2018 Fiscal Law & Policy Provided by County Services March 2018

Training includes: Review/interpretation of fiscal policy Tax code and district summaries Operating account and sub-funds Understanding your budget Valuations, tax levy General interpretation, amending, carryover Pre and post test Q & A

From Section 2.3 of “your” Fiscal Policy Public funds, as defined in Chapter 12C.1 of the Iowa Code, are those funds owned by a public entity such as a county extension district. This includes both tax and non-tax monies. All monies generated by users of the district entity are owned by the district, not the user, and are under the control of the local extension council. Utilize the template for the fiscal policy as a reference to this slide, note that tax and non-tax monies are under the control of the Council. The Council has to realize the partnership that exists with staff and volunteers groups that help generate the fee program and grant dollars. Council should work together in the management of those FP and G/C dollars to encourage entrepreneurship and revenue generation. USE HANDOUT 2&3 Policy

All public funds are the legal responsibility of the extension council All public funds are the legal responsibility of the extension council. Legal responsibility assigned by law cannot be transferred by extension council action. The Council by motion or consensus CANNOT give permission to violate GAP guidelines, IDOM, state auditor or fiscal policy rules; the Council holds the public trust in their hands. USE HANDOUT 2&3 Policy

All public funds have the same legal requirements for accounting, reporting, auditing, proper signatures, segregation of duties, publishing, bonding, investing and uniform financial accounting procedures. All funds generated have the same expectation for GAP management. Question raised is the existence of outside checking accounts of volunteer groups and clients who raise funds for program support, the appropriateness of the accounts (Master Gardeners, youth council, youth committee, 4H clubs) and should they be allowed. USE HANDOUT 2&3 Policy

Iowa Code 176A.8.2. To serve as an agency of the state and to manage and transact all of the business and affairs of its district and have control of all of the property acquired by it and necessary for the conduct of the business of the district for the purposes of this chapter. Transacting all business of the district is the key point plus control or oversight of all resources……dollars raised in the name of Extension and Outreach or any of its programs fall into this statement within the Iowa Code. Use the Iowa Code copy provided for those attending to read this statement. Sometimes the question is raised as to whether Extension as a non-profit can charge fees…see Iowa Code 176A.9.4 may want to share 176A.8..4 MOU is required USE HANDOUT 2&3 Policy

Internal Control 3.1.B Cash, check and/or credit card receipts received in the county extension district office should be recorded in a pre-numbered, duplicate copy receipt book 3.1.E Deposited at a minimum of once a week 3.1.G Council treasurer/designee shall monitor this internal control segregation of duties… reviewing the log Reference the fiscal policy template to point out these selected items. Offices MUST use a permanent, duplicate copy receipt book, make a deposit once a week or more often as needed or set forth in the policy. Refer to the internal LOG handout so they see what the log includes USE HANDOUT 3 &4 Policy

Authorizations Pages 18-19 Represents the “cliff notes” of your policy Sets limits and steps for credit card use, deposits, electronic funds transfers, obtaining bids, taking income by credit/debit, petty cash, use of an agency account Review appendix ONE: category funds 2.c. expenditures 1.c. authorization 1.g. Reference the fiscal policy template pages 18-19 for authorizations to see what detail must be discussed and decisions made by the Council…. Go to appendix ONE…page 23 and have attendees review each of the items referenced. (addressed is negative balances in fee program lines, volunteers are expected to follow accounting practices of this policy, staff are expected to follow policy or have privilege revoked) use handout 2 Policy

Voucher Report Activity Two versions of the voucher (detail and non-detail) What is the range of check numbers? In the “Multi” column, what does the “M” mean? Why is check #13713 not on the detail report? Why is there a reconciliation adjustment? For what was check #13739 written? The EFT transactions are for _______. How many deposits did we record? Amount of tax deposit is $___________. For the two versions of voucher reports, which do you prefer? Use handout 5

Extension Law Taxation Caps FY 17 & 18 The Double Cap Issue: 2010 Population Dollar Cap Increases Each Year by Levy Rate   FY 2017 FY 2018 Less than 30,000 $ 6,000 0.3000 $ 231,000 $ 237,000 30,000 to 49,999 $ 7,000 0.2025 $ 272,000 $ 279,000 50,000 to 89,999 $ 9,000 0.1350 $ 346,500 $ 355,500 90,000 to 199,999 $ 15,000 $ 540,000 $ 555,000 More than 200,000 $ 25,000 0.0500 $ 800,000 $ 825,000 Refer to the tax table in the references which carries out to 2036…….note the mil rate maximum vs the dollar caps. Note that county population determines the increase each year. May want to draw an example of the impact on a county when you move from one population category to another with the 2020 census just around the corner Use handout 6 Tax

Where Do Districts Stand in FY17 Tax Revenue? 59 districts currently have a single cap - $ only 41 districts now have the “double cap” - both $ and levy 22 of those districts can not raise even 75% of the dollar cap 10 of those districts can not raise even 50% of the dollar cap Another 12 districts vulnerable to levy cap within three years if no significant valuation changes in their county Almost all of the districts with these double cap challenges are in the “below 30,000 population bracket” with majority of counties below 11,000 in population Analysis of the districts…..59 hit the dollar cap first; 41 counties hit mill rate which caps their dollars; note the populations of the 41 counties that are hamstrung Tax

Conservative Budgeting Suggests Timing of Tax Receipts   Average Range in % Conservative Budgeting Suggests July 0.6% .3 to .8 don’t plan on any August 0.1% 0 to .7 September 4.5% .6 to 7.6 1% October 39.0% 36.0 to 41.8 35% November 6.2% 3.8 to 9.1 4% December 2.2% 1.5 to 2.9 January 0.7% .6 to .9 February 0.5% .5 to .7 March 2.4% 2.1 to 2.9 2% April 37.9% 36.0 to 38.6 36% May 5.0% 4.0 to 7.5 June 0.8% .7 to 1.0 balance See handout on the timing of tax revenues…..this concept helps explains why districts need to make efforts to carryover 3-4 months of revenue in the tax subfund to have a healthy budget use handout 7 Tax

Fund Accounting 101 Handout provided…….explains the 4 categories/sources of funds within the saving and checking accounts of a district. Grants/contracts are restrict use do to the goals and guidelines of the grant. Fee program is client assessed and used to support program expenses and future development. Use handout 8 Agency Account is completely separate from the Operating Account, with its own checking account. Fund

Revenue Sources 2016 Reflects the mean and state average of revenue sources Fund

How do I determine the health of a district budget? Start with this rule of thumb: carry the equivalent of 3-4 months of the average tax sub-fund revenue into the next fiscal year. Refer back to the slide on the timing of tax dollar revenues, the peak months are April and October. We need to bridge the gap between the peaks and the carryover rule of thumb helps with the cash flow needs and aids in projecting budget expenses. Refer back to handout 7 Budget

General Budget Activity #1 Using the example provided, for the FY ending June 30, 2016, what was the maximum carryover limit that would have been allowed? Does the tax sub-fund amount comply with the 3-4 month rule of thumb? Use Washington County R&E plus the balance sheet report for this example…..break into groups of 3-5, use calculators…. Handout 9….. Activity

General Budget Activity #1 Using the budget spreadsheet, have I under or overspent my tax sub-fund the last three years? Fee program sub-fund? Use Washington County budget template in this discussion handout 9 Activity

General Budget Activity #1 Can program fee revenue be used to cover wages? Is the use of program fee revenues to purchase a full time position sustainable? Can use the Washington County budget template to assist in this discussion handout 9 Activity

Revenues -- Actuals FYE 2016 Total State Median Maximum Minimum Total Tax Revenue 61.2% 70.1% 95% 28% Other Revenue 2.1% 1.2% 12% 0% Program Fee Revenue 21.9% 18.6% 66% 3% Grant & Contract Revenue 14.8% 4.1% 61% Total Revenue all Sources 100.0% 100% Break out of counties and where their revenues emanated from…..note state total vs maximum and minimum which represents a range, MEDIAN means that half the counties are higher and the other half is lower refer back to pie chart slide Fund

5000-3-0-000-000-1 Payroll - Office Assistants The budget amendment example has account numbers OR use the 2 examples shown for discussion, handout provided use handout 10 5719-0-1-000-101-2 Ag Fee Exp - PPAT Fund 5000-3-0-000-000-1 Payroll - Office Assistants

Tort and Unemployment Sub-funds Districts qualify for the funding when $ or mil rate caps are reached Resources are restricted for use for in these expense lines including carryover Expense lines can be negative at year end for these 2 sub-funds; if negative balance, levy funds in next cycle Tort sub-fund covers General & Excess Liability, Auto, D&O, Professional, and Employee Dishonesty Handout on tort and unemployment provided, must be at caps to levy for these funds; SEE handout on Tort and Unemployment….Note can have a negative balance and levy in subsequent years to replace and replenish the funds use handout 11 Fund

Tort Liability and Unemployment Slide shows how we levy for TORT and UNEMPLOYMENT……..using form 678 from the IDOM web site……handouts on insurance are to BE USED to help estimate how much TORT to levy….see insurance handout for explanation of coverages USE HANDOIUT 12-13 TO IDENTIFY WHAT TORT FUNDS CAN PAY FOR Fund

Summary on Tax Revenues 1/3 ---of the counties levy 100% for Extension Education fund as well as levy for either Tort, Unemployment, or both 1/3 ---of the counties levy 100% of the Extension Education fund but did not levy for Tort Liability fund or the Unemployment Compensation fund this past year 1/3 ---of the counties did not levy to their first cap -- $600,000 left just in the Extension Education fund Summary of what districts are doing concerning tort and unemployment tax levies Budget

Iowa Department of Management Website Note link to review archived budgets and to obtain valuations; only staff are approved to submit the budgets……you can break to a live site and demo the features or use the following slide to show results GO LIVE AND DEMO THE SITE…..VALUATIONS, ARCHIVE AND LOG INTO SUBMIT BUDGET SITE IF YOU WISH Budget https://dom.iowa.gov/agricultural-ext-district

Tax Law – Effective Valuations Translates into the aggregate District Taxable Valuation needed to avoid the double cap, the Levy cap: FY 2017 FY 2018 Less than 30,000 0.3000   $ 770,000,000 $ 790,000,000 30,000 to 49,999 0.2025 $ 1,343,209,877 $ 1,377,777,778 50,000 to 89,999 0.1350 $ 2,566,666,667 $ 2,633,333,333 90,000 to 199,999 $ 4,000,000,000 $ 4,111,111,111 Greater than 200,000 0.0500 $ 16,000,000,000 $ 16,500,000,000 This slide runs in conjunction with the IDOM site and where we receive our valuations. The next slide shows a valuation; later the IDOM site is referenced. Tax

Property Valuations Tax Note the with and without excise utility tax…….later on form 674 we show where these numbers are used REINFORCEMENT OF IDOM SITE, VALUATIONS Tax

Iowa Property Tax by Property Class Notes tax revenue comes from residential property and commercial property, not ag land FY16/17 = $5.463 billion (Jeff Robinson, Iowa Legislature Fiscal Services) Tax

Iowa Property Tax by Taxing Authority Notes that Extension is a very small piece of the tax levy system, a property owners property tax bill is 92.1% schools, counties and cities FY16/17 = $5.463 billion (Jeff Robinson, Iowa Legislature Fiscal Services) Tax

Agricultural Productivity Agricultural property is not assessed on its market value. Instead, a productivity value is calculated based on the net earning capacity of the land. Net earning capacity for productivity purposes means the landlord share of crop revenue, minus the expenses of growing the crop. Productivity is calculated county-by-county. The assessed value of individual properties within the county is set by the assessor based on the total value of the ag property in the county and the soil conditions and other factors of individual properties. The annual net revenue per acre is calculated on a five year average and the average is then capitalized at a statutory rate of 7.0%. A county with a five-year per acre revenue of $150, divided by 7.0%, would have an average productivity value of $2,143 per acre. Any agricultural rollback is then applied to the county number, so if the rollback for ag property was 60.0%, the taxed value per acre would equal $1,286. How is ag land taxed…..note example at the end of the slide. Taxation is NOT based on market value. Tax

Archived Budgets for a County Demo of the archived budgets for a county REINFORCES THE IDOM SITE REVIEW Budget

Log on to Submit a Budget Site to log into to submit a budget, can demo or use this link and show them REINFORCES LOG IN SITE Budget

Carryover Rule The extension district may carryover in the tax sub-fund up to 50% of the that year’s tax sub-fund expenditures Use example R&E reports to help them determine how limits are determined HANDOUT 14 Budget

Budget Carryover Activity #2 Does this county have a carryover problem? Using the Balance Sheet and Revenue & Expense Summary through February 28, 2017, what would you advise? What circumstances would cause a carryover issue? GROUPS of 3-5 people, HANDOUT 14 Activity

Amending Current Year Budget The public hearing and budget amendment process MUST be completed and filed before your expenses exceed the budget limit that was previously approved. Districts have until May 31 of the current budget year to hold a public hearing and file the amended budget documents. The hearing notice must be published 10-20 days before the date of the hearing. Brief summary, must have public notice and proof of publication, file by May 15, last day to publish notice is May 4. Be aware of weekends to file paperwork with auditor’s office, may require an earlier publication date HANDOUT 15 Budget

https://dom.iowa.gov/document/miscellaneous-budget-amendment-form-653a Form and general guidelines for amending. NOTE you have a FREMONT County example for amending; can be a breakout session to review; tell them who we file this form with…county auditor!! HANDOUT 16 https://dom.iowa.gov/document/miscellaneous-budget-amendment-form-653a Must be filed on or before May 31, follows public hearing process for notification 10-20 days prior to the hearing..... Budget

Budget Amendment Activity #3 Using the Revenue and Expense Report provided, determine how much the county in the example would need to amend/increase the gross expenditures by in order to stay within fiscal guidelines. What may be some reasons that would cause/require a district to amend its budget? What would be the last possible date to publish the hearing notice? When does the amendment paperwork need to be filed? Use the Fremont County R&E report to calculate if an amendment is needed. HANDOUT 17 Activity

Time Line for Annual Budget November – December: Develop draft budget January: Iowa Department of Management entry, modify/accept estimate, set hearing date, publish 10-20 days before hearing February: Hold hearing, adopt budget on-line March 15: Finish filing documents May 31: Deadline to amend current FY Handout with more comprehensive time line is provided; this slide provides the cliff notes HANDOUT 18 Budget

“Tax” Expenses – Actuals FY16 District Expenses as a Percent of Tax Sub-Fund Revenue Mean Median Maximum Minimum Standard Deviation Personnel Expense 72.4% 71.6% 109% 44% 12.4% Facility Expense 9.9% 8.7% 42% 0% 6.3% General Office Expense 12.8% 12.1% 24% 7% 3.8% Non-Fee Expense 2.9% 1.3% 23% 4.3% Residual: Net Gain or Loss 2.0% 4.1% -35% 10.7% How are county operating funds used….?? Note: Tax sub-fund includes interest, rental, resale, and other revenues Budget

What is needed for an AUDIT? Receipt books, deposit slips, internal control log All bank statements, voucher reports, invoices Financial reports-month end (X12) Proof of publication-public hearing and year end All year end reports Proof of bonding (treasurer/dishonesty) Proof of filing w/auditor and treasurer Organizational minutes and certificate of organization Fiscal policy and all minutes (signed!) IDOM forms, budget template Full disclosure and access to staff for questions..... What auditor’s need to see…. Budget

Summary Taxation revenue source – what to monitor Rule of Thumb: Carry 3-4 months of tax revenue in sub-fund Non-taxation revenue sources – closer examination Can these support infrastructure needs periodically? Expenses to purposely manage: Human resources – increased skill development of our: Educators/associate educators group Front counter (support staff) group Management and leadership group Facilities Continue to improve all our systems impacting field operation! Summary…..almost done…..reminder to invest in staff development Budget

On behalf of County Services, Thank You! Questions?