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GORENZ DISTRICT NEWSLINE A newsletter of audit significance from Gorenz and Associates, Ltd., Peoria, IL November 2005 Are you complying with bidding law? Most districts understand that there is a requirement to seek bids for purchases of supplies, materials, or work or contracts with private carriers for transportation services in excess of $10,000. Some don’t realize that there are numerous exceptions to this requirement and specific requirements for the bidding process. The following purchases are specifically exempt from the bidding law requirement: 1. Professional Services (Attorneys, Auditors, Architects, etc) 2. Contracts for printing of finance committee or departmental reports 3. Contracts for printing of bonds, tax warrants, or other evidence of indebtedness 4. Contracts for the purchase of perishable food or beverages 5. Contracts for materials and work related to unforeseen revisions (not the fault of the contractor) on previously bid work not in excess of 10% of the original contract price 6. Contracts for maintenance or servicing of equipment that is best performed by the manufacturer 7. Lease or purchase of data processing equipment, software, or services (including telecommunications and internet equipment, software, or services) 8. Contracts for duplicating machines and supplies 9. Contracts for purchase of natural gas when the cost is less than that offered by the public utility 10. Purchases of previously owned equipment 11. Contracts for repair, maintenance, remodeling, or construction for a single project not to exceed $20,000 and not increasing the size, type, or extent of the existing facility 12. Contracts for goods or services procured from another government agency 13. Contracts for goods or services that are economically procured from one source – magazines, books, periodicals, or utilities for example. 14. Where funds are expended in an emergency and ¾ of the members of the board approve the expenditure. While all of these exceptions are allowable, there is no prohibition on bidding these services to insure that the district is receiving the most competitive pricing for goods and services it is purchasing. The following procedures should be followed when seeking bids: 1. Publish notice at least 10 days prior to the due date of the bids in a newspaper published in the district, or if no newspaper is published in the district, then a newspaper of general circulation including the district – Notice may also be sent directly to prospective bidders, if known. 2. Provide detailed specifications to all individuals seeking information on the bid requirements 3. At least 3 days prior to the bid opening, notify each bidder of the place and time of the opening 4. All bids should be presented to the district in sealed envelopes 5. The bids should be opened by a school board member or an appointed employee at the designated time and all bids should be announced at that time. 6. The bidders should be investigated to insure they are responsible bidders – including providing a statement certifying to the district that they are not barred from bidding or entering into a contract under the provisions to School Code Section 10-20.21 7. A recap of the responsible bidders along with a recommendation should be presented to the board for approval. Please keep a file that documents that the above steps have been taken. If the board should elect to reject all bids (they may do that) be certain that upon issuing a secondary bid request that the specifications have changed in some way.
HB 676 was signed into law July 12, 2005 by the Governor, extends the relaxed rules for inter-fund transfers for an additional two years through June 30, 2007. The limitation on the amount of the transfer between operating funds has been suspended. The requirement that it must be to meet a one time non-recurring expense and be to the fund in most need has also been suspended. In other words, for the next year and a half you have the opportunity to make any transfer you like between the Education, Operations and Maintenance, and Transportation Funds. This is the perfect time to redistribute those excess funds without worrying about being in violation of one of the usual limitations. A transfer under these provisions does still require a proper resolution made after a public hearing, with notice given at least 7 days and not more than 30 days prior to the hearing. Also be sure to include both the transfer in and the transfer out in your final budget. Are your Tort Immunity Expenditures defendable? The use of Tort Immunity funds is being scrutinized around the state. In a case of first impression in Stephenson County, there were mixed results in the decisions in the cases relative to the two school district defendants. Freeport District 145 was determined to have misused tort funds due to the use for payment of salaries. Pearl City School District 200 was found to be in compliance because they had appropriately documented their expenditures which also included salaries. While these cases will undoubtedly be appealed, they do give us some idea as to what the courts may look for in determining the appropriate use of Tort Immunity Funds. We believe that it is important for districts to protect themselves from taxpayer scrutiny by adopting a program identifying what the district believes to be “risk care management” expenditures. Once a “Risk Management Plan” is adopted, it should be documented with annual reviews and be part of personnel performance evaluations (for individuals performing risk management activities). Any utilization of non-administrative staff for “risk management duties” should be particularly well documented. If those individuals are covered under a negotiated agreement then those duties should be outlined and agreed to in the negotiated agreement. The bottom-line is the more documentation the better. We would recommend that districts consult their legal counsel on any expenditure that could be questioned by taxpayers. The proper use of Student Activity Funds – During our FY05 audits we continued to discover the inappropriate use of Student Activity Funds to carry on school business activities. Student Activity Funds and Convenience accounts are authorized by the school code and generally accepted accounting principles in order to account for funds that are held in a fiduciary capacity. That means funds that don’t belong to the district, but funds that benefit the district’s students and/or employees. Therefore, it is NOT appropriate for student fees, textbook rentals, lunch revenues, admissions, and the like to be deposited into a student activity account; even if those funds are later transferred in to the districts general account. 2005 Federal Mileage Rate On September 9th the IRS released IR 2005-99 which officially notified taxpayers of an increase in the standard mileage rate as of September 1, 2005 for the balance of 2005 to 48 ½ cents from the 40 ½ cents per mile rate for the first eight months of the year. Due to the anticipation of declining gas prices as of the notice date, the IRS stated that they would wait until close to January before releasing the rate for 2006. Gorenz and Associates, Ltd. Certified Public Accountants 3010 N. Sterling Ave. Peoria, IL 61604 (309) 685-7621 This publication is distributed for general information. It is not intended to address specific matters or render legal opinion.
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