Financial Management Program. GASBO 2016 Financial Policies John G. Hulsey, CGFM, CPFO

Transcription

1 Financial Management Program GASBO 2016 Financial Policies John G. Hulsey, CGFM, CPFO

2 Learning Objectives At the end of this session, the participant will be able to - Define financial policies and recall why they are important Contrast policies and procedures Discuss important financial policies 2

3 A Tale of Two Schools School A: The School Board is calling a meeting to discuss following issues: A temporary borrowing is required due to lack of available cash to meet obligations in the next two months Audit report with multiple findings related to financial reporting and compliance Appearance of fraudulent activity in one of the departments 3

4 A Tale of Two Schools School B: The School Board has a regularly scheduled meeting to discuss the following: Favorable audit results Strong quarterly financial statement Upcoming debt issuance for capital projects School has historically had excellent debt ratings! Recognition of the Purchasing Department for their admin efforts related to p-cards 4

5 A Tale of Two Schools Which school do you want to be? 5

6 Why Financial Policies Matter Provide a strategic link between management s goals and objectives and the achievement of those goals and objectives Are highly recommended by most finance professionals and auditors Provide parameters within which a government can operate and guide operations without constant intervention 6

7 Financial Policies Defined Financial Policies Guidelines or the plan of action for operational strategic decisions as they relate to financial matters 7

8 Class Discussion Fact or Misconception Small school systems do not need financial policies

9 Policy Guiding principle put in place to give employees direction Set by governing body Reflect the mission statement of the school Sets out what staff can do Procedure Set of actions that staff perform Step by step instruction that tell employees what to do and when to do it Spells out how staff is going to do it Policies translated into action are procedures.

10 Policy or Procedure? The budget shall be balanced for each and every budgeted fund. Total anticipated revenues plus that portion of the fund balance that is designated as a budget funding source shall equal total estimated expenditures for each fund. 10

11 Policy or Procedure? The budget shall be balanced for each and every budgeted fund. Total anticipated revenues plus that portion of the fund balance that is designated as a budget funding source shall equal total estimated expenditures for each fund. POLICY! 11

12 Policy or Procedure? All bank statements and cancelled checks will be opened, reviewed and initialed by the Director of Operations upon receipt. 12

13 Policy or Procedure? All bank statements and cancelled checks will be opened, reviewed and initialed by the Director of Operations upon receipt. PROCEDURE! 13

14 WHY HAVE FINANCIAL POLICIES? Provides direction to staff for handling day-to-day financial business Provides historical basis for future direction by encouraging stability and continuity Establishes consistent guidelines for financial activities Sets a foundation for financial planning and decision making Minimizes risk and safeguards assets

15 Why Financial Policies are Positives: Important Empower employees to do the right thing Provide staff with a degree of freedom within defined boundaries Execute duties without constant managerial oversight 15

16 Role of Elected Officials Establish Policy with Concentration on Long- Term Financial Sustainability

17 Where to Start? Georgia Laws Charters/Ordinances Resolutions Budget Documents Capital Improvement Plans Administrative Handbooks

18 Effective Policy Characteristics Clear, Specific Current Centrally available Comprehensive Who, what, when, where, why

19 Fund Balance/Equity Who? Department Directors Financial Advisors Finance Staff What? Reserve Limits When? Annually Review Where? By Fund Why? Sustainability Discussion Points: What is the right amount of fund balance to have based on your current financial situation and best practices? Has the School placed fund balance into the five categories and reviewed those lately? What happens when the School falls below their target fund balance amounts?

20 Steps to Policy Development Determine needed policies Obtain sample policies from other schools Create a draft policy Template for policies, include legal citations Legal and department review Approval by Board Distribute policy Train on policy

21 Minimum Financial Policies At a minimum, policies should be adopted for the following areas Budgeting Accounting, Auditing and Financial Reporting Capital Asset Management Cash and Investments Revenue Debt Management Expenditures Fund Balance Purchasin Capital Improvement g 21

22 Accounting and Financial Reporting Audit OCGA Requires DOAA to perform annual financial statement audit of LUAs Statute allows additional audit to be performed by CPA Audits performed by CPA still subject to Desk Review by DOAA Audit findings should be addressed May require Single Audit >=$750,000 Federal

23 Accounting and Financial Reporting Preparation of annual financial statements in accordance with generally accepted accounting principles Reporting systems will be maintained to communicate financial information to board and divisions and to record transactions according to DOE Chart of Accounts

24 Budget Balanced Budget Revenues + Appropriated Fund Balance = Appropriations Annual - General, Special Revenue, Debt Service Capital Project - Project length Budget AND amendments require ordinance or resolution Legal Level of Control

25 Other Budget Laws Public access to budget at same time council receives OCGA Public hearing required at least 1 week before adoption OCGA

26 Other Budget Laws O.C.G.A Property Taxes One week prior to setting a millage rate, ad must be run showing current and prior five-year history of assessed values, millage rates, and total amount of taxes to be levied. Ad must show percentage increase and dollar increase for each year from prior year. Ad must show date, time, and place for setting of millage rate. Copy of ad must accompany digest submission.

27 Other Budget Laws Taxpayer Bill of Rights Net assessed tax digest value increased by reassessment should be handled by Rolling back millage rate so same revenue is collected Rate is adopted at an advertised public meeting OR Increase the millage rate beyond the roll back rate, which requires advertising intent and three public hearings

28 Revenue Policy Revenues estimated conservatively Revenue diversification User fees One-time revenues Collections Interfund transfers

29 Expenditure Policy Expenditures controlled by annual budget process Expenditures will be monitored (at least monthly) and action taken prior to potential shortfalls Purchases will be made in accordance with purchasing policy School will maintain a purchasing system sufficient to meet departments needs in delivering services

30 Debt Management Purpose of debt capital acquisition or construction Types of debt General Obligation Revenue Bonds Refunding Circumstances Remove restrictive covenants Interest rate reduction

31 Debt Management Limits Constitution, Article IX, Section V not more than 10% of assessed value of all taxable property

32 Fund Balance Working Capital meet cash flow requirements (at least two months) Emergency meet unforeseen expenditures (i.e. tornado, ice storm) Asset Replacement Replenishment strategy once fund balance is used

33 Capital Asset Policy Definition of capital asset Useful life $ value, at least $5,000 Method of depreciation Useful life by category Physical inventory requirements Disposal authority

34 Cash and Investments Policy Authority to invest Authorized investments ( ) Obligations of this state or other states US Government obligations Local Government Investment Pool Selection of Financial Institution Diversification of Investments Collateral requirement 110% OCGA

35 Purchasing Policy Authorization Methods (quotes, bids) Ethics Public Works OCGA thru

36 Purchasing Policy OCGA , Purchasing cards no cards issued after this date to elected officials unless governing body by public vote has authorized issuance and adopts policy covering Authorized and unauthorized purchases Transaction limits Card administrator Review process for purchases Violations of policy

37 Capital Improvement Definition of the time horizon (for example, a five year plan) Definition of major expenditure (for example, minimum cost of $25,000) Definition of useful life (for example, a useful life of ten years or longer) Direction regarding spending priorities Details of evaluation process

38 Characteristics of the Government Success of financial policies: Value placed upon the policies Accountability for the financial policies Commitment to ongoing training Policy training should be held at both the board and staff levels to ensure that everyone is knowledgeable about the policies 38

39 What Do You Do Now? Ask for a copy of your financial policies Determine when policies were last updated Ask whether policies have been reviewed by School Attorney Review audit for findings related to policies Ask staff whether current issues exist with certain policies

40 Sample Policies Professional judgment required Policies must be followed once adopted

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42 The Carl Vinson Institute of Government. All rights reserved.