Teacher Professional Develop Executive Summary Finance Division

Transcription

1 Teacher Professional Develop Executive Summary Finance Division I. History and Key Functions The Finance Division consists of three main areas Financial Services, Budget Development and Management Services, and Procurement Services. Each of these areas play an important role in the financial management of the district and in ensuring the duties of the Finance Officer as outlined in the state statutes are fulfilled in compliance with those statutes and other regulatory requirements and authoritative guidance. Most importantly, the Finance Division is charged with maintaining the financial system integrity including the internal control structure and utilizing best practices in financial management. The key business operations managed by the finance team include budget development and management, accounts payable, payroll, procurement, accounting and audit functions, and financial reporting. There are 60 employees in the finance division most with day to day responsibilities focused on transaction processing, compliance, audit and financial analysis work. In addition, the internal audit team conducts financial audits of every school annually and departments on a rotating basis. Top management has 62 combined years of managerial experience with more than half earned in CMS. There are 7 CPA s (Certified Public Accountants) and 4 C.P.M. s (Certified Purchasing Managers) on staff. For context on the financial resources and transaction volume managed by the finance team, note that the Adopted Current Expense Budget totals $1.14 billion which equates to $8,483 per pupil. When considering the Capital Replacement and Enterprise Funds also, the total operating budget is $1.23 billion. The primary revenue sources for the Current Expense Budget are state (55.7%), county (27.8%), federal (14.6%) and other (1.9%). This mix represents a significant shift from 10 years ago when the revenue percentages by funding source were state (62.4%), county (32%), federal (4.5%) and other (1.1%). The most notable changes are in the decline of state and county revenues as a percentage of total revenue, while federal has increased substantially. This trend is more pronounced in due to the significant budget reductions required at both the state and county level and the increase in federal ARRA (American Recovery and Reinvestment Act of 2009) funding. The chart below demonstrates the shift in revenue streams over the past 10 years. 100% 90% 1.1% 1.1% 1.9% 2.4% 4.5% 2.8% 1.9% 1.9% 5.0% 7.9% 7.7% 8.2% 8.5% 14.6% 80% 70% 60% 50% 62.4% 58.9% 58.3% 59.0% 59.9% 60.2% 55.7% 40% 30% 20% 10% 0% 32.0% 35.0% 31.9% 30.9% 29.1% 29.4% 27.8% History Recent Trend County State Federal Other Local

2 2 Each source of funding has unique financial management requirements and varying levels of restrictions as to how those funds may be used with federal funding being the most restricted. The finance team works to ensure that the resources are maximized for all funding sources within the regulations. A few transaction volume indicators also reveal the size and complexity of the financial management of the district more than 79,000 invoices processed and 45,000 accounts payable checks issued to vendors; more than 30,000 purchase orders issued and 25,000 P card transactions processed; 354,000 payroll checks and 26,000 W 2 s issued during Maintaining the financial system integrity requires that the district has an effective system of internal controls in place The Committee of Sponsoring Organizations (COSO) states that internal control is a process, affected by an entity s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of the entity s objectives in three categories: reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations There are 5 components of internal control that span across many areas of the organization which include 1) Control environment 2) Risk assessment 3) Control activities 4) Information and communication and 5) Monitoring. The Finance Division plays an important role in each of these areas with a focus on assessing financial risk, creating controls to manage those risks, monitoring for compliance with policies, procedures and regulations, providing accurate and timely financial information for decision making, and monitoring internal controls to ensure they are functioning as intended, and if not, taking appropriate, corrective action. The Finance Division management team also assists with establishing the proper control environment or tone at the top by consistently reinforcing the district s commitment to complete and accurate financial reporting. The Finance Division routinely provides financial information (ranging from summary reports to source document evidence for detail transactions), and documents internal control processes for audits and monitoring visits by federal agencies. In addition, the district is audited annually by an external audit firm and has received an unqualified audit opinion on its financial statements for many years. In early 2006, the Accounting Standards Board of the American Institute of Certified Public Accountants (AICPA) issued eight new Statements on Auditing Standards (SASs) collectively referred to as the Risk Assessment Standards. One of the primary objectives of the standards is to provide the auditor with a more in depth understanding of the entity and its environment, including its internal control, to identify risks of material misstatements in the financial statements and the procedures the entity is performing to mitigate them. These new standards have been applied in our audits since The most recent audit is to be completed this month for fiscal year , and a full report to the board is anticipated in November. II. Governance The financial management of the district is subject to numerous regulatory requirements and authoritative guidance from various sources. A high level summary is outlined below: Federal level Governmental Audit Standards (GAS) Yellow Book issued by GAO Single Audit Act established audit requirements for government entities with federal dollars OMB Circular A 133 defines program compliance requirements for auditors Education Department General Administrative Regulations (EDGAR) establishes regulatory requirements on administration of federal grants OMB Circular A 87 establishes principles for determining the allowable costs incurred by an agency using federal awards

3 State level: NC General Statutes frequent reference to o North Carolina Public School Laws Article 31 The School Budget and Fiscal Control Act o Procedure for Letting of Public Contracts o Contracts on Informal Bids o 115C 522 Provisions of Equipment for Buildings Local Government Commission audit approval and lending State Board of Education Department of Public Instruction State allotment policies and chart of accounts 3 Local level: Board of Education policies (and related administrative regulations not listed): DFA Revenue from investments DIE Audits/Financial monitoring DM Monies received by schools DNA Disposition of district owned real estate DNB Disposition of district owned personal property JJE Student fund raising activities KCD Gifts of personal property and monetary contributions to schools/departments DJ Purchasing/Contracting DJA Minority, Women, Small Business Enterprises Program GBEA Conflicts of Interest Board of County Commission 10% variance on operating and capital financing Finance policies and procedures Internal School Accounts Manual (school s yellow book ) Authoritative Accounting Guidance: Governmental Accounting Standards Board (GASB) Generally Accepted Accounting Principles (GAAP) Governmental Accounting, Auditing and Financial Reporting (GAAFR Blue Book ) III. Finance Division Budget FY FY FY Adopted Adopted Actual Budget Budget Expenditures Salaries $ 3,211,970 $ 3,445,775 $ 3,022,971 Benefits 798, , ,129 Purchased Services 2,941,322 2,881,923 5,052,697 Materials and Supplies 31,715 31,715 58,816 Furniture and Equipment Other Total $ 6,983,765 $ 7,195,786 $ 8,846,613

4 4 The budget outlined above represents estimated operating costs for the Finance Division to carry out its assigned duties and responsibilities. The budget for Salaries and Benefits cover the cost of full time equivalent employees (1.75 FTEs funded by bond dollars not included here). The majority of the funds budgeted for purchased services cover insurance premiums, $2.8 million and the outside audit contract, not to exceed $110,250. IV Goals The Finance Division has established goals for the current year that are in alignment with the Strategic Plan 2010 and are intended to drive our work so that the plan s objectives will be met. The main goals for the Finance Division are: Deliver world class customer service by providing timely, accurate, courteous and responsive service Provide financial leadership and support activities in a timely, cost effective, and high quality manner in compliance with accounting and regulatory requirements Implement continuous improvement process (CIP) initiatives to improve the operational efficiency within the Finance Division and across the district Improve interdepartmental relationships and communication to enhance productivity and quality of service Develop future leaders and enhance staff performance Establish high expectations for personal accountability V. Initiatives The Finance Division participated in several key initiatives during the past year. Some are outlined below: Lawson HR/Payroll system implementation In a coordinated effort of the Finance, HR and Technology teams, we successfully implemented the fully integrated Lawson HR/Payroll system in March This will improve accuracy, timeliness, and quality of service for human resources and payroll functions. The payroll area achieved numerous efficiencies as a result of the implementation and more are expected as staff becomes more familiar with the new improved business processes and management reports available. Direct Deposit This initiative began last year as we transitioned to Lawson and a great deal of progress was made. Employees may choose between one of two methods to receive their pay direct deposit into a bank account or deposit to a pay card secured by the employee. We are currently targeting full time or part time employees that receive earnings on a regular basis, but plan to expand to substitute employees as well. Payroll Customer Service Plan A customer service plan was implemented for the Payroll Department as a result of the Principal satisfaction survey. Various initiatives were defined from communication to customer service training designed to improve the service level provided to CMS employees. In a subsequent follow up meeting with the Principal Leadership Advisory Team, the feedback was positive indicating that progress had been made. Nevertheless, more work in this area remains to be done in the coming year.

5 5 Fund Reversion Management The management of the operating budget required careful planning as we faced significant challenges with the required reversion of funds to both the state and county. The district returned over $9 million in state funds and $5 million in county funds during FY The impact of these reversions was minimized by holding positions vacant, freezing certain expenditures and maximizing all funding sources Budget Process The economic environment significantly impacted our budget process and ultimate budget outcome for the Budget. It was a long arduous process which included many staff meetings and board work sessions to provide updates and get feedback and support for the planned reductions. Budget reductions were presented in tiers based on varying levels of estimated cuts. In the end, we identified and operationalized cuts and redirections totaling $106.7 million to cover the overall state and local reductions required of $86.9 million. The balance was used to fund areas such as teacher level positions to be strategically placed in our schools, technology and textbooks. Overall, the total current expense budget decreased by $54.2 million or 4.5%. Procurement Card Program A new procurement card program with a more user friendly web based platform, better control features, and favorable rebate structure was implemented. It provides increased accountability with dual approvers. The new program also has enhanced automated capabilities to promote program effectiveness. Remote Deposit Remote Deposit allows CMS to scan checks and deposit them with the bank remotely without making a trip to the bank. Remote deposits are posted the same banking day if transmitted before 8:00 p.m. Audit Consistency The Accounting staff has bi monthly meetings to discuss tough audit issues that have presented themselves and to develop the accurate responses to those issues in accordance with CMS policies. The staff provides an exit interview survey to the Principal and Financial Secretary at the end on each audit to gain feedback to improve consistency in audits. VI. Performance Results The Finance Division results in alignment with the Goals are as follows: Goal: Deliver world class customer service by providing timely, accurate, courteous and responsive service On a scale of 1 4 (with 1= Very Satisfied and 4=Satisfied), Finance had a composite score (mean) of 3.11 across the Core Items on the Principal Survey. The lowest score received was on provides courteous service at 83.3% of responders indicating they were Satisfied or Very Satisfied with the Finance Division providing courteous service. This is an area in which Finance will continue to focus on for improvement.

6 6 Goal: Provide financial leadership and support activities in a timely, cost effective, and high quality manner in compliance with accounting and regulatory requirements Efficiency and Effectiveness Benchmarks CMS Peer Group* World Class Companies* Finance cost as a % of operating revenue 1.37% 1.13%.6% Finance FTEs per billion in operating revenue Procurement cost as a % of annual spend %.80%.60% Payroll administration cost per employee (based on the number of employees) 10,000 to 25,000 employees 2 $59 $131 $73 1 Based on Adopted Budget 2 Based on actual expenditures (excluding bond dollars) * Source: 2009 Perspectives on World Class Finance Organizations, The Hackett Group Key Performance Indicators Target Vendor Payments made timely % of vendor payments made timely within terms (net 30 days) Payroll payments made timely and accurately % of payrolls processed in accordance with established pay schedules % of payroll payments made via manually processed check % of manual payroll checks processed due to Payroll dept. error 92.0% 94.3% 93.3% 96.5% 97.0% 100% 100% 100% 100% 100% 0.76% 1.32% Data not available 18.6% 16.3% Data not available 1.02% < 1% 14.9% 14.0% Procurement effectiveness Total annual spend on the P card $5.5m $5.1m $5.1m $5.1m $6.0m Transmission/Delivery of purchase orders electronically via auto /auto fax Procurement Administrative Lead Time (PALT) in days NA NA NA 30% 90% Data not available Procurement Transactions Per Buyer 2,613 2,754 2,938 2,830 3,000 Volume and % of P card Transactions 21,346 (41%) % of spend controlled by Procurement Services 97.9% dept. vs. % of spend on P Card vs. 2.1% 23,188 (42%) 98.7% vs. 1.3% 27,856 (46%) 98.6% vs. 1.4% 25,426 (46%) 42% 98.7% 98 vs. 99% 1.3% Budget Management % of state funds reverted at the close of the fiscal year Annual expenditures within approved budget (No budget deficit).001%.01% 0% 0.09% 0% Yes Yes Yes Yes Yes

7 7 Key Performance Indicators Target Consistency in Internal Audits % of survey respondents who agree or strongly agree that the guidance and interpretation of policy was consistent with that provided in prior years audits Financial Accounting and Reporting % of undesignated/unreserved fund balance as a % of total revenue Financial Accounting and Reporting Received an unqualified opinion on the annual external audit 81.3% 98.1% 94.0% 98.4% 97.0%.65%.49%.52% 1.49% 1 2% Yes Yes Yes Yes Yes Other performance results Successful close out of all state allotments resulting in maximization of state and local funding In spite of the state freeze imposed in April 2009 which limited the allowable expenditures within each of the allotments, the district only reverted months of employment for CTE teachers, $547 thousand in DSSF funds and.06 of a Literacy Coach position or approximately.08%.of total allotted state funds. Executed a budget development process resulting in a budget that is fiscally sound, balanced, and aligned toward accomplishing the goals of the Strategic Plan 2010 in spite of an unprecedented level of budget reductions ($87m) from state and county sources Received both the Government Finance Officers Association and Association of School Business Officials Certificate of Excellence in Financial Reporting award for the 2008 Comprehensive Annual Financial Report Goal: Implement Continuous Improvement Initiatives (CIP) to improve operational efficiency within the Finance Division and the district Worked in coordination with the HR and Technology teams to successfully implement the fully integrated Lawson HR/Payroll system in March 2009 Implemented a new p card platform with better control features, rebate structure and program efficiencies VI. Next Steps Customer Service Continue to strive to deliver world class service training, tracking and follow up Continuous Improvement Initiatives Expand the direct deposit requirement to all employees including substitutes Continue to identify efficiencies and enhance controls as a result of the Lawson HR/PR implementation as staff becomes more familiar with the new improved business processes and management reports available Upgrade single function copiers to multi function capabilities (copying, faxing, scanning and printing) for increasing efficiency and cost savings Incorporate auto and auto fax applications to expedite the delivery of purchase orders to suppliers, improve end user delivery time and generate cost savings

8 8 Update all procurement documents to include the legally required sex offender language and ARRA funding requirements Establish a fuel card program with enhanced system integration, flexibility and controls Reevaluate and retrain on the contract management process across the district Submit Operating Budget document for Distinguished Budget Presentation award Budget Management Develop a budgetary plan to effectively address the funding cliff anticipated for FY as a result of the depletion of the ARRA funding Evolve the budget process to incorporate ERS data and research to drive the strategic use of resources (time, people and money) around the instructional model and increase effectiveness of resource use in support of Strategic Plan 2014 Leadership and staff development Continue to develop staff and increase bench strength Create processes that promote personal accountability of staff