Author: Donna Crowley

Is It Time to Update Your PHA’s Software? Outdated Housing Software Hinders Financial Operations

Like many organizations, Public Housing Authorities rely on online systems to carry out a wide range of essential operations. However, PHAs using antiquated software often face a multitude of challenges and frustrations. Outdated software impedes operations, leads to delays, hinders financial processes, and increases the PHA’s susceptibility to cyber threats.

Issues Posed by Outdated Software

PHAs rely on IT systems for many crucial processes, including inspections, application management, reporting, and other necessary functions. These online processes are essential for maintaining the safety, security, and everyday operations of PHAs. However, HUD has long experienced issues due to software complications, with IT failures causing major disruptions in PHAs across the country. Reliance on outdated information technology (IT) systems and software not only causes delays and disorganization in PHAs but can also increase the risk of cyber threats and serious data breaches. For the last several years, HUD has been working towards technology modernization and increased cybersecurity.

In a report entitled “Top Management Challenges Facing the U.S. Department of Housing and Urban Development,” The Office of Inspector General summarized the most pressing issues facing HUD in fiscal year 2025. The report discussed HUD’s continued efforts to improve cybersecurity, but also spoke about the ongoing challenges related to the use of “legacy systems.” Legacy systems refer to older or outdated hardware, software, and programs. The report states, “These legacy systems and processes present elevated risks to HUD’s IT environment and increase risk in the functionality of HUD’s key programs. Managing cybersecurity risks for legacy systems is resource-intensive and limits OCIO’s capacity to acquire and deploy the technology necessary to implement or improve critical security controls.” The report points to the difficulties HUD programs face in attempting to modernize a large number of legacy systems while operating within a limited budget.

Impact on Financial Processes and Reporting

Among the operations negatively impacted by the use of outdated software are critical financial processes. Antiquated manual processes leave more room for error and inaccuracy than modern online systems. The use of outdated software impedes budgeting and financial reporting processes, impacts the efficiency of audits, and prohibits auditors from running certain reports.

Software Options and Benefits

Modern IT systems significantly enhance efficiency and organization across financial processes and other PHA functions. A variety of software options are available to PHAs for use in both tenant accounting and financial accounting. Some commonly used programs include PHA-Web, Yardi PHA Suite, MRI Software (HAPPY and Lindsey), AppFolio, and RealPage. These platforms offer a range of benefits such as electronic document storage, paperless processing, streamlined workflows, automated processes, routine maintenance, and other features. PHAs should use the most recent, up-to-date version of the program available.

Additional Guidance

Up-to-date technology, reliable operations, and effective financial processes are all necessary for your PHA to function optimally and provide the critical services relied on by so many. For more guidance on improving financial processes within your PHA, please don’t hesitate to reach out to RBT CPAs. RBT CPAs proudly provides our accounting, audit, tax, and advisory services to HUD programs in the Hudson Valley and beyond. At RBT CPAs, we believe we succeed when our clients succeed. Give us a call today to find out how we can be Remarkably Better Together.

Is Your School District Audit-ready?

Financial statement audits are crucial to any organization’s financial health, and school districts are no exception. A financial statement audit provides an independent assessment of an organization’s financial statements, which in turn ensures transparency, accountability, and a strong foundation for future planning. Preparation is key to ensuring a smooth audit process and avoiding delays. Here are some ways school districts can prepare for a financial statement audit.

Educate your audit committee.

Audit committees are required under NYS Education Law. Audit committees oversee the audit process. The committee acts as the primary point of contact between the auditor and the appropriate staff or departments. The committee also reviews audit findings and assists in recommendations for improvement. The Government Finance Officers Association (GFOA) makes certain recommendations for the establishment of audit committees, which can be found under the “Best Practices” section of their website.

Know the regulations and requirements.

The audit committee should be familiar with the various regulations governing financial reporting for school districts set forth by the Generally Accepted Accounting Principles (GAAP) and Governmental Accounting Standards Board (GASB) guidelines. This guidance is frequently updated, so districts must stay up to date with the latest updates and revisions to these standards.

Understand the audit process.

The audit committee should understand the scope of the audit (what will be assessed), the timeline, and the roles and responsibilities of everyone involved. The audit committee should also understand that audit-ready means that all supporting documentation should reconcile to the trial balance before the auditor’s review. The auditor’s role is to verify accuracy, not to make adjustments. Any corrections should be identified and addressed before the audit begins to ensure a smooth and efficient process.

Gather all necessary documentation.

The school district must request, collect, and organize documentation and information from the appropriate departments and staff, per the audit requirements. This includes general ledgers, detailed schedules of account balances, bank statements, invoices, receipts, payroll records, purchase orders, contracts, and other financial documents. The documentation should be easily accessible for the auditor, and all financial records should be reviewed for accuracy prior to an audit.

Review internal controls.

Regular internal control assessments help to strengthen the mechanisms for preventing fraud and abuse within an organization. Internal controls include procedures for authorization, record keeping, reconciliations, and auditing. These processes must be periodically reviewed to ensure that they are achieving their objectives in preventing risk to the school district.

Review prior years’ audit findings.

Ensure that corrective actions have been taken for any deficiencies identified in the prior year’s audit. This will not only reduce the likelihood of repeated findings but also demonstrate your commitment to improving your financial management practices.

Communicate with your auditor and prepare for questions.

It’s important to keep an open line of communication with your auditor, maintaining transparency throughout the audit process. Make sure you disclose any changes to your financial systems or operations. Be prepared to answer questions regarding your school district’s financial procedures and processes, internal controls, documentation, operations, and personnel.

Further guidance

A financial statement audit can be a daunting and sometimes stressful event, but proper preparation can reduce the opportunity for error and disorganization. If you have any questions about the audit process for school districts, or if you need any other audit, accounting, tax, or advisory support, please know RBT CPAs is here for you. We’ve been proudly serving school districts, municipalities, businesses, non-profits, and individuals in the Hudson Valley for over 55 years. Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.

To Merge or Not to Merge: New York State Offering Increased Aid to Consolidating School Districts

As of July 2024, school districts in New York State that reorganize—or merge—are eligible for financial assistance of up to 40 percent of the Total Foundation Aid Base under the Reorganization Incentive Operating Aid (RIOA) program. Unfrozen in the 2024-2025 state budget, RIOA is available to reorganized school districts for up to 14 years after merging, on a phase-out basis. New York State encourages consolidation for districts with small student populations as a solution to issues caused by low enrollment. Several districts in the state have already made the decision to merge, and more are considering the possibility.

The potential benefits of merging districts include cost savings, additional resources, expanded offerings for students, and upgraded facilities. However, many smaller districts are reluctant to merge due to concerns over loss of school identity, less individualized student attention, increased travel time, the potential for higher property taxes, and other possible consequences. In-depth studies evaluating the prospective benefits versus costs for school districts considering reorganization are necessary to determine the feasibility of potential mergers.

Potential Benefits of Merging

Cost Savings

Merging districts can result in reduced administrative and operational costs. Consolidating districts reduces the number of teachers and administrative staff required to operate the district, and fewer school buildings means less spending on utilities such as heat and electricity. Consolidating bussing systems can also help reduce transportation costs.

Additional Resources

A reorganized district benefits from the combined resources of both districts involved in the merger, including teaching staff, learning materials, and school equipment.

Expanded Programs

The funding provided through the RIOA program allows reorganized districts to develop and strengthen both academic and extracurricular programs. The new, larger districts may be able to hire more specialized instructors and offer a wider variety of educational programs. The funds can also be used to support non-academic programs such as athletics, clubs, and theater and music programs.

Facility Upgrades

RIOA funds can also be utilized to improve or renovate school buildings and grounds.

Concerns over Merging

Loss of School Identity

Communities faced with the possibility of a school district merger often fear that combining districts will lead to a loss of school identity. People may be reluctant to give up familiar school traditions, mascots, and the tight-knit communities they’ve become accustomed to.

Less Individualized Student Attention

Students, employees, and families in smaller school districts are accustomed to the personal qualities of a small school community, such as small class sizes, opportunities for parent involvement, easy access to teachers, and individualized student attention. A transition to a larger combined district may translate to a less personalized experience for students and families.

Longer Travel Time

When a merger occurs, students may need to travel further distances to school, increasing travel time and transportation costs.

Potential Increased Costs for Taxpayers

When two school districts merge, the new district may level up staff salaries and benefits to those of the higher-paying district, raising staffing costs. These higher staffing costs may result in higher property taxes for residents. Increased school transportation costs can also lead to higher taxes.

School district mergers present both potential advantages and disadvantages for communities in New York State, all of which should be considered by districts exploring the possibility of reorganizing. Merger feasibility studies should be conducted in order to thoroughly weigh the potential benefits versus costs for individual communities. For more information on school district reorganization, see NYSED’s Guide to the Reorganization of School Districts in New York State.

While you continue to act in the best interest of your school district, please know that RBT CPAs is here to support your district’s accounting, advisory, tax, and audit needs. Contact us to find out how we can be Remarkably Better Together.

How Do You Know If You Have a Good Fee Accountant?

A fee accountant is an external accountant hired by a Public Housing Authority on a contractual basis to handle the organization’s accounting responsibilities. The use of a fee accountant can improve the accuracy and efficiency of an Authority’s financial reporting, give the Authority access to specialized knowledge, and save the organization the expense of an in-house accounting team. But—not all fee accountants are created equal.

Below are some signs of a good fee accountant.

Minimal (or zero) audit adjustments

One sign that your fee accountant is doing his/her job well is a lack of adjustments, posted or unposted, to the Authority’s audited financials. This indicates that the Authority’s financial data has been reported accurately and in compliance with regulations.

Minimal errors in monthly financial reports

Another indicator of a good fee accountant is a lack of errors in the financial statements he/she prepares each month for the Board of Commissioners. Monthly financial reports are key to monitoring a PHA’s financial health; they should be accurate and submitted in a timely manner.

Ability to meet deadlines and communicate about delays

Fee accountants need to meet several key deadlines including those regarding budget reports, monthly financial reports, and Financial Data Schedules. If delays occur, the accountant should communicate this information to the PHA.

Understanding of HUD programs and compliance requirements

A good fee accountant understands the specific compliance requirements for HUD programs and keeps abreast of updates in industry regulations.

Experience with PHA software programs

Your fee accountant should be familiar with the common software programs used in the management of Public Housing Authorities, such as MRI Software, Yardi, and PHA-Web.

Audit preparation and readiness

Your fee accountant should have experience working with auditors and must be able to provide accurate supporting documentation to auditors in a timely manner. A fee accountant must ensure that the PHA’s books and records are audit-ready, meaning that all supporting documentation should reconcile to the trial balance before the auditor’s review. The auditor’s role is to verify accuracy, not to make adjustments. Any necessary corrections should be identified and addressed before the audit begins to ensure a smooth and efficient audit process.

Communication and responsiveness

Is your fee accountant accessible and responsive when you reach out with questions or concerns? A good fee accountant maintains consistent communication with the Housing Authority as well as with auditors.

Willingness and ability to help the Authority resolve issues

Finally, your fee accountant should be a helpful resource, identifying potential issues and opportunities in the PHA’s financial processes. A good fee accountant is committed to helping the PHA resolve deficiencies and other issues that arise.

As you can see, there is much more to the fee accountant role than merely completing accounting tasks. When it comes to accounting services, quality of service matters. Essential to maintaining the financial reputation and integrity of your PHA is a fee accountant who is reliable, effective, and well-versed in the specific requirements for HUD programs.

Our experts at RBT CPAs possess the specialized knowledge and skills to work with you on a per-service basis alongside your internal accounting resources or as your full-service accounting and tax department and advisor. When you partner with RBT CPAs, you can be confident in your program’s financial integrity and compliance, so you can continue to focus on your goal of providing decent and safe housing for our state’s residents. To learn more about how we can support your accounting, tax, audit, and advisory needs, visit our website or give us a call.

Is Your Municipality Audit-ready?

Financial statement audits are crucial to any organization’s financial health, and government entities are no exception. A financial statement audit provides an independent assessment of an organization’s financial statements, which in turn ensures transparency, accountability, and a strong foundation for future planning. Preparation is key to ensuring a smooth audit process and avoiding delays. Here are some ways municipalities can prepare for a financial statement audit.

Create an audit committee.

An audit committee, made up of members of the governing body, oversees the audit process. The committee acts as the primary point of contact between the auditor, the governing board, and the appropriate staff or departments. The committee also reviews audit findings and assists in recommendations for improvement. The Government Finance Officers Association (GFOA) makes certain recommendations for the establishment of audit committees, which can be found under the “Best Practices” section of their website.

Know the regulations and requirements.

The audit committee should be familiar with the various regulations governing financial reporting for municipalities. The Generally Accepted Accounting Principles (GAAP) and Governmental Accounting Standards Board (GASB) guidelines lay out the rules for financial reporting for government entities. This guidance is frequently updated, so municipalities must stay up to date with the latest updates and revisions to these standards.

Understand the audit process.

The audit committee should understand the scope of the audit (what will be assessed), the timeline, and the roles and responsibilities of everyone involved. The audit committee should also understand that audit-ready means that all supporting documentation should reconcile to the trial balance before the auditor’s review. The auditor’s role is to verify accuracy, not to make adjustments. Any necessary corrections should be identified and addressed before the audit begins to ensure a smooth and efficient process.

Gather all necessary documentation.

The municipality must request, collect, and organize documentation and information from the appropriate departments and staff, per the audit requirements. This includes general ledgers, detailed schedules of account balances, bank statements, invoices, receipts, payroll records, purchase orders, contracts, and other financial documents. The documentation should be easily accessible for the auditor, and all financial records should be reviewed for accuracy prior to an audit.

Review internal controls.

Review prior year’s audit findings.

Communicate with your auditor and prepare for questions.

It’s important to keep an open line of communication with your auditor, maintaining transparency throughout the audit process. Make sure you disclose any changes to your financial systems or operations. Be prepared to answer questions regarding your municipality’s financial procedures and processes, internal controls, documentation, operations, and personnel.

A financial statement audit can be a daunting and sometimes stressful event, but through preparation, the opportunity for error and disorganization can be reduced. Municipalities can follow the guidelines above to ensure the audit process runs as smoothly and efficiently as possible. If you have any questions about the audit process for municipalities—or if you need any other audit, accounting, tax, or advisory support, please know RBT CPAs is here for you. We’ve been proudly serving municipalities, businesses, non-profits, and individuals in the Hudson Valley for over 50 years. Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.

Comments and Reevaluation Requests Due for Fiscal Year 2025 Fair Market Rents (FMRs)

On August 14, HUD published Fiscal Year (FY2025) Fair Market Rents (FMRs), as well as a Federal Register notice, entitled “Fair Market Rents (FMRs) for the Housing Choice Voucher Program, Moderate Rehabilitation Single Room Occupancy Program; and Other Programs; Fiscal Year 2025.” The notice provides details about the FMRs and instructions on how to submit comments or request a reevaluation.

The recently published FMRs take effect October 1, 2024. As explained in 2024 FMR FAQs, “FMRs are an estimate of the amount of money that would cover gross rents (rent and utility expenses) on 40 percent of the rental housing units in an area. FMRs are used in several HUD programs, including determining the maximum amount a Housing Choice Voucher will cover.”

The updated FMRs may result in changes to the rent level subsidies. For areas where FMRs are increasing, owners may be able to raise rents (within defined limits). On the other hand, for areas where FMRs are decreasing, owners may see tighter rent controls. Ultimately, this will impact residents’ costs for rent as well.

Mandatory Small Area FMR (SAMFR) use has been expanded to another 41 metropolitan areas, which are identified in the Federal Register notice.

According to the notice, comments are due before October 1 and requests for reevaluation of FMRs are due 30 days after the Federal Register notice was published (although some sources indicate HUD may accept reevaluation requests submitted before October 1).

The Federal Register notice includes details about how PHAs can submit comments or request a reevaluation. (Others who want to request a reevaluation should work through their local PHA.) Refer to the notice for complete details. Highlights include:

Reference Docket No. FR-6479-N-01 and the notice’s title: “Fair Market Rents for the Housing Choice Voucher Program, Moderate Rehabilitation Single Room Occupancy Program, and Other Programs; Fiscal Year 2025.”
The PHA for the area or PHAs representing at least 50% of voucher tenants in an FMR area must agree reevaluation is necessary.
The requestor must provide HUD with more recent data than the 2022 ACS data used to calculate FY 2025 FMRs. Details are in section V.A.(2) of the Federal Register notice.
Indicate whether the FY 2024 FMR will be maintained or the FY 2025 FMR will be implemented during the reevaluation period. (Per the notice: PHAs requesting reevaluation of newly designated SAFMR areas may adopt FY 2024 SAFMRs or FY 2025 SAFMRs during the reevaluation period. Following the comment period, HUD will post a list, at https://www.huduser.gov/portal/datasets/fmr.html, of the areas requesting reevaluations where FY 2024 FMRs remain in effect.)
Submit electronically via the Federal eRulemaking Portal at https://www.regulations.gov. Submissions can also be made via mail, although electronic submissions are encouraged. The mailing address is Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7^th Street SW, Room 10276, Washington, DC 20410-0500.

As you navigate the FY 2025 FMRs and what they may mean to your organization or tenants, you can count on RBT CPAs to focus on your accounting, audit, tax, and advisory needs. Give us a call to find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your organization’s confidential financial data.

Government Procurement Challenges, Priorities & Trends

Procurement is in the spotlight on global, federal, state, and local stages. Driven by rising costs, supply chain fragility, the beyond-fast evolution of technology, social and environmental concerns, ever-changing legislation, staffing challenges, and more, all levels of government are being challenged like never before to modernize procurement with a keen eye toward cost savings, sustainability, and compliance.

One survey identifies the complexity of systems and processes as the top procurement challenge across industries, with rising costs and preparing for unexpected challenges being the next two biggest challenges for government.

The National Association of State Procurement Officers (NASPO) defined top priorities for state procurement in 2024 as modernizing the procurement process (moving up from the fifth priority in 2023), continuous process improvement, talent management and succession planning, and more.

Cybersecurity, sourcing requirements, climate/sustainability, supplier diversity, and more are converging to put more demands on procurement. Agility to promote repeatable quality processes that offer flexibility, deliver results faster, incorporate user feedback, and respond to changing needs while addressing talent challenges and upholding the myriad of regulations appears to be central to addressing today’s procurement challenges.

E-procurement is taking the lead as a prominent trend, with municipalities increasingly adopting digital solutions for tendering, bidding, and contract management in an effort to shorten the procurement cycle, enhance transparency, reduce paperwork, and improve efficiency. At the same time, it promotes equal opportunities among suppliers to bid by providing greater access to information.

Sustainability is increasingly being embedded into procurement practices, with a focus on acquiring services and goods in a manner that protects and supports the environment, while promoting ethical practices and supporting social welfare. (New York’s Green Purchasing Community provides a framework for local governments to ensure purchasing has a lower environmental impact while earning points toward Climate Smart Communities Certification.)

Data analytics and artificial intelligence point to increased opportunities for municipalities to use data for insights on spending, performance, and market trends. AI can help detect fraud, improve decision-making, and automate processes, while predictive analytics improves forecasting and increases cost savings. According to NASPO, there may be ways for AI to help vet suppliers, track supplier performance, identify problem suppliers, and detect fraud.

Beyond technology, municipalities are looking to create job opportunities and drive economic growth with a greater focus on supporting small and medium-sized businesses (SMBs) via their procurement processes. Some are adopting policies to award a percentage of contracts to SMBs while making bidding easier and providing assistance to help SMBs navigate the process.

As your municipality explores opportunities to modernize procurement while operating within New York State laws, you can count on RBT CPAs to focus on your accounting, audit, tax, and advisory needs. Give us a call to find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your organization’s confidential financial data.

What Municipalities Can Do to Prepare for the 2025 Budget Season

With budget season around the corner, the following are some strategies and changes you may want to consider.

Rethinking How You Budget

While line-item budgets for municipalities served their purpose for a long time, in 2022 the International City/County Management Association (ICMA), the Government Finance Officers Association (GFOA), and the National League of Cities (NLC) came together to explore modernizing local government budgeting to be more responsive to community needs, reflect today’s technological capabilities, and better align with the way the world works via their Rethinking Budgeting Initiative.

At the heart of the initiative is the transition from line-item budgets to priority- and program-based budgeting.

Priority-based budgeting puts community needs and requirements at the forefront of the municipality budget planning process. This approach offers the added benefits of having a budget that serves as a strategic plan and decision-making tool to ensure a community’s top priorities – for example, having a safe community where residents, workers, and businesses can thrive – are resourced appropriately.

Program-based budgeting defines the programs and services a municipality provides in a manner that’s more understandable and useful to residents. For example, showing the budget for police patrols is a lot more meaningful to residents than embedding those costs into line items for salaries, benefits, contractual services, etc.

At a time when inflation is stretching residents’ and municipality budgets, while demands for services and mandates increase, taking a new approach to budgeting may help promote community understanding, trust, and support when you need it most.

Minimum Wage and Exempt Threshold Changes

Pivoting from the strategic to tactical, we just want to provide a friendly reminder that 2025 wage and pay-related-benefit budgets will need to reflect January 1, 2025:

Minimum wage increase (of $.50/hour);
Higher NYS DOL thresholds for administrative and executive employees exempt from overtime (increasing from $58,458.40 to $60,405.80 in upper New York and from $62,400 to $64,350 in NYC, Westchester, and Long Island); and
Higher FLSA threshold (jumping from $43,888/year to $58,656/year) for professional employees exempt from overtime.

If during your budget or strategy development you need assistance, please know, RBT CPAs professionals are available to provide advisory, accounting, audit, and tax services, while our Visions Human Resources Services affiliate can help with all things people-related.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

What Is Audit Readiness and Why Is It Important?

Audit readiness is crucial for all organizations, particularly for Public Housing Authorities (PHAs).

Essentially, it refers to the level of preparedness of an organization to engage in an audit process. This involves having all necessary documents and records organized, up-to-date, and easily accessible for auditors.

Owing to their responsibility of managing public funds and ensuring safe, decent, and affordable housing, PHAs are subject to stringent audits. Adequate audit readiness ensures that PHAs have accurate financial statements, comply with program requirements, and can demonstrate accountability and transparency in their operations.

The process of achieving audit readiness includes maintaining accurate financial records, implementing effective internal controls, and ensuring compliance with housing regulations and laws. Additionally, it involves regular internal audits, identifying potential areas of risk, and taking corrective actions. It also requires training staff on audit procedures and expectations to foster an audit-ready culture within the organization.

For a more detailed discussion on audit preparation, see Preparing for a Financial Audit: A Guide for PHAs.

However, if a PHA is not audit-ready, numerous problems can arise, which can significantly impact a PHA’s effectiveness and reputation. Below are some potential implications:

Financial Discrepancies: Without proper record-keeping and internal controls, financial discrepancies may arise. This includes misallocation of funds, inaccurate financial reporting, and potential fraud. These discrepancies can result in financial loss, legal implications, and loss of public trust.
Non-compliance: Audits for PHAs not only assess financial statements but also compliance with housing laws and regulations. Lack of audit readiness may reveal non-compliance with these laws, leading to penalties and possible loss of funding.
Operational Inefficiencies: Poor audit readiness often reflects internal operational inefficiencies. This can lead to mismanagement, poor decision-making, and the inability to achieve organizational objectives.
Damaged Reputation: A poor audit report can significantly damage a PHA’s reputation. This can result in a loss of public confidence and trust, making it harder for the authority to fulfill its mission.
Increased Audit Costs: Not being prepared for an audit can lead to delays and prolonged audit engagements. This increases the cost of the audit and can strain a PHA’s resources.

Audit readiness is not an option but a necessity. It is a continuous process that requires commitment and diligence to help promote financial accuracy, operational efficiency, and organizational integrity. More importantly, it enables PHAs to retain public trust and continue serving communities by providing safe and affordable housing to those who need it the most.

Whether your PHA is looking for help becoming audit-ready or for an audit or accounting, tax, and advisory services, you can count on RBT CPAs. Let us know if you need more information, so we can show you how we can be Remarkably Better Together.

RBT CPAs never offshores work outside of the U.S. so you always know who is handling your financial information.

Managing an Unassigned Fund Balance: An Overview

As part of a school district’s financial management, maintaining a reasonable unassigned fund balance provides a safety buffer for unforeseen expenses or revenue shortfalls. This is vital as it helps ensure adequate cash flow to cover the ongoing cost of operations. Managing these funds entails a strong understanding of their purpose, limits, and use.

To start, an unassigned fund balance is what remains after expenditures are paid. Unlike reserve funds that have specific purposes and requirements as set forth in law, an unassigned fund balance is not committed, assigned, or restricted in any way. This flexibility allows school administrators to use the funds where they are most needed, especially during periods of financial uncertainty.

The Governmental Accounting Standards Board (GASB) has set specific guidelines for maintaining and reporting fund balances into five classifications under GASB #54. It’s crucial for school districts to be aware of these guidelines and implement them effectively as they aim to ensure transparency, accountability, and fiscal responsibility in managing public funds.

One of the most important things to understand about unassigned fund balances is their purpose. They are not meant to be a source of ongoing funding for regular expenses. Instead, they are designed to meet unexpected or emergency costs, such as unforeseen repairs, unexpected increases in student enrollment, or sudden reductions in revenue.

Strategic planning and forecasting are vital tools in managing unassigned fund balances. School districts should have a clear understanding of their financial stability, including potential risks and opportunities, to ensure they maintain an appropriate fund balance level. This includes regular reviews of financial performance and adjusting the fund balance accordingly.

In New York, the maximum amount of unassigned fund balance at the end of the school year cannot be more than 4% of the following year’s budget. However, a 2019 report from the Office of the State Comptroller (OSC) indicated 60% of districts had unassigned fund balances higher than 4%.

While bills have been crafted to increase the 4% limit to 6% and to require greater transparency around unassigned fund balance, they haven’t made it past the initial stages.

For now, it’s important to be aware of the facts that having a healthy unassigned fund balance can be beneficial, but excessively large balances can draw public criticism for over-taxation or poor fiscal management and is against the law (Section 1318 of the Real Property Tax Law). It’s important to strike a balance by maintaining a fund balance size that is sufficient to handle unexpected costs but not excessively large to invite unnecessary scrutiny and undermine public trust.

In the presentation, “School District Fund Practices: The Law and the Reality,” these best practices were shared for school district officials:

Develop policies and procedures for fund balance and reserve funds.
Develop multiyear financial and capital plans.
Adopt budgets that reasonably reflect the district’s operating needs based on historical trends and other analyses.
If over 4%, develop a plan to reduce the unexpended surplus fund balance.

If you’d like to discuss or analyze your district’s unassigned fund balance, we’d be glad to help. You can always count on RBT CPAs for accounting, audit, tax, and advisory services. Give us a call to see how we can be Remarkably Better Together.

RBT CPAs never offshores work outside of the U.S., so you always know who is handling your financial information.