Optional 2020 Tax Settlement Extension
A non-statutory provision in the state COVID-19 response bill gives counties the option of waiving penalties for late 2020 property tax payments through October 1, 2020. If a county board adopts a resolution to do so, the August 20 tax settlement will include taxes collected through the end of July, and then a new final tax settlement will occur on September 20.
Barring another change in law, this is a one-time provision in effect for calendar year 2020 only. The statutory August 20 final settlement date would resume in 2021. We strongly recommend districts follow up with county officials and review their summer and fall cash flow to determine what impact a one-month delay in final tax settlements would have.
Due to revenue limits and state aids, DPI is requiring that September 20, 2020 tax settlements be reported as 2019-20 property tax revenue in the PI-1505 Annual Report.
Generally Accepted Accounting Principles (GAAP) require property taxes to be recognized as revenue in the period they are levied for, which must be collected during the fiscal year or within 60 days of year-end. In a county that waives penalties and has a September 20, 2020 final tax settlement, each district’s revenue from that settlement will be outside of that 60-day period.
GAAP allows a district to temporarily use a period greater than 60 days, if the circumstances are unusual and the facts justify doing so. The period used and related facts must be properly disclosed in the financial statements. This would not be considered to be a change in accounting policy and the district must resume use of the standard 60-day period in the following year.
Otherwise, if a district with a September 20, 2020 final tax settlement continues to use the standard 60-day period, revenue from that settlement will be recorded in its fiscal year 2020-21 audited financial statements, and both the 2019-20 and 2020-21 statements will report a GAAP-to-regulatory difference in property tax revenues.
The SFS Team strongly recommends that districts in counties with September 20, 2020 final settlements elect a 90-day collection period for property tax revenues in 2019-20, due to the unusual circumstances of COVID-19. This would:
- Provide consistent application of governmental fund revenue recognition year over year.
- Align audited financial statements with 2019-20 budget expectations.
- Allow audited financial statements and the PI-1505 Annual Report to match.
We recommend that districts and auditors communicate on this matter and make decisions timely, so as not to delay any audit work.
A Note on Employment Provisions of FFCRA, CARES Act, etc.
The SFS Team has received a number of questions regarding the leave and unemployment provisions of FFCRA and the CARES Act, employer contributions for unemployment benefits, FICA contributions, and similar topics. As much as we would like to be of assistance, nearly all of these are labor and tax law questions that the SFS Team is unable to address. We recommend that LEAs seek advice from their legal counsel and/or human resources professionals on implementing those provisions.
The one question we can address is in regard to account coding of unemployment insurance credits through the Department of Workforce Development. Any credits or payments received against a school district’s unemployment obligations should be recorded as Source 971 revenue in the year received. The revenue should be apportioned to the applicable funds based on the proportion of related expenditures.
Unspent Student Activity Funds
The SFS Team has also been receiving questions about the use of unspent student activity funds, particularly related to cancelled spring and summer activities such as senior class trips and celebrations, the FFA State Convention, or marching band tours. There are no specific DPI requirements regarding appropriate use of unspent activity funds. School districts should look to their existing board policies on unspent activity funds for guidance, taking into account the sources of funds and the expectations of those who provided them.