Monitoring Your District’s Financial Position

1. Monitoring Your District’s Financial Position 2008 TASB/TASA Annual Conference Presented by: Texas Association of School Business Officials Gwen Santiago, Executive Director Tom Canby, Director of Research and Technology Becky Bunte, CFO/Special Projects Dallas, TexasSeptember 26, 2008

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 • Target expenditures

8. Sample Financial Fact Sheet

9. Sample Financial Fact Sheet Continued

10. Sample Financial Fact Sheet Continued

11. Sample Financial Reports • Financial reports

12. 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?

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

14. Optimum Fund Balance Schedule

15. 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

16. 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.

17. 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 – TASBO Best Practices

18. The “Smoothing” Issue • Distribution of State Funds • SB 1848 introduced in the previous Leg Session, but did not pass • Committee Hearings during the Interim have considered alternatives • Bridge Loans may be necessary

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

20. Sample Benchmark Report SM • FACTS

21. Increases in Property and Casualty Insurance FY 2005 to FY 2007

22. Sample Benchmark Reports SM Expenditures Per Student

23. SampleBenchmarkReports Special Ed Expenditures in General Fund and FSP State Aid Allotment Is Your District Maximizing Use of Federal Funds?

24. Sample Benchmark Reports Student to Staff Ratios SM

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

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

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

28. Sample Benchmark Reports SM Utility Costs

29. Sample Benchmark Reports SM State Aid Funding for Transportation and Operating Costs

30. Sample Benchmark Reports Expend Per Student Function Maintenance and Operations General Fund for Comparable School Districts

31. Sample Benchmark Reports SM Students to Non Teaching Staff by Campus

32. Sample Benchmark Reports SM Students to Teachers by Campus

33. Sample Benchmark Reports SM Students to Teachers Aides by Campus

34. Sample Benchmark Reports 4 Year Pct Change for Staff and Students by Campus

35. SampleBenchmarkReports Operating Costs and Percent Economically Disadvantaged Students

36. Sample Benchmark Reports Campus Operating Costs and Student Teacher Ratio by Campus

37. Sample Benchmark Reports Campus Performance TAKS and Percent Economically

38. 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

39. 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

40. Don’t ForgetPeriodic Operations 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

41. Operations Reports, continued • Food Service • Estimated contribution from Operating Fund 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?

42. 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?

43. Expenditure Targets • New budget requirement for fiscal year 2008-09 • Adoption of resolution (sample from TEA) • 65% requirement • Check TEA website for updates • Based on actual expenditures for prior years except for 65% requirement for instruction • Applies to all funds except SSA, but resolution applies only to Operating Fund

44. 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/tools07.xls • Use the eFACTS+ program (available from TASBO) • Use TEA data—AEIS, etc. • www.tea.state.tx.us/adhocrpt/Standard_Reports.html

45. Standard Reports

46. 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 • TASBO Best Practices Website for members • www.tasbo.org • 800-338-6531

47. Presentation and Files