Policy Statement:

Lakeway Christian Schools (LCS) maintains a robust accounting system rooted in sound financial principles, emphasizing fund accounting, transparent reporting, and a strong internal control structure. This policy outlines the core principles, account structure, and components of the LCS accounting system, including its internal control components.

Principles of Accounting:

• Fund Accounting:
  • LCS's accounting system operates on a fund basis, defining a fund as a fiscal and accounting entity with self-balancing accounts dedicated to specific activities or objectives, following applicable regulations, restrictions, or limitations.
• Minimal Fund Types:
  • The establishment of funds shall comply with legal requirements and sound financial administration practices. LCS aims to minimize the number of funds, recognizing that excessive funds and accounts lead to complexity and inefficiency.
• Core Funds:
  • LCS shall initially implement the following core funds:
    • General Fund: Accounts for and reports all financial resources unless a legal or compelling reason dictates the use of another fund type.
    • Capital Projects Fund: Accounts for resources restricted, committed, or assigned to capital outlays, including capital facilities and assets.
    • Debt Service Fund: Accounts for resources restricted, committed, or assigned to principal and interest payments and accumulates resources for future debt service.
    • Other Potential Funds: LCS may establish other fund types as needed to address specific circumstances (e.g., Special Revenue Fund, Enterprise Fund, Fiduciary Fund).
• Accounting Basis:
  • In fund financial statements, LCS shall use the modified accrual or accrual basis of accounting, as appropriate, to measure financial position and operating results. Revenues shall be recognized when available and measurable, while expenditures shall be recognized when the fund liability is incurred, if measurable.
• Transfers:
  • Transfers between funds shall be reported in the accounting period in which the inter-fund receivable and payable arise.

Account Structure:

• Complete Account Structure:
  • LCS's account structure encompasses the recording of revenues, expenditures, and balance sheet accounts. It employs multiple dimensions to create an organized and flexible filing system for recording and reporting financial activity.
• Dimensions:
  • The following dimensions shall be used when coding financial transactions:
    • Fund: Identifies fiscal and accounting entities with self-balancing accounts.
    • Account: Classifies transactions as assets, liabilities, equity, revenue, or expense and further describes the activity.
    • Object: Used for expenditures, describing the service or commodity obtained as a result of a specific expenditure.
    • Cost Center: Assigned to the main branches of LCS.
    • Program/Project: An optional category to track specific activities without overcomplicating the standard chart of accounts.

Internal Control Structure:

• Control Environment:
  • LCS's internal control structure is established based on management's attitude toward internal control, fostering a commitment to sound business processes and controls.
• Risk Assessment:
  • LCS identifies and analyzes risks relevant to its objectives, actively managing risks arising from changes in the operating environment, personnel, information systems, growth, new programs, restructuring, changes in accounting statutes, and other factors.
• Control Activities:
  • Control activities encompass policies and procedures ensuring the execution of board directives, including performance reviews, information processing, physical controls, and segregation of duties, adapting to the entity's size.
• Information and Communication:
  • LCS is committed to accurately identifying, recording, and reporting transactions while ensuring transparency and proper financial reporting.
• Monitoring:
  • Monitoring assesses the quality of internal control performance over time, including regular management and supervisory activities and periodic reviews of internal controls and related activities. Deficiencies in the system of internal controls shall be reported to the appropriate management level.

Compliance and Reporting:

LCS's goal is to provide accurate financial information to the board, encouraging directors to question and comment on specific operational aspects, thereby fostering transparency and accountability.

Review and Revision:

This policy shall be reviewed annually and revised as necessary to reflect changes in financial practices, objectives, and best practices in accounting and reporting. Any proposed revisions to this policy shall be presented to the Board of Directors for approval.

References:

• LCS Mission Statement
• LCS Strategic Plan
• LCS Financial Policies and Procedures
• Federal Laws, Regulations, and Standards