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With respect to the financial planning for any fiscal year, the CEO shall not deviate materially from the Board's Ends policies, risk fiscal jeopardy to the district or fail to be derived from a multi-year plan.
Accordingly, as Superintendent, I may not present to the Board a recommended budget which:
1. Is not in a summary format understandable to the Board.
In Compliance: The Government Finance Officers Association (GFOA) of the United States and Canada presented a Distinguished Budget Presentation Award to the Guilford County Schools for its annual budget for the 2002-03 fiscal year. This marks the third consecutive year that the district has earned this prestigious award. The Budget Awards Program is an international awards program in governmental budgeting. The program was established in 1984 to encourage exemplary budgeting practices. Through the program, budget documents are (a) rated by budget practitioners against 26 awards criteria and (b) judged on their effectiveness as a policy document, operating guide, financial plan and communications device.
Budget documents satisfying the Budget Awards Program's criteria provide clarity (understandable to elected officials, members of the media, the general public and the financial community), completeness (includes information on all funds subject to appropriation and enables readers/users to derive an informed impression of the district's proposed budget and the environment in which the budget was developed) and credibility (provides an impartial assessment of the district's budgetary practices and the budget document's quality via an internationally recognized awards program).
The award is valid for a period of one year only. The 2003-04 budget document will be prepared in conformance with GFOA Budget Awards Program requirements and will be submitted to GFOA for certificate eligibility and award consideration.
2. Fails to adequately describe revenues and expenditures.
In Compliance: Page 79 of the 2002-03 budget document contains a narrative that describes major revenue sources, explains the underlying assumptions for the revenue estimates, and discusses significant revenue trends. State Public School Fund allotments are explained on pages 80-85. Local Current Expense Fund revenue descriptions are reflected on pages 89-91 and expenditure descriptions are found on pages 95-99. An explanation of the object code component of the state chart of accounts is also included on pages 105-106. The federal grants are described on pages 113-116. Capital outlay revenue sources are explained on pages 119-120 and expenditure categories are explained on page 123. Information regarding the 10-year facilities plan and the Capital Improvements Plan (CIP) is also included on pages 131-140.
3. Fails to show the amount spent in each program or area for the most recently completed fiscal year, the amount budgeted for each program or area for the current fiscal year and the amount recommended for the next fiscal year.
In Compliance: The 2002-03 budget document contains a summary/analysis of revenues and/or expenditures for the district's four governmental funds (state, local, federal and capital outlay). Each summary/analysis contains audited expenditures for 1999-00 and 2000-01, the final budget for 2001-02 and the approved budget for 2002-03.
4. Fails to disclose budget planning assumptions.
In Compliance: Budgetary assumptions regarding enrollment projections, personnel needs, salary increases, fringe benefit costs and non-personnel items (textbooks, replacement equipment, facilities/renovations and indirect cost) appear on pages 74-75. The per pupil allotments for instructional supplies, staff development, office/custodial supplies and furniture/equipment and the fixed-dollar allotment for the high school tutorial program are on page 76.
5. Plans for the expenditure in any fiscal year of more funds than are conservatively projected to be received during the year.
In Compliance: Funds have been expended and or obligated in accordance with sections (a) and (b) of NCGS 115C-441.
Per NCGS 115C-441(a), no obligation may be incurred unless the budget resolution includes an appropriation authorizing the obligation and an unencumbered balance remains in the appropriation sufficient to pay in the current fiscal year the sums obligated by the transaction(s) for the current fiscal year. This is known as preauditing the obligation.
Per NCGS 115C-441(b), when a bill, invoice, or other claim against a local school administrative unit is presented, the finance officer may approve the claim only if he/she determines the amount to be payable, the budget resolution includes an appropriation authorizing the expenditure and either (i) an encumbrance has been previously created for the transaction or (ii) an unencumbered balance remains in the appropriation sufficient to pay the amount to be disbursed.
6. Proposes to reduce the current fund balance at any time to an amount less than necessary to meet the district's commitments when due.
In Compliance: NCGS 115C-425(a) restricts appropriation of fund balance or fund equity to an amount not to exceed the sum of cash and investments minus the sum of liabilities, encumbrances and deferred revenues arising from cash receipts as these amounts stand at the close of the fiscal year preceding the budget year.
Per our comprehensive annual financial report for the fiscal year ended June 30, 2002, we have the following fund balance reservations and designations:
- reserved for encumbrances - portion of fund balance available for appropriation to pay for commitments related to purchase orders and contracts which remain outstanding at year-end;
- reserved for inventories - portion of fund balance not available for appropriation because it represents the year-end balance of inventories, which are not expendable, available resources;
- reserved by state statute - portion of fund balance, in addition to reserves for scholarships, encumbrances and inventories, which is not available for appropriation under state law (this amount is usually comprised of accounts receivable and interfund receivables which are not offset by deferred revenues);
- designated for subsequent year's operating expenditures - portion of total fund balance available for appropriation which has been designated for the adopted 2002-03 budget ordinance; and
- undesignated - portion of total fund balance available for appropriation which is uncommitted at year-end.
NCGS 115C-433(d) allows transfers to or from the capital outlay fund to or from any other fund, with the approval of the board of county commissioners, to meet emergencies unforeseen and unforeseeable at the time the budget resolution was adopted. The board of education may adopt a resolution requesting such approval from the board of county commissioners. The resolution shall state the nature of the emergency, why the emergency was not foreseen, and was not foreseeable when the budget resolution was adopted, what specific objects of expenditure will be added or increased as a result of the transfer, and what objects of expenditure will be eliminated or reduced as a result of the transfer. In addition, note the references to sections (a) and (b) of NCGS 115C-441 in item 5 above.
Also, per Section (12)(a)(3) of the Guilford County Board of Education 2002-03 Budget Resolution, amounts may not be transferred between funds nor from any contingency appropriation within a fund without board of education and board of county commission approval. No such transfers have been requested.
7. Fails to provide adequate and reasonable budget support for Board development and other governance priorities, including the costs of fiscal audits, Board and committee meetings, Board memberships and district legal fees.
In Compliance: The budget is developed based on the district's mission, goals/beliefs and ongoing efforts to provide quality education to all students. It includes costs for programs which already exist plus any refinements as a result of local program development based on Board actions; costs for programs which occur as a result of state or federal programs/mandates/requirements; and costs which result form meeting accreditation standards.
8. Fails to take into consideration fiscal soundness in future years or ignores the building of organizational capabilities sufficient to achieve Ends in future years.
In Compliance: Per Policy EL-8 - Financial Administration, the CEO shall not knowingly cause or allow a material deviation from the annual budget or budget policy adopted by the Board, knowingly cause or allow any fiscal condition that is inconsistent with achieving the Board's Ends, or that places the long-term financial health of the district in jeopardy. Also note compliance comments in items 6, 7 and 9 of this monitoring report.
9. Fails to reflect anticipated changes in employee compensation, including inflationary adjustments, step increases, performance increases and benefits, environmental influences and market conditions.
In Compliance: The multi-year budget forecasting model was developed in order to facilitate long-range budget planning for the school district by the Board of Education and the Board of County Commissioners. Previous years' budgets and development processes were reviewed in order to identify the following major budgetary assumptions/variables of federal, state and local origin impacting budget development/adoption:
- salary increase percentage for teachers/licensed staff;
- salary increase percentage for principals/assistant principals;
- salary increase percentage for classified employees;
- changes in employee benefit rates/amounts (social security, retirement, hospitalization, workers' compensation, unemployment, dental insurance, life insurance);
- percentage of increase for annual utility/energy and gas/diesel fuel costs;
- percentage of increase for various risk management areas (i.e., liability/fleet/property/pupil scholastic accident insurance lines of coverage);
- additional energy costs for newly constructed and or air conditioned square footage associated with the district's $200 million Capital Improvement Plan (CIP) Program;
- additional maintenance/staffing costs associated with newly constructed and/or renovated square footage associated with the CIP Program; and
- increase in funding associated with projected growth in student enrollment (the County has funded the projected increase in tenth-day enrollment for the upcoming fiscal year at the same level of county appropriation per pupil funding as the district received in the current fiscal year).
Each line-item in the budget is assigned a budgetary assumption/variable value based on the object code of the line item. Calculations are then made automatically based on the values assigned to the budgetary assumption/variable tables. The fringe benefit calculations are also automated by the values assigned in the tables and via formulas for items such as wages subject to social security/retirement and by full-time equivalencies (FTEs) for items such as health/dental/life insurance.
The multi-year budget forecasting model provides historical data/statistics on the major budgetary assumptions/variables, contains line-item detail as well as summarized data, immediately updates and reflects the impact of any changes to those budgetary assumptions/variables, traces the origin of calculated budget numbers and provides an export file that can be used by our data processing programmers to create the beginning budget journal entries needed to populate our general ledger files once the budget is adopted.
Also note the comments regarding disclosure of budget planning assumptions in item 4 above.
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I certify this information to be accurate as of the close of business on April 3, 2003.
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Terry B. Grier, Ed.D.
Superintendent |
Attachment #1 - Official Board Response to EL Policy Monitoring Policy
Attachment #2 - Policy EL-7
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