U-46 considering accounting method switch
After more than a decade of hemming and hawing, Elgin Area School District U-46 may finally change the way it keeps tabs on its finances.
Chief Financial Officer John Prince and district auditor David Meyer Monday night recommended to the school board that the district move from a cash method to an accrual method of accounting.
The new method, they said, would more accurately reflect state aid payments and property tax revenue.
The cash method, which the district has used for decades, records revenue when it is received, and expenditures only after money is spent.
However, Meyer said, that method often paints a distorted financial picture.
"As a district, you're subject to other governments passing money onto you," he said. "If your property taxes come in late, that can skew the revenue you've collected and alter your financial score from the state board of education."
For instance, U-46 last year scored a middle-of-the-road rating for its financial performance from the state. Receiving another $15 million earlier, Meyer said, would have changed the district's profile to a more favorable rating.
According to the U.S. Treasury, under the suggested accrual method, the district would track income when it is earned and record expenses before paying for them, smoothing out the timing of receipts and payments.
The new method, Meyer said, requires more financial sophistication on the part of the district. It's also more complex than the old method, with more accounting rules to follow. And, it's more costly, requiring additional staff time and audit fees.
Audit fees, Meyer estimated, could increase by about 15 percent, approximately $10,000.
"We've always believed we should go to an accrual (method)," Prince said. "At this point in time, it would provide clarity - Especially in terms of the situation the state is in. It would give us a better sense of where the district is at financially. That's driving our recommendation."
The district will vote on the switch next week.