Fast Spending with Transparent Reporting

1. Fast Spending with Transparent Reporting Maintaining confidence and accountability during schools capital projects A presentation to Council of Educational Facilities Planners 86th Annual World Conference and Expo Washington, D.C., September, 2009 published online at www.colbitech.com Sarah Lynn Schoening1 and Lettie E. Boggs2 1 NW Region Director, Colbi Technologies, Portland, Oregon 2 CEO, Colbi Technologies, Tustin, California Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

2. FastSpending with Transparent Reporting Common scenarios Significant gap since prior upgrades Deferred maintenance; euphemism for almost none Mid-century facilities and materials Declining enrollment… or increasing Cherished landmark schools Unstable property values Tax saturated community No standard for reporting Oversight committee of mandated skeptics Stimulus funds add new agenda Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

3. FastSpending with Transparent Reporting Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

4. FastSpending with Transparent Reporting Common challenges Abundant needs, scarce resources Critical repairs eclipse educational support Cost escalation is primary schedule driver Flood of decision making Program management foreign to school administrators School administration foreign to program managers Different accounting for construction and district fiscal Embarrassment of riches Community diversity makes consensus difficult Highly involved or vocal community Last program made skeptics of community Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

5. FastSpending with Transparent Reporting Plan for the end from the beginning • Background • Fundamentals of Accountability • Agreement on Outcomes • Budget • Plan • Internal Controls • Reporting • Regular monitoring and adjusting • Summary Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

6. Fast Spending with Transparent Reporting Background “We deal with people’s children and taxes. They will never butt out.” Lettie Boggs K12 governance and funding are largely local • Governance is by elected board • Board sets policy • Superintendent executes • Sunshine laws apply • Funding is for specified purposes • General obligation bonds, levies, grants, special programs • Ballot language limits use of funds • Revenue streams must be strategically managed Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

7. Fast Spending with Transparent Reporting Background Two views of capital projects • Schools • Annualized encumbrances and accounting • Predictable budgets • Fund accounting • FY closing and reporting • Warrant driven audits and accountability • Construction • Multi-year project duration • Less predictable budgets and contracts • Multi-fund revenue sources • FY closing foreign to construction • Results driven accountability Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

8. Fast Spending with Transparent Reporting Fundamentals of Accountability Establish agreement on outcomes Develop budgets Map a program plan Implement internal controls Report regularly Monitor and adjust throughout Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

9. Fast Spending with Transparent Reporting Fundamentals of Accountability Outcomes Establish agreement on outcomes Develop education specifications Facilities condition surveys Needs assessments District engagement and agreement Community engagement and agreement Prioritize projects with community Record process Report progress and results Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

10. Fast Spending with Transparent Reporting Fundamentals of Accountability Outcomes Engage community, communicate findings • Enlist ambassadors • Community leaders • Diverse representation • Establish priorities with community input • Listen to concerns • Respond with project sequence • Communicate schedule and budget limitations • Calibrate expectations • Calibrate, don’t manage, with real information Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

11. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets Good budgets: • Exist! A budget is a plan; never spend without a plan • Are created with knowledgeable input • Are balanced Revenue = expenditures • Are aged Plan across FYs for cashflow • Have positive cashflow At both project and program levels • Include contingencies At both project and program levels • Are rolled up into a program Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

12. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets Conceptual project budgeting Use knowledgeable people and historic data to create formula driven projects • Site Acquisition, surveying, hazardous materials, environmental reports • Planning AE fees, state DoEd fees, permits, specialty consultants • Construction Main construction contracts, CM fees, interim housing, soils, legal, advertising • Testing and Inspections • F F & E • Contingencies Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

13. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets • This budget is: • Balanced • Aged • Has positive cash flow • Was created by knowledgeable person • Has contingencies • Records changes Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

14. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets Conceptual budgeting • Top down • Driven by available funding • Extract common costs and allowances, remainder is available for bricks and mortar • Bottom up • Driven by needs • Assemble incremental project costs • Sum of projects = program Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

15. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets • Top down conceptual budgeting is driven by funding • Test several scenarios, varying program size and project configuration • Print and date scenarios • Record analyses • Leave a clear trail of district planning and decisions Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

16. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets • Bottom up conceptual budgeting is driven by project estimates • Test several scenarios, varying project configuration to determine program size • Print and date scenarios • Record analyses • Leave a clear trail of district planning and decisions Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

17. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets • Build contingencies into the budget at both program and project levels • Illustrate strategic use of these reserves • Record pros and cons of each strategy • Obtain Board direction • Leave a clear trail of district planning and decisions Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

18. Fast Spending with Transparent Reporting Fundamentals of Accountability Budgets Conceptual budgeting • Budget aging • Each project has phases • Early budgets are formula driven • Recognize leverage of planning and design phases • Escalation • Include cost escalation estimate • Typically to mid point of program • More accurate to escalate according to aging plan • Program budget is highly sensitive to escalation Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

19. Fast Spending with Transparent Reporting Fundamentals of Accountability Program and Project Planning Programs, projects and operations • A program is a collection of projects • Projects have fixed durations and budgets • Operations are ongoing activities • Projects must be strategically scheduled • Examine cashflow of entire program • Examine long term effects on taxpayers Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

20. Fast Spending with Transparent Reporting Fundamentals of Accountability Program and Project Planning • Fund demand planning • Predict revenue stream • Prioritize projects dynamically against funding • Don’t spend ahead of revenue • Ladder funding instruments • Repayment capacity (or tolerance) typically constrains planning • Program plan • Plan program phases in long range plan • Develop short term plan with greater detail Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

21. Fast Spending with Transparent Reporting Fundamentals of Accountability Internal Controls Fundamental areas of internal controls • Control environment • Risk assessment • Control activities • Information and communication • Monitoring Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

22. Fast Spending with Transparent Reporting Fundamentals of Accountability Internal Controls Procedures and workflow • Examine workflow in a team meeting • Map existing system • Correct bottlenecks and inappropriate assignments • Map flow of all documents and transactions • Communicate to all team members Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

23. Fast Spending with Transparent Reporting Fundamentals of Accountability Internal Controls Handling transactions • Identify and standardize transactions; invoices, retainages, notices • Establish approval routing • First reviewer is person most familiar with completed and stored • Person familiar with project budget • Person familiar with program budget • Person familiar with account coding • Program director • CFO, Superintendent Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

24. Fast Spending with Transparent Reporting Fundamentals of Accountability Internal Controls Audit preparations • Prepare for audit at outset • Set up filing system and designate a keeper • Warrant driven audits • Maintain notebook for each project • Standardize AEC invoices • Performance audits • Post bond language and refer to it often • Train team in public contracting and ‘sunshine’ regulations • Be proactive • Review standards of professional conduct Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

25. Fast Spending with Transparent Reporting Fundamentals of Accountability Internal Controls Change management • Document budget adjustments • Save and print budget status regularly • Keep record of budgets with narratives for changes • Move funds from contingency to appropriate line Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

26. Fast Spending with Transparent Reporting Fundamentals of Accountability Internal Controls Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

27. Fast Spending with Transparent Reporting Fundamentals of Accountability Internal Controls • Fund management • Plan and manage fund demand for interest and liquidity • Communicate upcoming draws • Use funds as intended • No co-mingling of funds • Document internal loans Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

28. Fast Spending with Transparent Reporting Fundamentals of Accountability Reporting Know your stakeholders and their interests; establish regular reports with standardized formats Board Superintendent Oversight Committee Auditors Teachers, staff, parents and students Community Your team Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

29. Fast Spending with Transparent Reporting Fundamentals of Accountability Reporting • Board • Printed status report at each board meeting • Monthly, detailed update with one or two members • Periodic program status study sessions Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

30. Fast Spending with Transparent Reporting Fundamentals of Accountability Reporting • Board and Superintendent No surprises… • Monthly, detailed update with one or two members • One page summary • Increasing level of detail Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

31. Fast Spending with Transparent Reporting Fundamentals of Accountability Reporting “A mountain of papers is not transparency, in fact, it is a good way to obscure the view”. Sarah Lynn Schoening Explain in layers from overview to detail Single page program overview Sector activity Site detail Project detail Contract detail Transaction detail Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

32. Fast Spending with Transparent Reporting Fundamentals of Accountability Reporting • Oversight committee • Mandate typically is to review compliance with bond language • Earn trust with preparedness • Overview of program budget, schedule, changes and challenges • Be prepared to drill down, drill down, drill down • Take committee members on a tour of district • Beware conflict of interest • OC cannot participate in decisions Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

33. Fast Spending with Transparent Reporting Fundamentals of Accountability Reporting Oversight committee Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

34. Fast Spending with Transparent Reporting Fundamentals of Accountability Own the Program Find the right person or very small team to “own” the program Establish a vision Print and post the bond language and refer to it often. Give your team a mantra: quality and communication; pride in our neighborhood; warm, safe and dry; great schools for a great city… Bring all the news – good and bad Be prepared to explain, keep organized records, and support your recommendations with comparison of alternatives Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009

35. Fast Spending with Transparent Reporting Summary “There is no advertisement like a job well done.” Chas Smith, long time Director of MOT, Fresno Unified School District (Lettie’s dad) Sarah Lynn Schoening and Lettie E. Boggs CEFPI World Conference September 2009