Policy Statement:

Lakeway Christian Schools (LCS) recognizes that efficient financial management includes the ability to record incoming transactions directly to expense lines under specific circumstances. This policy outlines the conditions under which such direct recording is permissible, ensuring transparency, accuracy, and accountability in financial reporting.

Objective:

To outline the policy for managing reimbursements to expense lines, particularly concerning pass-through costs and collections from stakeholders, ensuring clarity, and maintaining financial integrity while complying with appropriate accounting practices.

Principle of Pass-Through Costs:

• Definition: Pass-through costs refer to expenses initially borne by the school but subsequently recovered from families, students, or other stakeholders.
• Rationale: Managing such expenses as reimbursements, rather than separate revenue and expense, prevents the inflation of both revenue and expense accounts, thereby providing a more accurate representation of the school's operational costs.

Criteria for Expense Line Reimbursement:

• Direct Relationship: Ensure that there is a direct, clear relationship between the initial expense and the reimbursement.
• No Net Benefit: Ensure the school does not derive a financial benefit from the transaction.
• Limited Scope: This method should be utilized only for select, well-defined scenarios (e.g., field trips, specific team or club activities) and not for widespread or recurring financial activities.

Procedure for Recording Reimbursements:

• Ensure that reimbursements are recorded against the exact expense line which was initially used for the payment.
• Maintain detailed records of both the initial expense and the reimbursement to ensure clarity and accountability in financial reporting.

Transparency and Reporting:

• Establish clear communication and disclosure mechanisms to inform stakeholders (e.g., parents, participants) about the nature, purpose, and amount of each cost and corresponding reimbursement.
• Ensure transparent reporting to governing bodies or auditors regarding the rationale and specifics of each reimbursement transaction.

Monitoring and Review:

• Periodically review all pass-through costs and reimbursements to ensure they comply with this policy.
• Monitor to ensure that this accounting approach is not being overly utilized or exploited.

Legal and Ethical Compliance:

• Ensure the reimbursement policy complies with relevant accounting standards, tax regulations, and legal requirements, safeguarding the school's non-profit status.
• Validate that all transactions align with LCS’s ethical guidelines and mission.

Policy Review and Training:

• Periodically review the policy to ensure it aligns with any changes in accounting standards or organizational practices.
• Provide training and guidance to staff members involved in managing and recording such transactions to ensure consistency and compliance.

Rationale for the Policy:

Accounting for pass-through costs via expense line reimbursements, in specific instances, allows for:

• Accuracy: Prevents the distortion of financial statements by avoiding the inflation of income and expenditure accounts.
• Transparency: Ensures that stakeholders can see exactly how and why funds are being managed, maintaining trust.
• Efficiency: Simplifies accounting for small, non-beneficial transactions which might otherwise complicate financial records and reporting.