RED OAK ISD BUDGET WORKSHOP 2017-2018.

RED OAK ISD BUDGET WORKSHOP

Budget Workshop Agenda Business Office Leadership Glossary of Terms
School Funding Review Recap of Fiscal Year Draft of Budget Tonight’s agenda

Business Office Leadership
RED OAK ISD Business Office Leadership Look first at the General Fund

Chief Financial Officer Vickie L. Benbow Certified Public Accountant (CPA) Registered Texas Business Official (RTSBO) Chartered Global Management Accountant (CGMA) Chair, Texas Lone Star Investment Pool Advisory Board Committee Member, Texas Skyward User Group 4

Chief Financial Officer Vickie L. Benbow Bachelor’s – East Texas Baptist University Master’s – Texas A&M Commerce Over 25 years of public school finance experience Leadership roles from small 2A schools to large 5A districts Independent auditor for schools and other non-profit entities Municipality experience 5

Chief Financial Officer Vickie L. Benbow Memberships Texas Assoc. of School Business Officials (TASBO) Texas Society of Certified Public Accountants DFW Society of Certified Public Accountants American Institute of Certified Public Accountants TASBO Certifications Accounting Personnel Risk Management Management 6

Teresa Simpson Director of Accounting Certified Public Accountant Over 13 years of school finance Independent Auditor Audited public schools, municipalities, non-profits, and benefit plans Coordinated audit engagements Supervised staff auditors Senior Accountant Maintained federal, state, and local grants and awards Processed transactions relating to bond sales and debt service payments Collaborated with Human Resources to manage staffing position reports Utilized Skyward Salary Negotiations to prepare salaries & benefits for budget Internal Auditor Created Internal Audit Department documentation and procedures manual Performed financial and operation audits New Director of Accounting brings KNOWLEDGE & SKILLS; also familiar with Skyward, Began by auditing school district

Teresa Simpson Director of Accounting Certified Texas School Business Specialist Certified Internal Auditor Certified Government Auditing Professional Bachelor’s – University of Texas at Arlington Memberships Texas Association of School Business Officials Institute of Internal Auditors American Center of Government Auditing TASBO Certifications Accounting Payroll Auditing An assortment of certifications.

Tammy Wardlaw Coordinator of Finance Almost 20 years with ROISD Promoted to Business Office in 2006 and named Business Office Manager in 2011 Became Coordinator of Finance in 2013 Prior corporate accounting experience Certified Texas School Business Specialist TASBO Certification Accounting Julie Phillips Purchasing Agent Bachelor’s – Texas Woman’s University Master’s – Texas Woman’s University Registered Texas School Business Official Over 9 years of school finance Member of TASBO Purchasing Mentor Program TASBO Certifications Accounting Management Two other key personnel in Accounting & Finance

Business Office Team Vicki Dennis Jennifer Holdt Tanisha Massie
Payroll Manager Jennifer Holdt Payroll / Employee Benefits Tanisha Massie Accounts Payable Manager Karen Dillon Accounts Payable It is a TEAM effort with Payroll, Accounts Payable, and Support Sharon Alsup Accounting Clerk Therese Winslow Administrative Assistant

Business Office Team It takes a team to achieve clean audits, superior FIRST ratings, and our newest... Comptroller’s Transparency Star Award.

Glossary of Frequently Used Terms
RED OAK ISD Glossary of Frequently Used Terms Click through

Gross receipts; Money received
Glossary Revenues Gross receipts; Money received Examples Local Property Taxes State Funding Federal Funding Investment Earnings Athletic Gate Receipts Rental of Facilities Tuition and Fees Donations Money coming into the District 13

Financial outlays; Charges against revenue
Glossary Expenditures Financial outlays; Charges against revenue Examples Instructional Needs Salaries School Leadership Transportation Costs Contracted Services Facilities Maintenance Utilities Safety & Security Money going out of district for expenditures 14

Difference between assets and liabilities
Glossary Fund Balance Fund Equity Difference between assets and liabilities TEA Recommendation Fund Balance should be equal to the estimated amount needed to cover cash flow until state funding and tax revenue is received plus one month of cash disbursements. Fund balance is the differenct between assets and liabilities. When revenues exceed expenditures, fund balance is increased. When expenditures are greater than revenue, the difference comes out of fund balance. TEA recommends... 15

Glossary Fund Balance Types Reserved – Board Approved Inventory
Bond Construction Federal and State Programs Retirement of Debt Designated Unreserved – Either Board or Designee Construction Repairs Purchase of Fixed Assets Undesignated Unreserved All Other Legal Expenditures Three classifications of fund balance 16

Acronyms ADA – Average Daily Attendance
ASATR – Additional State Aid Tax Reduction ASF – Available School Fund CEI – Cost of Education Index CPTD – State Comptrollers Property Tax Division EDA – Eligible Debt Allotment FASRG – Financial Accountability System Resource Guide FIRST – Financial Integrity Rating System of Texas FSP – Foundation School Program List of common acronyms... Won’t read all but you have this as a reference for future. 17

Acronyms LEA – Local Educational Agencies
IFA – Instructional Facilities Allotment LFA – Local Fund Assignment PEIMS – Public Education Information Management System PSF – Permanent School Fund RFP – Request for Proposals RFQ – Request for Qualifications SBOE – State Board of Education 18

Acronyms SHARS – School Health & Related Services
TAC – Texas Administrative Code TEC – Texas Education Code TASBO – Texas Association of School Business Officials TEA – Texas Education Agency TRE – Tax Ratification Election TRS – Texas Retirement System of Texas WADA – Weighted Average Daily Attendance 19

RED OAK ISD School Funding Review

Three Funds Approved by Board
Maintenance & Operation (M&O) Interest & Sinking (I&S) Student Nutrition Different FUNDS are used to designate the source and purpose of particular programs. The Board is required to approve these three. Day to Day Operations Teacher Salaries Classroom Supplies Utilities Transportation Nutritious Meals Breakfast Lunch Free & Reduced Debt Service Capital Expenditures Bldg Construction/Renovations Technology Infrastructure Land

Three Funds Approved by Board
Maintenance & Operation (M&O) Interest & Sinking (I&S) Student Nutrition is fairly self explanatory, but this is an example of how M&) and I&S relate to your household budget Household Budget Groceries Utilities Entertainment Gas for Automobile Note Payments Car Note Mortgage Payment Mortgage Escrow Home Improvement Loan

General Fund Revenues State Local Federal Miscellaneous Local Revenue
Property Taxes Funding Formula Texas Retirement System On- Behalf Federal Program Indirect Costs School Health & Related Services (SHARS) Three Sources of Revenue – Reflects the dollars or revenue coming into the District. 23

General Fund Revenues Miscellaneous Local
TSTC – Services Interest Income Athletic Activities E-Rate Reimbursement Little Hawks Learning Ctr After the Bell Summer School Other Tuition Facilities Rental Autism NJROTC Here are some samples of the local revenue paid to the District. Let me clarify, “revenue” means money coming into the District to help offset the applicable expenditures. It is NOT PROFIT.

General Fund Revenues Local Taxes
Local Revenues – Net Taxable Values The two bars for each year represent the Taxable Values used to determine the Maintenance & Operation tax revenue (the darker bar) and the Interest & Sinking. The variances in 2016 & indicates the M&O tax incientive to bring Triumph Industries to Red Oak. The full amount of Triumph’s value is taxed for Interest & Sinking. The next slide will show how the taxable values are used to calculate the actual tax revenue for M&O.

General Fund Revenues INCREASED TAX REVENUE (local funds get heavier)
Inverse Impact of Tax Revenue to State Funding INCREASED TAX REVENUE (local funds get heavier) DECREASED STATE REVENUE (state funds get lighter) BE VERY CLEAR ON HAND VISUAL As tax revenues increase (gets heavier as more dollars come in), state funding per student decreases, so the District still does not receive any more per student than dictated by the state. We will see how this looks when we discuss State Funding. 26

General Fund Revenues State
Two Main Variables of Funding Formula Property Taxes Seque into Student Counts

Refined Average Daily Attendance As you look at this chart, remember that school funding is based on the Average Daily Attendance, not enrollment. If a child is not in his seat, we do not get funding. The first three columns reflect FINAL ADA counts, is based on our current PEIMS numbers and won’t be final for several months. You can see there is a small dip in We had a smaller Kindergarten class than is typical. There must not have been snow days 5 years ago. This year, however, current demographics indicate growth this fall.

Weighted Average Daily Attendance Special Education Bilingual Compensatory At-Risk Career & Technology Gifted & Talented The State Funding formula also looks at weighted ADA – districts receive additional weights for special programs.

General Fund Revenues State Funding Formula
TIER I - Basic Allotment A set dollar amount x WADA Adjusted for Cost of Education Index (CEI) which has not been updated since 1989 LOCAL FUND ASSIGNMENT (LFA) The amount of Tier I entitlement required to be funded by the school district Determined by collections generated by assessing $1.00 / $100 property valuation TIER II A guaranteed yield funding for pennies of tax effort above the LFA tax rate up to $1.17 So how does the State Funding Formula work? There is a set dollar amount per WADA, adjusted for CEI. The amount expected to be funded locally is LFA.. Tier II is an attempt to recognize our local tax effort. This is where the copper & golden pennies come into play. The state contributes Particularly notice the LOCAL FUND ASSIGNMENT... Goes back to that inverse relastionship 30

Six Golden Pennies guaranteed yield amount per WADA of $77.53 Copper Pennies guaranteed yield amount per WADA of $31.95 Total Tier II Entitlement Golden Pennies Based on the six pennies above $1.00 ($1.00 to $1.06) Local election needed to tax above $1.04 The state will fund up to the Austin ISD yield per penny ($77.53) of tax effort per WADA Copper Pennies Based on pennies above $1.06 up to $1.17 The state will fund up to the $31.95 yield per penny of tax effort per WADA 31

General Fund Revenues Inverse Impact of State Funding to Tax Revenue
This a different look at the inverse relationship. N,ote how the % of state revenue decreases as the % of local increases.

General Fund Revenues Inverse Impact of State Funding to Tax Revenue
This line graph shows it clearer.

Estimated State Share of FSP % % % So how does the State Funding Formula work? There is a set dollar amount per WADA, adjusted for CEI. The amount expected to be funded locally is LFA.. Tier II is an attempt to recognize our local tax effort. This is where the copper & golden pennies come into play. The state contributes Particularly notice the LOCAL FUND ASSIGNMENT... Goes back to that inverse relastionship Source: Moak Casey & Assoc. 34

Texas Retirement System On-Behalf Another source of state revenue is TRS on-behalf. The state contributes 6.8% of earned income to the Teacher Retirement System on behalf of the District. Because the same amount is shown as District payroll cost, it has a net neutral effect to the bottom line. Employees also contribute 7.7%, similar to social security. However, that is not reflected on our financial statements because it is a cost to the employee, not the district. 6.8 % of Earned Income Also shown as offsetting payroll expense. 35

General Fund Revenues Federal
Federal Program Indirect Costs The last category for General Fund revenue is from the federal government – two main sources – Certain Federal programs allocate a small percentage of the grant to cover indirect costs like lighting, administration, etc. SHARS is a federal program that reimburses us for certain services covered by Medicaid. Unfortunately, this may be reduced by Trump’s agenda. School Health and Related Services (SHARS)

RED OAK ISD Expenditures Look at Expeditures

General Fund Expenditures
Based on last year’s approved Budget

General Fund Expenditures
Another way to classify general fund expenditures. Based on last year’s approved Budget

National School Breakfast and Lunch Programs
Student Nutrition National School Breakfast and Lunch Programs United States Department of Agriculture (USDA) Texas Department of Agriculture (TDA) Free & Reduced Meals Available depending on economic status Implemented not to show discrimination Commodities – Food instead of dollars Cheese Meats Vegetables Student Nutrition TermsCommodities similiar to TRS On-Behalf: Revenue & Expenditure Cut out “the middle man”. We will discuss how the HS is doing off the NSLP when we talk about current year,

Debt Service Principal – Amount owed to Bond Holder(s) at maturity
Capital Appreciation Bonds (CABs) – Bonds that defer the full payment of the principal, allowing more flexibility with working capital Interest – The amount bond holder(s) charge for the bond or loan Credit Risk – The risk of default; the higher the rating, the lower the interest rate Payment Schedule of Debt – February & August (for Districts with FYE of June 30 – August & February) Debt Service Terms

Calendar Shows the importance of a healthy fund balance… We do not start getting state revenue until September. Ta.x revenue begins to trickle in during November, but strongest in December & January

Calendar

RED OAK ISD Budget Purpose
Before we look at our current financial status and the proposed Budget, let’s look at the purpose of the budget

Budget Priorities Commit to the WHOLE child providing social, emotional, physical, and academic support Continue to prepare students for their future whether it is college, career, or military Recruit, retain, & support highly qualified staff at every campus Provide a safe, secure, and well-maintained learning environment 45

Budget Goals & Vision Evaluate short-term programs for long-term impact Keep our focus on Student Learning Reduce or eliminate spending in areas that do not support identified priorities Seek input from campus principals and department heads Implement a balanced and sustainable budget aligned with the District’s mission Maintain transparency 46

Execute the goals and objectives of the Board of Trustees.
Budget Principles Allocate resources effectively and efficiently. Execute the goals and objectives of the Board of Trustees. Plan for anticipated growth while maintaining the highest level of excellence. Promote community involvement. Prioritize the distribution of funds to address both academic and operational functions. Stay grounded in proud tradition, while soaring to new heights. 47

Significant Factors for ROISD
Last successful bond election in 2007 48

RED OAK ISD RECAP OF BUDGET

2016-2017 Fiscal Year Shields Rebuild
Payments for the rebuild are reported as EXPENDITURES. Costs incurred from December, 2015 through June, 2016 were recorded in last year’s financial statements. Costs incurred after June, 2016 will be recorded in this current year.

2016-2017 Fiscal Year Recap of Shields Rebuild
Cash donations are reported as REVENUE. FEMA, insurance, and settlements are reported as OTHER SOURCES OF REVENUE. NO TAX DOLLARS WERE USED. RECEIVED ENOUGH IN DONATIONS, INSURANCE AND OTHER SOURCES THAT NO TAX DOLLARS WERE USED. WE DID NOT HAVE TO UTILIZE ANY FUND BALANCE.

2016-2017 Fiscal Year One-Time Projects
Instructional Initiatives $2,185,071 District-Wide Technology ROE & RHS PA Technology Eastridge Construction ROMS Technology ROMS Construction & FFE Facilities $ 874,796 District Share of Road Scoreboard & Play Clock Upgrades Stadium PA & Speakers Roofs – ROMS & 6GC Little Hawks Expansion Other $ ,000 Misc. District-Wide Projects Reduction of State Revenue $1,055,517 $4,207,384 All are complete, mostly under budget

2016-2017 Fiscal Year Prosperity Bank Loan
Promissory note Originally $2,500,000 Renewable 2-year terms Annual principal payment $250,000 Renewal date June 30, 2017 $1,000,515 Payment of current loan will be reported as an EXPENDITURE. Renewal for next 2-year term will be reported as an OTHER SOURCE OF REVENUE. ZERO IMPACT TO BOTTOM LINE OF FINANCIAL STATEMENTS.

2016-2017 Fiscal Year General Fund Year End Projections

2016-2017 Fiscal Year Student Nutrition Current YTD

2016-2017 Fiscal Year Student Nutrition – High School

2016-2017 Fiscal Year Debt Service Year End Projections

RED OAK ISD DRAFT OF BUDGET

General Fund Expenditures Considerations
No Bond Portables in Spring, 2017 for Fall, 2018 Delay Classroom Revolution into High School and Elementary Campuses Delay replacement of heating & A/C units Skip a year in 5 year replacement plan for computers Update police radios to match Cities & Counties 59

General Fund Expenditures Considerations
Raises Increase teachers by step Increase non-professional staff by 2% Increase professional staff by 1.5% Additional Funding Requests Increase in UIL requirements Increase for demographic studies, software, and other programs as district grows Add the mandatory budget for Section 504 60

Changes to Teacher Retirement System of Texas
TRS Care (Health Insurance for Retirees) District contribution from 0.55% to 0.75% Estimated impact to budget - $45,000 / yr. 61

Changes to Teacher Retirement System of Texas
TRS ActiveCare (Health Insurance for Current Employees) Average rate increase to employees 9.6% - TRS ActiveCare 5.875% - Scott & White HMO ROISD enrollment ActiveCare 1 61% ActiveCare 2 17% ActiveCare Select 18% Scott & White HMO 3% District Contribution Employee Only $250 / month Employee+Child/Spouse $255 / month Employee+Family $265 / month 62

2017-2018 Proposed Draft General Fund

Proposed Budgets

Fund Balance Importance of Fund Balance
To provide cash flow until new year funding arrives To provide cash flow for emergencies & disasters To provide assurance to bond rating companies of the stability of the district and it’s ability to withstand downturns in the economy. 65

Fund Balance TEA Standard
Should be equal to the estimated amount needed to cover cash flow until state funding and tax revenue is received plus one month of cash disbursements; generally 20-25% of annual expenditures ROISD Policy 12.5% of annual expenditures 66

Fund Balance ROISD Analysis
NOTE: We were able to achieve this ONLY because of the OTHER FINANCING SOURCES INCLUDES OTHER FINANCING SOURCES (insurance, settlement, sale of right of way, etc.)

Fund Balance ROISD Analysis
Taking out the additional sources of funding and the tornado expenses, this is how it would have looked. ROUTINE M & O

Fund Balance Discussion Points Options for rebuilding fund balance
Gradually increase recommended policy of 12.5% to 25% 69

RED OAK ISD WHAT’S NEXT

Continue to Finalize Budget
What’s Next Continue to Finalize Budget Budget Workshop Tonight Public Hearing June 26, 2017 Adopt Budget Set Tax Rate 71

RED OAK ISD QUESTIONS

Chief Financial Officer
Questions Vickie L. Benbow Chief Financial Officer

RED OAK ISD BUDGET WORKSHOP 2017-2018.

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