2004-4 Notification of New Sinking Fund Policy
June 25, 2004
To: School Districts Levying Sinking Fund Tax and Other Interested Parties
From: Suzanne Schafer, Administrator; Local Audit and Finance Division
RE: Notification of New Sinking Fund Policy
This memorandum is to serve as notification regarding the Department of Treasury's policy for oversight of school district sinking funds as provided by section 1212 (1) of the Revised School Code (PA 451 of 1976). Historically, numbered letter 01-95 invited school districts to request pre-approval or opinion letters as to acceptable sinking fund use.
It has since been determined that in order to provide the specific oversight required by section 1212 (1), the Department will no longer issue pre-approval or opinion letters as to permissible sinking fund use. As a result, numbered letter 01-95 is repealed and no longer in effect. In place of the former pre-approval process, the Department will administer section 1212 (1) as written.
Section 1212 (1) authorizes the following three sinking fund uses:
- the purchase of real estate for school building sites;
- the construction of school buildings; and
- the repair of school buildings.
If a contemplated use does not fall into one of the above categories, it is not permitted. Section 1212 (1) further requires each school district that levies a sinking fund tax to have an independent audit of its sinking fund conducted annually. This audit is to be submitted to the Department of Treasury, Local Audit and Finance Division, P.O. Box 30728, Lansing, Michigan 48909-8228 and it must specifically include a review of the uses of the sinking fund. The Department will determine from the audit report and its review of the uses whether the sinking fund has been used for authorized purposes.