Financial Management for Transit Operators. Rob Lynch Training Coordinator Small Urban and Rural Transit Center

Transcription

1 Financial Management for Transit Operators Rob Lynch Training Coordinator Small Urban and Rural Transit Center

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3 Session Overview General accounting Budgeting Revenue Management Cost allocation Audits Recordkeeping - Oversight

4 General Accounting Chart of accounts for transit A uniform and systematic way to record the information necessary to produce the operating statement and balance sheet Also needed for reporting to various funding sources (i.e.: local, state, federal organizations providing funding through grants, donations and other subsidies) Separated into revenues and expenses

5 General Accounting Revenue categories include: Passenger fares School bus contracts Non-transportation rentals and services Taxes levied by the transit agency Freight revenue Concessions Advertising

6 General Accounting Revenues categories cont. Grants and reimbursements from local government Grants and reimbursements from state government Grants and reimbursements from federal government Contributions/donations Contract revenue

7 General Accounting Expense categories include: Labor costs (salary, pay, overtime) Fringe benefits (PTO, insurance, retirement, uniforms, holidays, FICA, unemployment) Services Materials and supplies Utilities Casualty and liability coverage Taxes

8 General Accounting Expense categories cont. Miscellaneous (travel, dues, bad debt, fines/penalties, other) Leases and rentals Depreciation Purchase of lease agreements Other reconciling items

9 General Accounting Income statement for transit Sometimes called Operating Statement; Revenue and Expense Report; Statement of Revenues, Expenses and Changes in Net Position A summary of the revenue and expenses of the transportation agency for a specified period of time Typically by month, quarter and year

10 General Accounting Cash Accounting Accrual Accounting Revenues are recognized when cash is received and deposited Expenses are recorded when bills are paid Revenues are recorded when earned, regardless of the time of payment or receipt of cash Expenses are recorded as soon as they are incurred, regardless of whether or not payment has been made

11 Revenue Example You sell a business 20 rider passes in November but don t collect the money until January. CASH: Record the revenue in January ACCRUAL: Record the revenue in your November books

12 Expense Example You purchase a new printer in June, but don t pay the invoice until August. CASH: Record the expense when you pay in August ACCRUAL: Record the expense in your June books

13 General Accounting Cash Accounting Accrual Accounting Does not recognize promises to pay or expectations to receive money such as payables, receivables and prepays Simpler for organizations that do not have many of these types of transactions Gives a much more accurate financial picture Expenses recorded as they are owed Recognizes revenue once contract services are provided or grant provisions are met

14 General Accounting The National Transit Database (NTD) requires the use of accrual accounting for reporting of data If your transit agency is using a method other than accrual accounting, adjustments must be made to properly record data for NTD reporting

15 Budgeting Budgets are tools for transit financial planning and control Budgets make comparisons between forecasted income/costs and actual income/costs Budgets assist in transit service decisions Budgets allow a historical look back at previous financial performance

16 Budgeting Budget types Operating Operating revenues Operating expenses Grant Federal State Local Capital Vehicles Equipment Facilities

17 Budgeting Steps to creating a budget 1. Evaluate previous year s budget 2. Analyze goals & objectives 3. Evaluate routes/operations/staffing 4. Factor in wages/benefit increases 5. Determine projected growth

18 Budgeting Steps to creating a budget (continued) 6. Estimate overhead 7. Estimate revenue/expenses by service 8. Estimate federal, state, & other funding 9. Estimate passenger revenues 10.Estimate local match required (& excess)

19 Budgeting Provide narrative that includes: Major assumptions Changes to revenue producing operations Methods used to calculate revenue Changes to expense categories Methods used to calculate expenses

20 Budgeting Know your budget approval process Internal Advisory board MPO/COG Policy Board City Council County Commission

21 Budgeting A transit budget is a financial tool It is not usually one big uncontrollable decision that sinks a budget, it is a bunch of small, controllable decisions that have the greatest impact It should be used every day

22 Revenue Management Farebox Revenue Grant Revenue Contract Revenue Local Funding

23 Revenue Management - Fares Fare box revenues Cash Pre-payment Post-payment

24 Revenue Management - Fares Fare collection and cash control Internal controls are essential Method to track driver s fares and reconcile with driver s logs Staff who count cash should be independent of those who reconcile logs or make deposit

25 Revenue Management Fares Cash handling NO envelopes NO bank bags NO cardboard boxes NO driver s pocket At minimum locking metal box

26 Revenue Management - Fares Reasons for overages and shortages Driver error recording information Cancels/no-shows not recorded Riders don t have exact change Riders using wrong fare media fake coins/slugs car wash arcade tokens

27 Revenue Management - Grants Grants FTA formula programs 5311 Rural Areas 5307 Urbanized Areas 5310 Seniors and Individuals with Disabilities 5339 Bus and Bus Facilities

28 How FTA funds public transportation programs UZA < 200,000 4% 19% 28% 8% Rural < 50,000 18% 23% 27% 22% 35% 16% Local State Federal Fares Other 28

29 Revenue Management - Grants Grants FTA discretionary funding Competitive State grants Local grants Municipal Foundations Other federal programs

30 Revenue Management - Contracts Contracts Human service agencies Adult/child day care Businesses employee rides Clients to day training Community work placement Typically a fixed rate/passenger

31 Revenue Management - Local Local funding sources Subsidies (Funding by local governments) Contributions Fundraising United Way In-kind match Bus advertising

32 Cost Allocation Full Cost Accounting The total costs of providing transportation services must be included in the cost allocation All commitment or use of time, money, physical resources and other assets (i.e., administrative time or overhead)

33 Cost Allocation Definitions Capital vs. Operating Costs Administrative Costs Fixed vs. Variable Costs Direct vs. Indirect Costs

34 Capital vs. Operating Capital Costs expenses associated with long-term acquisitions and leases of physical assets such as vans, buses, garages and facilities Operating Costs expenses consumed in a fiscal year to make the transit system operate (i.e., labor, benefits, materials, insurance, supplies, fuel, maintenance)

35 Capital vs. Operating Allowable Capital Costs (varies by state) Vehicles Communications Equipment Passenger Amenities Accessibility Items Vehicle Rehabilitation Computer Hardware and Software Construction Projects Bicycle Accessibility

36 Capital vs. Operating Allowable Operating Costs (but not limited to) Wages - Fringe Benefits (driver/dispatcher) Consumable Materials Vehicle Insurance Licenses Supplies Fuel & Lubricants Maintenance Items Office Space

37 Administrative Costs For multi-service agencies, there are two kinds of administrative costs: Those associated with administering agency operations as a whole Those associated with administering specific services (i.e.: transportation, meals, health services, outreach, etc.)

38 Administrative Costs Administrative Costs (but not limited to) Salaries - Fringe Benefits (admin personnel) Rent & Utilities for General Office & Administrative Space Office Supplies & Materials Casualty & Liability Costs Justifiable Miscellaneous Expenses Professional Fees Taxes (if applicable)

39 Fixed vs. Variable Fixed Costs those which do not vary with the amount of service provided (administrative salaries) Variable Costs those which do change with the amount of service provided (driver s wages, fuel, maintenance costs)

40 Cost Allocation Break into groups and develop a list of expenses. Break them into 2 lists: Fixed Costs Variable Costs

41 Direct vs. Indirect Direct Costs those which can be associated on a one-to-one basis with a given service (driver labor, fuel, maintenance costs) Indirect Costs those which cannot be associated with a given service (shared costs which support more than one function such as utilities and administrative costs)

42 Direct Costs Direct vs. Indirect Driver/Dispatcher/Vehicle Maintenance Wages & Fringe Benefits Contracted Vehicle Maintenance Fuel/Lubricants Consumed Tires/Tubes Consumed Purchased Transportation

43 Indirect Costs Direct vs. Indirect General Administration of Agency Accounting and Personnel Services Costs of Operating and Maintaining Facilities Telephone Mailing Office Equipment Other Overhead Costs

44 Direct vs. Indirect There are no universal rules for classifying a specific cost as direct or indirect. The test is the degree of ease with which a cost can be assigned with a high degree of accuracy and consistency

45 Total Cost Allocation Capital Costs + Operating Costs + Administrative Costs = Total Costs of providing transit service Fixed Costs + Variable Costs = Total Costs of providing transit service Direct Costs + Indirect Costs = Total Costs of providing transit service

46 Why allocate costs? Cost Allocation To divide expenses among funding sources To determine fair billing rates & transit fares To evaluate proposed service increases or reductions To provide cost information for performance evaluation To compare competitive service bids To determine the cost of providing a portion of your service

47 Cost Allocation How to allocate costs: Directly charge as many expenses as possible to the specific service Divide shared expenses based on how resources are used: Vehicle miles / Vehicle hours % of time spent by staff % of space used Arbitrary but consistent allocation

48 Recordkeeping Records must be retained for a minimum of 6 years following the end of a contract period or final audit conclusion for that period. States may be more restrictive than the federal standards Be aware of your jurisdiction s policy on records retention and disposal

49 Recordkeeping How do you store your financial records On-site/off-site Paper vs. electronic 3 rd party vendors Accountant Political subdivision In the cloud

50 Audits Benefits of an independent audit: Credibility of financial statements Professional assistance in financial statement presentation Professional advice on internal controls and business matters Assistance in reporting & compliance GAAP

51 Audits Whether or not you are required to have an audit, good fiscal management practice dictate that your agency s financial records should be audited by an independent, professional accountant each year

52 Resources Transit Cooperative Research Program tcrponline.org The American Institute of CPAs aicpa.org Federal Transit Administration transit.dot.gov

53 Financial Management Oversight FY 2013 Home Page>>Top Requests>>Oversight>>Financial Management Oversight

54 Summary Know your accounting basics Budgets are an important financial tool Revenue must be closely managed basic controls Cost allocation Recordkeeping and financial audits

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56 Small Urban and Rural Transit Center Upper Great Plains Transportation Institute North Dakota State University Fargo, ND