1. School District Fiscal Health
October 31, 2014
Crystal Dorsey, CPA
Local Government Audit Manager
Office of the State Auditor

3. School District Fiscal Health 6th Year!
76 out of 178 school districts with one or more missed benchmarks
48 in the prior year
One district missed three benchmarks
None in the prior year
19 districts missed two benchmarks
9 in the prior year
56 districts missed one benchmark
39 in the prior year

4. School District Fiscal Health
State of Colorado
Fiscal Health Analysis
State Funding for School District Programs
For the Fiscal Year Ending June 30,
2011
$3,763,293,850
2012
$3,562,775,745
2013
$3,309,457,170
SOURCE: State of Colorado General Assembly Bill Digest per annual legislative session.

5. School District Fiscal Health
Areas of highest risk
General Fund
Debt
Changes in Fund Balance
Excludes enterprise funds
Five Ratios
Three year period to review

6. School District Fiscal Health
What will this ratio tell me?
What will a trend in this ratio tell me?
Where do I find the information?
How do I calculate the ratio?
What is the benchmark?
What questions should I consider if my school district if below the benchmark?

7. School District Fiscal Health
Ratio 1 – Asset Sufficiency Ratio (ASR)
ASR Formula
GENERAL FUND TOTAL ASSETS + DEFERRED OUTFLOWS
GENERAL FUND TOTAL LIABILITIES + DEFERRED INFLOWS

8. School District Fiscal Health
Ratio 1 – Asset Sufficiency Ratio (ASR)
Financial Indicator Criteria:
CONTINUOUS DECLINE IN ASR FROM YEAR ONE TO YEAR THREE,
WITH YEAR THREE LESS THAN 1.0
—OR—
ASR LESS THAN 1.0 ALL 3 YEARS

9. School District Fiscal Health
Ratio 1 – Asset Sufficiency Ratio (ASR)
Questions to Consider:
Does the school district have consistent decreases in the ratio over time?
Does the school district have trouble paying debts as they become due?
Is the school district incurring more liabilities?
Are more liabilities coming due faster than cash is coming in to pay them?
Is the school district below the benchmark due to timing issues?
Is the school district’s cash flow structure sufficient to continue paying liabilities as they become due?

10. School District Fiscal Health
Ratio 2 – Debt Burden Ratio (DBR)
DBR Formula
TOTAL GOVERNMENTAL REVENUE OF FUND(S) PAYING DEBT
TOTAL GOVERNMENTAL DEBT PAYMENTS

11. School District Fiscal Health
Ratio 2 – Debt Burden Ratio (DBR)
Financial Indicator Criteria:
CONTINUOUS DECLINE IN DBR FROM YEAR ONE TO YEAR THREE,
WITH YEAR THREE LESS THAN 1.0
—OR—
DBR LESS THAN 1.0 ALL 3 YEARS

12. School District Fiscal Health
Ratio 2 – Debt Burden Ratio (DBR)
Questions to Consider:
Does this ratio indicate that the school district does not have the ability to pay its future debt service expenditures?
Is the ratio consistently decreasing because the school district has decreasing revenue available to make consistent debt service payments?
Does the school district have plans to change the situation that is causing the consistently decreasing DBR ratio?

13. School District Fiscal Health
Ratio 3– Operating Reserve Ratio (ORR)
ORR Formula
FUND BALANCE OF THE GENERAL FUND
GENERAL FUND TOTAL EXPENDITURES (NET OF TRANSFERS)

14. School District Fiscal Health
Ratio 3– Operating Reserve Ratio (ORR)
Financial Indicator Criteria:
CONTINUOUS DECLINE IN ORR FROM YEAR ONE TO YEAR THREE,
WITH YEAR THREE LESS THAN
—OR—
ORR LESS THAN ALL 3 YEARS

15. School District Fiscal Health
Ratio 3– Operating Reserve Ratio (ORR)
Questions to Consider:
Will the school district have a problem paying its future expenditures?
Does the school district understand the circumstances that resulted in a consistently decreasing ORR and was it planned?
Do consistent decreases in the ratio mean that expenditures are increasing or fund balance is decreasing, or both?

16. School District Fiscal Health
Ratio 4 – Operating Margin Ratio (OMR)
OMR Formula
GENERAL FUND TOTAL REVENUE – (GENERAL FUND TOTAL
EXPENDITURES, NET OF TRANSFERS)
GENERAL FUND TOTAL REVENUE

17. School District Fiscal Health
Ratio 4 – Operating Margin Ratio (OMR)
Financial Indicator Criteria:
DECREASE IN OMR FROM YEAR ONE TO YEAR THREE, WITH YEAR
THREE LESS THAN ZERO
—OR—
OMR LESS THAN ZERO IN ALL 3 YEARS

18. School District Fiscal Health
Ratio 4 – Operating Margin Ratio (OMR)
Questions to Consider:
Is the school district aware that it has a consistently negative OMR?
Does this ratio indicate that the school district is spending too much money?
Does the decrease in OMR indicate planned reductions in fund balance?
Are there one-time capital expenditures that led to the decrease?
What is causing the OMR to be consistently less than zero and can the school district fix this issue?
Is the consistent decrease due to a timing issue?

19. School District Fiscal Health
Ratio 5 – Change in Fund Balance Ratio (CFBR)
CFBR Formula
CURRENT YEAR FUND BALANCE OF THE GENERAL FUND
– PRIOR YEAR FUND BALANCE
PRIOR YEAR GENERAL FUND BALANCE

20. School District Fiscal Health
Ratio 5 – Change in Fund Balance Ratio (CFBR)
Financial Indicator Criteria:
DECREASE IN CFBR FROM YEAR ONE TO THREE, WITH YEAR THREE
FUND BALANCE LESS THAN YEAR ONE BEGINNING FUND BALANCE
—OR—
CFBR LESS THAN ZERO FOR ALL 3 YEARS

21. School District Fiscal Health
Ratio 5 – Change in Fund Balance Ratio (CFBR)
Questions to Consider:
Do changes in this ratio indicate that the school district is spending too much?
What does the school district plan to do to reverse this trend?
Should the school district maintain more or less reserves?

22. School District Fiscal Health
State of Colorado
Fiscal Health Analysis
Number of School Districts Missing Benchmarks1
For the Three-Year Period Ending June 30,
Fiscal Health Ratio
2013
2012
2011
Ratio 1: Asset Sufficiency Ratio
Ratio 2: Debt Burden Ratio 14 13 10
Ratio 3: Operating Reserve Ratio
Ratio 4: Operating Margin Ratio 64 34
Ratio 5: Change in Fund Balance Ratio 19 5
Total Indicators 97 57 25
Total Districts With One or More Indicators 76 48
SOURCE: Analysis performed by the Office of the State Auditor, Local Government Division using data from audited financial statements submitted by school districts.
1Some districts had indicators in more than one category.

23. FISCAL HEALTH ANALYSIS OF SCHOOL DISTRICTS
STATE OF COLORADO
FISCAL HEALTH ANALYSIS OF SCHOOL DISTRICTS
SCHOOL DISTRICTS MISSING TWO OR MORE FINANCIAL BENCHMARKS
FOR THE THREE-YEAR PERIOD ENDING JUNE 30, 2013
County
District
Adams/
Arapahoe
Strasburg 31J
Phillips
Holyoke RE-1J
Baca
Campo RE-6
Prowers
Lamar RE-2
Elbert
Agate 300
Pueblo
Pueblo Rural 70
Big Sandy 100J
Rio Grande
Monte Vista C-8
Elizabeth C-1
San Juan
Silverton 1*
Kit Carson
Arriba-Flagler C-20
Washington
Akron R-1
Bethune R-5
Arickaree R-2
Lincoln
Karval RE-23
Lone Star 101
Logan
Valley RE-1
Yuma/Kit Carson
Liberty J-4
Morgan
Weldon Valley RE-20
Yuma
Wray RD-2
SOURCE: Office of the State Auditor, Local Government Division Fiscal Health of Colorado School District reports
* Silverton 1 School District identified with three missed financial benchmarks.

27. School District Fiscal Health
Two distinct themes:
Districts have offset reductions in state school finance funding with the use of fund balance reserves rather than decreasing expenditures AND
Districts have been spending down their fund balance for various maintenance and capital expenditures

28. School District Fiscal Health
Plans to correct the situation
Budget cuts – eliminate jobs
Cuts to education programs
Further spend down of fund balance
CDE Actions

29. School District Fiscal Health
Important analytical tool
Early warning system
The more missed benchmarks, the greater the risk
Allows school districts to take prompt action

30. How to contact us NEW phone numbers! Questions, examples, discussions
Justin/Main Local Government Phone Number
My direct line is: