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Board Budget Presentation on Understanding School District Budgets (Part 1 of 2) Board Meeting of April 2, 2009. Ontario-Montclair School District. What We Will Cover. Budget Calendar Proposition 98 Glossary of Terms District Budgeting Operates within a Set Framework

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Board Budget Presentation on Understanding School District Budgets (Part 1 of 2)

Board Meeting of April 2, 2009

Ontario-Montclair School District


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What We Will Cover Budgets (Part 1 of 2)

Budget Calendar

Proposition 98

Glossary of Terms

District Budgeting Operates within a Set Framework

State Reporting and Oversight Requirements

Revenue Limit Calculation

Special Education Revenue Calculation

Sample Adopted Budget

Sample Interim Report

1


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Budget Calendar Budgets (Part 1 of 2)

Always working on 3 budget years at a time: PRIOR (Unaudited Actuals), CURRENT (Estimated Actuals) and NEXT (Budget).

JULY to SEPTEMBER – The State adopts the Final CURRENT year budget and the District makes the necessary revisions within 45 days. The District is also closing the books in order to prepare the PRIOR year Unaudited Actuals and determines the categorical program carryover to post to the CURRENT year. Submit to County.

In the FALL of each year, the budget priorities (ADA, staffing & programs) are put together for NEXT year. The auditors file their report with the CDE & SBCSS for the PRIOR year. The First Interim report and effects of the State budget are prepared and submitted for Board approval for the CURRENT budget. Submit to County.

In JANUARY, the Governor releases NEXT year’s budget. Cabinet adopts NEXT year’s budget calendar & evaluates impact of Governor’s budget. Fiscal Services & Human Resources begin to update the position control system for the salary & benefit costs of employees to roll into NEXT year.

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Budget Calendar Budgets (Part 1 of 2)

FEBRUARY to MARCH – Cabinet continually evaluates & revises programs for NEXT year. Fiscal Services prepares the Second Interim report submits for Board approval for the CURRENT budget. Submit to County.

MAY – The Governor releases his “May Revision” of his January NEXT year version. Cabinet determines what changes need to be made in the NEXT year budget that is being prepared.

JUNE – The Board has final study sessions and mandatory public hearings prior to adopting the NEXT year budget. The District is making preliminary closing entries to the CURRENT budget before June 30. Submit to County.

The process begins all over again as the CURRENT year becomes the PRIOR year. The NEXT year budget becomes the CURRENT year.

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Proposition 98 Budgets (Part 1 of 2)

Guarantees K-14 Education at least 40% of State’s General Fund Revenues.

Ratchet-up mechanism – this year’s expenditures is next year’s base.

One of the State’s main structural deficit creators.

Continually revised based on revenues and student enrollment.

It can be suspended:

2/3s majority vote of Legislature and Governor or

Test 3 when revenues grow slower than personal income (maintenance) or

No need as revenues have decreased and can be cut without suspension (dollars lost here are permanently lost).

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Proposition 98 Budgets (Part 1 of 2)

Test 1 – “A Slice of the Pie”, when revenues are at their highest, K-14 is guaranteed 41% to 42% of State revenues

Test 2 – “Business as Usual”, Annual change in ADA funding equals annual change in personal income. California Schools do no better than California taxpayers (40).

Test 3 – “When State Tax Growth Lags Personal Income Growth.” The minimum per ADA funding changes by the increase or decrease in State General Fund revenues per resident plus ½%.

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Glossary of Terms Budgets (Part 1 of 2)

Unaudited Actuals – the financial statements of the District.

General Fund – Reflects the restricted (categorical) and unrestricted (ADA, K-3 CSR and Lottery) revenues & expenditures of operations.

Object Code – 4 digit code that reflects revenue & expenditure types.

Position Control – system of internal controls that coordinates and authorizes Board approved positions.

Special Education Local Plan Area (WESELPA) centralized coordinator of SE services among member districts – usually run by County. Also the central distributor of Federal (IDEA) and State (AB602) funding. Districts refer students it cannot serve to the SELPA.

Reserve for Economic Uncertainties – the unrestricted “3%” of total expenditures & other outgo District must set aside each year.

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District Budgeting Operates within a Set Framework Budgets (Part 1 of 2)

Fund Accounting and GAAP Modified Accrual Method.

Funds of the District are defined by what activities they track:

General Fund

Special Revenue - Child Development, Cafeteria, Deferred Maintenance, Special Reserve.

Trust and Agency – Retiree Benefits and ASBs.

Capital Facilities – GO Bond, Capital Facilities, Special Reserve.

Debt Service – GO Bond & Interest and Facilities Corporation.

Enterprise – Self-Insurance (workers comp).

Nearly all revenues and expenditures are driven by the number of students.

Personnel dominates District decisions as they are about 85% of all costs.

The State determines nearly all revenue levels.

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District Budgeting Operates within a Set Framework Budgets (Part 1 of 2)

Object Codes – the 4 digit roadmap

Revenues: 8000s = Revenue Limit, Federal, State & Other (interest).

Expenditures:

1000s Certificated Salaries

2000s Classified Salaries

3000s Employee Benefits

4000s Books & Supplies

5000s Services & Other Operating Expenses

6000s Capital Outlay

7000s Other Outgo

Balance Sheet Accounts 9000s = accept the other side of the double entry bookkeeping system – checks & balances.

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District Budgeting Operates within a Set Framework Budgets (Part 1 of 2)

The District’s first responsibility is to always meet its financial obligations (maintain a 3% reserve after budgeting all of its bills) in the current and two future years. This is demonstrated in the Multi-Year Projection (MYP).

Ed Code 42127(c)(1) …the adopted budget must comply with the standards and criteria adopted by the State Board pursuant to EC 33127…. (2) the county superintendent shall determine whether the adopted budget will allow the district to meet its financial obligations during the current and two future fiscal years and is consistent with a financial plan that will enable the district to satisfy its multi-year financial commitments.

Any budget presentation is a snapshot in time based upon assumptions. It is a moving target and is akin to nailing jello to the wall.

Districts certify to this financial condition three times per year: Adopted Budget (June 30), First Interim (December 15) and Second Interim (March 15).

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District Budgeting Operates within a Set Framework Budgets (Part 1 of 2)

Collective Bargaining Agreements are central to all spending decisions.

Superintendent and CBO must certify to the multi-year affordability of any settlement. Otherwise they risk impacting their retirement.

Assessing a District’s financial condition goes beyond the General Fund.

Facilities commitments

Retiree Benefits

Unsecured Debt (e.g. COPs)

Encroachment programs (Special Ed, Transportation, K-3 CSR)

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State Reporting and Oversight Requirements Budgets (Part 1 of 2)

The SBCSS has fiscal oversight over the District per EC 42127 to ensure it is a going concern by reviewing its:

Adopted Budget = approved or disapproved

Interim Reports (2) = positive, qualified or negative

Unaudited Actuals

Audit Report

Related Consulting Reports (e.g. retiree benefits actuarial study)

15 warning signs that trigger budget disapproval:

Majors are: deficit spending, ADA projections, cashflow shortfalls, unaffordable salary settlements, increasing encroachments, flawed MYP.

The annual audit provides the independent view of internal controls.

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Revenue Limit Calculation Budgets (Part 1 of 2)

TBD

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