2007-08 Adopted Plan - Wake County Public School System

Budget and Financial PoliciesReporting EntityThe cost of public education in North Carolina is fi nanced primarily bythe state, which establishes minimum programs. Local funds, in varyingamounts by district, supplement the basic program and are appropriatedby local boards of county commissioners. Local boards of educationin North Carolina have no tax levying or borrowing authority and arerequired to maintain accounting records in a uniform format.The budget is prepared on the modifi ed accrual basis of accountingprescribed by legal requirements.The board is a local education agency empowered by the North Carolinageneral statutes with the responsibility to oversee and control all activitiesrelated to public school education in Wake County, North Carolina. Theboard receives county, state, and federal government funding and mustadhere to the legal requirements of each funding entity.Public School FinancingFUND ACCOUNTINGPrivate: Private sector presents a single, unitary entity for fi nancialreporting purposes. Private sector fi nancial statements are taken as awhole.Public: Governmental fi nancial reporting focuses on grouping of variousfunds rather than as whole. Fund accounting developed from legalcompliance and resource limitation issues.SPENDING FOCUSPrivate: Private sector focuses on earnings and changes in business’stotal net resources.Public: Governments focus on changes in current spendable resourcesrather than total resources. Government limitation has short-term focustypically on operating budget.BUDGETARY REPORTINGPrivate: Private sector budget is simply a fi nancial plan allowing forchange and fl exibility during fi scal year.Public: Governmental budget is a system of checks and balances withlimited fl exibility. Governments demonstrate compliance with legallyadopted budgets through mandated budget-to-actual comparisonstatements.Budget BasisThe North Carolina School Budget and Fiscal Control Act mandates auniform budget format and the adoption of an annual balanced budgetresolution by July 1 each year. Budgets are adopted on a basis consistentwith Generally Accepted Accounting Principles (GAAP), except forrevenues and expenditures of the debt service fund, which is included inthe budget of the capital projects fund and the enterprise fund, which isbudgeted on the modifi ed accrual basis.Legal provisions confl ict with GAAP in that there is no authorization forthe board to maintain a debt service fund even though the statutes allowcontinuing contracts for capital outlay purchases.As required by the statutes, the board maintains encumbrance accountsunder which purchase orders, contracts, and other commitments for theexpenditure of funds are recorded in the governmental funds in orderto reserve that portion of the applicable appropriation. Outstandingencumbrances at the end of the year do not constitute expendituresand are either charged to an appropriation in the following year or thecontractual commitment is cancelled. The encumbrances are reportedas reservations of fund balance since the commitments will be fulfi lledthrough subsequent years’ budget appropriations.The primary revenue sources for the school system are budgetedallocations and appropriations from the State of North Carolina, WakeCounty, and the federal government. State budgets are recorded asallotments and are issued or revised by the North Carolina Department ofPublic Instruction (NCDPI). Grants are recorded in accordance with thegrant award notifi cations. These may span multiple fi scal years. Buildingprogram budgets are recorded when resolutions have been approved68