The monitoring of budget activity takes place at several levels. The staff member who is to be responsible for monitoring each section of the budget should be assigned prior to the start of the budgeting process. The assigned staff member must be involved in developing the budget to fully understand its contents, and be knowledgeable about the activity that will take place during the budget year.
Each request for spending must be authorized by the appropriate assigned staff member(s) and purchasing agent. Such authorization establishes that the transaction(s) should be processed, thereby creating the first level of budget monitoring.
The authorization request is next submitted to the business office for further action. The appropriate business office staff member determines if the purchase is allowable, if it must be bid or quoted, and if it is consistent with the budget plan and available funds. At the time of purchase, each purchase order must be encumbered prior to its issuance, as required by the Uniform System of Accounts. If funds are available, the purchase order may be processed.
At least once a month, a budget status report should be prepared for the board of education and for the use of those staff members assigned responsibility for administration of specific portions of the budget. The report should include: estimated revenues, revenues received to date, and estimated revenues yet to be received; original appropriations, adjustments and transfers, revised appropriations, expenditures, encumbrances, and unencumbered balances pursuant to Commissioner's Regulations 170.2(p). Other information may be included as necessary.
The school board president should review the budget status report at least once monthly, with special attention to encumbrances and expenditures. Special summary reports which identify variances from past spending levels are helpful in pinpointing abnormal situations requiring extra attention. Potential problem areas may be identified in time to adjust for them, thereby avoiding serious shortfalls.
The budget status report and/or monthly treasurer's report, the Annual Financial Report (ST-3) and the annual independent audit are financial information sources available to the chief school officer and the board of education, and should be used when planning, managing, and monitoring the financial activities of the district.
Budget estimates are often prepared months in advance of the actual expenditures. The possibility that the amount of each expenditure will be known in exact terms at the time of the budget preparation is very unlikely.
Boards of education are constrained by Education Law, Section 1718, and may not "... incur a district liability in excess of the amount appropriated by a district meeting..." This law is also enforced by the State Comptroller, who, in the Uniform System of Accounts, states that, "An appropriation must be available before an expenditure is charged." (Italics have been added for emphasis.) School districts must comply with this provision and must keep expenditures within available appropriations.
The Commissioner of Education, in Section 170.2(1) of the Regulations of the Commissioner provides school districts with a vehicle for making necessary budget transfers in discretionary areas. The Regulation grants the board of education the authority through the following provision: "To make transfers between and within functional unit appropriations for teachers' salaries and ordinary contingent expenditures, boards of education may, by resolution, authorize the chief school officer to make transfers within limits established by the board."
This regulation allows:
- Transfers to be made between contingent expenditure codes.
- Transfers to be made from a non-contingent expenditure code to a contingent expenditure code.
This regulation does not allow:
- Transfers to be made from contingent expenditure codes to non-contingent expenditure codes.
- Transfers to be made between non-contingent expenditure codes.
Delegation of this authority to the chief school officer, combined with the encumbering of purchase orders before their release, will prevent expending appropriations beyond the amounts authorized. Transfers made by the chief school officer will be shown on the monthly Budget Status Report presented by the treasurer to the board of education at the regularly scheduled board meeting.
The board of education must be diligent in monitoring the budget status report to ensure that there are no over-expended or over-encumbered accounts. When operating under a contingent budget, transfers cannot be made if their occurrence allows the overall contingent budget and/or the administrative caps to be exceeded. The board must rely upon it's administrators' diligence to ensure that requisitions are not approved or purchase orders released when appropriations are not sufficient to cover the proposed obligation. The purchase process is materially slowed when the administration must await action to make transfers.