1
School Activity
Fund
Guidelines
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REVISION HISTORY | SCHOOL ACTIVITY FUND GUIDELINES
3 Kansas State Department of Education | www.ksde.org
Revision History
Date
Reason of Change
Edited By
Related Documents
Document Title
Document Location
Comments
Accounting
Handbook
School Finance
Guidelines & Manuals
within Guidelines section
Handbook with resources on all Functions,
Sub-Functions, Object Codes, and other
accounting related topics
4 Kansas State Department of Education | www.ksde.org
School Activity Fund Guidelines
Table of Contents
Revision History ........................................................................................................... 3
Related Documents ..................................................................................................... 3
Table of Contents ......................................................................................................... 4
Introduction ................................................................................................................. 5
Exemption from Guidelines ........................................................................................ 6
Summary....................................................................................................................... 7
What are Activity Funds? ............................................................................................ 8
Student Activity Funds .................................................................................................................... 8
District Activity Funds ..................................................................................................................... 9
Controls for Establishing & Maintaining Activity Funds ....................................... 10
Lines of Authority .......................................................................................................................... 10
Suggested School Board Policies ................................................................................................ 11
Establishment & Operation ............................................................................................................................... 11
Segregation of Duties ......................................................................................................................................... 12
Internal Accounting Controls over Cash Collections ................................................................................... 12
Disbursement Procedures for Student Activity Funds ................................................................................ 13
Non-Activity Funds .................................................................................................... 16
Fee Funds ....................................................................................................................................... 16
Sales tax ......................................................................................................................................... 18
Revolving funds ............................................................................................................................. 18
Gate Receipts ................................................................................................................................. 19
Petty Cash ...................................................................................................................................... 20
Creating a Petty Cash Account ......................................................................................................................... 20
Reporting Petty Cash in the District’s Financial Statements ...................................................................... 24
Classification of Activity Funds in Financial Statements ..................................... 25
Student Activity Funds .................................................................................................................. 25
District Activity Funds ................................................................................................................... 25
Fee Funds ....................................................................................................................................... 25
Petty Cash ...................................................................................................................................... 25
5 Kansas State Department of Education | www.ksde.org
School Activity Fund Guidelines
Introduction
Craig Neuenswander
Director, School Finance
Division of Fiscal & Administrative Services
Kansas State Department of Education
The nature of activity funds makes them
particularly vulnerable to misuse and fraud. For this
reason, this document focuses on policies and
procedures a school district can adopt to improve
controls over these funds. Except for certain
disbursement procedures and reporting these funds in
the district’s financial statements, these guidelines are
not mandated, but are suggested procedures with two
objectives in mind:
• safeguard activity fund moneys
• provide the USD with an efficient and
effective means to administer activity
funds.
Many USDs will find that these guidelines
constitute minimum controls they want to adopt. To
adopt anything less would likely increase the risk of
misuse or fraud. Therefore, before discounting any of
these suggested policies and procedures, you should
consult your auditor. Your auditor can explain not only
the importance of these internal controls, but also can
assist you in implementing them.
EXEMPTION FROM GUIDELINES | SCHOOL ACTIVITY FUND GUIDELINES
6 Kansas State Department of Education | www.ksde.org
Exemption from Guidelines
K.S.A. 72-1178, includes the following provisions:
School district boards may authorize, by resolution, school activity funds to account for “activities”
(athletics, music, forensics, dramatics, one-time special projects, etc.), and school district employees
shall account for these school activity funds. The uniform payment of claims requirements of
K.S.A.
12-105b shall not apply to school activity funds established by such resolutions.
Moneys from receipts for “activities” (athletics, music, forensics, dramatics, one-time special projects,
etc.), shall be credited to activity funds following policies and procedures of the school district board,
but these moneys are not subject to
K.S.A. 72-1136.
Thus, a USD which uses its discretionary authority to create such activity funds under the provisions
of
K.S.A. 72-1178 appears to be exempt from the provisions of these guidelines for such funds.
Instead, such activity funds are to be handled, as noted above, in accordance with policies and
procedures of the school district board. All other activity funds should follow these guidelines.
SUMMARY | SCHOOL ACTIVITY FUND GUIDELINES
7 Kansas State Department of Education | www.ksde.org
Summary
Activity funds are accounting funds, similar to the general fund and special revenue funds.
They are created for the purpose of accounting for moneys related to
co-curricular activities such as student organizations and athletics. Activity funds can be
divided into two categories based on who the money belongs to:
• student activity funds (money belongs to the students)
• district activity funds (money belongs to the school district)
The collection, disbursement, and accounting for activity fund moneys are usually centralized
at the building level, with the building principal designated as the activity fund supervisor. The
principal’s secretary normally acts as activity fund bookkeeper.
In addition to handling activity fund moneys, the activity fund supervisor and bookkeeper may
also account for non-activity fund moneys such as fee collections, sales tax, and petty cash.
These non-activity fund moneys can be accounted for along with activity fund moneys in the
same checking account.
Thus, the activity fund supervisor may be responsible for several different types of funds at the
building level:
• student activity funds which belong to the students
• district activity funds which belong to the district
• non-activity funds which normally belong to the district
Student activity funds are usually collected and disbursed at the building level. District funds,
on the other hand, must be disbursed at the district level. District moneys collected at the
building level must be transferred to the district treasurer.
Petty cash at the building level can be treated much like an activity fund in the same checking
account. However, a separate checking account for petty cash may be necessary if different
check signers are used.
WHAT ARE ACTIVITY FUNDS? | SCHOOL ACTIVITY FUND GUIDELINES
8 Kansas State Department of Education | www.ksde.org
What are Activity Funds?
Activity funds are accounting funds just like a general fund or a special revenue fund. Each
activity fund is an independent accounting entity, its purpose being to segregate its financial
activity from that of other funds because of special restrictions or limitations on how its money
can be spent.
Activity funds are unique to school districts. They are created to account for moneys related to
co-curricular activities. Co-curricular activities are those activities outside the classroom which
complement the curriculum. Co-curricular activities include those of student clubs and
organizations as well as district-administered activities such as sports events, drama
productions, and music concerts.
There are two types of activity funds:
• student activity funds
• district activity funds
The distinction between these two funds is who the money belongs to. To put it another way,
who controls how the money is spent? As the name implies, student activity fund moneys
belong to the students. Similarly, district activity fund moneys belong to the school district.
All activity funds must be reported in the school district’s financial statements. This includes
student activity funds even though they do not “belong” to the district. Student activity funds
should be reported in the district’s financial statements as agency type funds. District activity
funds should be reported in one or more special revenue funds.
Student Activity Funds
Student activity funds consist of those student activities that revolve around a student
organization. The students in the organization not only participate in the activities of the
organization, but also are involved in the management of the organization’s activities. Further,
disbursement of the organization’s moneys is subject to the approval of the student
organization (and its sponsor), and not the school’s board of education. If it isn’t a student
organization, it should not be classified as a student activity fund.
Student Activity Funds
Note: This list is
NOT
intended to be all-
inclusive
Academic Decathlon
Electronics Club
National Honor Society
Art Club
French Club
Orchestra Club
Auto Club
Future Farmers of America
Peer Helpers
Band
FCCLA
Pep Band
Camera Club
Honor Piano Club
Quiz Bowl
WHAT ARE ACTIVITY FUNDS? | SCHOOL ACTIVITY FUND GUIDELINES
9 Kansas State Department of Education | www.ksde.org
Student Activity Funds
Note: This list is
NOT
intended to be all-
inclusive
Character Education
Humanities Club
Red Cross Club
Cheerleading/Dance
Industrial Arts Club
S.A.D.D.
Chorus Club
International Club
Scholars Bowl
Class of 20##
Journalism Club
Spanish Club
Computer Club
Kays
Speech Club
Debate/Forensics Club
Key Club
Spirit Club
DECA Club
Lettermen’s Club
Student Council
Drama Club
Marching Band
Student Athletic Booster Club
Drill Team
Math Club
District Activity Funds
District activity funds consist of co-curricular activities that have student participation
in the activity, but are administered by the district. The most important factor which
distinguishes this type of activity fund from student activity funds is that approval for
disbursement of district activity fund moneys rests with the school’s board of
education, not the students. In other words, the district controls how district activity
fund moneys are spent. Except for those district activity funds created under
K.S.A.
72-1177, these funds must be treated like any other district fund. That is, they should
be deposited in the district’s bank account by the district treasurer and expended in
accordance with the Uniform Payment of Claims Act.
Athletic Events
Normally, one fund is sufficient for all athletic events. It is not necessary, nor recommended, to
create a separate fund for each sport. However, a separate accounting for each sport or
activity could be accomplished using line items within the fund for both receipts and
expenditures.
Other District Activity Funds
Note: This list is
NOT
intended to be all-inclusive
• Lyceums
• Music Concerts
• Plays
• Band Uniforms
• Book Fair
• Special Field Trips
CONTROLS FOR ESTABLISHING & MAINTAINING ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
10 Kansas State Department of Education | www.ksde.org
Controls for Establishing &
Maintaining Activity Funds
To establish and maintain proper control over activity funds, one should first recognize the
general lines of authority over such funds. Then, the local board of education should formally
adopt activity fund policies. From these policies, more specific internal controls should be
created at both the district and building levels.
Lines of Authority
Most school districts should follow these lines of authority for activity funds:
Board of Education: The board of education should adopt policies to govern the
establishment and operations of all activity funds.
See
Suggested School Board Policies section below.
Superintendent: The superintendent is responsible for administering all board policies.
District Treasurer: The district treasurer, being the fiscal officer of the school district, has
overall responsibility for the accounting and reporting of all activity funds to the board. The
district treasurer is also responsible for implementation and enforcement of required internal
control procedures. The district treasurer may delegate custodial and other functions to other
district employees.
Principal: The principal is normally designated as the activity fund “supervisor” for that building.
As supervisor of the activity fund for the building, the principal has overall responsibility for the
operation of the activity funds, which includes:
• collection and deposit of activity fund moneys
• approving disbursements of activity fund moneys
• book keeping responsibilities.
Depending on the circumstances, the principal may delegate all or some of their supervisory
responsibilities. For example, the bookkeeping function may be delegated to an office worker
such as the principal’s secretary. And the approval of disbursements and signing of checks
may be delegated to an assistant principal.
Sponsor (Advisor): The sponsor or advisor is responsible for supervising the activities of the
student organization or program and any other duties assigned by the proper administrative
authority. The sponsor or advisor may be a teacher or an administrative employee of the
district.
CONTROLS FOR ESTABLISHING & MAINTAINING ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
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Suggested School Board Policies
Establishment & Operation
• All activity funds should be approved by the board of education or its designee.
Application for creation of a student organization should be accompanied by a
statement of the organization’s purpose and proposed fund-raising activities. The
name of the student organization should, insofar as possible, indicate its purpose.
Acronyms should be avoided as much as possible in naming the organization.
• All activity funds should be operated in accordance with sound internal control
procedures and forms prescribed by the district treasurer.
• All fund-raising activities for activity funds should be approved in advance by the
superintendent or designee.
• Activity fund moneys should, insofar as possible, be expended in such a way as to
benefit those students who have contributed to the accumulation of such moneys.
• Each activity fund must comply with the cash-basis law. That is, no commitments or
indebtedness should be incurred unless there is available cash in the fund.
• All activity funds must be audited along with other funds of the district.
• The superintendent should designate one or more activity fund supervisors. Generally,
there should be no more than one activity fund supervisor at each building or
attendance center. More or less supervisors can be designated, depending on the
needs of the district.
• Each activity fund supervisor should maintain a checking account and/or petty cash
account at the attendance center, depending on the needs of the center. Using more
than one checking account per attendance center should be discouraged.
• Activity fund moneys should not be used for any purpose that represents an
accommodation, loan, or credit to school employees or other persons.
CONTROLS FOR ESTABLISHING & MAINTAINING ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
12 Kansas State Department of Education | www.ksde.org
Segregation of Duties
Proper segregation of duties should be implemented whenever possible. There are three
critical duties that should be separated for internal control purposes:
• signing checks
• maintaining fund accounting records
• reconciling the bank statement
Usually the activity fund bookkeeper will have the most time-consuming tasks related to activity
funds. These tasks likely will include collection of activity fund moneys, preparation of the
deposit slip and deposit of the moneys, maintenance of the fund accounting records, and
preparation of the checks for disbursement. It is best to require two signatures on the checks.
The principal of the attendance center should normally be the primary check signer. The
second check signer preferably should be someone other than the activity fund bookkeeper. If
possible, someone other than the bookkeeper should reconcile the bank statement to the
fund accounting records. At a minimum, however, the principal should review the bank
reconciliation.
Internal Accounting Controls over Cash
Collections
Because substantial amounts of activity fund cash receipts are collected in the form of
currency, as opposed to checks, particular emphasis should be placed on internal control
procedures designed to safeguard moneys collected. Particularly important is providing an
audit trail that creates documentary (physical) evidence for each step in the flow of
transactions.
Example: All moneys collected should be substantiated by pre-numbered receipts, cash
register receipts that show cumulative readings, pre-numbered tickets, or other
auditable, checkable records. These suggestions should be considered.
• Procedures should be in writing and distributed to all activity fund supervisors and
sponsors.
• Generally, all forms, receipts, and tickets should be pre-numbered.
• A perpetual inventory should be maintained on pre-numbered forms, receipts, and
tickets.
• Where tickets are used, ticket reports and unsold tickets should be available for audit.
• A perpetual inventory should be maintained on pre-numbered forms, receipts, and
tickets.
CONTROLS FOR ESTABLISHING & MAINTAINING ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
13 Kansas State Department of Education | www.ksde.org
• Where tickets are used, ticket reports and unsold tickets should be available for audit.
• Pre-numbered forms should not be printed in the school printing office.
• The student organization’s sponsor should keep records of cash collections by source.
• The person who collects cash for an event should be changed frequently. For example,
you should rotate persons used as cash collection agents for sporting events,
concessions, and vending machines. To the extent possible, DO NOT ALLOW the same
person to collect cash for the same event or purpose continuously.
• Generally, for gate receipts, such as cash collected at sporting events, the cashier
should sell tickets, which are then collected by a second person. This two-person
arrangement may not be feasible for low-attendance events.
• For concession stands, it is preferable to use one cashier. This procedure will normally
speed up concession operations and reduce cash handling problems. This
arrangement may not be feasible depending on the volume of activity and physical
arrangement of the stand.
• No collections should be turned over to a cashier, such as the activity fund bookkeeper,
without receiving a pre-numbered receipt.
• The activity fund bookkeeper should use pre-numbered, bound receipts for all currency
or checks received. One copy of each receipt should be retained in the receipt book.
• The activity fund bookkeeper should deposit all receipts intact. This means that all
receipts should be deposited in the form they are collected. They should not be used
for making change or disbursements.
• The activity fund bookkeeper should deposit all receipts as often as possible, preferably
on a daily basis. Undeposited receipts should be kept under lock with limited access.
Disbursement Procedures for Student Activity
Funds
The activity fund supervisor will be handling two types of funds at the building level:
• funds which contain moneys belonging to the students (student activity funds)
• funds which contain moneys belonging to the district
Moneys which belong to the students will normally stay at the building level, whereas moneys
which belong to the district will be transferred to the district treasurer, usually by means of a
check being written on the activity fund checking account.
Disbursement of student activity fund moneys is controlled at the building level. In contrast,
district moneys collected at the building level (i.e. moneys belonging to the district, as opposed
to the students, must, by law, be transferred to, and deposited by, the district treasurer (unless
exempt under K.S.A. 72-1177
) and a policy approved by your local board of education).
CONTROLS FOR ESTABLISHING & MAINTAINING ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
14 Kansas State Department of Education | www.ksde.org
Disbursement procedures for student activity fund moneys will differ somewhat from the
procedures followed by the district treasurer for expending district moneys because of the
strict laws that must be followed for disbursement of district funds. This approval process is
the primary difference between student activity funds and district funds:
• Disbursement of student activity funds requires approval of the student organization’s
sponsor and activity fund supervisor (principal).
• Disbursement of district funds requires the approval of the governing body (local
school board).
Generally speaking, the disbursement procedures for student activity funds at the building
level should parallel the disbursement procedures at the district level as closely as possible.
The following procedures are recommended specifically for student activity funds. You may
wish to add additional procedures, or change these procedures, depending on your situation.
• Student activity fund cash disbursements should be first approved by the student
organization and then by the organization’s sponsor. It is a good idea to also require
the approval of the activity fund supervisor (principal).
• The district may wish to establish a dollar limit for student activity fund disbursements,
any disbursement in excess of the limit requiring approval at the district level by either
the superintendent or the school board.
• Student activity fund disbursements should be substantiated by a voucher signed by
the organization’s sponsor and/or the principal. A voucher system similar to that used
at the district level would be appropriate.
• All disbursements should be made by a pre-numbered check. The checks normally will
be prepared by the activity fund bookkeeper and signed by the activity fund supervisor
(principal).
• Certain “small-dollar” purchases may not require the formal use of a purchase order or
voucher. However, this does not mean that approval of the disbursement and related
documentation is eliminated. Assuming a formal purchase order/voucher form is in
use, a form similar to the voucher should be completed at the time the activity fund
bookkeeper writes the check for the disbursement. This documentation of the
disbursement should then be filed in the same manner as the purchase order/voucher
forms. This alternative voucher form should show:
o who requested the purchase
o what the purchase was for
o which activity fund is to be charged
o amount
o check number
CONTROLS FOR ESTABLISHING & MAINTAINING ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
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• The activity fund bookkeeper should prepare each month a report showing the
financial activity for each fund the bookkeeper is responsible for. Title this report
“Activity Fund Monthly Report of Cash Receipts and Disbursements” and use these
column headings:
o beginning cash balance (this figure should agree with the ending cash balance
on the prior month’s report)
o cash receipts
o cash disbursements
o ending cash balance
o unpaid purchase orders
o unencumbered cash
Note: If unpaid purchase orders exceed the ending cash balance for any fund, a cash
basis law violation has occurred. The activity fund supervisor (principal) should
review this report and submit the report to the superintendent or designee on a
timely basis.
• The activity fund bookkeeper should prepare a financial report for each student
organization showing, at a minimum, the organization’s cash receipts and
disbursements. Preferably these reports should be prepared monthly. The reports
should be reviewed by the activity fund supervisor (principal) and submitted to the
student organization’s sponsor.
• Each student organization sponsor should compare the report prepared by the activity
fund bookkeeper with the sponsor’s records. Any discrepancies should be resolved
immediately.
• It is the Attorney General’s opinion that all student activity (i.e. clubs and organizations)
monies belong to the students. In the event of a student activity being dissolved, an
attempt should be made to contact the student officers that last participated in that
student activity to determine how those funds should be spent. If the student officers
cannot be located, the Board should consider a policy on how those funds should be
used at the student level.
Example: A class fund that has money left in the account after that class graduates.
The board could pass a policy that the club spend the money by a certain
date. If the fund still has a balance after that date, the money is
transferred to the next senior class.
NON-ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
16 Kansas State Department of Education | www.ksde.org
Non-Activity Funds
Even though reference is made to the “activity fund” supervisor and the “activity fund”
bookkeeper, this is not to say that non-activity funds must be handled differently. More often
than not, moneys will be collected at the building level, which does not fit into the “activity fund”
category. Some of these moneys are more closely identified to curricular activities rather than
co-curricular activities (remember that activity funds are related to co-curricular activities).
Thus, by strict definition these would not be considered activity funds.
Like activity funds being collected at the building level, non-activity fund moneys must also be
accounted for at the building level, even if only temporarily until the money can be transferred
to the district treasurer. Because of the need to deposit all moneys collected intact and on a
timely basis, it may be necessary for the activity fund bookkeeper to include non-activity fund
moneys along with activity funds in the same checking account. There is no problem with
doing this. Generally, it will be easier to use the same checking account for all moneys
collected at the building level, rather than creating separate checking accounts for specific
types of moneys. But the same internal control procedures should be observed for all moneys
collected.
Non-activity funds that may be encountered at the building level include fee funds, sales tax
moneys, revolving funds, and petty cash. All of these can be treated as separate “accounting
funds” by the activity fund bookkeeper, but because of their special nature each is discussed
separately below.
Fee Funds
These funds are not presented in the district’s financial statements like the general, special
revenue, and other district funds. They are merely vehicles to accommodate the collection of
fees and user charges.
Fee Funds
Class Materials Charges
Use for the collection of fees for materials and supplies used in the classroom. This fee fund
should not be used for charges for workbooks and materials which are supplemental to
textbooks (these charges should be included in the Textbook Rental Fee Fund). A separate
student material revolving fund is authorized at the district level and may be used for charges
of this type.
Copier Fees
NON-ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
17 Kansas State Department of Education | www.ksde.org
Fee Funds
Food Service Charges
Food service collections might have to be broken down between various “reimbursable”
sources and “non-reimbursable” sources for federal reporting purposes. If this is
necessary, you may wish to create the following four food service collection fee funds:
• Food Service Charges - Student School Lunch
• Food Service Charges - Student School Breakfast
• Food Service - Student Special Milk
•
Food Service - Non-Reimbursable
Home Economic Fees
Lab Fees
Musical Instrument Rental Fees
Use for rental fees only. Collections for materials and supplies should be accounted for in
the “Class Materials Charges” fee fund.
Physical Education Fees
Shop Fees
Textbook Rental Fees
Use for textbook rental, fines, sales of workbooks and materials supplemental to
textbooks, and payments for lost or destroyed textbooks.
Transportation Charges
Use for charges to students for transportation to special events.
Vending Machine Collections
Use to account for certain or all vending machine collections. If a particular student
organization is in charge of one or more vending machines, the money should be
accounted for through that organization’s activity fund.
Fees collected by teachers and administrative employees of the district must be credited to a
specific district fund, such as the general or a special revenue fund. If the fees are collected
and given directly to the district treasurer, the district treasurer will deposit the moneys into
the district’s checking account and credit the appropriate district fund immediately.
Often, however, it is not feasible on a daily basis to give the fees collected at the building level
directly to the district treasurer. Therefore, the fees must be deposited temporarily in the
activity fund checking account for safekeeping. Periodically (at least at the end of each month),
the activity fund bookkeeper should write a check (to be signed by the activity fund supervisor)
to the district treasurer and submit, along with the check, a statement that breaks down the
check into the amounts to be credited to one or more district funds. The district treasurer
then will deposit the check into the district checking account and credit the appropriate district
funds, such as the textbook rental fund or the student material revolving fund.
NON-ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
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These fee funds are “receipt only” funds. Disbursements should not be made from them
except by the activity fund bookkeeper to transfer the money to the district treasurer, who will
then deposit the money into the district’s checking account.
It is not necessary for the activity fund bookkeeper to create a separate checking account for
fee funds. Fee receipts can be deposited into the same checking account that is used for
activity funds, but they should be transferred out on a regular basis and no later than the end
of the school year. That is, a check for the total amount of fee receipts collected should be
written to the district treasurer. This is especially important at year-end to ensure that the
moneys are reflected in the appropriate district fund on the district’s books at the end of the
school year.
Sales tax
It is possible that sales tax moneys will be collected at the building level for co-curricular
related activities. For districts that have obtained multiple sales tax numbers, it may be more
practical to report and remit sales tax to the Department of Revenue from the building level for
some sales tax numbers and from the district level for other sales tax numbers. The
Department of Revenue encourages entities to consolidate, as much as possible, the reporting
and remitting of sales tax.
Revolving funds
Some school districts currently use revolving funds to accommodate instruction in career and
postsecondary education classes such as shop, automotive, and body classes. If miscellaneous
receipts cannot be deposited with the district treasurer on a timely basis, a fee fund
should be
created for such receipts and submitted to district treasurer on a regular basis.
NON-ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
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Gate Receipts
Note: Gate receipt funds established under the authority of K.S.A. 72-1177 are
NOT
subject to these activity fund guidelines. Therefore, the following discussion
related to replacing gate receipt funds with petty cash accounts does NOT apply.
Many school districts have been accustomed to spending gate receipt moneys at the building
level. However, these moneys belong to the district and they must be transferred to, and
deposited by, the district treasurer. Principals and/or Athletic Directors who previously
controlled such moneys at the building level may object to the perceived loss of the control of
these moneys, the knowledge of how much money is available to work with, and the flexibility
for making disbursements. However, they will have adequate flexibility to make disbursements
by using petty cash.
The important point here is that the moneys belong to the school district. Therefore, it is the
school district, not the Principal and/or Athletic Director, who should establish the internal
controls, which in turn establish the flexibility or inflexibility for handling these moneys.
Further, there is no reason why the Principal and/or Athletic Director needs to be left in the
dark about how much money they have to work with. An informal budgeting system can be
used where the building Principal and/or Athletic Director submits an annual budget of
expenditures for approval by the Superintendent. That approved budget then becomes the
expenditure plan of the Principal and/or Athletic Director for the coming year. Actual
disbursements in accordance with the informal budget would be made through petty cash,
and/or the related district gate receipt funds.
NON-ACTIVITY FUNDS | SCHOOL ACTIVITY FUND GUIDELINES
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Petty Cash
Petty cash is a source of cash used for making small disbursements. Depending on need,
petty cash may consist of currency on hand or moneys in a checking account. If the purpose
of the petty cash is to avoid writing checks for small amounts, a small amount of currency on
hand is sufficient. If, on the other hand, the purpose is to expedite certain disbursements, a
larger amount in a checking account may be needed.
Both types of petty cash are commonly used by school districts. The use of petty cash is
authorized by K.S.A. 72-1177
for the purpose of making emergency type disbursements.
Depending on your needs, you may wish to establish petty cash accounts for some or all
activity fund bookkeepers. In addition, you may find a need for the Athletic Director or certain
student organization “sponsors” to have petty cash.
Petty cash is normally not needed for student activity funds. Because student activity funds
are controlled at the building level, even emergency type disbursements can be made with
relative ease. On the other hand, petty cash is often necessary for certain types of
disbursements chargeable to district funds because it is not feasible to gain governing body
approval in advance.
Example: Use of petty cash would be appropriate for paying referees who work at an
athletic event.
Creating a Petty Cash Account
K.S.A. 72-1177 specifies how petty cash accounts are established. Each petty cash account
must be approved by a resolution of the local school board, and cannot exceed $1,500. In
authorizing the petty cash, the board should clearly state:
• the amount of petty cash authorized for this purpose
• what types of disbursements can be made in advance
• a dollar limit of such disbursements, above which board approval is required
Usually petty cash will be approved for more than one type of disbursement. The petty cash
account should normally be maintained by the activity fund bookkeeper, along with activity
fund moneys.
To create the petty cash account, the district treasurer normally will write a check to the activity
fund bookkeeper (i.e., the petty cash custodian), who will then deposit the check into the
activity fund checking account along with activity fund moneys. The activity fund bookkeeper
will track the receipts and disbursements of the petty cash account just as if it were an activity
fund. Cash receipts posted to the petty cash account will always be checks written to the
bookkeeper by the district treasurer to replenish the petty cash.
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Petty Cash & the General Fund
Even though a check is written on the district treasurer’s checking account to establish the
petty cash account, this check is not a disbursement that reduces the cash balance of the
general fund. Charges to the general, or any other fund, are not appropriate until the petty
cash is replenished.
If you do not reduce the cash balance of the general fund when you create the petty cash
account, what do you do?
You are simply moving a portion of the district’s cash from one location (the district level
checking account) to another location (the petty cash account). From an accounting or book
entry standpoint, creating a petty cash account is no different than moving money from a
checking account to a savings account, or writing a check to invest in a Certificate of Deposit.
These transactions have no impact on any book fund (general fund, bond and interest fund,
etc.) balances.
If you don't record a disbursement in the district’s accounting records then how do you reconcile
the bank statement to the district’s accounting records when the checks per the bank will not
equal the disbursements recorded in the books?
You will have a reconciling item for the transaction. The bank’s records and the district’s
records will almost always disagree because of legitimate reconciling items such as deposits in
transit, outstanding checks, the bank’s charging and redepositing of NSF checks, etc. Setting
up a petty cash account will also set up a recurring reconciliation item for the amount of the
petty cash account.
Petty cash account is not tied into the General Fund
At the time a petty cash account is established, the initial “seed” money comes from idle funds.
The creation of the petty cash account basically involves transferring the money from one
checking account (the district treasurer’s checking account) to another checking account (the
activity fund bookkeeper’s account).
The petty cash account is not an advance from the general fund, or any other fund. It is not
tied to the general fund any more than a savings account is tied to the Capital Outlay fund, or a
Certificate of Deposit is tied to the Bond and Interest fund.
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22 Kansas State Department of Education | www.ksde.org
Petty Cash Account vs. Accounting Funds
A petty cash account is not an accounting fund, in the sense that the General Fund is an
accounting fund, even though it is often referred to as a petty cash fund. Petty cash
represents cash available to the petty cash custodian for making disbursements, very much
like the district checking account is used by the district treasurer for making disbursements.
Petty cash is no more an accounting fund than is the district checking account. This may
sound confusing because at the building level, petty cash is treated just like a student
organization fund. From the viewpoint of the activity fund bookkeeper, petty cash is another
“fund” that must be segregated for accounting purposes. However, from the viewpoint of the
district, the petty cash “fund,” maintained by the bookkeeper is not a fund. Rather, it is a part
of the district’s cash balance.
Petty Cash Policy Recommendations
If you decide to use one or more petty cash accounts, adhere to the following special rules:
• The petty cash account should be approved by the district’s board of education in an
amount and for the purposes determined by the board. A limit should be placed on
individual petty cash disbursements, above which the disbursement must be approved
by the board.
• Any petty cash account should be financed by the district’s idle funds. The district
treasurer should write a check for the amount of the petty cash account payable to the
petty cash custodian. There is no change in the balance in any fund. Transferring cash
from the district treasurer to a petty cash custodian does not represent an expenditure
from any fund. It is simply moving cash from one source to another, much like moving
cash from the checking account to a savings account.
• After the petty cash account has been established, all reimbursements to it are made
from the respective funds that should be charged for the petty cash disbursement.
That is, charges are made to the respective accounting funds, such as the general fund,
when the petty cash is replenished.
• The petty cash should be in the sole custody of a single employee, the petty cash
custodian. Generally, the activity fund bookkeeper should act as petty cash custodian.
If the petty cash account requires a checking account, it should be incorporated into
the activity fund bookkeeper’s checking account. That is, the petty cash should be
deposited into the activity fund checking account along with activity fund moneys.
There is no need for a separate checking account unless different check signers are
needed for the petty cash disbursements.
• The petty cash custodian is responsible to see that all disbursements are properly
accounted for, usually by means of receipts signed by the person receiving the cash.
The receipt should document the appropriate fund at the time the petty cash is
replenished.
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• Petty cash should be replenished to its original cash position, usually at the end of each
month or more often if needed. To replenish the petty cash account, a check is issued
to the petty cash custodian in the amount of the sum of the “receipts” presented by the
petty cash custodian. That check will usually be issued by the district treasurer for
charges to district funds. At the time the check is written to reimburse the petty cash
custodian, the district treasurer will make entries to record the related disbursements
similar to this:
Debit
Credit
2160 – Gen Fund, Supp Serv, Supplies
47.45
2353 – Gen Fund, Gen Adm, Commun
19.20
2430 – Gen Fund, Sch Adm, Purch Prof Serv
125.00
2640 – Gen Fund, Op & Maint, Repr Bldgs
32.15
Cash Account
*223.80
Note: The amount of the replenishing check should always be for the exact
amount of the disbursements previously made from the petty cash
account.
• You should close out the petty cash accounts at the end of the school year, and
“physically” return the money to the district treasurer. The same petty cash accounts
should be re-established at the beginning of the next school year without formal board
approval.
Important: This procedure is recommended for internal control purposes. If the
general fund cash balance was reduced when the petty cash account was
created, this procedure is critically important to ensure the general fund
unencumbered cash balance is correctly reported at year-end.
• Petty cash should never be reported in the financial statements either as a district fund
or a student activity fund. It is nothing more than a source of cash, just like the moneys
in the district’s checking or savings account.
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24 Kansas State Department of Education | www.ksde.org
Reporting Petty Cash in the District’s Financial
Statements
Petty cash is NEVER reported as an accounting fund anywhere on the district’s financial
statements. Instead, it should be reported as a source of the district’s idle funds, or cash,
along with other sources of cash like the district checking account, a savings account, and
investments.
If the petty cash account is closed out at year-end, the related moneys will simply be deposited
into the district’s checking account. Just as no fund balances were changed when the petty
cash account was created, the same can be said when the petty cash account is closed out.
No entries are needed in the accounting system which would change the balance of any
accounting fund.
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25 Kansas State Department of Education | www.ksde.org
Classification of Activity Funds in
Financial Statements
All activity fund moneys, as well as non-activity fund moneys, should be reflected in the school
district’s financial statements. Just because such funds may be accounted for at the building
level does not mean that they do not need to be shown in the district’s financial statements.
While these moneys are treated like individual funds by the activity fund bookkeeper at the
building level, they are treated very differently for financial reporting at the district level.
Student Activity Funds
Student activity funds should be classified as agency funds in the school’s financial statements.
The school (i.e., the activity fund supervisor) acts as custodian for student organizations’
moneys, but has no say in how the money is spent. The school acts as an agent for the various
student organizations for which it holds money.
District Activity Funds
District activity funds generally are classified as special revenue funds in the school’s financial
statements. These funds are district funds, much like other special revenue funds, and require
approval of the board of education to be spent.
Fee Funds
Fee funds should never be shown as funds in the district’s financial statements. All fee fund
moneys should be transferred to the district treasurer at year-end for the purpose of
recording the amounts as revenues in the appropriate district fund. If this transfer is not made
at year-end, the district’s financial statements should be presented as if the transfer had been
made.
Petty Cash
Petty cash should be replenished at year-end to make sure that the related disbursements
are properly reflected in the district’s financial statements. If, after being replenished, the petty
cash funds are not transferred back to the district treasurer, the moneys should be shown on
the financial statements as another source of cash, just like the district’s checking account or
savings account.
