This 2003 revision of the National Center for Education Statistics
(NCES) handbook, Financial Accounting for State and Local School
Systems, reflects the many changes that have taken place since
its initial publication in 1980 and modest update in 1990. It is anticipated
that this handbook will receive periodic updates to ensure that contemporary
issues are regularly incorporated into the accounting guidance for
schools. The online version of this handbook will be updated as revisions
This handbook represents a national set of standards and guidance
for school system accounting through January 2003, incorporating
guidance from Governmental Accounting Standards Board (GASB) statements
through 39. Its purpose is to help ensure that education fiscal
data are reported comprehensively and uniformly. To be accountable
for public funds and to assist educational decisionmakers, all school
financial reports need to contain the same types of financial statements
for the same categories and types of funds and account groups. This
revised and restructured guidance focuses on
This revision was prepared with guidance from
a national panel of experts representing national accounting firms,
accounting board officials, and practitioners. A working Task Force
of the National Forum on Education Statistics (NFES) included national,
state, and local education accounting practitioners. The members of
the review panel and the Task Force are listed on the opening pages
of this handbook.
- defining account classifications that provide
meaningful financial management information for its users;
- complying with generally accepted accounting
principles (GAAP), established by the GASB;
- recognizing the changes that have taken place
in technology, safety, and security; and
- supporting federal reporting requirements.
The statutes and regulations
regarding school accounting differ from state to state. Those differences
may require states, school districts, and schools to adapt the guidance
that appears in this handbook. However, consistent practices and
terminology are critical to accountability for government funds.
The accounting methods must be capable of producing financial reports
that conform with GAAP and with the legal requirements of each state,
if the two differ.
The updates to this handbook incorporate many changes in content and
structure. The remainder of the introduction highlights the chapters
and the major changes in each chapter.
2: Uses of Information
This discussion of the role of the fiscal data system in education
management and policymaking includes the advantages of alignment
with a comprehensive information system and an overview of the users
of education information.
Chapter 3: Budgeting
Formerly, this topic was covered briefly in the "Uses of Account
Classification System" chapter. This new chapter expands the discussions
of budgeting methods and budget preparation, including capital budgeting.
It addresses budgetary approaches and responsibilities, financial
forecasting, and special budgeting practices such as multiyear construction
Formerly, this topic was also covered briefly in the "Uses of Account
Classification System" chapter. This new chapter expands the topic
of accounting systems and requirements for governmental accounting
to provide information on internal control practices as well as
new information on fund-level reporting and governmentwide reporting
required by GASB Statement 34.
This new chapter in this handbook outlines the major financial statement
elements and reporting requirements for governments. It significantly
expands the guidance provided in the former "Account Classifications"
chapter and describes each major balance sheet element. Where detailed
guidance is provided by a particular GASB requirement, this chapter
offers additional guidance. Financial statements for governments
are highlighted, particularly in regard to changes owing to GASB
Account Classification Descriptions
This new chapter consolidates the former "Account Classifications"
and "Account Classification Description" chapters into a single
account code chapter. Several changes and additions have been made,
including revising obsolete language and expanding the codes for
technology, safety, and security. A detailed list of account code
changes is presented in appendix A.
Cost Accounting and Reporting for Educational Programs
Equity and accountability issues have expanded the need for cost
information at school and program levels. This chapter presents
cost accounting methods and examples of the use of existing data
systems to provide this information.
Activity Fund Guidelines
This new chapter addresses the complex issues surrounding student
activity funds. It defines and distinguishes activity funds and
provides proper classification. The chapter gives initial guidance
for improving controls and for accounting for and reporting these
funds. The requirements of the most recent GASB standards are also
[back to top]