M&O Expenditure

Ark. Code Ann.§ 6-21-808(d)(1), concerning the annual expenditure requirement for utilities and facilities maintenance, requires school districts to dedicate nine percent (9%) of Foundation Funding exclusively to payment of utilities and costs of custodial, maintenance, repair, and renovation activities, which include related personnel costs, for public school facilities.  

The following definitions are included in Ark. Code Ann. § 6-21-803:

(4) Custodial Activities means routine and renovation cleaning activities related to the daily operations and upkeep of a public school facility, including related supervisory and management activities.

(10) Maintenance, Repair, and Renovation means any activity or improvement to a public school facility that maintains, conserves, or protects the state, condition, or efficiency of the public school facility.

(13) Public School Facility means any public school building or space, including related areas such as the physical plant and grounds that is used for any purpose, including, without limitation:

(A) An extracurricular activity.

(B) An organized physical activity course as defined in Ark. Code Ann. § 6-16-137;

(C) Pre-kindergarten education.

(D) District administration; or

(E) Delivery of instruction to public school students that is an integral part of an adequate education as described in Ark. Code Ann.§ 6-20-2302.

The expenditure requirement is based on nine percent (9%) of Foundation Funding.  For 2024-2025 Foundation Funding is equal to $7,771 multiplied by the 3 Quarter Average Daily Membership (ADM) for 2023-2024. 

School districts should code expenditures eligible to meet the nine percent (9%) requirement as follows:  Fund = 2000 or 2100-2199, 65300 through 69999.  This will include all Operating Fund expenditures charged to Operating and Maintenance of Plant Services in the "General Operating Fund" except for " Insurance Other than Employee Benefits".

If any amount of the dedicated nine percent (9%) is unspent at the end of the school district's fiscal year, the funds shall carry over, and the school district must transfer the remaining amount into a public school facilities escrow account.  Fund Source of Fund code 2391 shall be used for this escrow account.  The funds in escrow may be used in any fiscal year for payment of utilities and costs of custodial, maintenance, repair, and renovation activities, which include related personnel costs, for public school facilities.

If a school district wants to use funds from its public school facilities escrow account for new construction, the school district shall apply to the Division of Public School Academic Facilities and Transportation for approval.

An updated spreadsheet, that shows each district's 2024-25 spending requirement for M&O based on the Foundation Funding amount of $7,771 can be found on APSCN - District Warehouse YTD Financials titled "M&O 9% Required Expenditure YTD with NBC Bonus." 

Gifted and Talented

Pursuant to Ark. Code Ann. § 6-20-2208(c)(6), school districts are required to expend state and local revenues on Gifted and Talented Programs in an amount equal to fifteen percent (15%) of the Foundation Funding amount multiplied by five percent (5%) of the school district's prior year three quarter average daily membership (3 QTR ADM).

An updated spreadsheet, that shows each district's 2024-25 spending requirement for Gifted and Talented Programs based on the Foundation Funding amount of $7,771 can be found on APSCN - District Warehouse YTD Financials Page titled "Gifted/Talented Expenditure Required Summary YTD With NBC Bonus."

Net Legal Balance Limitation

Pursuant to Ark. Code Ann. § 6-20-2210, established by Act 1105 of 2017, if at the close of the fiscal year a public school district has a net legal balance that exceeds twenty percent (20%) of the public school district’s current year net legal balance revenues, the public school district shall within five (5) years reduce its net legal balance to no more than twenty percent (20%) of the public school district’s current year net legal balance revenue.    

A public school district may reduce its excess net legal balance by:

(1) Transferring funds into the public school district’s building fund to be used for construction, renovation, repair or other planned building fund expenditure or project; or

(2) Spending funds on pre-kindergarten programs, remediation programs, career and technical education or workforce readiness programs, or any other program or for any other purpose authorized by law. 

The Division shall monitor on a yearly basis each public school district’s compliance with the net legal balance requirements and withhold subsequent state funding from a public school district for each year the district fails to make required reductions.

A report listing each district’s 20% net legal carry forward balance can be found on the APSCN - District Informational Reports page. (Reports > District Informational Reports > Net Legal Balance Act 1105). 

To monitor, the department annually compares closing balances from one year to the next. 

ESA Fund Balance Limitation

Ark. Code Ann. § 6-20-2305(b)(4)(E)(ii) states as follows:

 A school district that on June 30 of any year has an enhanced student achievement funding balance in excess of fifteen percent (15%) of the school district's current year enhanced student achievement funding allocation shall reduce its total enhanced student achievement funding balance by at least ten percent (10%) in each year that follows so that by June 30 of each year, the school district has a balance of no more than fifteen percent (15%) of the school district's current year enhanced student achievement funding allocation

Ark. Code Ann. § 6-20-2305(b)(4)(E)(v)(b) states as follows:

 If a school district fails to comply with the requirements of this subdivision (b)(4)(E) during a school year, the Division of Elementary and Secondary Education may in the following school year withhold from that school district's national school lunch state categorical funding allocation an amount equal to the amount required to be spent by the school district in order to be in compliance with the requirements of this subdivision (b)(4)(E).

A monthly report listing each district’s Categorical Expenditures and Fund Balances YTD (updated every second Saturday) can be found on the APSCN - District Warehouse YTD Financials  (Reports > District Warehouse YTD Financials Reports > Categorical). 

Categorical Fund Balance Limitation

Ark. Code Ann. § 6-20-2305(e)(2) states as follows:

On June 30, 2012, and on June 30 of each school year thereafter, if the total aggregate balance of all state categorical fund sources exceeds twenty percent (20%) of the school district's total aggregate annual state categorical fund allocations for the current school year, the school district shall reduce the total balance by ten percent (10%) each year until the school district's June 30 balance of aggregate annual categorical fund sources is twenty percent (20%) or less of the total aggregate annual state categorical fund allocations for the current school year.

Ark. Code Ann. § 6-20-2305(e)(4)(B) states as follows:

If a school district fails to comply with the requirements of this subsection during a school year, the Division of Elementary and Secondary Education may in the following school year withhold from that school district's categorical funding allocation an amount equal to the amount required to be spent by the school district in order to be in compliance with the requirements of this subsection.

A monthly report listing each district’s Categorical Expenditures and Fund Balances YTD (updated every second Saturday) can be found on the APSCN - District Warehouse YTD Financials  (Reports > District Warehouse YTD Financials Reports > Categorical).