CBO Boot Camp Presented by: Christy White, CPA President, Christy White Associates

Transcription

1 Spending the Money Managing The Top 4 Spending Categories CBO Boot Camp Presented by: Christy White, CPA President, Christy White Associates Cwhite@christywhite.com

2 How Money is Spent Expenditures of Average District $276, 2% $1,242, 11% $543, 5% $5,025, 45% $2,505, 22% $1,677, 15% Certificated Salaries Classified Salaries Employee Benefits Books & Supplies Services and Other Operating Capital Outlay and Other

3 The Top 4 Spending Categories Personnel salaries Employee benefits Maintenance, operation and transportation costs Capital facilities costs Spending management controls are also needed within the balance of the budget, areas such as: travel and conference; pupil materials; utilities; other insurance; consultants; and, food service And, any program that encroaches onto the General Fund needs close examination. Special education enrollment (cost) is increasing faster than the general student population, without adequate funding from the federal and state governments Outside the LCFF formula, funding is a combination of federal and state restricted sources with the excess costs being paid with unrestricted funds. The state special education funds are paid based on total student enrollment and not by the number of special education students (AB 602), to discourage over-identification of disabilities. Special revenue funds need to cover the operational cost with dedicated revenue sources (e.g., child nutrition fund, child care fund)

4 Definitions and Revenue Sources Personnel Salaries Budget Guidelines Certificated, classified and administrator salaries full-time, part-time, overtime, stipends, bonusses and retirement incentives Possible Funding Sources: LCFF, federal entitlements and grants, lottery, mandated cost reimbursements, special revenue sources Budgeting personnel costs requires careful projection of revenues Poor budgeting practices can bankrupt a district (results in unwanted state loans!) Position Control a must One-time revenues do not pay for ongoing expenditures When grant funding disappears so do the positions! Class size and staffing ratios drive costs Salary agreements drive costs Reductions require careful long-term planning projections a necessity Early retirement incentives require careful planning to ensure net cost savings, also be careful to not offer too frequently as you risk it becoming an added benefit (with cost!)

5 Internal Controls Personnel Salaries Accounting Considerations From personnel requisition to paycheck, accuracy a must Position control makes sure there is available budget, must be checked when hiring Good hiring practices required Employee vs independent contractor determination Segregation of duties between the HR and payroll function Any June payroll paid in July accrued as a liability as of 6/30 (along with related benefits) Procedure 905 of CSAM, Documenting Salaries and Wages, for federal and state programs -- follow or risk funding loss! Early termination benefits follow GASB Stmt #47, accrue when a plan has been approved, the employees notified and the amount estimable Supervision and review Personnel Activity Reports (or approved alternative) for federal and state grants Using SACS coding Object codes Goal code used for Special Education Resource codes used for restricted program (federal, state and any local grants)

6 Personnel Salaries What Can Go Wrong! Significant Projection Errors Don t forget to include all costs, i.e., step/col, overtime, related benefits Over-projecting costs could also give you credibility problems with the unions Watch how you budget unfilled vacancies District liability due to underpayment or miss-classification of employees independent contractors Fraud Ghost employees Falsifying time sheets Faking illness and workers comp fraud Expense reporting fraud

7 Employee Benefits Definitions and Revenue Sources Statutory benefits include: Social security/medicare Unemployment insurance Worker s compensation insurance Voluntary benefits include: Medical benefits active employees and retirees Life insurance STRS/PERS pensions Other (TSA s, 401(k) plans, health benefit accounts) Vacation and sick leave Possible Funding Sources: the same funding sources as salaries Budget Guidelines Ties directly to salary projections, know your percentages; for example: OASDI 6.2% employer share Medicare 1.45% Worker s Comp varies widely, state average 3.5% CalPERS % and increasing 2% or more annually! CalSTRS 14.43% and increasing 2% or more annually! Medical premiums 2-3 times COLA annually. 8% increase on average in 2016! Largely driven by negotiations with your unions and providers Vacation Liability manage through policies to use vacation and adhere to agreed upon caps

8 Internal Controls Statutory benefits: proper filing and deposit of taxes and voluntary withholdings/contributions Medical: Employee Benefits Regular verification of employee and dependent eligibility Reconciliation of benefit invoices to benefit rolls PERS/STRS proper application of a myriad of laws, including: membership eligibility, creditable compensation, monthly contributions, employment of retirees Worker s Compensation: claims and risk management Retiree Heather Benefits: verification of eligibility and proper billing/collection of retiree paid portions Misc. benefits: proper administration of the plan and cash/investment management Vacation and sick leave: proper tracking, valuation and payout Accounting Considerations Object code series 3000 (the fund, resource, function and goal coding follow related salaries) Procedure 785 in CSAM provides guidance for accounting for OPEB costs. Allowability to charge against federal programs is complex, use the guidance Self-insurance funds: district may self-insure for workers comp, medical, OPEB (and P&L insurance), CSAM Procedure 775 must be followed Vacation liability, CSAM Procedure 465, compute at year-end

9 Employee Benefits What can go wrong?! Improper payments to employees, former employees, retirees and dependents Vacation payouts in excess of caps or available balances Not properly administering retirement, supplemental retirement and medical benefit plans Spiking salaries for higher PERS/STRS benefits Watch for inconsistent pay raises and large amounts of special compensation STRS and PERS activity audit in this area

10 Projection Factors Affecting Salaries and Benefits Negotiated salary and benefit amounts FTE s by classification Seniority of staff Class size minimum requirements Administrator and classified staffing needs Health care premium rates STRS/PERS rates Changes in any of these factors can have a significant impact on the District budget

11 Maintenance, Operations and Transportation (MOT) Definitions and Revenue Sources Routine maintenance, grounds keeping, custodial services, transportation services Possible Funding Sources: mostly unrestricted sources although you may transfer actual costs most programs using prescribed cost accounting standards in CSAM Transportation and deferred maintenance funding combined in the LCFF formula Budget Guidelines Maintenance: routine and deferred Prudent to establish deferred maintenance reserves in addition to current year budget, then manage reserve level to long-term needs Transportation: cost directly related to transportation policy, ridership estimates, routing of busses, condition of the bus fleet Custodial: costs managed through staffing deployment (e.g., assigned to site or to a team that moves site to site) To transfer MOT costs to programs, budget the allocation either directly or using Classroom Units or Pupils Transported methods

12 Maintenance, Operations and Transportation (MOT) Internal Controls Accounting Considerations Maintenance work order systems to track time and materials by job MOT activity is tracked by function codes (M&O #8100, transportation #3600) Time supervision Materials controls Inventory of vehicles, tools, equipment, maintenance materials and custodial supplies Transportation: must comply with maintenance of effort by spending the lesser of (1) the actual expenditures or (2) the amount received in every year (tested in the audit) Control over vehicle fuel usage and authorized use CSAM Procedure 910 provides permissible methods to allocate the cost of maintenance and operations to other programs Classroom units (CU) for maintenance and operations Pupils transported (PT) for transportation

13 Maintenance, Operations and Transportation (MOT) What Can Go Wrong?! Personal use of district vehicles, tools, equipment and materials Inflation of hours worked, overpay staff in regular or overtime hours Theft of district property Unauthorized sale of district property Purchasing kick-backs (corruption) Conflicts of interest Unsafe conditions = district liability

14 Capital Assets Definitions and Revenue Sources Budget Guidelines Major construction and reconstruction, major equipment and vehicle purchases Possible Funding Sources: bond sales, developer fees, sale of district property, state and federal grants, leasing arrangements, special assessments and unrestricted funds Facilities master plan, board approved and updated regularly Budget to match available funding sources Specialized software helpful to track the details of multiple projects that often cross fiscal years Good project management to minimize budget overruns and change orders Prioritization of projects as there is never enough money for the needs!

15 Internal Controls Capital Assets Compliance with Public Contract Code for bid procedures Compliance with Proposition 39 for 55% voter approved bonds Annual financial and performance audits required Establishment of a citizens oversight committee Inventory of capital assets and depreciation Capitalization policy Maintenance of an inventory ledger with historical costs, date of purchase, location/description and related depreciation Tagging moveable assets (grants might require additional identification) Annual inventory of moveable assets Procedures for disposal Inventory of FMV for insurance Accounting Considerations CSAM Procedure 430 provides accounting guidance Recorded in Object Code 6000 series and/or Function Code 8500 EC required record of equipment >$500, but capitalization threshold often higher (i.e., $5,000) Record into proprietary funds directly as an asset Government funds expense the conversion entry for audited government-wide statements GASB 42 requires write-down to realizable value when property is damaged or unfit for use Related debt and debt payments must also be recorded (refer to CSAM) Receipt of funds is revenue (recorded as a liability on the Statement of Net Assets) Payment of principal and interest are expenditures (principal payments reduce the liability)

16 Capital Assets What Can Go Wrong?! Theft of movable capital assets Purchasing kick-backs (corruption) Bid-rigging Overbilling Deliberate use of sole source contractors to perpetuate a fraud Unauthorized use of facilities Conflicts of interest Over-budget Loss of public confidence Unsafe conditions, poor construction = district liability

17 Questions? Comments? Thank You!