Basis of Accounting Newton Public Schools utilizes a modified accrual method of accounting. Modified accrual accounting recognizes revenues when they become available and measurable. Measurable means that the amount can be reasonably estimated. Available means that the revenues collected during the current year or soon thereafter are accessible to pay current liabilities. Expenditures are recorded when the liabilities are incurred. An encumbrance is a commitment of funds for contracts not yet performed or goods not yet received. An encumbrance is created when a contract is signed, or a purchase order is issued. At year end, the purchase order is recorded as a reservation to fund balance. Although not considered to be Generally Accepted Accounting Procedures (GAAP) expenditures, encumbrances are treated as expenditures on a budgetary basis of accounting (MA DESE EOYR Reporting Instructions). Newton Public School Fund Types By state statute and city charter, the Newton Public Schools is organized as a department of the City of Newton. Because it is not an independent entity, the district has no legal authority to levy taxes, issue bonds, or incur debt. For this reason, the district receives most of its revenue through the City’s general fund. Also, the district must follow the City’s budget administration and fiscal management policies.
Newton utilizes fund accounting as a means of organizing the financial records into multiple, segregated locations. A fund is a distinct entity within the municipal government in which financial resources and activity (assets, liabilities, fund balances, revenues, and expenditures) are accounted for independently in accordance with specific regulations, restrictions, or limitations. The City of Newton has several funds to track financial activity and include the following: ● The General Fund is the City’s main operating fund and is used to account for all activity which is not required to be accounted for in a separate fund. Fund expenditures are governed by annual appropriations, recommended by the mayor, and approved by majority vote of the City Council.
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