Roles and Responsibilities of the School District Treasurer ASSOCIATION OF SCHOOL BUSINESS OFFICIALS Roles and Responsibilities of the School District Treasurer TREASURY DUTIES and LEGAL INVESTMENTS TO IMPROVE CASH FLOW AND FISCAL STABILITY Nancy McKay Educational Management Consulting Blackwell Public Schools

Roles and Responsibilities Authority Oklahoma Statutes Title 70 § 5-114 Title 70 § 5-115 Oklahoma Administrative Code Title 210, Chapter 25, subchapter 5, section 11 Oklahoma State Courts Network (oscn.net)

Roles and Responsibilities Surety Bond Amount estimated by board that treasurer will have on hand at any one time during the current year, not including investments Collateral Does not need to exceed Co. Treasurer Collateral Shall require depository to insure or guarantee the deposit by proper securities

Roles and Responsibilities Cash Ledger Separate cash ledger for each fund Additional ledger for investments, if applicable Appropriations Temporary Appropriations (no publish) Estimate of needs (publish) Supplemental appropriations (no publish) 307, 308 and 150 School Budget Act

Roles and Responsibilities Appropriations – cont’d Must enter into ledger and monitor Must not register check/warrants in excess of approved appropriations Warrant registers Each fund and each year Number, fiscal year and fund on warrants Non payable warrants

Roles and Responsibilities Record and deposit revenue Receipt and code using OCAS (yr, fd,prj,source,prg) Monitor and compare your large revenue sources to last year Deposit timely Reconcile bank statements Reconcile to cash and fund ledgers In timely manner

Roles and Responsibilities Financial Statements Report monthly to board Cash balance sheet by fund Bank statement Revenue report Appropriation report Investment report Investments Accordance with written board policy Liquidity, diversification, type, return

Roles and Responsibilities Exceptions Not reconciling to ledgers Improper coding Not entering deposit info, in timely manner Supplemental appropriations not correct Also perform encumbrance clerk duties (breach in segregation of duties Lack of reporting to board

TREASURY FUNCTIONS AND KNOWLEDGE BASE The sources of revenue for the six major funds of Oklahoma School Districts and the five major sources of General Fund Revenue Legal expenditures that may be made from each fund Legal investments of public funds Ability to calculate the school district’s state aid formula, identifying the elements used to compute foundation, transportation supplement, and incentive sections

TREASURY FUNCTIONS AND KNOWLEDGE BASE Recognize and understand cash flow management applicable to your school district’s needs. Keep up with current legislation which could potentially affect the financial condition of your school districts Ability to read and understand a District Budget (Estimate of Needs) with all major components. (Function/Object) Continuation of professional development in order to feel confident and secure in your knowledge and ability to interact with administration

A As INVESTING PUBLIC FUNDS IN TODAY’S MARKET ENVIRONMENT A Practical Guide to Investing School Funds : Nancy McKay Educational Management Consulting, LLC Blackwell Public Schools

ECONOMIC ENVIRONMENTS WHAT IS A NORMAL ECONOMIC ENVIRONMENT? DESCRIBE TODAYS ECONOMIC ENVIRONMENT ………………. DESCRIBE TOMORROW’S ECONOMIC ENVIRONMENT………………..

INVESTMENTS “I am more concerned with the return of my principal than the return on my principal.” Will Rogers

DEVELOPING AN INVESTMENT POLICY To establish guidelines To establish strategies To set parameters To assign responsibilities To schedule critical actions

Oklahoma Requirements Written Policy Adopted by Board and monthly reporting Addressing: liquidity diversification safety yield maturity quality of instrument capability of investment management Require competitive bids

INVESTING SCHOOL FUNDS WHAT COLLATERAL MUST A FINANCIAL INSTITUTION PROVIDE WHEN SCHOOL FUNDS ARE DEPOSITED? (TITLE 62-516-5)

INVESTING SCHOOL FUNDS FDIC PROTECTION IF AN INDIVIDUAL SCHOOL DISTRICT DEPOSITS SEPARATE FUNDS IN THE SAME BANK, ARE THE FUNDS ENTITLED TO SEPARATE FDIC PROTECTION? NO! READ FDIC GUIDELINES AND POLICY CAREFULLY AND USE PRUDENT JUDGEMENT WHEN DEPOSITING FUNDS. $250,000

INVESTING SCHOOL FUNDS HOW IS THE BOARD OF EDUCATION INVOLVED IN THE INVESTMENT PROCESS? (House Bill 1157) Written Investment Policy Adopted by Board Addressing: liquidity, diversification, safety, yield, maturity, quality of instrument, capability of investment management and requiring competitive bids. Resolution to Invest Oversight and Review of Monthly Investments

CASH FLOW MANAGEMENT PROGRAM Treasurers Investment Training CASH FLOW MANAGEMENT PROGRAM

CASH FLOW MANAGEMENT The success of every School District’s Investment Program is based upon “a sound Cash Flow Management Program”. DEFINITION: “RECEIVE THE CASH AND LET IT FLOW!!!-----------------NOT! Blackwell Public Schools

CASH FLOW MANAGEMENT Simply put “To manage the cash flow of a fund basically means to save and invest surplus cash inflows (for maximum interest earnings) and have the cash available at the time needed to meet the spending requirements of your district”

CASH FLOW MANAGEMENT Goals AVAILABILITY: To ensure availability (liquidity) to meet the daily needs of a school district and to increase cash available for investment purposes. YIELD: To earn the maximum return on cash invested. SAFETY: To protect the assets of the school district against loss of principal. POLICY: To establish written statement defining the district policies relative to cash management.

CASH FLOW MANAGEMENT Who is it? School Treasurer Finance Director or Business Manager Chief Financial Officer Superintendent A Cash Flow Manager can wear many hats depending on the size of the district and the policy set forth by the Board of Education Blackwell Public Schools

CASH FLOW MANAGEMENT Requires Cash flow Forecasting HOW DOES IT WORK? Requires Cash flow Forecasting of all Revenue and Expenditures Monitoring Actual Cash Flow Review and Report Collections of Major sources of Revenue and other Factors Blackwell Public Schools

CASH FLOW MANAGEMENT DAY-TO-DAY CASH MANAGEMENT PROCESS: 1. COLLECTIONS 2. INVESTMENTS 3. DISBURSEMENTS

INVESTING SCHOOL FUNDS, DEPOSITORY RELATIONSHIPS AND INTERNAL CONTROLS

INVESTING SCHOOL FUNDS WHAT SCHOOL OFFICIAL CAN INVEST DISTRICT FUNDS? O. S. TITLE 62-348.1 Except as otherwise provided for by law, the treasurer of any city, town or school district, when authorized by the appropriate governing body by a written investment policy, ordinance or resolution, shall invest monies in the custody of the treasurer.

INVESTMENT LEDGERS MUST A DISTRICT MAINTAIN SEPARATE LEDGERS FOR INVESTING FUNDS? YES! Discloses: Date Description Principal amount paid for investment purchased Date and principal received for investment liquidation

INVESTING SCHOOL FUNDS Choosing Investment Instruments Choose Your Weapons! Securities - banks - pools - funds??? How long can I safely go out? What are these Instruments? Can I use the web?

Authorized Investments-Definitions

INVESTING SCHOOL FUNDS What Types of Investments? Legal Investments for School Districts (Amended Title 70-5-115) Direct Obligations of the U.S. Government, ie., Treasury Bills, Treasury Notes Collateralized or insured Certificates of Deposits of Savings accounts or savings certificates of Savings and Loan banks or Credit Union Associations which are fully insured by FSLIC or acceptable collateral. Repurchase agreements with collateral as listed above. You want a diversified Portfolio. Market conditions can shift quickly. Blackwell Public Schools

What Types of Investments? AGENCIES: Other obligations of the U.S. Government - Only If the treasurer of a school district has satisfactorily completed an investment education program approved by the State Board of Education and the State Board of Vocational- Technical Education.

Treasury Bills Bills are sold at a discount Bills are listed by days to maturity Bills mature each Thursday Strips, another discount treasury securities

Treasury Notes and Bonds Notes and bonds have a coupon Notes and bonds mature on the 15th and last day of the month

Federal Issue - Comparison Treasury Bills sold at discount weekly auction mature on Thursdays Treasury Notes have a coupon regular auctions Agency “Discos” sold at discount sold at “window” you pick maturity Agency Notes have a coupon regular issuances new issues

Authorized Investments Cont’d-- Money Market Mutual Funds which consist of obligations of the United States Government, its agencies and instrumentalities Warrants, bonds or judgments of the school district Approved Qualified pooled investment program by the Board of Education. (Oklahoma Inter local Pooled Investment Program)

Authorized Investments Commingled Investments Local Government Investment Pools (Oklahoma Interlocal Pool Investment Program) Money Market Mutual Funds

Constant Dollar Funds/Pools MONEY MARKET MUTUAL FUNDS Designed for safety Low risk Short securities Little volatility

INVESTING IN WARRANTS Issuing non-payables can send a WHY WOULD A DISTRICT WANT TO INVEST IN ITS OWN WARRANTS? Issuing non-payables can send a negative signal to the Community Law enables districts to do so. Another tool to manage cash flow

INVESTING SCHOOL FUNDS HOW TO START Remember the Cash Flow Steps Identify data sources General Ledger Banking Records Budget Reports (Historical and Current) Total Revenues by month – Remember: 80% comes from 20% of Sources Total Expenses by month 80% goes to 20% of Uses Net balance or cash to invest

LET’S GET STARTED!!!

INVESTING SCHOOL FUNDS HOW TO START - OVERVIEW CALENDAR KNOW YOUR CASH FLOW NEEDS Maintain daily cash ledger by fund Disbursement dates Use historical data Communicate with “key” people (Encumbrance Clerk, Payroll, treasurer, etc.) What dates are Major Sources of Revenue received? Do you need the funds or can you investment immediately?

INVESTING SCHOOL FUNDS DEPOSITORY RELATIONSHIPS Establish a rapport with your Banking Sources Politics Know your Banker or Broker Request Bids for Services or investments If your district’s depository is the only Bank in town and negotiations break down, what would you do?

ALTERNATIVE BANKING SERVICES AND INVESTMENT OPPORTUNITIES: Withdraw district funds and keep in a mayonnaise jar??? OR------- Pursue an ALTERNATIVE Investment Instrument. What are your OPTIONS?

INVESTING SCHOOL FUNDS OPTIONS: NOW ACCOUNT Generally pays minimum rate, ie. SWEEP ACCOUNT Invests school funds overnight into an investment instrument usually based upon the 90-day Treasury Bill INTER LOCAL POOLED PROGRAM (Liquid Asset) Liquid Asset Account Fixed Term/Fixed Rate Account

CALCULATING INTEREST EARNINGS Investments are traditionally calculated on a 360 day year base as is used in the Treasury Bill. Most banks will try to calculate on 365 day base ……..negotiate! Always verify the calculations of your investments to ensure you are receiving the full benefit of your district’s investment.

CALCULATING SIMPLE INTEREST EX: 300,000X63DAYSX.020 = $1,050.00 360 VS   300,000X63DAYSX.020 = $1,035.62 365 Difference : $ 14.38

INTERNAL CONTROLS Controls and procedures should be written to protect the funds and securities. The School Board should establish a system of controls to be reviewed annually by the external auditor. Controls should be designed to prevent fraud, error, misrepresentation or imprudent actions. The Treasurer should maintain a cash flow analysis designed to monitor cash positions and forecast cash needs for investment purposes.