Applying money received under article; determining reasonableness of expenditures; withholding apportionment for violation; adoption of annual budget; availability of information on website; submission of annual comprehensive financial data; report; Michigan public school accounting manual chart of accounts; filing special education actual cost report and transportation expenditure report; review and update of pupil accounting and pupil auditing manuals; retention of property by public school academy; failure to comply with subsections (4), (5), (6), (7), and (12); inconsistent financial data; failure to comply with subsection (2); report on virtual learning per-pupil costs; "vendor type" defined; allocation contingent upon compliance with section; report of allocations.
MCL 388.1618
in effect388.1618. Applying money received under article; determining reasonableness of expenditures; withholding apportionment for violation; adoption of annual budget; availability of information on website; submission of annual comprehensive financial data; report; Michigan public school accounting manual chart of accounts; filing special education actual cost report and transportation expenditure report; review and update of pupil accounting and pupil auditing manuals; retention of property by public school academy; failure to comply with subsections (4), (5), (6), (7), and (12); inconsistent financial data; failure to comply with subsection (2); report on virtual learning per-pupil costs; "vendor type" defined; allocation contingent upon compliance with section; report of allocations.
Sec. 18.
(1) Except as provided in another section of this article, each district or other entity shall apply the money received by the district or entity under this article to salaries and other compensation of teachers and other employees, tuition, transportation, lighting, heating, ventilation, water service, the purchase of textbooks, other supplies, and any other school operating expenditures defined in section 7. However, not more than 20% of the total amount received by a district under sections 22a and 22b or received by an intermediate district under section 81 may be transferred by the board to either the capital projects fund or to the debt retirement fund for debt service. A district or other entity shall not apply or take the money for a purpose other than as provided in this section. The department shall determine the reasonableness of expenditures and may withhold from a recipient of funds under this article the apportionment otherwise due upon a violation by the recipient. A district must not be prohibited or limited from using funds appropriated or allocated under this article that are permitted for use for noninstructional services to contract or subcontract with an intermediate district, third party, or vendor for the noninstructional services.
(2) A district or intermediate district shall adopt an annual budget in a manner that complies with the uniform budgeting and accounting act, 1968 PA 2, MCL 141.421 to 141.440a. Within 15 days after a district board adopts its annual operating budget for the following school fiscal year, or after a district board adopts a subsequent revision to that budget, the district shall make all of the following available through a link on its website homepage, or may make the information available through a link on its intermediate district's website homepage, in a form and manner prescribed by the department:
(a) The annual operating budget and subsequent budget revisions.
(b) Using data that have already been collected and submitted to the department, a summary of district expenditures for the most recent fiscal year for which they are available, expressed in the following 2 visual displays:
(i) A chart of personnel expenditures, broken into the following subcategories:
(A) Salaries and wages.
(B) Employee benefit costs, including, but not limited to, medical, dental, vision, life, disability, and long-term care benefits.
(C) Retirement benefit costs.
(D) All other personnel costs.
(ii) A chart of all district expenditures, broken into the following subcategories:
(A) Instruction.
(B) Support services.
(C) Business and administration.
(D) Operations and maintenance.
(c) Links to all of the following:
(i) The current collective bargaining agreement for each bargaining unit.
(ii) Each health care benefits plan, including, but not limited to, medical, dental, vision, disability, long-term care, or any other type of benefits that would constitute health care services, offered to any bargaining unit or employee in the district.
(iii) The audit report of the financial audit conducted under subsection (4) for the most recent fiscal year for which it is available.
(iv) The bids required under section 5 of the public employees health benefit act, 2007 PA 106, MCL 124.75.
(v) The district's written policy governing procurement of supplies, materials, and equipment.
(vi) The district's written policy establishing specific categories of reimbursable expenses, as described in section 1254(2) of the revised school code, MCL 380.1254.
(vii) Either the district's accounts payable check register for the most recent school fiscal year or a statement of the total amount of expenses incurred by board members or employees of the district that were reimbursed by the district for the most recent school fiscal year.
(d) The total salary and a description and cost of each fringe benefit included in the compensation package for the superintendent of the district and for each employee of the district whose salary exceeds $100,000.00.
(e) The annual amount spent on dues paid to associations.
(f) The annual amount spent on lobbying or lobbying services. As used in this subdivision, "lobbying" means that term as defined in section 5 of 1978 PA 472, MCL 4.415.
(g) Any deficit elimination plan or enhanced deficit elimination plan the district was required to submit under the revised school code.
(h) Identification of all credit cards maintained by the district as district credit cards, the identity of all individuals authorized to use each of those credit cards, the credit limit on each credit card, and the dollar limit, if any, for each individual's authorized use of the credit card.
(i) Costs incurred for each instance of out-of-state travel by the school administrator of the district that is fully or partially paid for by the district and the details of each of those instances of out-of-state travel, including at least identification of each individual on the trip, destination, and purpose.
(3) For the information required under subsection (2)(a), (2)(b)(i), and (2)(c), an intermediate district shall provide the same information in the same manner as required for a district under subsection (2).
(4) For the purposes of determining the reasonableness of expenditures, whether a district or intermediate district has received the proper amount of funds under this article, and whether a violation of this article has occurred, all of the following apply:
(a) The department shall require that each district and intermediate district have an audit of the district's or intermediate district's financial and pupil accounting records conducted at least annually, and at such other times as determined by the department, at the expense of the district or intermediate district, as applicable. The audits must be performed by a certified public accountant or by the intermediate district superintendent, as may be required by the department, or in the case of a district of the first class by a certified public accountant, the intermediate superintendent, or the auditor general of the city. A district or intermediate district shall retain these records for the current fiscal year and from at least the 3 immediately preceding fiscal years.
(b) If a district operates in a single building with fewer than 700 full-time equated pupils, if the district has stable membership, and if the error rate of the immediately preceding 2 pupil accounting field audits of the district is less than 2%, the district may have a pupil accounting field audit conducted biennially but must continue to have desk audits for each pupil count. The auditor must document compliance with the audit cycle in the pupil auditing manual. As used in this subdivision, "stable membership" means that the district's membership for the current fiscal year varies from the district's membership for the immediately preceding fiscal year by less than 5%.
(c) A district's or intermediate district's annual financial audit must include an analysis of the financial and pupil accounting data used as the basis for distribution of state school aid.
(d) The pupil and financial accounting records and reports, audits, and management letters are subject to requirements established in the auditing and accounting manuals approved and published by the department.
(e) All of the following must be done not later than November 1 each year for reporting the prior fiscal year data:
(i) A district shall file the annual financial audit reports with the intermediate district and the department. If the issuance of single audits is delayed for the 2024-25 school year due to a late issuance of a Compliance Supplement, the single audit portion of that audit must be filed within 30 days of the issuance of the Compliance Supplement by OMB.
(ii) The intermediate district shall file the annual financial audit reports for the intermediate district with the department. If the issuance of single audits is delayed for the 2024-25 school year due to a late issuance of a Compliance Supplement, the single audit portion of that audit must be filed within 30 days of the issuance of the Compliance Supplement by OMB.
(iii) The intermediate district shall enter the pupil membership audit reports, known as the audit narrative, for its constituent districts and for the intermediate district, for the pupil membership count day and supplemental count day, in the Michigan student data system.
(f) The annual financial audit reports and pupil accounting procedures reports must be available to the public in compliance with the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246.
(g) Not later than January 31 of each year, the department shall notify the state budget director and the legislative appropriations subcommittees responsible for review of the school aid budget of districts and intermediate districts that have not filed an annual financial audit and pupil accounting procedures report required under this section for the school year ending in the immediately preceding fiscal year.
(5) By the first business day in November of each fiscal year, each district and intermediate district shall submit to the center, in a manner prescribed by the center, annual comprehensive financial data consistent with the district's or intermediate district's audited financial statements and consistent with accounting manuals and charts of accounts approved and published by the department. For an intermediate district, the report must also contain the website address where the department can access the report required under section 620 of the revised school code, MCL 380.620. The department shall ensure that the prescribed Michigan public school accounting manual chart of accounts includes standard conventions to distinguish expenditures by allowable fund function and object. The functions must include at minimum categories for instruction, pupil support, instructional staff support, general administration, school administration, business administration, transportation, facilities operation and maintenance, facilities acquisition, and debt service; and must include object classifications of salary, benefits, including categories for active employee health expenditures, purchased services, supplies, capital outlay, and other. A district shall report the required level of detail consistent with the manual as part of the comprehensive annual financial report.
(6) By the last business day in September of each year, each district and intermediate district shall file with the center the special education actual cost report, known as "SE-4096", on a form and in the manner prescribed by the center. An intermediate district shall certify the audit of a district's report.
(7) By not later than 1 week after the last business day in September of each year, each district and intermediate district shall file with the center the audited transportation expenditure report, known as "SE-4094", on a form and in the manner prescribed by the center. An intermediate district shall certify the audit of a district's report.
(8) The department shall review its pupil accounting and pupil auditing manuals at least annually and shall periodically update those manuals to reflect changes in this article. Any changes to the pupil accounting manual that are applicable for the school year that begins after March 31 of a fiscal year must be published by not later than March 31 of that fiscal year. However, if legislation is enacted that necessitates adjustments to the pupil accounting manual after March 31 of a fiscal year, and a district incurs a violation of the amended pupil accounting manual in the subsequent fiscal year, the department must notify the district of that violation and allow the district 30 days to correct the violation before the department is allowed to impose financial penalties under this act related to the violation.
(9) If a district that is a public school academy purchases property using money received under this article, the public school academy shall retain ownership of the property unless the public school academy sells the property at fair market value.
(10) If a district or intermediate district does not comply with subsections (4), (5), (6), (7), and (12), or if the department determines that the financial data required under subsection (5) are not consistent with audited financial statements, the department shall withhold all state school aid due to the district or intermediate district under this article, beginning with the next payment due to the district or intermediate district, until the district or intermediate district complies with subsections (4), (5), (6), (7), and (12). If the district or intermediate district does not comply with subsections (4), (5), (6), (7), and (12) by the end of the fiscal year, the district or intermediate district forfeits the amount withheld.
(11) If a district or intermediate district does not comply with subsection (2), the department may withhold up to 10% of the total state school aid due to the district or intermediate district under this article, beginning with the next payment due to the district or intermediate district, until the district or intermediate district complies with subsection (2). If the district or intermediate district does not comply with subsection (2) by the end of the fiscal year, the district or intermediate district forfeits the amount withheld.
(12) By November 1 of each year, if a district or intermediate district offers virtual learning under section 21f, or for a school of excellence that is a cyber school, as defined in section 551 of the revised school code, MCL 380.551, the district or intermediate district shall submit to the department a report that details the per-pupil costs of operating the virtual learning by vendor type and virtual learning model. The report must include information concerning the operation of virtual learning for the immediately preceding school fiscal year, including information concerning summer programming. Information must be collected in a form and manner determined by the department and must be collected in the most efficient manner possible to reduce the administrative burden on reporting entities.
(13) By March 31 of each year, the department shall submit to the house and senate appropriations subcommittees on state school aid, the state budget director, and the house and senate fiscal agencies a report summarizing the per-pupil costs by vendor type of virtual courses available under section 21f and virtual courses provided by a school of excellence that is a cyber school, as defined in section 551 of the revised school code, MCL 380.551.
(14) As used in subsections (12) and (13), "vendor type" means the following:
(a) Virtual courses provided by the Michigan Virtual University.
(b) Virtual courses provided by a school of excellence that is a cyber school, as defined in section 551 of the revised school code, MCL 380.551.
(c) Virtual courses provided by third party vendors not affiliated with a public school in this state.
(d) Virtual courses created and offered by a district or intermediate district.
(15) An allocation to a district or another entity under this article is contingent upon the district's or entity's compliance with this section.
(16) The department shall annually submit to the senate and house subcommittees on school aid and to the senate and house standing committees on education an itemized list of allocations under this article to any association or consortium consisting of associations in the immediately preceding fiscal year. The report must detail the recipient or recipients, the amount allocated, and the purpose for which the funds were distributed.
1979, Act 94, Eff. Oct. 1, 1979; Am. 1989, Act 197, Eff. Oct. 1, 1989; Am. 1991, Act 118, Imd. Eff. Oct. 11, 1991; Am. 1992, Act 148, Eff. Oct. 1, 1992; Am. 1993, Act 175, Eff. Oct. 1, 1993; Am. 1993, Act 336, Eff. Oct. 1, 1994; Am. 1994, Act 283, Eff. Oct. 1, 1994; Am. 1995, Act 130, Eff. Oct. 1, 1995; Am. 1996, Act 300, Eff. Oct. 1, 1996; Am. 1999, Act 119, Imd. Eff. July 20, 1999; Am. 2003, Act 158, Eff. Oct. 1, 2003; Am. 2004, Act 414, Eff. Jan. 1, 2005; Am. 2005, Act 155, Eff. Oct. 1, 2005; Am. 2006, Act 342, Eff. Oct. 1, 2006; Am. 2007, Act 137, Imd. Eff. Nov. 8, 2007; Am. 2008, Act 268, Eff. Oct. 1, 2008; Am. 2009, Act 121, Imd. Eff. Oct. 19, 2009; Am. 2010, Act 110, Eff. Oct. 1, 2010; Am. 2011, Act 62, Eff. Oct. 1, 2011; Am. 2012, Act 201, Imd. Eff. June 26, 2012; Am. 2013, Act 60, Eff. Oct. 1, 2013; Am. 2014, Act 196, Eff. Oct. 1, 2014; Am. 2014, Act 476, Eff. Mar. 31, 2015; Am. 2015, Act 5, Imd. Eff. Mar. 10, 2015; Am. 2015, Act 85, Eff. Oct. 1, 2015; Am. 2015, Act 114, Imd. Eff. July 7, 2015; Am. 2016, Act 249, Eff. Oct. 1, 2016; Am. 2017, Act 108, Eff. Oct. 1, 2017; Am. 2018, Act 265, Eff. Oct. 1, 2018; Am. 2018, Act 586, Imd. Eff. Dec. 28, 2018; Am. 2019, Act 58, Eff. Oct. 1, 2019; Am. 2020, Act 165, Eff. Oct. 1, 2020; Am. 2021, Act 48, Eff. Oct. 1, 2021; Am. 2022, Act 144, Eff. Oct. 1, 2022; Am. 2025, Act 15, Imd. Eff. Oct. 7, 2025
[Compiler] Enacting section 1 of 2005 PA 155 provides:
[Compiler] "Enacting section 1. In accordance with section 30 of article I of the state constitution of 1963, total state spending in this amendatory act and in House Bill No. 4831 of the 93rd Legislature from state sources for fiscal year 2005-2006 is estimated at $11,364,814,000.00 and state appropriations to be paid to local units of government for fiscal year 2005-2006 are estimated at $11,341,913,100.00."
[Compiler] Enacting section 1 of Act 342 of 2006 provides:
[Compiler] "Enacting section 1. (1) In accordance with section 30 of article I of the state constitution of 1963, total state spending in this amendatory act from state sources for fiscal year 2006-2007 is estimated at $11,682,508,200.00 and state appropriations to be paid to local units of government for fiscal year 2006-2007 are estimated at $11,536,597,200.00.
[Compiler] (2) In accordance with section 30 of article I of the state constitution of 1963, total state spending from state sources for fiscal year 2005-2006 in this amendatory act and 2005 PA 155 is estimated at $11,308,027,200.00 and state appropriations to be paid to local units of government for fiscal year 2004-2005 are estimated at $11,285,376,300.00."
[Compiler] Enacting section 1 of Act 137 of 2007 provides:
[Compiler] "Enacting section 1. In accordance with section 30 of article I of the state constitution of 1963, total state spending in this amendatory act from state sources for fiscal year 2007-2008 is estimated at $11,527,973,800.00 and state appropriations to be paid to local units of government for fiscal year 2007-2008 are estimated at $11,458,493,300.00."
[Compiler] Enacting section 1 of Act 268 of 2008 provides:
[Compiler] "Enacting section 1. In accordance with section 30 of article I of the state constitution of 1963, total state spending in this amendatory act from state sources for fiscal year 2008-2009 is estimated at $11,816,898,200.00 and state appropriations to be paid to local units of government for fiscal year 2008-2009 are estimated at $11,602,465,900.00."
[Compiler] Enacting section 1 of Act 121 of 2009 provides:
[Compiler] "Enacting section 1. In accordance with section 30 of article I of the state constitution of 1963, total state spending in this amendatory act from state sources for fiscal year 2009-2010 is estimated at $10,825,754,100.00 and state appropriations to be paid to local units of government for fiscal year 2009-2010 are estimated at $10,718,801,700.00."
[Provisional] ***** 388.1618 THIS SECTION IS AMENDED EFFECTIVE OCTOBER 1, 2026: See 388.1618.amended *****
Source: Michigan Legislature (legislature.mi.gov)URL: https://legislature.mi.gov/Laws/MCL?objectName=mcl-388-1618Fetched: 10/20/2026