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Financial Accounting for Local and State School Systems: 2009 Edition
NCES 2009-325
June 2009

Chapter 8: Activity Fund Guidelines — Preparation and Review of Monthly Activity Fund Reports

A monthly report of cash receipts and disbursements to the activity fund should be prepared and reviewed by the activity fund supervisor and submitted to the school district office. Column headings in the report should include the following:

  • beginning cash balance, which should agree with the ending cash balance in the prior month's report;
  • cash receipts;
  • cash disbursements;
  • ending cash balance;
  • unpaid purchase orders; and
  • unencumbered cash.

The activity fund bookkeeper should also prepare a monthly financial report for each student organization, showing the organization's cash receipts and disbursements. These reports should be reviewed by the activity fund supervisor and submitted to the student organization's sponsor. Each sponsor should then compare the activity fund bookkeeper's report with their own records. Any discrepancies should be resolved immediately. Additionally, the school finance office should periodically perform internal audits of the reports and supporting records.

Application of GASB Statement 34 to Activity Funds

Governmental Accounting Standards Board (GASB) Statement 34 made significant changes in financial reporting for all governments, including school districts. Chapters 4 and 5 discuss fully the reporting structure established by this accounting standard and its specific requirements, including the presentation of government-wide financial statements, fund financial statements, and the Required Supplementary Information. The purpose of the government-wide statements is to provide a broad overview of the governmental entity. Because fiduciary fund resources are not available for use by the government, fiduciary activities are excluded from the entity-wide financial statements. In accordance with the new reporting structure, fiduciary activities, including student activity funds, are reported only in the fund financial statements.

The impact of GASB Statement 34 on district and student activity funds is summarized below:

  • If student activity funds are classified as agency (fiduciary) funds as recommended, they are not reported in the government-wide financial statements. Instead, they are reported only in the fund financial statements.
  • District activity funds that are classified as governmental (special revenue) funds are consolidated with all governmental activities in the government-wide financial statements. District activity funds are also presented in the governmental fund financial statements.
  • Fiduciary funds are presented in the fund financial statements by fund type. Student activity funds, as agency funds, report no operating activity and, therefore, are presented only in the statement of fiduciary fund net assets.

Revenue From Enterprise and Alternative Sources

Many school districts and individual school sites derive significant revenue from enterprise activities and alternative sources: vending machines, school stores, class ring sales, and a wide variety of fundraising activities (magazine sales, candy sales, school pictures, etc.). In addition, large sums of money are generated through interscholastic sports in the form of gate receipts and other contributions. These revenues are typically associated with activities conducted at the school level that generate revenues to be used for the benefit of the school. In many instances, particular student organizations are in charge of one or more such enterprise activities. In other instances, the district administers the revenues for its own programs. If a student organization is in charge of an enterprise activity, the money should be accounted for through that organization's activity fund. If the district determines the use of the funds, the money should be accounted for with other district funds in the district's accounts. However, in all instances, the funds should be recorded in the district's books.

School districts and student groups are also increasingly benefited by affiliated organizations that support curricular, cocurricular, and extracurricular activities. Affiliated organizations include groups such as Parent-Teacher Associations (PTAs), Parent-Teacher Organizations (PTOs), school foundations, and athletic booster clubs. Contributions by these groups often include supplies, materials, equipment, and even school facilities, such as weight training rooms.

Specific board of education policies are needed to address these issues. In the case of activity funds derived from enterprise activities, board authorization to operate the activity is needed, and all funds should be accounted for in the district's books. In the case of revenue from affiliated organizations, board authorization to receive such funds is needed. In some cases, owing to the requirements of GASB Statement 39, affiliated organizations may be included in the financial statements of the school district as discretely presented component units. (See chapter 5 for a discussion of GASB Statement 39.) Whether or not affiliated organizations are included as component units, decisions regarding allocation of their contributions should be made on the basis of whether the curricular or cocurricular program is the primary beneficiary, as well as on the basis of fundamental fairness in resource allocation.

The following examples are illustrative of issues discussed in this section:

  • A high school chess club holds a fundraiser and raises $500, which is accounted for in an agency fund. The club uses $400 to buy supplies and club T-shirts. When the $500 in cash is deposited by the club sponsor or school administration, the district should debit the "cash in bank asset" account and credit $500 to the "due to student organizations" liability account within the designated agency fund (for student activity funds). When the club spends $400 for supplies, an entry should be recorded to credit cash and debit the liability account. At year's end, the district would reflect a $100 balance for the club in its agency fund.
  • A school district enters into a multiyear agreement with a soft drink company for vending machine services at all of its schools. Under the contract terms, the district will receive 10 percent of sales. In the current fiscal year, the district receives $10,000 for its portion of sales. If this payment represents an advance, a portion of it should be deferred on a prorated basis (code 481, deferred revenue, a liability account code). Using the estimated proceeds from the contract, the district should budget the revenues within a special revenue fund during its normal budgeting process. The portion of the $10,000 payment that is not advanced should be recorded as revenue from enterprise activities (code 1750) within the special revenue fund. It should be noted that it may be appropriate or required by state statute for this revenue to be, instead, included in the general fund. The same guidance, though, generally applies.

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