Contingency Budgets and Other Updates

1. Contingency Budgets and Other Updates Presented by Deborah Cunningham and Jay O’Connor NYS Education Department Office of Educational Management Services April 14, 2010 Welcome! This session will begin at 9:00 am Wednesday April 14, 2010

2. Agenda • Contingency Budgets • ARRA Update –Reporting, Monitoring and Audits • Change in Transportation Contract Approval Process and Payment of Transportation Aid • Budget Deadlines • Questions and Answers

3. Contingency Budget • Has its basis in law (as opposed to “austerity budget”) • Certain requirements for calculating a contingency budget. • Must consider public response to contingency budget information.

4. Contingency Budgets - Laws • Education Law § 1716 – All expenses necessary included in proposed budget (No separate proposition for “budget” item). • Education Law § 2023 - Board of Education to adopt contingent budget when voters have refused to approve budget. • Education Law § 2007 - Budget re-vote (3rd Tuesday in June). • District may choose to adopt a contingency budget after proposed budget is defeated once rather than re-vote. • If budget is defeated twice, then BOE must adopt contingency budget.

5. Contingency Budget - Constraints • When a district adopts a contingency budget, they are constrained in two ways: 1) Statutory caps 2) Determination of ordinary contingent expenses • Statutory caps include contingency budget cap and administrative cap.

6. Ordinary Contingent Expenses • Those items necessary to maintain schools or defined in statute (required or BOE discretion) • Opinion of NYSED Counsel 213 is the best place to start for definition of ordinary contingent expense. It may be found at: http://www.emsc.nysed.gov/mgtserv/budgeting/handbook/appendixg.html

7. Contingency Budget Cap • Overall increase in the budget, with certain exclusions, is capped at the lesser of: 120% X Average of National CPI or 4% Change in the average from 2008 to 2009: -0.4% Executive budget proposes minimum cap of 0%; Legislationalso has been introduced to use a 5 year “rolling average”.

8. Contingency Budget vs. Proposed Budget • Use the worksheet at: www.emsc.nysed.gov/mgtserv/budgeting to calculate the contingency budget cap; • Compare the calculated contingency budget cap with the proposed budget; • Depending on whether the proposed budget is greater or less than the calculated cap will determine next steps.

9. Calculating the Contingency Budget • If the proposed budget is greater than the calculated cap, then: 1. Remove all non-contingent items from the proposed budget; 2. If the budget amount is still greater than the contingency budget cap, then other cuts must be made to “get down” to the cap amount.

10. Calculating the Contingency Budget • If the proposed budget is less than the calculated cap, then the contingency budget is calculated by subtracting non-contingent items from the proposed budget. • At the time of budget preparation, the contingency budget is never to be greater than the proposed budget (and most likely will always be less). • Not restrained by cap in this case; rather, by the definition of ordinary, contingent expenses. • Unanticipated, ordinary contingent expenses or grants-in-aid, for example, may be added to the contingent budget adopted by the Board of Education.

11. What about exclusions? • Certain expenditures, i.e. capital expenditures previously approved by the voters, are not subject to the cap. • Non-recurring items are expenses that were in the base year budget but not part of subsequent year’s contingency budget. Could be something like an Interfund Transfer to Capital. • District does not have authority to buy buses or make Interfund Transfer to Capital under a contingency budget if these were items in the proposed budget that was defeated.

12. Exclusions (continued) • Caution must be exercised when adding any expenses associated with projected increases in enrollment. • Projected increase in enrollment means increase in costs related to the total district enrollment, not just an increase to a grade or building. • Specific costs are to be used, not a per-pupil amount or generic percent increase applied to all costs. • Districts must be mindful of public awareness when it comes to this topic.

13. Public Notice • “Contingency Budget” column of budget notice must reflect reductions. • “Contingency Budget” column should not be greater than “Proposed Budget” column at the time of budget preparation. • “Statement of Assumptions” on the budget notice should list the items for those reductions necessary if the Board of Education adopts a contingency budget.

14. Administrative Cap Calculation • Districts on a contingent budget are also subject to a cap on the administrative component of the budget. • Administrative cap is the lesser of the percent of administrative component from previous year (not including capital component) or the percent of administrative component of most recently defeated budget for the subsequent year.

15. Other Updates • Common misunderstandings on ARRA • ARRA monitoring and audits • Pupil transportation contract approvals • Budget deadlines

16. Common Misunderstandings • Quarterly reporting is a request for payment • Fact: Sub-recipients submit requests for payments through a payment office (Grants Finance in most cases) • A full-time employee is .25 FTE per quarter • Fact: a Full-time employee is 1.0 FTE per quarter • That a job created in one quarter is a job saved in the next • Fact: Job creation refers to jobs created with ARRA funds compared with school year 2008-09. A job created and funded throughout the year remains a job created.

17. Common Misunderstandings • Supplemental ESF funds can be used next year • Fact: ARRA funds appropriated for school year 2009-10 must be obligated by June 30, 2010 and expended by September 30, 2010 • Not knowing when the report is due! • Fact: We all know the end of each quarter: 3/31, 6/30, 9/30, 12/31. This is when quarterly reports are due for each and every ARRA grant (even if there are no changes). • Forgetting to check the ARRA website • Fact: http://usny.nysed.gov/arra

18. ARRA Monitoring • Monitoring—to verify that funds are spent as intended and to receive feedback on SED data collection and communication • 2 districts visited; 10 remaining visits in April and May • Allowable costs reviewed • Job calculations reviewed • Supporting documentation reviewed

19. Audits—ARRA ESF, IDEA and Title I • 30 audits by June 30, 2011 • Audit Plan Objectives • Verify the allowability and accuracy of amounts expended to date, or amounts reported for each expense code, • Verify the appropriateness of any request for additional funding, • Determine if the District has sufficient control systems in place to administer ARRA, and • Assess compliance with pertinent federal requirements for the use of federal funds (includes cash management and positions funded).

20. Initial Findings • That job estimates were not recalculated each quarter • That districts didn’t know they must remit to SED interest earnings over $100 • Not maintaining payroll certifications for jobs that are funded in part by ESF and in part by another federal grant • FTE for jobs funded in the accounting system differs from the FTE the district reported in the ARRA quarterly report

21. Pupil Transportation • We are moving to a system where aid will be paid only if a transportation contract is approved • Will be implemented for 2009-10 contracts with aid to be paid in 2010-11 • We are inviting school officials to come to SED to straighten out long standing contract problems. • We will send monthly disapproval notices to Superintendent and pupil transportation contact

23. Resources • http://www.emsc.nysed.gov/mgtserv/budgeting/ • http://usny.nysed.gov/arra/ • http://www.emsc.nysed.gov/schoolbus/ • Office of Educational Management Services: 518-474-6541 emscmgts@mail.nysed.gov www.emsc.nysed.gov/mgtserv

24. Questions?