purchasing expectations for school councils, teachers and administrators Board members should not, however, attempt to influence school personnel in the area of purchasing. Board members should not do "favors" for gain of any kind – monetary, political or friendship. Nor should board members get involved in “micro‑purchasing.” The day-to-day operation of the district is the responsibility of the superintendent. Once it has adopted the budget and approved a bid calendar, the board's role should be to protect the integrity of the purchasing process.
CONFLICTS OF INTEREST
Board members may not have a direct or indirect interest in the sale to the district (including schools) of any services, materials, equipment, or supplies. If a board member benefits monetarily from an expenditure by the board, then most likely there is a conflict. (See KRS 160.180)
BIDDING
Boards must either elect to operate under KRS 424.260 or the Model Procurement Code (KRS Chapter 45A).
KRS 424.260 Districts are required to reasonably estimate the total dollar amount of “like” items to be purchased during the fiscal year. If the total amount exceeds $20,000[1], the district must purchase from an established price contract of the federal government (General Services Administration), the Kentucky Finance and Administration Cabinet or educational cooperatives, or the district must advertise for its own bids. If the district bids the items, specifications must meet those awarded through the State Price Contracts (explained in next section). State Price Contracts may be used to purchase items for which bids have been awarded by state government, without having to be bid locally. An exception to the bidding requirements allows local school districts to purchase supplies and/or equipment outside the bidding procedure if:
1. the supplies and/or equipment meet the specifications of contracts awarded by the state Finance and Administration Cabinet, a federal agency (GSA), or a school district that allows other districts to use its bids, or cooperative agency; 2. the supplies and/or equipment are available for purchase at a lower price; and 3. the district’s finance officer or purchasing officer has certified 1 and 2.[2]
The above exceptions to KRS 424.260 are not available for any specific item once the district has initiated the bidding procedure by issuing an invitation to bid and bid specifications have been published. If the district rejects all bids, the district may revert to the provisions in 1 and 2 above.
Perishable meat, fish, vegetables, equipment and professional contractual services (such as architectural, engineering and accounting services) are not required to be bid.
Model Procurement Code KRS 45A.343 permits any local public agency to adopt the model Procurement Code. Operation under the Model Procurement Code requires official adoption by the board. If adopted, no other statutes governing purchasing apply. If a board has adopted the Model Procurement Code, a detailed description of its requirements should be provided the board by its superintendent. The code requires that all contracts or purchases be awarded by competitive sealed bidding, except if a determination has been made in writing by the public official making the determination. The determination must be based on written findings. The code allows competitive negotiations, non‑competitive negotiations, and negotiations after competitive sealed bidding on some occasions if specific written findings are given. KRS 45A allows local school districts to acquire supplies and/or equipment outside of the purchasing agreements held by the federal government (GSA), the state Division of Finance, or local co-ops if:
1. the purchase is for less than $2,500; 2. the supplies and/or equipment meet the same contract specifications; 3. the supplies and/or equipment are available at a lower price; and 4. the district finance officer has certified items 2 and 3.
Districts operating under the Model Procurement Code also may accept a price reduction on supplies and/or equipment being offered by a vendor with whom a price agreement has been made, if:
· the items being purchased meet all terms and conditions specified in the price agreement except for price and · the price reduction is offered to all participants in the price agreement.
Districts may accept special price reductions even if the reduced price requires the purchase of a specified quantity of units different from the quantity stated in the original price agreement.
Small Purchase Procedures A school district may use small purchase procedures for any contract for that does not exceed $20,000 in the aggregate, if small purchase procedures are in writing and available to the public.
STATE PRICE CONTRACTS
The local board may purchase supplies and equipment from the vendor to whom state price contracts have been awarded. The commissioner of education must furnish full information on established price contracts to each district board of education (KRS 156.076). When purchasing supplies and equipment through a local bid the following procedures must be followed:
1. The local board must advertise using specifications meeting the standards of the contracts established by the Kentucky Board of Education.
2. Before a contract is awarded, the commissioner of education must certify that the local bid offers supplies and equipment that meet the standards and specifications fixed by the state board of education, and that the bid price is lower than that established by the price contract agreement.
QUESTIONS
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