0513 Redbook changes

0513 Redbook changes

Redbook revisions will tighten screws on student activity funds, boosters

By Madelynn Coldiron
Staff Writer

When school boards receive their annual audit report, there are three words that tend to jump out at them, and not always in a good way: School Activity Fund.

Those words, in theory, may crop up less frequently with issuance of a new version of the manual that guides districts and schools in uniformly reporting money received and spent in school activity funds. 

“The core process of this entire change has dealt with suggestions from bookkeeper levels and school finance levels, so one would hope that it won’t be too bad. A lot of it is clarification – there have been so many questions,” said Woodford County Schools Chief Operating Officer Amy Smith, who serves as president-elect of the Kentucky Association of School Business Officials.

Formally called Accounting Procedures for Kentucky School Activity Funds, and informally known as the Redbook, the manual carries the force of a state regulation. The state education department’s timetable targets a July 1 effective date.  School bookkeepers, principals and booster organizations will need to receive training in the new guidelines.

The revised Redbook looks nothing like the 2008 version: the entire manual has been reorganized – “to get everything you need to know about a topic in one place,” said Susan Barkley, assistant director of the state education department’s Division of District Support. The rule changes are aimed at strengthening accountability and financial oversight of school activity funds, and promoting transparency.

The most significant Redbook changes – at least numerically – affect booster clubs and similar support organizations – a six-point list of responsibilities for these groups in the 2008 version has been replaced with 17 general guidelines, plus additional detail governing insurance and in particular, fundraising.

“There is a lot more focus on these external booster organizations, a lot clearer guidance, clearer requirements for them,” Barkley said.

Boosting booster scrutiny
The new Redbook specifies the relationship school board members can have with booster clubs and other external support groups. It says a board member can be a member of the group but cannot be an officer or serve on its executive board; district employees can be on the executive board and be an officer, as long as they don’t have check-signing authority.

The new Redbook makes it clear that the officers of external support groups and booster clubs – not the district – are responsible for making sure their organization complies with the Redbook, and state and federal regulations. “A district, including any district employee, cannot be held responsible for any deficiencies by the external support/booster organization,” it states.

The revisions say that booster clubs cannot pay or enhance salaries or stipends for any district employee. However, they can donate funds for this purpose to the school or district as long as the payment doesn’t go over salary limits set by the school board.

Districts have the legal authority to go beyond the Redbook in imposing additional requirements on external support and booster groups. And the new Redbook makes it clear that a school board may disassociate itself from any external organization that doesn’t comply with the rules; in that case, the group cannot use the name of the school or athletic group, or use school facilities for fundraising.

“The local board and district management definitely have a vested interest in what the external booster groups do,” Barkley said. “Because anytime one of them appears in the paper for something naughty, it’s a big, black mark on the school district itself.”

Some of the revised manual’s booster group provisions were toned down following a December public hearing during which district and school officials made the case that some were too onerous. Language stating that booster clubs “must” have written bylaws and that their treasurer “must” be bonded was walked back to “should.” And a recommendation that booster clubs transfer their funds to the school for expenditure was removed, though they still are free to do so. But another proviso requiring the groups to carry liability insurance was retained.

Small booster clubs that can’t afford liability insurance may end up running their money through the school so they can be covered under the school’s liability coverage, Barkley said. This could mean more work for school personnel if enough groups do this. In some districts, Barkley said, boosters have banded together under a single umbrella club for administrative purposes.

The Redbook also will now provide some new fundraising limitations for the external organizations. In line with IRS regulations, money raised in group fundraisers must benefit all students in the group, even those who did not participate in the fundraising activity. 

Money management
The new Redbook establishes a clear system at the school level of segregating duties for issuing receipts for money that is collected and for depositing it.

Some school district officials who commented on the new version asked that the school bookkeeper be allowed to collect money directly from parents and students, but the request was rejected to maintain proper segregation of duties in dealing with cash. The bookkeeper can collect money only from the teacher/sponsor. For the same reason, the treasurer/bookkeeper cannot be the person opening the mail and recording the checks. 

“That’s the whole goal – to minimize the risk of theft because the school level is where the cash is,” Smith, of KASBO, said.

Barkley said though some district finance officers wanted even more segregation of duties, that would have been problematic for schools with limited staff. For schools that do have more staff, the new manual’s appendix includes an outline of best practices in this area.

The revised guidelines also bar the use of signature stamps for school activity checks or any other financial document. And they make it clear that travel expenses for school and district administrators cannot be reimbursed from student activity funds unless students are involved in the travel.

Expenses – yes or no?

The revised Redbook incorporates lists of “allowed” and “disallowed” expenses that may be paid out of the student activity fund.

Some highlights:

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• Charitable contributions and donations out of school activity funds are allowed if collected specifically for that purpose – while not educational in purpose, these are considered activities that promote citizenship.

• Training required for sponsors or coaches of a student group is allowed to be paid from activity funds.

• Student incentives for academic, athletic or other achievements; and recognition awards such as trophies, certificates and plaques are allowable expenses.

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• No cash awards, gift cards or prepaid credit cards can be purchased using school activity funds.

• School activity funds cannot be used for operational expenses. This includes professional development and maintenance, which the education department classifies as operational expenses.

• Attendance incentives for the compulsory instructional day cannot be paid with student activity funds, unless the incentives are instructional in nature, such as educational field trips.

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