Current through Register Vol. 56, No. 6, March 18, 2024
(a) A district board of education or board of school estimate may establish, at any time, by board resolution a capital reserve account, pursuant to N.J.S.A. 18A:21-2 and 3 and 18A:7G-31.
(b) A district board of education shall be prohibited from using the funds in the capital reserve account for current expenses, pursuant to N.J.S.A. 18A:21-4, and shall use funds only to:
1. Implement capital projects in the school district's LRFP as required pursuant to N.J.S.A. 18A:7G-4.a and N.J.A.C. 6A:26-2; and
2. Augment a capital project funded in whole or part by bond proceeds only when:
i. The original referendum question separately listed the amount and portion of local share (or portion of total costs of a project receiving debt service aid) to be funded by capital reserve, pursuant to N.J.A.C. 6A:26-3.7 and 3.12; or
ii. Voter or board of school estimate approval was received to augment the original approved question by special appropriation in a type I school district, by separate question at a special election, or through the appropriate line items and supporting documentation in the base budget at the annual school election, pursuant to N.J.A.C. 6A:26-4.4(a)3 iii; or, for school districts that hold annual elections in November, through executive county superintendent approval of the base budget.
(c) A district board of education may increase the balance in the capital reserve account by:
1. Appropriating funds in the annual general fund budget certified for taxes to meet the needs of the LRFP that are not met by State support; or
2. Requesting approval from the executive county superintendent, as the Commissioner's designee, to appropriate any anticipated excess unreserved general fund balance, as calculated in the supporting documentation of the proposed budget, into a capital reserve in the proposed budget, pursuant to N.J.S.A. 18A:7F-7.b, only when the district board of education has:
i. Formally established a capital reserve account; and
ii. Obtained an approved LRFP in accordance with N.J.A.C. 6A:26-2.
(d) A district board of education may satisfy the withdrawal approval requirements in (h) below when funds are deposited into the capital reserve account in the annual budget, pursuant to (c)1 and 2 above, using the designated line item, supporting documentation, and a statement of purpose in the advertised budget. The district board of education shall include in its statement of purpose:
1. The amount of the deposit;
2. A description of the future capital project and purpose; and
3. A statement that "The amount represents expenditures for construction elements or projects that exceed the facilities efficiency standards determined by the Commissioner as necessary to achieve the New Jersey Student Learning Standards."
(e) A district board of education may request express approval of voters for appropriation of additional amounts into the capital reserve by a separate proposal at the April or November election, as applicable, or by a special question at one of the four special elections authorized pursuant to N.J.S.A. 19:60-2. A district board of education may request approval of the board of school estimate for appropriation of additional amounts into a capital reserve by a separate proposal at budget time or by special resolution. The amount expressly approved by voters or the board of school estimate for deposit into a capital reserve may be from surplus or unrestricted local miscellaneous revenue only if the source is delineated in the question and/or special resolution.
(f) A district board of education shall not deposit into a capital reserve account audited excess undesignated, unreserved general fund balance. The district board of education shall reserve and designate the funds in the subsequent year's budget, pursuant to N.J.A.C. 6A:23A-8.5(b).
(g) The district board of education shall maintain an amount of funds in the capital reserve account that does not exceed the amount needed to implement the capital projects in a school district's LRFP that are not met by State support.
1. If the amount in the capital reserve exceeds the amount authorized in (g) above, the district board of education shall withdraw the excess and reserve and designate it in the subsequent year's budget.
2. The district board of education shall ensure all excess amount in the capital reserve account identified in the annual audit, required pursuant to N.J.S.A. 18A:23-1 and Commissioner-developed procedures, are reserved and designated in the subsequent year's budget.
(h) A district board of education may withdraw funds from the capital reserve account at any time as follows:
1. By district board of education resolution for the transfer of funds to the line items in the capital outlay major account/fund to fund pre-development or other pre-application costs associated with architects, lawyers, and construction managers for school facilities projects included in the approved LRFP;
i. Pursuant to N.J.A.C. 6A:26-4.2(a), a district board of education that used capital reserve to fund pre-development or other pre-application costs in a capital project funded in part or in whole by bond proceeds may reimburse the general fund from the capital projects fund after approval of the referendum or resolution;
2. By district board of education resolution for the transfer of funds to the line items in the capital outlay major account/fund to fund the local share less any excess costs of a school facilities project as determined in accordance with N.J.A.C. 6A:26-3 and approved pursuant to N.J.A.C. 6A:26-3.3;
3. By district board of education resolution for the transfer of funds to the line items in the capital outlay major account/fund to fund the total costs, less any excess cost(s), of an other capital project submitted and reviewed in accordance with N.J.A.C. 6A:26-3.11, which would otherwise be eligible for State support, as determined in accordance with N.J.A.C. 6A:26-3;
4. By district board of education resolution for the transfer of funds to the capital projects fund, pursuant to N.J.A.C. 6A:26-4, for a school facilities project approved pursuant to N.J.A.C. 6A:26-3.3, after receiving voter, board of school estimate, or capital project review board approval, as applicable, or executive county superintendent approval for a school district that holds the annual school election in November, of the capital reserve use and specific amount in an approved referendum or resolutions, pursuant to N.J.A.C. 6A:26-3.7;
5. By district board of education resolution after receiving voter, board of school estimate, or capital project review board approval, as applicable, or executive county superintendent approval for a school district that holds the annual school election in November, except as authorized in N.J.A.C. 6A:26-3.12(c), for the transfer of funds to the line items in the capital outlay major account/fund to fund excess costs of a school facilities project and to fund the total costs for other capital projects that would not otherwise be eligible for State support, as determined in accordance with N.J.A.C. 6A:26, Educational Facilities;
i. Voter, board of school estimate, or capital project review board approval, or executive county superintendent approval for a school district that holds the annual school election in November, may be obtained through the original budget certified for taxes, in which the district board of education shall include a statement of purpose in the advertised budget, or through the board of school estimate's special appropriation process.
ii. The district board of education or board of school estimate shall include in the statement of purpose or special question for the capital project:
(1) The total costs;
(2) The final eligible costs;
(3) The amount requested for withdrawal for excess costs;
(4) A description/purpose of the capital project, or portion thereof, the excess costs will fund; and
(5) A statement that "The amount represents expenditures for construction elements or projects that exceed the facilities efficiency standards determined by the Commissioner as necessary to achieve the New Jersey Student Learning Standards."
iii. If requesting a withdrawal for multiple capital projects, the district board of education or board of school estimate shall include in the statement of purpose or special question the required information in (h)4i and ii above separately for each individual capital project.
iv. The district board of education or board of school estimate shall ensure the amount(s) approved by voters, the board of school estimate, or the capital project review board, or the executive county superintendent approval for a school district that holds the annual school election in November, are used exclusively for the purpose(s) contained in the associated statement or question.
v. For any approved amount(s) that remains unexpended or unencumbered at the end of the school year, the district board of education or board of school estimate shall:
(1) Return the funds to the capital reserve account;
(2) Anticipate the funds as part of the designated general fund balance of the subsequent school year budget; or
(3) Reserve and designated the funds in the second subsequent school year budget;
6. For the transfer of funds to the line items in the capital outlay major account/fund for the purchase of land by district board of education resolution, and after receiving Commissioner approval in accordance with N.J.A.C. 6A:26-3.12; and board of school estimate approval pursuant to (b)2ii above or capital project review board approval in accordance with N.J.A.C. 6A:26-3.1; and voter approval for school districts with April elections, or executive county superintendent approval for a school district that holds the annual school election in November; or
7. By district board of education resolution for the transfer of funds to the debt service account for the purpose of offsetting locally funded principal and interest payments for bonded projects included in the school district's LRFP.
8. By district board of education resolution for the transfer of funds to the general fund for the purpose of funding the Schools Development Authority debt assessment associated with grants the school district received in current or prior years.
(i) Notwithstanding (h) above, a district board of education or board of school estimate may apply, at any time, to the Commissioner for approval to withdraw funds from its capital reserve account for uses authorized in (b) above. A district board of education or board of school estimate may make a withdrawal pursuant to this subsection only upon receipt of the Commissioner's written approval. To obtain the Commissioner's approval, the district board of education shall establish, to the Commissioner's satisfaction, that an emergent condition exists necessitating an immediate withdrawal of capital reserve account funds.
(j) A district board of education shall administer and account for the capital reserve account as follows:
1. The district board of education shall establish and maintain the capital reserve account in accordance with Generally Accepted Accounting Principles, and shall be subject to annual audit, pursuant to N.J.S.A. 18A:23-1 et seq.;
2. If the cost to complete an approved school facilities project not funded in whole or part by school bonds exceeds the local share less excess costs, costs up to 10 percent above the local share less excess costs may be withdrawn from capital reserve in accordance with (h)1 above;
3. The district board of education shall transfer to the capital projects account, and account for separately with the corresponding grant, any funds withdrawn for the local share of a school facilities project that is not using school bonds or loan bonds for all or part of the local share that received a grant pursuant to N.J.S.A. 18A:7G-15. For any unexpended transferred capital reserve funds remaining after completion of the school facilities project, the district board of education shall:
i. Return the funds to the capital reserve account;
ii. Anticipate the funds as part of the designated general fund balance of the subsequent school year's budget; or
iii. Reserve and designate any unexpended transferred capital reserve funds in the second subsequent year's budget for tax relief;
4. Pursuant to 18A:21-3, a district board of education shall increase the capital reserve account by the earnings attributable to the investment of the account's assets, and:
i. Anticipate as miscellaneous income any investment income included in the original annual general fund budget certified for taxes; and
ii. Include any investment earnings in the maximum amount of capital reserve permitted in (g) above; and
5. A district board of education shall establish a separate account in the general fund for bookkeeping purposes only to account for increases to and withdrawals from the capital reserve account and its balance. The district board of education shall record a capital reserve account on the annual audit's general fund balance sheet as follows:
i. Dr: Capital Reserve Account; and
ii. Cr: Reserved/Restricted Fund Balance--Capital Reserve Account.
(k) Funds in capital reserve accounts in existence prior to July 18, 2000, shall be subject to the Educational Facilities Construction and Financing Act (EFCFA), P.L. 2000, c. 72, and this subchapter. The district board of education shall use the funds only for the original purpose for which the funds were deposited.
1. If the original purpose is outside the scope of the district board of education's approved LRFP, the district board of education shall account for the funds separately in the capital reserve fund and appropriate the funds as revenue for such purposes in the annual budget certified for taxes. The district board of education shall restore to the capital reserve account, for use pursuant to this subchapter, any unexpended capital outlay appropriations up to the amount of capital reserve funds appropriated. Expenditures shall be charged first to unrestricted capital outlay fund sources with capital reserve account appropriations expended last. The district board of education shall not deposit any additional funds into the capital reserve account, pursuant to (c) through (f) above, for pre-July 18, 2000, purposes.
2. If the original purpose is within the scope of the school district's approved LRFP, the district board of education shall make withdrawals pursuant to (h) above. However, if voter, board of school estimate, or capital project review board approval, or executive county superintendent approval for a school district that holds the annual school election in November, of excess costs or an other capital project was obtained when the funds were deposited into the capital reserve account, the district board of education shall be deemed to have satisfied the requirement for approval of excess costs or other capital projects in (h)2 above.
