Budget and Finance: What Every NEW School Board Member Needs to KnowJennifer bergel, Loudoun County School Board member Leigh Burden, Assistant Superintendent Business & Finance
Fiduciary Duty • Legal authority • Malfeasance Who is minding the store?
Fiduciary Duty • Legal authority • Malfeasance VA Code: 22.1-89 Management of funds “Each School Board shall manage and control the funds made available to the School Boards for public schools and may incur costs and expenses.” What this means… The School Board determines how the funds are to be spent. The local governing body determines appropriation levels.
Fiduciary Duty • Legal Authority • Malfeasance VA Code: 22.1-91 Limitation on expenditures “No school board shall expend or contract to expend, in any fiscal year, any sum of money in excess of the funds available for school purposes for that fiscal year . . . .” What this means… The School Board can not exceed the appropriation levels determined by the local governing body.
So, who IS minding the store? • Superintendent • CFO/Director of Finance/Assistant Superintendent • School Board
Budget • Superintendent’s role • School Board role • Local governing body role Who does what…when?
ORIGIN OF WORD “Budget”Used VIDEO on Budget from HOTFORWORDS.com
ORIGIN OF WORD “Budget” • The origin of our word budget is the Latin bulga, a little pouch or knapsack. • The word turned up in English in the fifteenth century, having travelled via the French as “leather bag” where housewives kept their money.
Superintendent’s Role • Development of needs-based budget • Compensation decisions • Date requirements What LCPS does….
School Board Role • Sometimes direction to Superintendent on priorities • Public hearings (formally advertised) • Public input (community info) • Submission to local governing body What LCPS does….
Local Governing Body Role • Fiscal guidance? • Appropriation – lump sum or state category? • It’s all about relationships…. What LCPS does….
Budget Development: Key Players • Board of Supervisors • School Board • Superintendent • Senior Staff • Department of Business and Financial Services • School Administrators • Parents and School Community • Education Association
Standard Budget Reports • Budget reports • Trend data • Comparisons with previous year • Explanations of changes – cost of salaries • Enrollment projections • Peer comparisons
Finance • School activity funds • Finance committee • School operating fund • Where the money goes • How to monitor? Financial reporting
School Activity Funds • Basic principles • Funds used for purpose collected • Projects shall contribute to educational experience • Funds derived by student body used for student body • Students encouraged to participate in management • Funds managed with sound business practices Note no oversight responsibility of PTAs/PTOs/Boosters
Finance Committee • Contracts/Procurement • Virginia Public Procurement Act (VPPA) • Sanctions significant • School Board policy • Competition thresholds
Standard Finance Reports • Monthly financial reports • Reporting by state category • Quarterly financial reports • Expenditure and revenue summary • Expenditure detail (by Dept, by Sub object)
LCPS Monthly Report- State Category ex. State CategoryOriginal BudgetRevised BudgetActualBalanceExpended Operating Fund Instruction $540,362,397 $560,301,189 $443,090,286 $117,210,903 79.08% Admin, Attend & Health $34,590,145 $38,420,337 $34,496,855 $3,923,482 89.79% Facilities $2,308,489 $4,224,570 $3,059,755 $1,164,815 72.43% Operation & Maintenance $65,840,169 $64,436,188 $55,227,551 $9,208,636 85.71% Pupil Transportation $52,466,940 $53,052,165 $39,733,172 $13,318,993 74.89% Technology $25,277,522 $30,838,772 $22,709,099 $8,129,674 73.64% Debt Service & Fund Transfers $0 $7,434,609 $7,434,609 $0 100.00% Fund Subtotal$720,845,662$758,707,831$605,751,327$152,956,50479.84% Food Service Fund Food Services $24,034,272 $24,034,272 $18,318,973 $5,715,299 76.22% TOTAL $744,879,934$782,742,103$624,070,300$158,671,80379.73%
LCPS School Operating Fund Where the money goes All other costs 12% Salaries & benefits 88%
Fund Balance/Surplus/Savings • Coming soon to a Local Governing Body meeting • Important issue facing School Boards across the Commonwealth • Why it happens and why it matters
Why it happens and why it matters What is lapse and turnover? • Fluctuations of budget to actual • Position lapse and turnover • CAUTION, CAUTION • Only flexibility the division has…
How To Address It • Budget a large negative number • Make assumptions for vacant / new positions • Other variables • Predicting human behavior
Surpluses Come From Savings • Surpluses are not a surprise • All school division’s budgets should have unspent funds • School divisions cannot exceed their appropriations
Unspent Funds All school divisions have unspent funds at the end of the year. Source: FY 2010 Comprehensive Annual Financial Reports
LCPS - Where the money comes from FY 2012Amount ($ in millions) • Carryover $10.0 • Local/County funding $494.0 • State revenue $221.6 • Federal funds $13.2 • Other Funds $7.2 Total $746.0 State 29.7% Local/County 66.2%
Local/County Funding Source: FY 2012 WABE Guide Tax Rate $1.285 per $100 of assessed value Value of 1¢ $7.5 million
State Funding & the Local Composite Index • Components • True Value of Property • Adjusted Gross Income • Taxable Retail Sales • LCPS LCI - .5854 Source: DOE website According to the LCI, locally we should be able to pay for about 58 percent of the costs of education and the Commonwealth should pick up 42 percent.
Sales Tax Calculation Basic Aid Calculation 08 Triennial census statewide 1,511,877 08 Triennial census LCPS 71,489 LCPS Percentage 4.7285% Sales tax statewide $95.9 billion Education share 1.125% $1.1 billion LCPS percentage 4.7285% Sales tax funding $51 million Adjusted ADM (K-12) 61,893 State per pupil amount $5,448 Total $337.2 million Less sales tax ($51 million) Total Basic Aid $286.2 million State share .4146 State funding $118.7 million
Other Stuff You Should Know • Misinformation • Simplify, simplify, simplify • Strategies to cut spending
MisinformationUsed VIDEO from SNL “Violins on Television” from HULU.com
Misinformation • The media sometimes gets it wrong • If your version isn’t out there, it doesn’t exist. • Tell the story better • Everyone has to help
Simplify, Simplify, Simplify • What kind of information do employees need? • What can be easily understood? • The right data will tell your story. • Peer comparisons • Pupil/teacher ratios • Cost per pupil • Compensation packages • School-based and non-school based positions
Strategies to Cut Spending • Reduce employer share of healthcare • Defer equipment replacement plans • Mid-year salary enhancements • Increase fees • Selective elimination of programs • Last in first out • Reduce staffing greater than SOQ • Review current vacancies • Reduce extended contracts • Increase class size • Healthcare co-pays and deductibles
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