Tying Your Forecast to Operations

BY Chris Mohr

President K-12 Business Consulting, Inc.

SE Chapter of OASBO

What’s Your Budget Process?

Buy operations I mean the budget

We all have a process or should have a process

It shouldn’t be just about complying with R.C 5705.36

It doesn’t have to be lofty or ornate

It needs to be something you can commit to

Make sense to you, the administration and BOE

Makes sense so you can help BOE and administration make educated and informed choices

Promotes effective communication to various groups

Whether you have this written down or not most if not all of your processes do certain elements of these

Do you feel your BOE or administration are confused about the forecast, appropriation resolution, tax budget, monthly report, and year end report and how they relate?

Our Process Ties Forecast to Budget/ (Operations)

Start With October 2011 FYF12 for FY13

Tax Budget is Just FYF Reiterated

Budget Training March 2012

Five Year Forecast Updated May 2012

Create Budget Document for FY13

Appropriation/Budget Document FY13 Approved June 2012

Year End Report Reviewed FY12 ended

Monthly Reports for New FY13

Start Over October 2012 FYF13 for FY14

SCSD Budget Process In Documents

Aug 12

July11

July 12

July12 Ju 11

May 12

Mar 12

Oct 11

Start

Five Year Forecast Is The Main Document

BOE’s and administration can get the FYF is the main document make sure everything ties back to it

If they understand then communication gets easier and people will begin to understand mystery of school funding

If people feel they understand what your talking about your stature and value increase…no one trusts a mystic!

Most months during the year my forecast presentation is one word…”solvent”! I am not joking!

So the key to tying forecast to operations is 4 digit Receipt Codes for revenues and 3 digit Object Coding for expenses since lines on the forecast tie to these coding levels

Consistency in coding FYF to Budget is key

Tying Forecast to Operations

Some common problems - Revenues • Coding PUPP to Line 1.01 or 1.02…who cares? Be consistent!

• Medicaid reimbursements posted to “restricted state funds”

• R&H Posted incorrectly to Gen Fund (i.e. not to 002, 003 , 034)

• TPP fixed rate and sum same as above

• PILOTs “other Income 1880”

• Non School District TIF’s paid by County Auditor 1111 or 1112 tax collections

• HB264 or TAN revenue post to either 002 or leave in 001 just be consistent I have seen AOS accept both

• Emergency levies fund 016 but almost all districts post in 001

• Post casino revenue to 3190

I see colleagues spending inordinate time determining revenue that is immaterial. Use time wisely!

Tie forecast revenues to Amended Certificate

Tying Forecast to Operations

First you should tie FYF to Gen Fund Budget it is logical and if you are dead-on only encumbrances will be the difference in cash flow. This I feel is a best practice!

Focus your time on where you spend 80% of your money

Suggestions to consider that can help sort out variances and get you to your base wages paid this will help make your wage estimates more accurate: Wages – Use a 132 and 162 object for termination benefits

Wages – Use a 116 and 142 object to track substitutes

Wages – Use a 117 and 147 for supplemental contracts

Wages - Use a 144 for over time

Wages- budgeting Ed Jobs in FYF twice & 27 pay issue

Fringe Benefits- Know your FB’s by % of wages for major categories Retirement, Insurance, BWC/UC and Medicare

Tying Forecast to Operations Fringe Benefits – some issues I see

Retirements typically 14.5% to 15.4% - surcharge and SERS 1/6 and pick-up…never just 14%.

Insurance know your plan year, medical trend, only include BOE’s share of increase typically 18% to 24% of wages

Watch Unemployment Comp if RIF’d staff we are direct reimbursement payer's

Medicare not entirely 1.45% of wages by close typically 1.25% to 1.3%

Some expenditure coding and estimating problems County BOE coded entirely to 400 objects or 800 objects

UC coded to 859 instead of 281/282

BWC coded to 859 or 491 (in a pool) instead of 261/262

Using FY12 utility costs to project FY13…record mild winter FY12….that could be a problem FY13-17

Track Your Cash Flow Do monthly cash flow projecting tied to your FYF ( and budget)

This should be basis of monthly financial report

Will give you critical information on need to borrow during the year

Help BOE and administration understand difference between finance report and cost study…

All of the data we talked about so far generates cash flows in and out…when the money is all gone the fun will stop! Cash is king!

Monitoring cashflow is one of the most important things we do.

Your historic cash flow is a rich source of this information especially if you are consistent in coding and paying bills!

SM1 yields analysis of ending cash that is vital to planning your investable funds and duration.

Yes interest rates are low and will likely remain low through CY2015 still need to provide proper management of money

Getting Buy In on Your Budget and Operating Process

Finance committee and one on one meetings

Invest in the buy in and communication

Other Budget Topics of Interest Balanced budget policy/ending cash balance

Contingency balance

Benchmarking district operations

Capital planning /No New Millage Bond Issues

Thank you for your attention!