This Financial Glossary contains definitions of terms used on this web site and such additional terms as seem necessary to common understandings concerning financial accounting procedures for schools. Several terms which are not primarily financial accounting terms have been included because of their significance for school financial accounting.

    ACCOUNTABILITY - The state of being responsible for one’s actions, to justify what one does. Accountability requires governments to answer to the citizenry – to justify the raising of public resources and the purposes for which they are used.

    ACCOUNTING SYSTEM – The total structure of records and procedures which discover, record, classify and report information on the financial position and operations of a school district or any of its funds, balanced account groups and organizational components.

    ACCRUAL BASIS – The basis of accounting under which revenues are recorded when levies are made, and expenditures are recorded as soon as they result in liabilities regardless of when the revenue is actually received or the payment is actually made. Also see ESTIMATED REVENUE and EXPENDITURES.

    ACCRUE – To record revenues when earned or when levies are made, and to record expenditures as soon as they result in liabilities, regardless of when the revenue is actually received or the payment is actually made. Sometimes the term is used in a restricted sense to denote the recording of revenues earned but not yet due, such as accrued interest on investments and the recording of expenditures which result in liabilities that are payable in another accounting period, such as accrued interest on bonds. Also see ACCRUAL BASIS.

    APPROPRIATION – An authorization granted by a legislative body to make expenditures and to incur obligations for specific purposes. Note: An appropriation is usually limited in amount and as to the time when it may be expended.

    AUDIT - A systematic collection of the sufficient, competent evidential matter needed to attest to the fairness of management’s assertions in the financial statements or to evaluate whether management has efficiently and effectively carried out its responsibilities. The auditor obtains this evidential matter through inspection, observation, inquiries and confirmations with third parties.

    AUTHORITY, SCHOOL – Appointed body created by State Law and vested with the responsibility of securing capital finances for school boards to build new buildings or additions.

    BASIS OF ACCOUNTING - A term used to refer to when revenues, expenditures, expenses, and transfers-and the related assets and liabilities-are recognized in the accounts and reported in the financial statements. Specifically, it relates to the timing of the measurements made.

    BOARD OF SCHOOL DIRECTORS – The elected or appointed body which has been created according to State law and vested with responsibilities for educational activities in a given geographical area.

    BUDGET – A plan of financial operation embodying an estimate of proposed expenditures for a given period or purpose and the proposed means of financing them.

    CAPITAL RESERVE – Funds appropriated for building maintenance and capital projects. A plan as set forth for each project or maintenance item so that appropriate funds may be designated.

    COMPENSATED ABSENCES - Absences, such as unused vacation, illness and holidays, for which it is expected employees will be paid. The term does not encompass severance or termination pay, postretirement benefits, deferred compensation or other long-term fringe benefits, such as group insurance and long-term disability pay.

    CONTRACTED SERVICES – Labor, material and other costs for services rendered by personnel who are not on the payroll of the local education agency. These are classified as either Professional or Property service Objects.


    CURRENT EXPENDITURES PER PUPIL – Current expenditures for a given period of time divided by a pupil unit of measure (average daily membership, average daily attendance, etc.)

    CYBER CHARTER SCHOOLS – Public Schools OPERATING IN AN ON-LINE, INTERNET ENVIRONMENT that are governed independently by their own board of directors and are granted more latitude in their operations than regular public schools.

    DEBT – An obligation resulting from the borrowing of money or from the purchase of goods and services. Debts of local education agencies include bonds, warrants and notes, etc.

    DEBT SERVICE – Expenditures for the retirement of debt and expenditures for interest on debt, except principal and interest on current loans.

    DELINQUENT TAXES- Taxes remaining unpaid on and after the date to which a penalty for nonpayment is attached. Even though the penalty may be subsequently waived and a portion of the taxes may be abated or canceled, the unpaid balances continue to be delinquent taxes until abated, canceled, paid or converted into tax liens.

    EQUIPMENT – Those movable items used for school operation that are of a non-expendable and mechanical nature, i.e., perform an operation. Typewriters, projectors, vacuum cleaners, accounting machines, computers, clocks, machinery, and vehicles, etc. are classified as equipment. (Heating and air conditioning systems, lighting fixtures and similar items permanently fixed to or within a building are considered as part of the building.)

    ESTIMATED REVENUE – When the accounts are kept on an accrual basis, this term designates the amount of revenue estimated to accrue during a given period regardless of whether or not it is all to be collected during the period.

    EXPENDITURES – This includes total charges incurred, whether paid or unpaid, for current expenses, capital outlay, and debt service. (Transfers between funds, encumbrances, exchanges of cash for other current assets such as the purchase of stores and investment of cash in U.S. Bond, payments of cash in settlement of liabilities already accounted as expenditures, and the repayment of the principal of current loans are not considered as expenditures.)

    FISCAL YEAR – A twelve-month period of time to which the annual budget applies and at the end of which a local education agency determines its financial position and the results of its operation. (The FASD fiscal year begins July 1 and ends June 30)

    FUND – A sum of money or other resources set aside for specific activities of a school district. The fund accounts constitute a complete entity and all of the financial transactions for the particular fund are recorded in them.

    FUND BALANCE – The savings account for a specific fund. The excess of assets of a fund over its liabilities and reserves. During the fiscal year prior to closing, it represents the excess of the fund’s assets and estimated revenues for the period over its liabilities, reserves and appropriations for the period.

    FUND, GENERAL – The fund used to finance the ordinary operations of the local education agency. It is available for a legally authorized purpose and consists of money not specifically designated for some other particular purpose.

    FUND, SPECIAL REVENUE – The fund used to finance special operations of the school district. These operations are legally restricted to expenditures for the special purposes.

    INSTRUCTION – The activities dealing directly with the teaching of students or improving the quality of teaching.

    LEVY – (Verb) To impose taxes or special assessments. (Noun) The total of taxes or special assessments imposed by a government unit.

    LOCAL EDUCATION AGENCY (LEA) – Public school system located within district boundaries.

    MANAGEMENT DISCUSSION AND ANALYSIS (MD&A) - The MD & A is component of the required supplemental Information and should introduce the basic financial statements and provide an analytical overview of the government’s financial activities.

    RISK MANAGEMENT - All the ways and means used to avoid accidental loss or to reduce its consequences if it does occur.

    SCHOOL, ELEMENTARY – A school classified as elementary by State and local practice and composed of any span of grades not above grade six. In this handbook this term includes kindergartens and nursery schools if they are under the control of the local board of education. Fairfield’s grade structure currently includes students in grades K through 4.

    SCHOOL, MIDDLE – A school offering the transition years between elementary and high school grades. Fairfield’s grade structure currently includes students in grades 5, 6, 7 and 8.

    SCHOOL, HIGH – A school offering the final years of high school work necessary for graduation. Fairfield’s grade structure currently includes students in grades 9 through 12.

    SCHOOL, VOCATIONAL – A secondary school which is separately organized under a principal for the purpose of offering training in one or more skilled or semi-skilled trades or occupations. It includes such schools whether federally aided or not.

    SELF-INSURANCE- A term often used to describe the retention by an entity of a risk of loss arising out of the ownership of property or from some other cause, instead of transferring that risk to an independent third party through the purchase of an insurance policy. It is sometimes accompanied by the setting aside of assets to fund any related losses. Because no insurance is involved, the term self-insurance is a misnomer

    TAXES – Compulsory charges levied by a governmental unit for the purpose of financing services performed for the common benefit. The term includes licenses and permits. It does not include special assessments.