Budget and Financial Reporting to the Board TASBO 2009 Business Manager’s Academy

Welcome Jon Graswich, CPA Chief Financial Officer DeAnne Hatfield, RTSBA Executive Director Business Services Northwest Independent School District (817) (817)

Agenda Introduction Legal Requirements Financial Cycle Summary Questions and Answers

Introduction Cub Scout Motto

Legal Requirements Legal requirements for school district budgets are formulated by the State of Texas and implemented by TEA

Statement of Texas Law Sections through of the Texas Education Code establish the legal basis for budget development in school districts. The following six items summarize the legal requirements from the code: The superintendent is the budget officer for the district and prepares or causes the budget to be prepared. The district budget must be prepared by a date set by the state board of education, currently August 20. The president of the board of trustees must call a public meeting of the board of trustees, giving ten days public notice in a newspaper, for the adoption of the district budget. Any taxpayer in the district may be present and participate in the meeting.

Statement of Texas Law No funds may be expended in any manner other than as provided for in the adopted budget. The board does have the authority to amend the budget or adopt a supplementary emergency budget to cover unforeseen expenditures. The budget must be prepared in accordance with GAAP (generally accepted accounting principles) and state guidelines. The budget must be legally adopted before the adoption of the tax rate. However, if a school district has a July 1st fiscal year start date, then a school district must not adopt a tax rate until after the district receives the certified appraisal roll for the district required by Section 26.01, Tax Code. Additionally, a school district must publish a revised notice and hold another public meeting before the district may adopt a tax rate that exceeds the following: (1) The rate proposed in the notice prepared using the estimate; or (2) The district’s rollback rate determined under Section 26.08, Tax Code, using the certified appraisal roll.

TEA Legal Requirements TEA has developed additional requirements for school district budget preparation as follows: The budget must be adopted by the board of trustees, inclusive of amendments, no later than August 31. Minutes from district board meetings will be used by TEA to record adoption of and amendments to the budget. Budgets for the General Fund, the Food Service Fund (whether accounted for in the General Fund, a Special Revenue Fund or Enterprise Fund) and the Debt Service Fund must be included in the official district budget (legal or fiscal year basis). These budgets must be prepared and approved at least at the fund and function levels to comply with the state's legal level of control mandates.

TEA Legal Requirements The officially adopted district budget, as amended, must be filed with TEA through PEIMS (Public Education Information Management System) by the date prescribed in the annual system guidelines. Revenues, other sources, other uses, and fund balances must be reported by fund, object (at the fourth level), fiscal year, and amount. Expenditures must be reported by fund, function, object (at the second level), organization, fiscal year, program intent and amount. A school district must amend the official budget before exceeding a functional expenditure category, i.e., instruction, administration, etc., in the total district budget. The annual financial and compliance report should reflect the amended budget amounts on the schedule comparing budgeted and actual amounts. The requirement for filing the amended budget with TEA is satisfied when the school district files its Annual Financial and Compliance Report.

Board Policy The District derives its legal status from the Constitution of the State of Texas and from the Texas Education Code as passed and amended by the Legislature of Texas. Texas Const., Art. VII

Board Policy CE(LEGAL)CE(LEGAL) ANNUAL OPERATING BUDGET CE(LOCAL)CE(LOCAL) ANNUAL OPERATING BUDGET CDA(LEGAL)CDA(LEGAL) OTHER REVENUES: INVESTMENTS CDA(LOCAL)CDA(LOCAL) OTHER REVENUES: INVESTMENTS CFA(LEGAL)CFA(LEGAL) ACCOUNTING: FINANCIAL REPORTS AND STATEMENTS (The Board Policy On Line is posted on the School Board web site)

The Financial Cycle The Financial Cycle starts with strategic planning and ends with the audited financial statements.

The Financial Cycle The seven steps of the Northwest ISD Financial Cycle are: Budget PlanningJanuary-March2010 Budget PreparationFebruary-March2010 Board of Trustee Budget ReviewApril-May2010 Budget AdoptionJune2010 Tax Rate AdoptionJuly-August2010 Financial & Investment ReportingJuly-June Audited Financial StatementsNovember2011

Budget Planning The Budget Planning steps of the Northwest ISD are: Review Budget Calendar01/11/10 Board Meeting Approve Budget Calendar01/28/10 Board Meeting Review Five Year Financial Forecast01/28/09 Board Meeting Review Strategic Plan - Goals & Objectives01/28/10 Board Meeting Approve Strategic Plan - Goals & Objectives02/08/10 Board Meeting Review District Improvement Plan03/08/10 Board Meeting Approve District Improvement Plan03/29/10 Board Meeting (Board Demographic reports and Construction reports on a quarterly basis)

Vision Mission Strategic Goals and Objectives District Improvement Plan Campus Improvement Plan Department Action Plans Beliefs BOARDapproves Beliefs, Vision, Mission, Goals and Objectives. GOALS are broad-based descriptions of desired future accomplishments. OBJECTIVES flow from goals and are measurable descriptions of what is to be accomplished. TARGETED OBJECTIVE – IdentifiedDistrict Goals and Objectives to be addressed during current year.

Budget Preparation The Northwest ISD Budget Preparation steps are: Budget Training/ Distribute Budget Packages01/28/10 DLT Meeting Complete Budget PackagesFebruary Return Budget Packages02/25/10 DLT Meeting Cabinet Reviews Budget Requests03/01/10 Cabinet Meeting

Budget Preparation Incorporate Student Art Art Contest for AP Art students Financial Services staff vote Board of Trustees recognition and nominal cash reward ($100) Frame for conference room Budget Manual is posted on the Financial Services department web site along with previous student art winners

Board of Trustee Budget Review The Northwest ISD Board of Trustee Budget Review steps are: Budget Update03/08/10 Board Meeting Budget Update03/29/10 Board Meeting Budget Update04/12/10 Board Meeting Budget Update04/26/10 Board Meeting Budget Workshop05/10/10 Board Meeting Review Personnel & Compensation Plan05/10/10 Board Meeting Budget Workshop05/24/10 Board Meeting Adopt Personnel & Compensation Plan05/24/10 Board Meeting (The Budget Updates are posted on the School Board web site)

Budget Adoption The Northwest ISD Budget Adoption steps are: Certify Estimated Rolls to Taxing Units06/07/10 CAD Calculate Estimated Rollback Rate06/09/10 DCTA/C Budget Update06/14/10 Board Meeting Publish Notice of Public Meeting06/16-17/10 Conduct Public Meeting and Adopt Budget06/28/10 Board Meeting

ASBO International’s Meritorious Budget Award The Meritorious Budget Awards Program (MBA) uses examples of the latest techniques from school business administrators to build your skills for developing, analyzing, and presenting your school system budget.

Criteria Checklist General Requirements Introductory Section Organizational Section Financial Section Informational Section

Texas Recipients AliefKlein AllenLewisville Carrollton-Farmers BranchNorthwest Clear Creek Pasadena ConroeRockwall Fort WorthSan Antonio Houston

GFOA Distinguished Budget Presentation Award The Budget Awards Program is designed to encourage governments to prepare budget documents of the highest quality to meet the needs of decision-makers and citizens.

Criteria Guide Policy Document Financial Plan Operations Guide Communication Device

Texas Recipients AliefHouston AustinKlein Big SpringLaredo Carrollton-Farmers BranchLewisville Clear CreekNorth east Conroe Northwest Corpus ChristiRockwall DallasSan Antonio Fort BendUnited

What The Budget Document Is The budget document is a policy document, an operations guide, a financial plan, and a communications medium designed to meet the needs of decision-makers and citizens.

What The Budget Document Ain’t It is not a “magic” bullet.

What The Budget Document Ain’t It will not cause money to rain from the heavens.

The “Magic” Bullet is the Strategic Plan The Northwest Independent School District approach to coping with the combination of fast student growth in a restricted funding environment with increasing academic standards has been to ensure that the budget process is driven by the Strategic Plan. The Board of Trustees and Administration review the Strategic Plan. The Administration performs a detailed review of all revenues and expenditures. The focus is on aligning the allocation of resources, both personnel and financial, with the accomplishment of the goals and objectives which are directly linked to the plan as described in the budget document. (The Budget Document is posted on the Financial Services department web site)

Receiving the Award Board of Trustee Recognition

Tax Rate Adoption The Northwest ISD Tax Rate Adoption steps are: Certify Final Rolls to Taxing Units07/25/10 CAD Calculate Final Rollback Rate07/31/10 DCTA/C Propose Tax Rate08/09/10 Board Meeting Publish Notice of Public Meeting08/11-12/10 Conduct Public Meeting and Adopt Tax Rate08/23/10 Board Meeting

Financial & Investment Reporting The Northwest ISD Financial & Investment Reporting steps are: Review Financial & Investment ReportsMonthly Board Meeting Approve Budget AmendmentsMonthly Board Meeting Approve Final Amended Budget06/27/11 Board Meeting

Financial & Investment Reporting All investments made by the District shall comply with the Public Funds Investment Act (Texas Government Code Chapter 2256, Subchapter A) and all federal, state, and local statutes, rules or regulations. Gov’t Code Financial and Investment Report Cover Sheet Financial and Investment Report Spreadsheets Investment Portfolio Summary Economic Summary 3rd Quarter 2009 (The Monthly Financial & Investment Reports are posted on the School Board web site)

Audited Financial Statements The Northwest ISD Audited Financial Statement steps are:  Approve Annual Financial Report11/14/11 Board Meeting

What is a CAFR? The Comprehensive Annual Financial Report (CAFR) is a report that tells the financial story of the school system through narrative, financial statements, and chart/graphs. The CAFR not only gives the summary and detailed information for the school year being reported, but also includes information for the previous ten years.

ASBO International’s Certificate of Excellence in Financial Reporting The Certificate of Excellence in Financial Reporting (COE) Program reviews the accounting practices and reporting procedures used by school districts in their Comprehensive Annual Financial Reports (CAFR), and enhances the award winners' credibility among stakeholders.

2007 Texas Recipients Independent School Districts35

GFOA Certificate of Achievement for Excellence in Financial Reporting The Certificate Program, which was established in 1945, is designed to recognize and encourage excellence in financial reporting by state and local governments.

2007 Texas Recipients Independent School Districts51

Why Should My School System Participate? Credibility Participation validates a school system’s commitment to fiscal and financial integrity and enhances its credibility with the school board and community Confidence Receiving the Certificate of Excellence Award gives the superintendent and school board confidence about their school system and the business management staff.

Why Should My School System Participate? Savings A CAFR complies with disclosure requirements by providing ninety percent of what is needed for credit evaluation. (The CAFR is posted on the Financial Services department web site)

Receiving the Award Board of Trustee Recognition

S UMMARY

Questions and Answers

Workshop Concluded