26
When I was superintendent, my
district staff was always
instructed to provide the
district’s
budget
without
hesitation for any request by
FOIA, media or citizens.
However, if the same request for
the Annual Financial Report
(AFR) was made, they were to
immediately inform me. The
difference was that the request
for the AFR indicated an
“informed consumer” of district
financial information and I was dealing with someone
who knew the correct document to examine. I will
discuss these two documents and their relative
approval process and formulation plus their relative
important to the understanding
of a district’s financial health.
Each year in the first quarter
of the fiscal year, school
districts
are
required to
complete two important fiscal
documents, the budget and the
AFR. The documents are
distinctly different in nature and
requirements for passage. Most
importantly, they are quite
different in the financial
information available from these
documents.
The budget is completed by
the district superintendent or
his/her designee. It is the estimate of revenues and
expenditures by line item for the district. The
timetable is that the superintendent completes the
tentative budget and has it approved at a meeting,
usually in July or August. The budget must be on
public display for 30 calendar days in the district
office. After the public display period is completed,
the Board would hold a hearing and adopt the budget
for the upcoming fiscal year.
Keep in mind that the only actual numbers on the
budget are the budget balances at the beginning of
the form that the district had at the end of the
previous fiscal year. The remainder of the line items
are estimates of revenues and expenditures by line
item. Budget amendments are required if you exceed
a 10 percent differential in line items during the year.
Budget amendments, if necessary, are usually later in
the fiscal year. It stands to reason that
superintendents would inflate the estimates of
revenues and expenditures to avoid budget
amendments due to unforeseen changes in revenues
or unexpected expenditures during the year. This
estimation process means essentially that estimates
are included throughout the budget document.
The AFR is compiled by Certified Public
Accountants hired by the district to complete this
report. The AFR is also due to be completed by the
end of the first quarter of the fiscal year or by
September 30. So both documents are basically due
to be completed at the same time. While a hearing is
not required for approval, Boards of Education should
accept the report. At this point, districts present the
information contained in the AFR in several ways.
The auditing firm that completed the
document may present the findings
of the AFR or the district
superintendent or his/her designee
may present the report. The AFR is
an accurate compilation of actual
revenues and expenditures for the
previous year. Therefore, in
assessing a district’s financial health,
the AFR is by far the document that
must be studied and assessed.
Included in the document is crucial
financial information including:
Information regarding the level of
revenues compared to the level of
expenditures
on
the
Budget
Summary (pages 8-9 of the AFR). This will indicate if
the district spent more than it received in fund
revenues and the level of the difference by individual
fund.
Also included in the Budget Summary are the last
two year’s Budget Balances giving a brief
chronological trend in financial stability by fund.
Therefore, multiple years of past AFRs can give you
a trend analysis of fund balances.
In the Financial Information page (page 3) the
current Equalized Assessed Valuation (EAV) is listed
along with information on the district’s main operating
funds, namely their revenues and expenditures.
Also listed is information on any Short-Term
Borrowing that the district has utilized, such as Tax
(Continued on page 27)
Fact vs. Fiction:
Budget vs. Annual Financial Report
Dr. Bill Phillips
IASA Field Service
Director
