Summit Financial Limitation Policy

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Duane Webster
5 years ago
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1 Summit Financial Limitation Policy Summit s Administration shall not cause or allow any organizational practice, activity, decision, or circumstance that is either unlawful, imprudent, in violation of Colorado Department of Education (CDE) policies, in violation of Boulder Valley School District (BVSD) policies as they pertain to Summit Middle Charter School, or in violation of commonly accepted business and professional ethics and practices. In addition, and without limiting the foregoing, Summit s Administration shall maintain the policies and practices that appear below. For the purposes of these Financial Limitation Policies, the following terms are defined: Summit Board shall be the Summit Charter Middle School Board of Directors. General Fund Reserves shall be all funds held in the Summit General Fund account including funds designated by the Summit Board for specific purposes ( General Fund Designated Reserves ) as well as funds that have not been designated by the Summit Board for specific purposes ( General Fund Undesignated Reserves ). General Fund Operating Reserve shall be a General Fund Designated Reserve, the purpose of which is to provide operating funds for Summit in the event of a rainy day; a condition or circumstance that disrupts or significantly changes the normal expected operating funding or costs of the school enough to threaten its normal operations. The principle underlying the maintenance of an Operating Reserve is to ensure continuity of Summit for a short period of time, such as two years, following a decrease or reduction in funding or an unusual increase in operating costs, in order to allow time for the Summit Administration and the Summit Board to plan and implement operational changes to maintain long term financial sustainability. The General Fund Operating Reserve shall be defined as the minimum amount required to be maintained according to the General Fund Operating Reserve Minimum Balance Requirement in section 1.3 (a). TABOR Reserve shall be a General Fund Designated Reserve that is required in accordance with the TABOR (Taxpayer Bill of Rights) amendment to the Colorado Constitution, Article X, Section 20.

2 General Fund Undesignated Reserves shall be defined as all General Fund Reserves that are not General Fund Designated Reserves. For the purpose of clarity, General Fund Designated Reserves include the General Fund Operating Reserve, TABOR Reserve, and Other Board Designated Reserves. Fiscal Year Operating Budget ( FYOB ) shall be the Summit Board approved annual operating budget for a given Summit fiscal year including reasonably detailed line item operating revenues and expenses and General Fund Reserves designations and releases. 1.1 Actual Financial Conditions and Activities With respect to the actual, ongoing financial conditions and activities, Summit s Administration shall not cause or allow the development of financial jeopardy or material deviation of actual expenditures from priorities established in Summit s Mission and strategic plan. Summit s administration shall not: 1. Expend more funds than will be received in the fiscal year without Summit Board approval. 2. Spend in excess of the current FYOB during the current Summit fiscal year. 3. Incur debt except for procurement card debt as provided in the Procurement Policy. 4. Fail to settle payroll and debts in a timely manner. 5. Allow tax payments or other government-ordered payments or filings to be overdue or inaccurately filed. 6. Make a single purchase or commitment of greater than $5,000 unless the purchase or commitment is an itemized part of the current FYOB or has been specifically approved by the Summit Board. Splitting orders to avoid this limit is not acceptable. 7. Acquire, encumber, or dispose of real estate. 8. Fail to aggressively pursue receivables after a reasonable grace period. 1.2 Financial Planning and Budgeting Summit s administration shall not cause or allow financial planning and budgeting for any fiscal year or the remaining part of any fiscal year to deviate materially from

3 Summit s Mission, Summit s Board Goals, risk financial jeopardy, or fail to be derived from a multiyear plan ( Financial Outlook ). Summit s administration will not cause or allow financial plans or budgets that: 1. Risk incurring those situations or conditions described as unacceptable in the "Actual Financial Conditions and Activities" section of the Financial Limitation Policy. 2. Omit: credible projections of revenues, expenses, and General Fund Reserves; separation of capital and operational items; or disclosure of planning assumptions. 3. Provide less for board prerogatives during the year than is set forth in Summit s strategic plan and Summit s Board Goals. 4. Create obligations over a longer term than revenues can be safely projected, in no event longer than one year, without Summit Board approval. 1.2 (a) Annual Operating Budget (FYOB) A FYOB developed and proposed by the Summit Administration and approved by the Summit Board must be in final, approved, form no later than May 1 of the year preceding the FYOB year. The FYOB will reflect an operating plan and program that is in alignment with Summit s mission. It will include sufficient narrative and annotation so that it discloses planning assumptions and line item budgeting assumptions. The original FYOB may be updated during the fiscal year with revised budgets that are developed by the Summit Administration and approved by the Summit Board. The FYOB will include those elements of revenue and expense as prescribed by state statute and adhere to the Unified Budget Summary. The FYOB will present credible projections of revenues, expenses, General Fund Reserves funding, and use of General Fund Reserves. The FYOB will incorporate both short and long term financial objectives: to support the Summit program and strategic initiatives for the specific fiscal year operation as well as maintain the long-term financial sustainability of Summit. The FYOB will be developed to maintain General Fund Designated Reserves and TABOR Reserve requirements. 1.2 (b) Spending Authority

4 The Administration of Summit has the authority to spend up to the approved FYOB amount so long as these expenditures are in accordance with the purposes articulated in the approved FYOB and its underlying detail, provided that: 1. A variance of less than $5,000 for non-compensation budget line items may be made without Summit Board approval. 2. A variance of $5,000 or greater for non-compensation budget line item requires Summit Board approval. 3. Any increase to the total of all the compensation-related line items requires Summit Board approval. Transfers between compensation-related line items do not require Summit Board approval, with the exception that any transfer from an administration to instructional compensation-related line item requires Summit Board approval. 4. Expenditures funded from the School Contingency Expense line item of the FYOB must be pre-authorized by the Summit Board. 5. All purchases follow the Depository of Funds/Authorized Signatures, Purchasing, and Contracting policy. 6. Any variances to the FYOB cannot result in an increase to the overall expenditures. 1.2 (c) Financial Outlook Each year in conjunction with preparation of the FYOB, the Summit Administration will develop a view of the future financial operation of Summit for a minimum of five years following the current fiscal year. This Financial Outlook will present the assumptions used for the key drivers of the Financial Outlook and it will both explain the resulting outlook as well as recommend operating changes if the Outlook does not represent a financially sustainable future or if it reflects significant operating surpluses. The Outlook should not project deficits beyond the capacity of the General Fund Reserve to fund those deficits. Any deficit projection for a Designated Reserve shall be replenished to the minimum required reserve balance as required by the Designated Reserve. Each year the Financial Outlook will be developed and proposed by the Summit Administration and approved by the Summit Board prior to final approval of the FYOB for the upcoming fiscal year. 1.3 General Fund Reserves Purpose, Uses, Minimum Balances

5 General Fund Reserves will be maintained to provide for the long-term financial sustainability of Summit and for other purposes that the Summit Board may approve from time to time. Use of General Fund Reserves requires Summit Board approval. Use of General Fund Reserves is generally limited to one-time, non-recurring-type costs with the exception that the Summit Board may approve use for recurring-type costs for a finite period of time. Use of General Fund Designated Reserves must be in accordance with the designated purpose of the specific General Fund Designated Reserve. 1.3 (a) General Fund Operating Reserve Minimum Balance Requirement The General Fund Operating Reserve Minimum Balance Requirement shall be an amount equal to 10% of the annual operating expense budget for the current fiscal year, excluding extraordinary, non-recurring operating expenses or one time capital expenditures. Each year the Summit Board shall review the General Fund Operating Reserve Minimum Balance Requirement in order to determine whether or not a larger reserve is prudent in view of uncertainties in the current and future revenue and operating expense outlook. Any use of the General Fund Operating Reserve that causes the balance to drop below its minimum balance requirement must be accompanied by a reasonably attainable plan for replenishing the General Fund Operating Reserve within four years from the first year of dispersal. A note on the 10% Minimum Balance Requirement: The 10% General Fund Operating Reserve Minimum Balance would have covered the peak to trough decline in per pupil revenues that Summit experienced beginning in FY Between FY 2010 and FY 2013, State funding declined by a total of 8.7%, and the combined state and override funding, excluding the 2010 override, declined by a total of 7.7%. The measurement of these declines excluded the 2010 override because it increased BVSD s funding from overrides to 25%, which is the maximum allowed by Colorado law. Moving forward, since additional mill levies cannot be passed, Summit s ability to rely on further funding from BVSD voters is limited, absent changes to Colorado state law. Future state budget cuts may have the potential to be larger than the one experienced from 2010 to 2013, which is why this is only a minimum requirement. 1.3 (b) TABOR Reserve Minimum Balance Requirement

6 An emergency reserve amount equal to the amount set forth in Article X, Section 20 of the Colorado State Constitution. This balance must be maintained in accordance with the current Colorado statutes. 1.3 (c) Other Board Designated Reserves Summit s Board may establish additional General Fund Designated Reserves, separate from the General Fund Operating Reserve and the TABOR Reserve, for the purpose of achieving the school s mission and maintaining financial sustainability. These additional General Fund Designated Reserves must be approved by the Summit Board and will be required to have their own policy related to use, minimum balance, and replenishment in alignment with their objectives. 1.4 Fiscal Accounting and Reporting The Summit Administration shall be responsible for properly accounting for all funds of the school. The accounting system used shall conform to the requirements of the State Board of Education. In accordance with C.R.S , the Summit Board and the Summit Finance Committee will review financial statements on a quarterly basis. NOTE: Fiscal accounting and reporting must meet requirements established by the State Board of Education as set forth in the Financial Policies and Procedures Handbook for public schools in Colorado. (C.R.S and ) 1.5 Asset Protection Summit Administration shall not cause or allow Summit assets to be unprotected, inadequately maintained, or unnecessarily risked. Summit s administration shall not: 1. Fail to insure adequately against theft and casualty and against liability losses to Summit Board members, employees, and the organization itself. 2. Subject facilities and equipment to improper wear and tear or insufficient maintenance. 3. Unnecessarily expose the organization, the Summit Board, or its staff to claims of liability. 4. Make any purchase (a) wherein normally prudent protections have not been given against conflicts of interest; (b) of more than $5,000 without a stringent

7 method of assuring the balance of long-term quality and cost. Orders shall not be split to avoid these criteria. 5. Fail to protect intellectual property, information, and files from loss or significant damage. 6. Receive, process, or disburse funds under controls insufficient to meet the Summit Board-appointed auditor's, CDE, and BVSD standards. 7. Compromise the independence of the Summit Board's audit or other external monitoring or advice, such as by engaging parties already chosen by the Summit Board as consultants or advisers. 8. Endanger the organization s public image, its credibility, or its reputation. 9. Change the organization s name or substantially alter its identity in the community. 1.6 Compensation and Benefits With respect to employment, compensation, and benefits to employees, consultants, contract workers, and volunteers, Summit s administration shall not cause or allow jeopardy to financial integrity or to public image. Summit Administration shall not: 1. Change the principal s compensation or benefits without Summit Board approval. 2. Change the benefits provided to employees without Summit Board approval. 3. Promise or imply any form of employment other than at-will. 4. Establish compensation that deviates materially from the geographic or professional market for the skills employed, particularly in relation to the compensation and benefits of the administrative and support team. 5. Make initial salary offers inconsistent with the Summit Salary Matrix. 6. Make faculty salary changes inconsistent with the Summit Teacher Compensation Policy. 7. Make administrative and support staff salary changes inconsistent with the Summit Administration and Support Evaluation Policy and the Summit Principal Evaluation Policy. Policy Information: Policy Section: D: Fiscal Management Waived BVSD Policies: DJ-DJE & DBJ

8 Effective Date: TBD Related Administrative Processes/Procedures:

POLICY TYPE: EXECUTIVE LIMITATIONS POLICY TITLE: GLOBAL EXECUTIVE CONSTRAINT

POLICY TYPE: EXECUTIVE LIMITATIONS POLICY TITLE: GLOBAL EXECUTIVE CONSTRAINT POLICY TITLE: GLOBAL EXECUTIVE CONSTRAINT The Executive Director shall not cause or allow any practice, activity, decision, or organizational circumstance which is either unlawful, imprudent or in violation