Internal School Uniform Accounting Policy

1 State of Tennessee Department of Education Office of Local Finance Effective July 2011 Tennessee Internal School Uniform Accounting Policy ANUAL i-1 Table of Contents Section 1: Introduction Title 1 History of Internal School 1959 Internal School Accounting Law ..1-1 Tennessee Internal School Uniform Accounting Policy Title 2 The Internal School Accounting Act ..1-3 Title 3 Purpose, Revisions and Waivers, Exemptions ..1-4 Purpose and Applicability of the Manual ..1-4 Revisions and Waivers ..1-4 Exemptions ..1-4 Title 4 Accountability and General Principles ..1-5 Accountability ..1-5 General Principles ..1-5 Section 2: Audit Requirements Title 1 School Audit Purpose and Frequency of Auditors.

2 2-1 Audit Standards and Approval ..2-1 Contract to Audit Accounts ..2-2 Section 3: Duties and Responsibilities Title 1 Local Boards of Education ..3-1 Title 2 Directors of Schools ..3-2 Title 3 School Principals ..3-4 Title 4 Tennessee Department of Education ..3-4 i-2 Title 5 Comptroller of the Treasury ..3-6 Title 6 Commissioner of Finance and Administration ..3-7 Section 4: Administration of Internal School Funds Title 1 Internal School Funds ..4-1 Internal School Funds ..4-1 Student Activity Funds ..4-1 General Fund ..4-2 Restricted Local Education Agency School Nutrition Fund ..4-3 Accounting for Athletics ..4-4 Title 2 Internal Control.

3 4-5 Objectives of Internal Control Controls Surrounding Electronic Files and Revenue/Collection Cycle ..4-6 Purchasing/Disbursement Payroll Cycle ..4-15 Capital Asset Cycle ..4-16 Inventory Cycle ..4-18 Reporting Cycle ..4-19 Title 3 Insurance/Bonding of Title 4 Safekeeping of Cash ..4-22 Title 5 Property Acquisition and Management ..4-23 Property Property Title 6 Retention and Disposal of Records ..4-26 Retention of Records ..4-26 Disposal of i-3 Title 7 Cooperative and Noncooperative Cooperative Activities ..4-28 Non-cooperative Title 8 Fundraising and Resale Activities ..4-30 Resale Activities.

4 4-30 Fundraising Activities ..4-31 State Sales Emphasized Internal Control Features ..4-36 Title 9 Donations & Other Miscellaneous Revenues/Receipts ..4-37 Premiums (Bonus Incentives)..4-37 Returned Check Fees ..4-37 Interest Earned on Bank and Investment Teachers Materials and Supplies Funds ..4-38 Student Fees/Fee Waiver ..4-39 Extended School Program (ESP)..4-40 Student Deposits and Fines Collected for the Board of Education ..4-40 Title 10 Loans and Accommodations ..4-41 Title 11 Budgets for Internal School Funds ..4-42 Section 5: Operating Procedures Title 1 Recording Transactions and Title 2 Definitions ..5-2 Separation of Duties.

5 5-2 Collection of Money by Collection of Money by Recording of Collections by Title 3 Purchasing ..5-10 i-4 Purchase Authorization ..5-10 Purchasing Procedures for Purchasing Procedures for Purchasing Procedures by Principal or Designee ..5-13 Bid Process and Required Documented Quotes ..5-14 Prior Authorization Required ..5-14 Limitations on Disbursements ..5-15 Expenditures Made by Pupils and Employees ..5-15 Title 4 Petty Cash ..5-16 Authorization ..5-16 Establishment of Petty Cash Vouchers/Invoices ..5-16 Replenishing Petty Cash and Recording Expenditures ..5-16 Emphasized Internal Control Procedures ..5-17 Title 5 Refunds and Refunds ..5-18 Travel and Conferences.

6 5-18 Other Travel Advances ..5-18 Title 6 Salary Supplements, Substitute Teachers, and Contracted Services ..5-20 Salary Supplements ..5-20 Substitute Contracted Services ..5-20 Title 7 Borrowing, Lending, and Borrowing and Transfers of Money from One School Account to Another ..5-22 Prohibited Transfers ..5-22 Title 8 Club and Class Accounts ..5-23 Unexpended Account Balances ..5-23 i-5 Section 6: Banking Title 1 Bank Accounts and Bank Investments ..6-1 Title 2 Deposits ..6-2 Frequency of Bank Intact Deposits ..6-2 Deposit Title 3 Checks ..6-3 Signatures on Voided Outstanding Checks.

7 6-4 Bad Checks ..6-4 Emphasized Internal Control Feature ..6-4 Title 4 Bank Reconciliations ..6-5 Procedures ..6-5 Emphasized Internal Control Features ..6-6 Title 5 Online Banking ..6-7 General ..6-7 Minimum Policies and Procedures ..6-7 Section 7: Accounting and Reporting Title 1 Information Provided by Accounting System ..7-1 Title 2 Accounting Records ..7-2 Revenue and Expenditure Expanded Reporting Accounting Records ..7-3 Title 3 Financial Reporting ..7-4 i-6 Periodic Financial Reports ..7-4 Financial Statements and Accompanying Schedules ..7-5 Exhibit 1: Table of 2: Combined Balance Sheet-Regulatory Basis-All Schools.

8 7-67-7 Exhibit 3: Combined Statement of Revenues, Expenditures, and Changes in Fund Balances-Regulatory Basis-All Schools ..7-8 Exhibit 4: Notes to the Financial Statements ..7-9 Exhibit 5: Individual Balance Sheet-Regulatory Basis-High School ..7-15 Exhibit 6: Individual Statement of Revenues, Expenditures, and Changes in Fund Balances-Regulatory Basis-High School ..7-16 Exhibit 7: Individual Balance Sheet-Regulatory Basis-Middle School ..7-17 Exhibit 8: Individual Statement of Revenues, Expenditures, and Changes in Fund Balances-Regulatory Basis-Middle School ..7-18 Exhibit 9: Individual Balance Sheet-Regulatory Basis-Elementary School ..7-19 Exhibit 10: Individual Statement of Revenues, Expenditures, and Changes in Fund Balances-Regulatory Basis-Elementary School .

9 7-20 Exhibit 11: Schedule of Expenditures of Federal Awards and State Financial Assistance ..7-21 Exhibit 12: Schedule of Interfund and Interaccount Transfers ..7-22 Exhibit 13: Schedule of Salary Supplements ..7-23 Exhibit 14: Schedule of Fidelity Bond Section 8: Local Education Agency School Nutrition Funds Title 1 General Rules and Regulations ..8-1 Centralized and Noncentralized Systems ..8-1 Application ..8-1 Petty Cash and Change Accounts ..8-2 Student Prepaid Fund Balance ..8-2 Utilization of School Nutrition Fund Money ..8-2 Vending Machines-Fundraising ..8-2 Banquets and Special Functions ..8-2 Separate Accounting Required ..8-3 Indirect Costs.

10 8-3 Charges ..8-3 Meals for Cafeteria Employees ..8-4 State Matching Funds ..8-4 i-7 Retention of Records ..8-4 Commodities- Accounting and Financial Reporting ..8-4 Financial Statements and Exhibit 1: Table of Contents ..8-6 Exhibit 2: Management s Discussion and Analysis ..8-7 Exhibit 3: Balance Sheet Governmental Funds ..8-9 Exhibit 4: Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds ..8-10 Exhibit 5: Notes to the Financial Statements ..8-11 Exhibit 6: Schedule of Salary Supplements ..8-15 Exhibit 7: Schedule of Fidelity Bond Exhibit 8: Schedule of Expenditures of Federal Awards and State Financial Assistance.