September/October 2021

Policy Page: The Policy Connection to School Finance

By Ken Carter

When we think of school finances, fiscal responsibility, and business operations, it is important we look to policies for clarity and direction. The following overview of policy connections is based on IASB’s PRESS (Policy Reference Education Subscription Service) and the Policy Reference Manual (PRM) that serves as an encyclopedia of more than 1,200 pages of sample materials.
The school board governs using written policies to ensure legal compliance, establish board processes, articulate district ends, delegate authority, and define operating limits (Sample Policy 2:240, Board Policy Development). The board employs the superintendent and the board is required, per 105 ILCS 5/10-16.7, to direct, through policy, the superintendent, in charge of the district’s administration (Sample Policy 3:40, Superintendent).
Having established that the school board governs with written policies and employees the superintendent to be responsible for the district’s administration, we can now look at policies that relate to school finances, fiscal responsibility, and business operations. The focus within the PRM would be Section 4: Operational Services, which contains a number of sample policies under a sub-category titled Fiscal and Business:
4:10, Fiscal and Business Management
4:20, Fund Balances
4:30, Revenue and Investments
4:40, Incurring Debt
4:45, Insufficient Fund Checks and Debt Recovery
4:50, Payment Procedures
4:55, Use of Credit and Procurement Cards
4:60, Purchases and Contracts
4:70, Resource Conservation
4:80, Accounting and Audits
A review of the policy titles shows that these policies connect to a school district’s fiscal and business operations. When boards look at school finance from a broad perspective and its connection to policy, two things should take place:
1)         Review of the current adopted board policy to ensure processes are being followed and that it aligns with district practices, and
2)         Review of the sample PRM policy which contains footnotes that explain or expand on the language contained within the policy. Footnotes will identify requirements and language controlled by state and federal law. Footnotes may also provide options to the policy language a board may want to consider. A policy’s first footnote always describes whether the topic is required to be included in a policy.
  • Completing items 1 and 2 is considered best practice and shows good governance for all policy work. Here are some examples of options presented by footnotes.
An example of optional language can be found in sample PRM policy 4:10, Fiscal and Business Management. Under the subhead Budget Planning there is default language that reads “The Superintendent shall present to the Board, no later than the first regular meeting in August, a tentative budget with appropriate explanation.”
Footnote 6 states, The purpose of this directive is to ensure that the budget can be adopted by September 30. The footnote also explains that a board may amend this directive to give the superintendent additional flexibility by requiring the superintendent to present a tentative budget “during a regular Board meeting in August.”
Some may view the option presented as not being much different than the default language. However, the adopted policy should reflect district practices. So when deciding on policy language, it is important that the board and superintendent have a discussion to ensure the directive is appropriate for the district and can be met.
An example of an optional policy is PRM sample policy 4:20, Fund Balances. Footnote 1 states, “This optional policy is at the local Board’s discretion. Its intent is to help the Board monitor the district’s financial health and allows a Board to clarify its expectations for maintaining fund balances.” A board must modify the policy to reflect realistic targets after considering important financial and operational issues, such as current financial practices, long-term projects, standards of fiscal health, and the current budget.
There is no statutory requirement that the board have such a policy, but it is easy to see the importance of having it in place. The PRM version of the policy does contain sample language which boards may elect to replace with district-unique language. Each district will have its financial goals and targets. District-unique language may be very detailed and arrived at by the board, district administration, finance committee, and others involved in district finances.
An example of a required policy is PRM sample policy 4:30, Revenue and Investments. Footnote 1 states, “Each district must have an investment policy; its detail and complexity must be appropriate to the nature of the funds, the funds’ purpose, and the amount of the public funds within the investment portfolio.” The additional footnotes explain the requirements and optional language for the policy.
Here is an example of a policy that is only required if a certain condition is met, PRM sample policy 4:55, Use of Credit and Procurement Cards. Footnote 1 states, “If district employees or Board members are issued credit and/or procurement cards, an ISBE rule requires this subject matter to be covered in policy and specifies its content. 23 Ill.Admin.Code §100.70(d).”
In this example, if the district does not issue credit/debit cards to anyone, the policy is not required. However, if the policy is required, the footnotes explain where customization can be completed, for instance setting limits on the amount a cardholder can charge in a single purchase or within a given month.
To recap, when thinking of school finance, the board working with the superintendent should review policies connected to a school district’s fiscal and business operations. The review should ensure processes are being followed, that required language is included in policy, and that optional language has been considered.
Ken Carter is Director of Policy Services with the Illinois Association of School Boards.