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Centennial School District2018‐19 Community Forum on School BudgetingFebruary 26, 2018Christopher M. Berdnik, PRSBAChief Financial OfficerDavid E. Baugh, Ed.DSuperintendent of Schools

About Centennial School District 5,475 students Six (6) school buildings Self‐operated facilities, food service, andtransportation (ownership) Three municipalities across 16.55 square miles 115 million budget (2017‐18) 128 million in outstanding debt (June 30, 2017) 150 million in capital assets net of depreciation(June 30, 2017)2/26/182

Our business is educationA budget is a plan: math curriculum example Math PQR‐2016 2016‐17 2017‐18 Aligned the Curriculum to PA CCSS(2017) EveryDay Math 4 adopted (2016) Khan Academy implemented WD (2016‐17) Districtwide Gr. 3‐5 (2017‐18) Klinger (2017‐18) ST Math (2015) K‐5 Math/Technology InstructionalCoach2/26/183

Math resultsMcDonaldDavisWillow DaleGrade 3 - 2016- 55%;2017 - 52.5%Grade 3- 2016 -63.2%2017- 62.6%Grade 3 - 2016 - 42.9%2017 - 62.3%Grade 4 - 2016 - 39%2017- 44.7%Grade 4 - 2016 - 64.2% Grade 4 - 2016 - 44.4%2017 - 70.5%2017 - 50.7%Grade 5 - 2016 - 44.6% Grade 5 - 2016 - 55.2%2017 - 35.4%2017 - 53.9%Grade 5 - 2016 - 38.7%2017 - 43.8%Significant increase with percentage of proficient and advancedstudents at WD in test scores across all grades!4

Moody’s assigns Aa2 bondrating (creditworthiness) “The Aa2 rating reflects the district's stable taxbase and above average wealth, strongmanagement, and satisfactory debt levels,moderated by a fund balance policy that keepsreserves narrow versus peers.” “In addition to conservative budgeting practices,management maintains a comprehensive long‐term financial plan.”2/26/185

Did you know? Our peers agree: Centennial SchoolDistrict staff presented on bestpractices in school budgeting at the2017 Pennsylvania Association ofSchool Business Officials annualconference, in addition to routinelytraining new school businessofficials through PASBO’s elementsof budgeting, school finance, schoollaw and organization, andapplications in revenues workshops.2/26/186

All Centennial Schools are Energy Star Certified Davis Elementary School, Klinger Middle School,Log College Middle School, McDonald ElementarySchool, William Tennent High School, and WillowDale Elementary School have all earned the U.S.Environmental Protection Agency’s (EPA) ENERGYSTAR certification for superior energy efficiency. This recognition is awarded to buildings that out‐perform 75 percent of similar buildingsnationwide. Willow Dale’s rating is literally 100. Only 300 K12 school buildings in theCommonwealth are certified. Bucks County has 18.2/26/187

What determines how we account forrevenues and expenditures?Accounting andFinancial ReportingExpenditure Focus2/26/188

Governmental Accounting Standards Board The GASB is the independent organization that establishes andimproves standards of accounting and financial reporting for UnitedStates’ state and local governments. The generally accepted accounting and reporting guidance included inPennsylvania’s manual of accounting for school districts began withthe National Council on Governmental Accounting, Statement No. 1,Governmental Accounting and Financial Reporting Principles, andwere adopted by the GASB in 1984 in their first pronouncement,GASB Statement No. 1.2/26/189

The National Center for Education Statistics,U.S. Department of Education (NCES) The National Center for Education Statistics (NCES) is the primary federalentity for collecting and analyzing data related to education in the U.S. andother nations. Located within the U.S. Department of Education, the NCESfulfills a Congressional mandate to collect, collate, analyze, and reportcomplete statistics on the condition of American education; conduct andpublish reports; and review and report on education activitiesinternationally. Pennsylvania’s account code structure is modeled after the current FederalAccounting Handbook II, as revised, and promulgated by the NCES. Astandard account code structure allows for the accumulation of programcosts at the level of detail the school administration chooses, as well asprovides for financial reporting in conformance with governmentalaccounting and financial reporting principles for all state and localgovernments, including public school systems.2/26/1810

The Association of School Business Officials(ASBO) International Founded in 1910, the ASBO International is a professional associationof school business management professionals. They provide programsand services to promote the highest standards of school businessmanagement practices, professional growth, and the effective use ofeducational resources.2/26/1811

Pennsylvania Association of School BusinessOfficials (PASBO) The Pennsylvania Association of School Business Officials (PASBO) is astatewide association devoted to providing members with education,training, professional development and timely access to legislative andpolicy news. It’s membership base covers school professionals working infinance, accounting, operations, facilities, transportation, food service,technology, communications, human resources, purchasing and safetyservices. The PASBO accounting committee is one of the PASBO committees whosepurpose is to review and comment upon all matters relevant to school orgovernmental accounting and to act in an advisory capacity to the PASBOboard and executive director in accounting and related matters. As part oftheir responsibilities, the committee regularly reviews and providesresponses to the GASB on Exposure Drafts.2/26/1812

The Pennsylvania School Boards Association The PSBA is a nonprofit statewide association of public school boards,pledged to the highest ideals of local leadership for the public schoolsof the Commonwealth. Since their foundation in 1895, they set out tocreate an efficient system of public education by maintaininglegislative awareness and communication with members of local,state, and federal legislative bodies. Centennial’s local Board policies are grounded in PSBA models.2/26/1813

American Institute of Certified PublicAccountants (AICPA) Founded in 1887, the AICPA is the national,professional organization for all Certified PublicAccountants. Its mission is to provide memberswith the resources, information, and leadershipthat enable them to provide valuable services inthe highest professional manner to benefit thepublic, employers, and clients. The regional branch, the Pennsylvania Institute ofCertified Public Accountants (PICPA), founded in1897, is the second oldest and fifth largest stateCPA organization in the United States. AICPA standards are instrumental to local audits.2/26/1814

Government Finance Officers Association The GFOA is the professional association of state/provincial and local finance officers inthe United States and Canada, and has served the public finance profession since 1906.The association’s members are dedicated to the sound management of governmentfinancial resources. The association provides and administers a broad range of products, services, andprograms in the major functional areas of government financial management, includingaccounting, auditing, and financial planning, along with many other areas. The GFOA is the publisher of Governmental Accounting, Auditing and Financial Reporting(GAAFR).2/26/1815

Generally Accepted Accounting Principles (GAAP) and theGovernmental Accounting Standards Board (GASB) GAAP are accounting standards and practices that govern how anorganization keeps information about its finance‐related resources,obligations, and transactions and, ultimately, how it reports that datain financial statements. In the United States, GAAP for state and localgovernments have developed separately of and differently from GAAPfor private‐sector companies. Example requirements stemming from GAAP principles includefinancial reporting annually to the PA Department of Education andadopting an annual budget for the general fund.2/26/1816

Financial audits School districts, charter schools, cyber charter schools or area vocational‐technical schools are required by Sections 2401 & 218 of the School Codeto conduct annual financial statement audits of their books and records. Financial audits are designed to provide reasonable assurance aboutwhether the audited financial statements present fairly the financialposition, results of operations, and cash flows of the LEA in accordancewith generally accepted accounting principles. Financial information,compliance requirements and internal controls are evaluated. CSD has a clean audit opinion and zero audit 6/1817

Single Audits A single audit is an entity‐wide financial audit consisting of two (2)main parts: an audit of the basic financial statements and an audit ofthe entity’s federal assistance programs. Centennial meets the US Office of Management and Budgetthresholds requiring a single audit. Single audit components are incorporated into the very same annualreport, with a clean opinion and zero 6/1818

Fund accounting 101 A fund is a fiscal and accounting entity with a self‐balancing set ofaccounts recording cash and other financial resources. It also containsall related liabilities and residual equities or balances or changestherein. Funds are established to carry on specific activities or attaincertain objectives according to special legislation, regulations or otherrestrictions. The General Fund is the general operating fund of the District. It isused to account for all financial resources except those required to beaccounted for in another fund. The General Fund is the primary fundof the District, and is where the operating revenue and expendituresof the District are budgeted and recorded.2/26/1819

Capital Reserve Fund Authorized by Municipal Code P.L. 145, Act of April 30,1943, also known as Purdon’s 53 § 1431, the CapitalReserve Fund accounts for (1) monies transferred duringany fiscal year from Appropriations made for any particularpurpose which may not be needed, (2) surplus monies inthe General Fund at the end of any fiscal year, and (3)interest earnings of the fund itself. Expenditures from this fund are limited to: capitalimprovements, replacement of and additions to publicworks and improvements, for deferred maintenancethereof, for the purchase or the replacement of schoolbuses, and for no other purpose.2/26/1820

Other governmental funds The Capital Projects Fund is utilized to report the total of all capitalproject activity not specifically associated with the Capital ReserveFund. Bond proceeds and associated expenditures are typicallyrecorded in the Capital Projects Fund. A Debt Service Fund may be used by Pennsylvania school districts toaccount for resources accumulated to provide for payment of generallong‐term debt principal and interest. The Pennsylvania LocalGovernment Unit Debt Act authorizes Pennsylvania public schools tomaintain this fund. Centennial School District established this fund forthe very specific purpose of leveling debt service payments in theGeneral Fund.2/26/1821

Food Service Fund This fund, authorized under Section 504 of the PublicSchool Code of 1949 accounts for all revenues andexpenses pertaining to cafeteria operations. The FoodService Fund is self‐supporting, receiving no aid from theGeneral Fund in its operating budget. This fund accounts for operations that are financed andoperated in a manner similar to private businessenterprises where the intent is that the costs (expenses,including depreciation and indirect cost) of providing goodsor services on a continuing basis be financed or recoveredprimarily through fees and user charges rather than taxesor similar revenues.2/26/1822

Income statement concepts Revenue codes provide for the classification by source. The primaryclassification differentiates Local, State, and Federal revenue sources. Function describes the activities for which a service or material is acquired.The functions of an LEA are classified into five broad areas: (1) Instruction,(2) Support Services, (3) Operation of Non‐instructional Services, (4)Facilities Acquisition, Construction, and Improvement Services, and (5)Other Financing Uses. Object is the service or commodity bought: (1) Personnel Services –Salaries, (2) Personnel Services – Employee Benefits, (3) PurchasedProfessional and Technical Services, (4) Purchased Property Services, (5)Other Purchased Services, (6) Supplies, (7) Property, (8) Other Objects, (9)Other Financing Uses.2/26/1823

Balance sheet concepts The Balance Sheet Account dimension consists of asset, deferredoutflows of resources, liability, deferred inflows of resources, andfund balance accounts. When presented together in statementpresentation, those accounts form the Balance Sheet, which is thebasic financial statement used to disclose an LEA’s financial positionat a specific date. GFOA recommends, at a minimum, that general‐purposegovernments, regardless of size, maintain unrestricted budgetaryfund balance in their general fund of no less than two months ofregular general fund operating revenues or regular general fundoperating expenditures.2/26/1824

PA limits school district fund balancesTotal Budgeted Expenditures (less than or equal to)Less Than or Equal to 11,999,999Between 12,000,000 and 12,999,999Between 13,000,000 and 13,999,999Between 14,000,000 and 14,999,999Between 15,000,000 and 15,999,999Between 16,000,000 and 16,999,999Between 17,000,000 and 17,999,999Between 18,000,000 and 18,999,999Greater Than or Equal to 19,000,0002/26/18Fund Balance % Limit12%12%11%11%10%10%9%9%8% PA limit applies to unassigned fundbalance. Taken together with GFOA guidanceon fund balance and Pennsylvaniarestrictions on unassigned fundbalances, Centennial has in recentyears maintained total General Fundbalances on or about 10 million.25

Fund balance has been carefully guardedTotal Fund Balance (General Fund)All Bucks County, PA School Districts2011‐12 to 2015‐16 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 11,559,868 11,641,583 12,189,125 10,034,036 10,318,055 5,000,000 ‐2011‐12Bensalem Township SDCentral Bucks SDNew Hope‐Solebury SDQuakertown Community SD2012‐13Bristol Borough SDCouncil Rock SDPalisades SD2013‐14Bristol Township SDMorrisville Borough SDPennridge SD2014‐15Centennial SDNeshaminy SDPennsbury SD2015‐16Source: PA Department of Education2/26/1826

Who are our employees and how arethey compensated?Labor Relations2/26/1827

Labor relationsoverview There are presently 647 employees of the SchoolDistrict, including 419 teachers, 35 administrators,and 193 full‐time secretaries, athletic staff,maintenance/custodial staff, transportation staff,cafeteria staff, and teachers’ aides. Part‐time andsubstitute employees are not included in thistotal. Professional/instructional employees of theSchool District are represented for purposes ofcollective bargaining by the Centennial EducationAssociation, which is affiliated with thePennsylvania State Education Association (“PSEA”).2/26/1828

Management Team: Act93 of 1984 (11‐1164) School employers are required to meet anddiscuss in good faith with school administratorsprior to adoption of a compensation plan. Centennial’s Act 93 Plan runs from July 1, 2017, toJune 30, 2021. The compensation plan addressesall CSD administrators outside of theSuperintendent, Assistant Superintendent,Director of Human Resources and Chief FinancialOfficer, who are precluded by the Act from beingcovered by the compensation plan. Base salary increases are 1% per year.2/26/1829

Non‐Act 93 Administrators Superintendent is under contract through June 30,2020. Section 1073 of the school code describes theprocedure for hiring a Superintendent. Assistant Superintendent is under contract throughJune 30, 2021. Section 1076 of the code outlines theprocedure for hiring an Assistant Superintendent. Director of Human Resources is under contract throughJune 30, 2021. Section 1164 precludes the personneldirector’s coverage under the Act 93 plan. Chief Financial Officer is under contract through June30, 2022. Section 1089 authorizes a school board toenter into a contract with a business administrator.2/26/1830

Support staff CSD support staff (secretaries, custodians, foodservice workers) are not represented by a union,but rather meet and discuss (see Act 93 process). Current compensation plan expires June 30, 2018. Recent increases: 15/16: 1.0% plus increment 16/17: 1.5% plus increment 17/18: 1.5% plus increment2/26/1831

Centennial Education Association Represents professional employees, including classroom teachers,psychologists, school counselors, etc. Two rounds of concessionary bargaining in the recent past. Contract runs July 1, 2016 to June 30, 2020, with modest raises asfollows: 16/17: 1.0% plus increment17/18: 1.0% plus increment18/19: 0.8% plus increment19/20: 0.8% plus increment Clever language in the contract slows the velocity of increments.2/26/1832

Attracting and retaining talent matters:CSD teacher salaries are quite competitive2016‐17 Average Administrator and Classroom Teacher SalariesAll Bucks County, PA School Districts 160,000 140,000 142,150 137,698 136,484 138,081 132,028 128,397 123,040 140,846 125,757 125,773 116,727 120,000 100,000 128,323 96,116 95,199 100,700 90,509 90,142 89,610 88,159 86,348 84,284 81,624 80,899 80,853 80,000 77,004 75,393 60,000 40,000 20,000 ‐Council Rock Centennial SD Neshaminy SD Bristol Borough QuakertownNew Hope‐SDSDCommunity SD Solebury SDBlue Average Classroom Teachers SalariesGray Average Administrator SalariesBristolTownship SDBensalemTownship SDPennridge SD Central BucksSDMorrisvilleBorough SDPalisades SDPennsbury SDDid you know? Centennial SD's average teacher salary ranked second in thecounty, but our administrative salaries were near the bottom, at 11th?Source: PA Department of Education2/26/1833

Pennsylvania public school teachers differ from other full‐timeemployees on education levelCompensation and demographic characteristics of Pennsylvania public school teachers compared withother full‐time Pennsylvania employees, 2010–2014PA private‐sector and stateand local governmentEducationemployeesPA public school teachersHigh school34.30%0.00%Some college11.40%0.30%Associate degree11.50%0.60%Bachelor’s degree22.10%32.60%Master’s degree7.40%63.60%Professional degree1.80%1.90%Doctorate1.30%0.80%Bachelor’s or 0.90%10.50%56.20%0.10%‐0.50%66.30%Source: Economic Policy Institute (2018).2/26/1834

Pennsylvania is losing teachers at an alarming rate The rate of Pennsylvania teacher certifications has declined by two‐thirds between 2010 and 2015 (Benshoff 2016). In 2013, 16,631students graduated from teacher‐training programs; by 2015, thatnumber had dropped to 6,125, a 63 percent decline. College students are shunning education majors, with reportsindicating that enrollment fell by 36 percent in traditional teachereducation programs at the 14 Pennsylvania State System of HigherEducation colleges (Palochko 2016).2/26/1835

Medical plan cost containment Centennial joined the DelawareValley Health Insurance Trust in2011. Self‐insured pool with a fullyinsured rate for the entity. Medical renewals have beenoutstanding: 16/17: 1.33%, net of RSF 17/18: 1.91%, net of RSF 18/19: 3.82%, before RSF(should land around 2%)2/26/1836

Pharmacy plan cost containmentDid you know?Centennialprojects a 10%or greaterreduction inpharmacypremium for2018‐19.2/26/1837

Avoiding Fool’s Gold: Just say no to ERIP1Minnesota examined

Government Unit Debt Act authorizes Pennsylvania public schools to maintain this fund. Centennial School District established this fund for the very specific purpose of leveling debt service payments in the General Fund. 2/26/18 21