Does It All Add Up

1
Does It All Add Up?

• Achieving Success Through Sound Financial
  Planning
• June 18, 2008
• Florida Department of Education
• MIS Database Workshop
• Charter School Session

2
Revenue - Expenses Bottom Line

• Rule 1 - Keep out of the Red
• Stay in the BLACK.
• Start with smart planning and sound budgeting.
• Develop a realistic budget.
• Implement a financial plan for long-term fiscal
  stability.

3
Charter Schools are a Business

• Youre in the business of educating students.

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Are you in business to

• Educate children?

5
Or are you in business

• To make money?

6
Identifying Revenue

• Florida Education Finance Program (FEFP)
• Student enrollment based on the October and
  February FTE survey counts
• State Categorical Funding
• Transportation (if you qualify)
• Charter School Capital Outlay (if you qualify)
• Federal Grants and Entitlements
• Implementation Grant Funds (Year One and Two)
• Individuals with Disabilities Act (IDEA)
• Title I - based on Free Reduced Lunch

7
Developing a Budget

• Estimating revenue (FEFP)
• Driven by student enrollment.
• Get to know your districts Finance Department.
• Use the FDOE Revenue Worksheet to calculate
  revenue.
• Updated each year, usually July

8
Estimating Expenses

• Fixed Coststheyre predictable
• Rent, Utilities, Phone/Internet
• Salaries
• Insurance (calculate all types)
• Interest on debt

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Heres the ChallengeCreate A Set of Assumptions

• Personnel costs constitute the largest portion of
  any schools budget - 80
• There are minimum and optimum levels of students
  necessary to be cost efficient.
• Average teachers salary 35k - 45k
• Be competitive to attract the best teachers and
  support staff.
• Consider developing a performance based incentive
  program to compete with district salaries.

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Calculating Classroom Instruction

• Salaries
• Classroom teachers (35k - 45k)
• ESE teacher
• Classroom assistants (13/hr for x 7.5 hrs/182
  days 17,745.00
• Other instructional staff (PE, Music, Art,
  Technology, Foreign Language)
• Calculate TOTAL INSTRUCTIONAL PERSONNEL

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Other Costs for Instructional Personnel

• Social Security _at_ 7.65
• Retirement FRS contribution - 9.85 or 401K
  company match
• Health Insurance (medical, dental, life) -
  Average contribution of 485 per employee per
  month
• Workers Compensation (premium is based on job
  duties and classification) - Total instructional
  salaries x rate. Average rate 1.25
• Unemployment Compensation (state and federal)
  averages 245 per employee per year

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Classroom Instruction Costs (continued)

• Professional Services (contracted) - Speech
  Therapy, OT/PT, School Psychologist 65/hr
• Instructional materials - average of 125 per
  student
• Classroom supplies - average of 70 per student
• Computer equipment - average cost 750 per
  machine
• Software - variable, based on need
• Substitute teachers - average 5 days per teacher
  x 85/day

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Add It Up

• Total Classroom Instructional Expenditure

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Instructional Support Services

• Pupil Personnel Services
• Guidance Counselor 40k year
• Health Assistant average 12/hr for 7 hrs/
• 182 days 15,288 year
• TOTAL Pupil Personnel Staff

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Other Costs of Pupil Personnel Staff

• Social Security _at_ 7.65
• Retirement FRS contribution - 9.85 or 401K
  company match
• Health Insurance (medical, dental, life) -
  Average contribution of 485 per month/employee
• Workers Compensation - Total instructional
  salaries x rate. Average rate 1.25
• Unemployment Compensation (state and federal)
  averages 245 per employee per year

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Will You Hire?

• Media Services Personnel
• Curriculum Specialist
• Media Specialist (38k)
• Library Aide (12/hr for 6 hrs/182 days 13k
  year)
• Curriculum Specialist (40k - 45 k)
• Calculate social security, retirement, health
  insurance, workers comp and unemployment
  compensation.

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Include Expenditures for

• Library books
• Technology-related equipment
• Interactive White Board - 500 - 1500
• (requires computer)
• Multimedia projectors - 600 - 1,000
• Overhead projectors - 200
• Document cameras - 750 - 800
• TV/VCR/DVD - 375

18
Dont forget Professional Development costs

• Professional development activities
• Consultant fees
• Workshop stipends
• Materials
• Travel (workshop registration, lodging, per diem,
  transportation)

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General Support Services for the Governing Board

• Professional Services - Legal 250/hr
• Independent Financial Audit - 15k
• Officers Directors Insurance Liability/Errors
  Omissions/Crime - Range 14- 22 per student
• Governance board training (required)
• Travel for board members to conferences,
  workshops
• TOTAL COST to support board

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General Administration

• Professional Management Services, if applicable
  (average is 12)
• Administrative fee - 5 based on total revenue
  (including transportation)
• TOTAL COSTS for General Administration

21
School Administration

• School Administrator
• Assistant Administrator
• School Secretary 25 - 30k
• Data Entry Operator/Office Assistant (14/hr x
• 8 hrs x 196 days 22k)
• Calculate social security, health insurance,
  workers comp, unemployment compensation,
  retirement
• TOTAL COST of School Administration

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Calculate with School Administration Costs

• Lease - copy machine 300/month
• Postage 6.00 per student
• Printing (includes advertising) 2,500 -
  5,000/year
• Office supplies 4,000 per year
• Office equipment (cost will be based on new or
  existing school) 1,000 per year
• Computer equipment 750 per computer plus
  printer
• Dues and fees (professional association dues)
• Travel - 2,500 per year per administrator
• Conference registration - 500 per year

23
Facilities Acquisition and Construction

• Building lease average 60 - 80 sq ft/student _at_
  12/sq ft and up
• Repairs and maintenance based on age of building
  and equipment
• Buildings and fixed equipment purchase of
  building
• Land purchase of land
• Improvements other than building fencing,
  playground equipment, landscaping, paving
• Remodeling and renovations AC replacement, fire
  alarm, security system, carpet/flooring, painting

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Fiscal Services

• Accounting services payroll, monthly financials,
  bill paying - 14k/yr. (average)
• Contract accounting services with a qualified
  professional.

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Pupil Transportation Services

• Salaries - Bus Drivers 14.00/hr (part-time
  position)
• Social Security 7.65
• Workers Comp total salary x rate of 8.6 (rate
  varies)
• Unemployment Compensation 245 per year
• Insurance - Auto/Bus 1,500 per year (rate
  varies)
• Repairs and maintenance 1,500 per year/bus
• Cell phone 300 per year/bus
• Bus inspections 300 per year/bus
• Dues Fees drug testing license fees 125
  per driver
• Gasoline Per bus/per year (variable, based on
  distance and fuel prices 5,000/yr

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Operation of Plant

• Salaries
• Custodial/maintenance - 12/hr (part-time)
• Include social security, workers comp (total
  salary x average rate of 8.6), unemployment
  compensation at 245 per employee per year
• Cleaning and maintenance supplies 4,000/yr

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Operation of Plant, cont.

• Cleaning Service 2,000/month - variable, based
  on size of school
• Property Insurance variable, based on
  location/type of building/lease or own - range
  2,500/yr - 8,000/yr
• Telephone, fax, Internet 1,000/month
• Utilities (electricity, water, sewer, trash
  service) 2200/month
• Pest control service 750/year
• Equipment variable, based on need

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Operation of Plant, cont.

• Fire Alarm/Security Monitoring 200/month
• Fire Inspections average - 250/yr
• Carpet cleaning variable, based on need
• Grounds maintenance 6,000/yr

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Food Services

• Lunchroom workers (part-time) at 9/hr (two for
  250 students)
• Include social security, workers comp (average
  rate 8.6) and unemployment compensation
• Materials and supplies 1,000/yr
• Equipment
• Lease warmer 30/month
• Purchase a warmer 2500 per unit
• Purchase a milk cooler 2000 per unit

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Balancing the Books

• Always have a contingency plan.
• Manage staff changes with an eye on the budget.
• Estimate carefully and conservatively.
• Educate your staff.

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Have a Contingency Plan

• Keep 3 - 5 in reserve.
• Apply for grants.
• Share services with other charter schools.
• Two equals ONE Fold two positions into one.
• Shopshopshop for services and insurance.
• Be prepared to make the hard choices.
• Have a line of credit.

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Manage Staff

• Hire with flexibility in mind.
• Hire teachers with certifications that cover
  multiple subjects or grades.
• Ensure that no one is indispensable.

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Estimate Conservatively

• Underestimate revenue.
• Overestimate expenditures.

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Educate the Staff

• Share the budget with staff.
• Explain whats whatand why.
• Understanding the budget helps put everyone on
  the same page.

35
Get Behind Fundraising

• Two big fundraisers are better than multiple
  small fundraisers.
• Parents easily suffer from fundraiser burnout.

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Whatever You Do

• Hire a responsible, honest, smart accountant.
• Recruit board members with strong financial
  experience. (Beware parents will have strong
  emotional attachments)
• And, remember

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The Governing Board Is

• Ultimately responsible for the schools finances.
• Obligated to ensure the schools finances are
  properly handled.
• Expected to follow practices of sound fiscal
  management.

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Establish Internal Controls

• Prevent fraud by establish sensible policies.
• Put policies in writing and have board approval.
• Create segregation of duties.
• Regularly monitor compliance.

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Monitoring Compliance with Fiscal Policies

• This function is one of the boards primary
  purposes.
• To accomplish
• 1. Administrator should certify, in writing,
  the segregation of duties.
• 2. Use external reports created by an auditor
• or other expert to examine documents and
• fiscal compliance practices.
  
• 3. Direct inspection by a board member.

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Understanding the Reports

• All board members should understand how to
  interpret four key financial reports
• 1. Balance sheet
• 2. Income expense statement
• 3. Budget vs. actual expenses
• 4. Cash flow projection

41
Review Reports Regularly

• The board should require regular financial
  reports.
• Failure to receive the four reports at least
  quarterly is dangerous.
• Understand what they say.
• The board should never adopt or approve a
  financial statement until its 100 comfortable
  with its accuracy and meaning.

42
Develop Accurate Budgets

• A board adopted budget is required by law.
• Essential to sound management.
• Should reflect the schools mission.
• Necessary for understanding the bigger picture.
• Spending should follow the plan.

43
Guidelines

• The mission of the school should drive the
  budget.
• The annual budget should be part of a multi-year
  plan.
• Budget variances will occur but must be approved
  by the board.

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Recognizing Red Flags

• Dont you trust me?
• Irregularity in receiving financial reports.
• Non-existence or violation of segregation of
  duties policies.
• The administrator cant explain every aspect of
  the schools finances.
• The auditor is not completely independent from
  management. (Example An auditor who audits
  multiple schools for a management company.)

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Red Flags, cont.

• Financial contributors to the school who are
  anonymous to the board.
• Peculiar practices, such as the administrator
  requiring that bank statements not be opened by
  staff.
• Dont you trust me?

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Do these Red Flags Sound Theoretical?

• Theyre not.
• Every one of these has occurred in a charter
  school embezzlement scheme.

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One last thought

• I believe that every right implies a
  responsibilityevery opportunity an
  obligationevery possession a duty.
• John D. Rockefeller,
  Jr.

48

• Thank you for attending todays session.
• Nancy Scowcroft
• District School Board of Pasco County