Essential Financial Reports for Your Board:

A Discussion

November 2012

The Finance Committee

The Finance Committee has the responsibility to • Create/Recommend a balanced budget for the upcoming fiscal year• Monitor implementation of the approved budget on a regular basis • Recommend proposed budget revisions• Review financial statements and audit findings• Recommend to the Board appropriate policies for the management of

the school’s assets• Review Debt issuance

Sample Finance Committee composition:• Board Treasurer• Back-up to Board Treasurer• Head of School• Director of Operations/Business Manager• Member of community (pref. w/financial expertise)

Board Needs to Know…

• What is the school’s fiscal health status?• Where are we hurting financially?• Where can we make cuts without jeopardizing

our mission?• What are the key financial covenants of our

school debt?• What are the financial drivers of school

sustainability?

Annual Financial Education for Board

• Standard 11 Rubric• CDE Chart of Accounts- how it relates to school’s

accounting system• Financial Transparency Act• Education Funding Cycle: PPR, At-Risk, Title Funds• Review of Annual Audit & Beginning fund balance• School Balance Sheet & Income Statement• How Budget Variances are portrayed in reports• TABOR, Restricted and Non-restricted Funds• Nature & restrictions of pupil activity funds• Explanation/covenants of debt

The Financial Packet• Financial Overview cover sheet• Dashboard Report(s)• Supporting Documents:– YTD Budget vs Actual (incl. projected EOY)– Balance Sheet (compared to Previous Year)– Check Register– Cash Flow Statement (esp. new schools)– Annual Finance calendar – Verification of FTA compliance

• Restricted Fund Spending Reports (qtrly)

Coaching the Right Questions

• What is your plan of correction?

• Is this a temporary situation?

• No questions! Everything is fine.

Sample Financial Overview Benchmarks

Oct RED YELLOW GREEN

Months Unrestricted Cash 2.8 < 1 1 - 3 3Debt to Worth 2.9 <0 or >4.5 0 - 4.5

Payroll/Benefits % of Revenue 67% <50% or >70% 50 - 70%

Occupancy % of Revenue 24% >20% 16 - 20% <15%Surplus/(Deficit) % 2.70% < 0 or > 20% 1 - 9% 10 - 20%

Fundraising as a % of Revenue 11.80% > 15% 11 - 14% 5 - 10%

Accts Payable Aging 41 days > 90 days 45 - 90 days < 44 days

SUMMARY:

Revenue: Revenues are over budget by $36, 124, or 1.4%. Revenues increased due to unanticipated grant funding received in October.YTD Operating revenue is $460,130 or 2.2% under budget (unaudited)

Expenses: Total operating expenses were $78,971 over budget in Oct. by 3.1%. Overages relate to Director Salaries, travel expenses and supply purchases.

YTD Operating expenses are $969,515 or 2.5% under budget (unaudited) Operations: Enrollment count was higher than expected by 24 students or 11%, which will increase revenue receipts in December by $148,272.

YTD utilization was up from prior year in all areas Notables: Water main needs to be repaired, estimated at $10,000; should end current doubling of water bill and prevent expense of new water tap at $40,000 State of the school: School is on track to exceed revenue projections and maintain estimated expense levels, providing flexibility for unforeseen cash needs, including

noted plumbing repair need.

Sample Dashboard Report

Note: should include high-level revenue & expense categories: State rev, Fed rev, Fundraising, Grants, Salaries & Benefits, Purchased Svcs, Facility Costs, Books, supplies, Equipment, Other

Sample Dashboard Report

Cash Balance (YTD) At or Above Budget 5 - 10% Below Budget More than 10% Below Budget$78,300

Operating Revenue (YTD) At or Above Budget 5 - 10% Below Budget More than 10% Below Budget

$100,000 Operating Expense (YTD) At or Below Budget 5 - 10% Above Budget More than 10% Above Budget

$22,700 Purchased Services At or Below Budget 5 - 10% Above Budget More than 10% Above Budget

$11,298 Fundraising Performance At or Above Budget 5 - 10% Below Budget More than 10% Below Budget

$1,200 Technology Performance At or Below Budget 5 - 10% Above Budget More than 10% Above Budget

$35,000 Salaries & Benefits (YTD) At or Below Budget 5 - 10% Above Budget More than 10% Above Budget

$14,650 Facility Costs At or Below Budget 5 - 10% Above Budget More than 10% Above Budget

$2,750

Sample Capital Budget

Category 2009 2010 2011 2012 2013 Total

Strategic: On-Going Capital needs (in 000’s) 750 750 825 825 850 4,000

Replacement: Special Capital needs (in 000’s) 25 55 25 15 10 130

Mission: IT needs (in 000’s) 75 52 35 150 55 367

Total 850 857 885 990 915 4,497

Funded through capital budget 4% 10% 15% 18% 20%

Funded through Debt 70% 67% 65% 60% 58%

Funded through Capital Campaign 15% 19% 17% 17% 16%

Funded through Operations 11% 4% 3% 5% 6%

Capital Projects Summary – Years 2009 - 2013

Source: Mark L. Holdt of Mountain Sage Consulting, CNPA Conference Presentation 2012

Salaries &

Benefits as % of

Revenue

TOTAL SALARIES & BENEFITS AS % OF REVENUEMEASURE: Total Salaries and Benefits/Total RevenueGOAL: 40-65%

Year

Total Salaries & Benefits Total Revenue

Total Salaries & Benefits as % of Total

Revenue2005-06 $ 4,778,817 $ 10,259,490 46.6%2006-07 $ 5,261,825 $ 10,638,043 49.5%2007-08 $ 6,061,280 $ 11,497,515 52.7%2008-09 $ 6,968,130 $ 12,663,539 55.0%2009-10 $ 7,279,556 $ 13,456,826 54.1%2010-11 $ 7,492,082 $ 14,203,299 52.7%2011-12 $ 7,742,771 $ 14,103,374 54.9%

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-1335.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

Sample Trend Analysis

Source: Sam Todd, Financial Key Performance Indicators presentation, CDE Fin Seminar 2012

Compliance with FTA

Required Posting1. The school’s annual budget. The first budget that must be posted is the budget for the 2009-2010 budget year. The budget for the 2010-2011 budget year must also be posted. 22-44-304(1)(a)(I)

2. The school’s annual audited financial statements. The first audit that must be posted is the audit for the 2009-2010 budget year. This report will not be ready until the fall of 2010 for most schools. Obviously, it cannot be posted by July 1. It must be posted when it is ready. The school may post earlier audits but is not required to. 22-44-304(1)(a)(II)

3. The school’s quarterly financial statements beginning after the first quarter of the 2010-2011 budget year (i.e., the quarter ending on September 30, 2010). If a school does not prepare quarterly financials, it must begin doing so. 22-44-304(1)(a)(IIII)

4. The school’s salary schedule or polices commencing with those applicable to the 2010-2011 budget year. 22-44-304(1)(a)(IV)

5. Commencing July 1, 2011, the school must begin posting its accounts payable check register and credit, debit and purchase card statements in a downloadable format. Schools that rely on their district for accounting services have one year to work out a method of compliance. 22-44-304(1)(b)

6. Commencing on July 1, 2012, the school must post an “investment performance report” for its investments. 22-44-304(1)(c)

The following items must be posted online . All of this information must be updated within 60 days of the issuance of new data. The school must maintain the two prior years’ data online. The school must put a link on its webpage to CDE’s website where the public may access information submitted directly to CDE.

Annual Finance CalendarABC ACADEMY - FINANCE COMMITTEE

FY13 CALENDARJul-13 Jan-13

7/1/12 FTA compliance (LD) --- FY14 Budget developmentN/A Finance Committee mtg cancelled

1/31/13 FTA compliance (LD)1/31/13 Bond compliance-qtrly reports due to UMB (LD)

Aug-12 Feb-138/1/12 FY12 audit completion (LD & AS) 2/8/13 Finance Committee mtg (8:30am)

8/31/12 FTA compliance (LD) --- Review insurance plan for FY13--- Put auditor rec. to Senate

2/28/13 FTA compliance (LD)

Sep-12 Mar-139/7/12 Finance Committee mtg (8:30am) 3/8/13 Finance Committee mtg (8:30am)

9/16/12 CDE Finance Seminar 3/29/13 Finance Committee mtg (8:30am)-for April--- Staff CSAP Bonus review 3/31/13 FTA compliance (LD)

9/30/12 FTA compliance (LD) 3/31/13 Book order request deadline9/30/12 Bond compliance-No Default Cert to UMB (AS)

Oct-12 Apr-1310/1/12 Student count day N/A Finance Committee mtg (held 3/29/13)10/5/12 Finance Committee mtg (8:30am) --- Staff contract reviews + vendor re-bids

--- Staff CSAP Bonus review 4/30/13 FTA compliance (LD)10/31/12 FTA compliance (LD) 4/30/13 Bond compliance-qtrly reports due to UMB (LD)10/31/12 Bond compliance-qtrly reports due to UMB (LD) 10/31/12 Bond compliance-audit to UMB (AS)

Nov-12 May-1311/9/12 Finance Committee mtg (8:30am) 5/10/13 Finance Committee mtg (8:30am)

11/30/12 FTA compliance (LD) 5/31/13 FTA compliance (LD)11/30/12 Bond compliance-cert of insurance compliance to 5/31/13 Bond compliance-budget due to UMB (AS)

UMB (AS)

Dec-12 Jun-1312/1/12 Kindy tuition review 6/7/13 Finance Committee mtg (8:30am)12/7/12 Finance Committee mtg (8:30am) --- Review/Approve final FY12 budget

12/31/12 FTA compliance (LD) 6/15/13 Bond compliance-annual lease appropriation (AS)6/30/13 FTA compliance (LD)

Audit Prep Ratios

• Asset Sufficiency Ratio:General fund total assetsGeneral fund total liabilities

• Debt Burden Ratio: Total Government revenue of fund(s) paying debtTotal governmental debt payments

• Operating Reserve Ratio:Fund balance of the general fundTotal general fund expenditures (net of transfers)

• Operating Margin Ratio:General fund total revenue – General fund total expenditures, net of transfersGeneral fund total revenue

• Change in Fund Balance Ratio:Current year fund balance of the general fund – prior year fund balancePrior year fund balance of the general fund

Fiscal Health Analysis for Colorado School Districts(a 3-year trend analysis)

Source: Office of the State Auditor Aug. 2012

Sample Annual Key Performance Indicators

• KPI #1: Unrestricted Cash on Hand– Total unrestricted fund balance/total expenses– Goal > 3 months

• KPI #2: Debt to Net Worth– Total liabilities/net assets– Goal < 4.5

• KPI #3: Salaries & Benefits as % of Revenue– Total salaries & benefits/total revenue– Goal 40 – 65%

• KPI #4: Debt Service as % of Revenue– Total bond debt service/total revenue– Goal < 15%

Source: Sam Todd, Financial Key Performance Indicators presentation, CDE Fin Seminar 2012

Sample Annual KPIs (con’t)

• KPI #5: Budget Performance– Actual vs Budgeted Revenues– Goal > 100%– Actual vs Budgeted Expenses– Goal < 100%

• KPI #6: Fund Development– Net funds raised, Actual vs Budget– Goal > 100%

• KPI #7: Cash Reserves– Actual vs Required 20% Cash Financial Reserves– Goal > 20% of non-local expenses

Source: Sam Todd, Financial Key Performance Indicators presentation, CDE Fin Seminar 2012

Facility Finance Planning Ratios• The following calculations are for government-wide accounting measures• Certain reconciliations between government fund accounting and government-wide

accounting may need to be implemented to consistently calculate these ratios— For example, capital expenditures should not be included in expenses

• TOTAL PER PUPIL REVENUE = (per-pupil revenues + grants + contributions + miscellaneous income - extraordinary items) / enrollment

• DAYS CASH ON HAND = unrestricted cash and investments / ((expenses – depreciation & amortization) x 365)

• CASH-TO-DEBT = unrestricted cash and investments / long-term debt net of current portion

• MADS COVERAGE = (increase in net assets + depreciation & amortization + interest expense [+ rent if applicable]) / maximum annual debt service [or current lease payment if applicable]

• MADS AS A PERCENTAGE OF REVENUES = maximum annual debt service / total revenues

• MADS AS A PERCENTAGE OF EXPENSES = maximum annual debt service / total expenses

• DEBT-TO-CAPITALIZATION = long-term debt net of current portion / (long-term debt net of current portion + unrestricted net assets)

• DEBT PER PUPIL = long-term debt net of current portion / enrollment Source: Matt O’Meara, Ziegler, Using Financial Benchmarks to Improve Borrowing Costs and Investor Relations, CDE Fin Seminar 2012

Who Should Be SharingTeam Approach Recommended:

• Board Member (Finance Committee Chair) opens presentation with highlights

• Staff Member (CFO or Business Manager) shares the details of the report

• Staff Member (HOS) redirects attention to the most critical data

Thank YouThe content of this presentation was compiled by Tiffany Kallevik, Director of Member Business Services at the League tkallevik@coloradoleague.org 303-989-5356 x116

In collaboration with and from resources provided by: Lori Deacon, Abstract ConsultingDoug Hering, Charter School Mgmt CorpLori Grant, G&G ConsultingMark L. Holdt, Mountain Sage ConsultingSam Todd, Peak to Peak Charter SchoolMatt O’Meara, Ziegler