ADE Director's Communication Memo Form

Memo Number : COM-07-099

Date Created : 04/02/2007


Co-op Directors
other: District Business/Financial Officers

Type of Memo: Regulatory
Response Required: No
Section:   APSCN - Bill Goff, Director
Financial Coding Requirements for 2007-2008, Categorical Funds

Regulatory Authority:
Ark. Code Ann. § 6-20-2305

Contact Person:
Kathleen Crain

Phone Number:


Some school districts have ended previous fiscal years with negative balances in one or more of the categorical funds (NSLA, ALE, ELL, Professional Development). This practice makes it impossible to determine exactly how the restricted categorical funds are being used. Since transfers from unrestricted funds to these restricted funds are not allowed, it is possible that these negative balances will continue to grow if expenditures charged to categorical funds continue to exceed the state revenue. Beginning with the fiscal year ending June 30, 2008, districts may not end the year with a negative fund balance for a categorical fund. Categorical funds include funds from the following revenue sources:

1. National School Lunch Act (NSLA)-Source of Fund 281;
2. Alternative Learning Environment (ALE)-Source of Fund 275;
3. English Language Learners (ELL)-Source of Fund 276;
4. Professional Development-Source of Fund 223.

Beginning with 2007-2008, districts will have four options for clearing negative categorical fund balances:

1. Transfer funds from another categorical fund;

2. Reclassify current year expenditures originally charged to the categorical fund with a negative balance to a fund with a positive balance;

3. Re-distribute current year salaries and benefits originally charged to the categorical fund with a negative balance to a fund with a positive balance.

4. For 2007-2008 only, reduce expenditures charged to categorical funds by enough to offset the negative balance at June 30, 2007. For example: If the NSLA fund has a negative balance of $10,000 at June 30, 2007, and the 2007-2008 NSLA revenue is $100,000, do not charge more than $90,000 to NSLA in 2007-2008. This will prevent a negative balance from occuring at June 30, 2008.

If reclassifying or re-distributing expenditures to another restricted fund or fund source, the expenditure must comply with the expenditure requirements in the new fund or fund source. State Board approved rules governing the use of these funds can be found on the Arkansas Department of Education’s (ADE) web site at under “Student Special Needs Funding.”

Though the new requirement is not effective until the 2007-2008 school year, it is highly recommended that there be no negative categorical fund balances at June 30, 2007.


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