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Monitoring Your District’s Financial Position

Monitoring Your District’s Financial Position. 2009 TASA Midwinter Conference Presented by: Texas Association of School Business Officials Tom Canby, Director of Research and Technology Becky Bunte, CFO/Special Projects Gwen Santiago, Executive Director Austin, Texas January 27, 2009.

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Monitoring Your District’s Financial Position

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  1. Monitoring Your District’s Financial Position 2009 TASA Midwinter Conference Presented by: Texas Association of School Business Officials Tom Canby, Director of Research and Technology Becky Bunte, CFO/Special Projects Gwen Santiago, Executive Director Austin, TexasJanuary 27, 2009

  2. Who Monitors District’s Financial Management? • District administrators • Taxpayers • Board members • Texas Education Agency (TEA)

  3. How Does TEA Monitor Financial Management in Districts? • Independent CPAs perform annual audits • Annual audits of every district are filed with TEA • TEA reviews all annual audit reports • Sample of CPA firms reviewed on-site each year

  4. What has TEA seen? • Deficiencies Ordered by Frequency • Lack of: • Monthly Cash Flow Projection Schedule • Budget Report to All Stakeholders • Bank Reconciliation • Accurate Estimate of State Aid in Official Budget • Budget Amendments • Fund Balance in General Fund (Highest deficit was 30% of Annual Budget) • Financial Accounting Ledger Adjustments and Maintenance • Check Numbers on Bank Statements

  5. Can You Answer These Questions About Your District? • Is there an adequate fund balance in the General Fund, Debt Service Fund, and Child Nutrition Fund? • Are bank statement reconciliations done each month? • Are monthly cash flow projections prepared? • Are budget reports provided to all stakeholders? • Budget managers • Principals • Board of trustees • Are budget amendments current?

  6. Can You Answer These Questions About Your District? • Is there a business office procedures manual and/or administrative guidelines? • Are comparisons made to other districts? • Are there a number of deficiencies in Annual Financial and Compliance Report and management letter? • Have all concerns from the prior year’s management letters been resolved?

  7. Key Indicators to Consider • District financial fact sheet • Budget to actual • Cash flow projections • Fund balance projections • Balance sheets • Investment reports • Construction reports by project • Tax collection report • Benchmarking metrics to comparable districts • Pupil/teacher ratios • Pupil/other staff ratios • FIRST indicators and trends

  8. Sample Financial Fact Sheet • Sample Financial Fact Sheet • (Included on last page of handout.)

  9. Sample Financial Reports • Financial reports • Sample financial reports can be downloaded from the TASBO website – www.tasbo.org – click on Presentations/Reports

  10. Step Back and Look at the “Big Picture” • Is the revenue side living up to expectations? • Taxes at or above projection? Collection rates similar to prior years? Is local economy still healthy? Top-ranked taxpayer status? • Attendance rates at or above projection? State funding estimate still good? • Are the expenditures following the budget? • Any significant variances between budget and actual revenues and expenditures?

  11. What Should Your Annual Audit Report Tell You About Your District? • Budget to Actual • General Fund • Child Nutrition Fund • Debt Service • Management letter

  12. Optimum Fund Balance Schedule

  13. Why is Fund Balance Important? • General Fund Balance is needed for: • Reserves • Designations • Cash flow deficit in fall until property taxes are collected in January • Financial cushion/emergencies • Bond credit ratings • Generally Undesignated Unreserved Fund Balance is between 8 and 21 percent (1-2.5 months) of General Fund Expenditures

  14. Bond Rating Considerations • Generally, a school district with a higher bond rating will achieve a lower borrowing cost than a district with a lower bond rating. • Key factor with all rating agencies • District fund balance is compared to other issuers • Rating agencies consider historical trends • Formal board policies viewed favorably Information on slides 17 – 19 provided by RBC Capital Markets.

  15. Considerations to Determine Appropriate Level • General uncertainty regarding state funding and school finance • Maintenance and Operations Tax Rate • Volatility of taxable assessed valuation

  16. Considerations to Determine Appropriate Level • Revenue Source – Local versus State • More local – higher fund balance • Cash flow • Growth of student enrollment • Increased investment revenues for operating expenditures

  17. Fund Balance Sample Policy • Bastrop ISD CE (Local) Annual Operating Budget: A financial goal of the District shall be to have a sufficient balance in the operating fund to be able to maintain fiscal independence in case of a financial need or crisis. The District shall strive to maintain a yearly fund balance in the general operating fund in which the total fund balance is 22.5 percent of the total operating expenditures and the unreserved/undesignated fund balance is 15 percent of the total operating expenditures.

  18. Other Sample Policies • Deer Park CE (Local) • The annual approved budget shall maintain a cash balance approximately equal to the total expenditures of the first two months of the fiscal year. • Round Rock ISD’s Fiscal and Budgetary Strategy 11/07 – Available at www.tasbo.org/Presentation/Reports or in TASBO Best Practices

  19. Trends and Benchmarking • Benchmarks • Ratios • Peer districts • Prior audits

  20. Sample Benchmark ReportsDemo available at http://www.tasbo.org/eFACTSDemo/eFACTSDemo.htm SM • FACTS

  21. Sample Benchmark Reports SM Expenditures Per Student

  22. Sample Benchmark Reports Student to Staff Ratios SM

  23. Sample Benchmark Reports Example District ABC SM Total Students and Total Staff

  24. Sample Benchmark Reports Example District ABC SM Total Fund Balance General Fund

  25. Sample Benchmark Reports Percent Tax Collections and Percent Low Income Students for ISDs within a RESC SM

  26. Sample Benchmark Reports SM State Aid Funding Elements All School Districts

  27. Sample Benchmark Reports SM State Aid Funding Elements All School Districts

  28. Sample Benchmark Reports SM State Aid Funding Elements

  29. Sample Benchmark Reports SM State Aid Funding Elements

  30. Sample Benchmark Reports SM State Aid Funding Transportation and Costs

  31. Sample Benchmark Reports SM Insurance Costs

  32. Sample Benchmark Reports SM Utility Costs

  33. Look at the Data Analyze revenue and expenditure trend lines (by function, by object, matrix combo) • Total $ • % of total • $ per student • Analyze student growth (decline) patterns • District-wide • By campus • By special populations • Develop staffing guidelines for district use for all areas • Analyze staffing patterns • Administrators (central + campus) • Student/teacher ratios • Counselors, Nurses, Librarians • Secretaries, Aides, Clerical Staff • Maintenance, Food Service, Transportation • Technology

  34. Remember….. • Campus and component administrators are held accountable for performance • They receive community input via their site-based team • They know their areas of weakness • They have limited resources to achieve exemplary status • Staffing decisions must follow district process and meet district needs

  35. Don’t ForgetPeriodic Component Reports • Maintenance • Utility status • Unforeseen areas of concern • Compliance issues • Short-term and long-term special project needs • Cost containment • Transportation • Bus replacement cycle • Fuel costs • Training issues

  36. Component Reports, continued • Food Service • Estimated subsidy requirement less than or equal to projection? • Food costs contained? • Staffing still aligned with budget? • Technology • Short-term and long-term goals? • Replacement cycle on target? • Basics before “fluff” in place?

  37. What can FIRST tell you about your district? • Review trends • What do district’s trends indicate? • Improvement • Decline • Is financial rating likely to decline if no changes to financial management practices?

  38. Where do I get help? • Use the FASRG (Financial Accountability Resource Guide) – TEA website • www.tea.state.tx.us/school.finance/audit/resguide13/index.html • Use the Student Projection template available through TASBO at no charge – TASBO website • www.tasbo.org/tools09.xls (use save - not open) • Subscribe to eFACTS+ (available from TASBO) • Use TEA data—AEIS, etc. • www.tea.state.tx.us/adhocrpt/Standard_Reports.html

  39. Standard Reports

  40. More help…… • Use TASB Salary Surveys • Use Legislative Budget Board’s web site • www.lbb.state.tx.us/Perf_Rvw_PubEd/Perf_Rvw_PubEd.htm • Use Comptroller’s web site • www.tea.state.tx.us/school.finance/forecasting/summaries/district_summary_0607.html • Call TASBO or a TASBO member • www.tasbo.org • 800-338-6531

  41. Presentation and Files

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