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Accounting and Auditing

Advisory on School Budgets and Municipal Expenditures

The state's Chapter 70 school finance formula sets a net school spending (NSS) requirement each year for each operating school district. Districts report their actual spending on the End of Year Financial Report (EOYR). This report is used by the Department to verify compliance with the NSS requirement.

Most expenditures from the school department's budget count toward meeting the NSS requirement. Notable exceptions include the cost of transporting students to and from school; most capital facility costs; adult education costs; expenditures from grant and revolving funds; and expenditures reimbursed by the state.

In addition to expenditures made from the school department's own budget, certain expenditures made by other municipal departments on behalf of the schools are also reported on the EOYR, and some of these expenditures count toward meeting the NSS requirement. These so-called "municipal charges" fall into three general categories:

  • Non-discretionary expenses which the city or town is entitled to report and which count toward NSS;

  • Discretionary programs which can only be reported and charged to NSS with the approval of the school committee; and

  • Expenses which should be reported but which do not count toward NSS.

Examples of non-discretionary expenses that the city or town is entitled to report and that count toward NSS (numbers in parentheses indicate end of year report account numbers):

Administrative Services (1000)- These include the cost of municipal accounting, auditing, central data processing, central purchasing, employee benefits administration, and other financial services supporting the school department.

There are three methodologies that can be used to determine the share of these costs attributable to the school department:

  1. The total school committee appropriation divided by the total amount to be raised as shown on the tax rate recapitulation sheet, multiplied by the cost of administrative services.

  2. The "per pupil administrative cost allowance" multiplied by the district's foundation enrollment. The allowance is published annually by the Department in the accounting and auditing section of the school finance webpage.

  3. An alternative proration methodology approved by the school committee, the municipality, and the Commissioner of Education.

Costs related to the mayor's or town manager's office, the town counsel's office, and any municipal offices other than those listed above, cannot be included.

Employee Benefits (5100-5250) - The actual costs of pensions, pension assessments and insurance premiums for active and retired school department employees only. Costs for insurance premiums for retired school department employees must be delineated and reported separately, as their eligibility with respect to net school spending is subject to special rules. Employee benefits cannot be charged for municipal employees in other departments providing services to the school committee.

Non-employee Insurance (5260) - The direct premiums for school buildings, grounds, equipment and liability coverage.

Short Term Debt Service(RANS) (5400) - A proration of the actual interest paid for revenue anticipation notes (RANs) to support current school year operations.

Examples of discretionary programs that can only be reported and charged to NSS with the approval of the school committee; these are considered contracted services which the school committee may choose to purchase from other municipal departments:

Library Services (2500)

Health Services (3200)

School Security Services (3600)

Operation & Maintenance of School Facilities (4000)- The direct costs of salaries, supplies, materials and contractual expenses for maintaining school buildings, grounds and equipment. This can include snow removal on school grounds but may not include snow removal on city/town roadways. Major renovation and repair work may only be reported here if the cost per project is less than $100,000. (In some municipalities, responsibility for the maintenance of school buildings is assigned by charter or local by-law to a municipal department.)

Rental/Lease of School Buildings and Non Instructional Equipment (5300) - Expenditures made under the terms of a lease or rental contract undertaken at the request of the school district for buildings or non-instructional equipment. This does not include the cost of capital leases or lease/purchase agreements. In the event of an emergency, the first three years of a long-term lease can be charged here but after three years must be charged as a capital lease in the Fixed Asset (7000) category.

Expenses that should be reported but that do not count toward NSS:

Student Transportation Services (3300) - The cost of providing transportation to public and non public school students once daily to and from school.

Short Term Debt Service (BANS) (5450) - A proration of the actual interest paid on bond anticipation notes (BANs) for bonds and loans used to finance school building maintenance or construction, or textbooks or educational equipment.

Other Fixed Charges (5500) - Cost of bank charges for school department accounts, salaries of crossing guards, cost of public safety inspections, and the cost of claiming Medicaid reimbursements.

Fixed Assets - Includes major renovation and repair work (when the cost of the project is $100,000 or more) (7000) and bond payments (8000).

In the case of regional districts, all of these expenses are typically incurred by the district itself. Municipal charges are permitted only with the express written consent of the regional school committee, where the committee chooses to contract with a member municipality for the provision of specific services.

Detailed information on the various expense categories and their eligibility to meet the NSS requirement can be found in the Department's school finance regulations and guidelines for student and financial reporting.

We strongly urge every district to have a written agreement, signed by the superintendent and by the mayor, town manager, or selectmen, documenting the items which will be reported and charged and, where appropriate, the methodology for determining the costs. Having such an agreement will help avoid disputes and misunderstandings.

If district and municipal officials are unable to agree on the allocation and reporting of any particular expense items, they may request the Department to assist in the resolution of the dispute. The best time to raise such issues is prior to the start of the fiscal year, while budgets are still being developed. When an issue is raised at the end of the year, during the preparation of the end of year report, it is more difficult to make adjustments retroactively. In such cases, particularly in the absence of a written agreement, we will generally require the municipality and district to follow past practice for the year just completed, and look to the new year for implementing any changes.

For further information or assistance on these issues, please contact Jay Sullivan, administrator for school business services, at jsullivan@doe.mass.edu or 781-338-6594.



Last Updated: May 10, 2008
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