THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, September 3, 1995 TAG: 9509020129
SECTION: VIRGINIA BEACH BEACON PAGE: 06 EDITION: FINAL
LENGTH: Long : 147 lines
Memo to: Sidney L. Faucette, superintendent
From: Mordecai L. Smith, interim chief financial officer/director of budget development
Date: Nov. 28, 1994
As you know, the Sept. 30, 1994, ADM count was 75,926 pupils. A calculated 2.5 percent reduction in the Sept. 30, 1994, membership count (or an ADM of 97.5 percent) would equal to an ADM count of 74,028 (a reduction of 1,898 pupils). Based on the state funding formula . . . the calculated reduction in state revenues (assuming a 2.5 percent reduction in ADM) would be approximately $4,596,500.
1994-95 Budget Projection Analysis
By Mordecai L. Smith
Dec. 12, 1994
(A) $2.8 million surplus is anticipated as the 1994-95 year-end balance. This project, which was conservatively (worse case scenario) calculated, assumes that the March 31, 1995, average daily membership (ADM) will be fairly close to the budgeted ADM of 76,079. Historically, the March 31 ADM has averaged approximately 98 percent of the Sept. 30 ADM. If this trend holds true for this fiscal year, state revenues . . . would be adjusted downward .
Using an anticipated reduction in the March 31 ADM of 2.5 percent, efforts are under way to reduce the expenditure side of the budget equation by $7.4 million ($4.6 million for the 2.5% ADM reduction and $2.8 million for the non-budgeted 1993-94 commitments). Despite the projected expenditure shortfalls in health insurance and a few salary line items . . . the projected surplus in non-salary line-item accounts will offset the bottom-line expenditure shortfall. The surpluses projected in revenues (impact aid, state sales tax, categorical accounts and indirect allocations from other funds) will provide additional year-end safeguards . . .
Year-end fund balance: The 1993-94 fund balance was $234,093. Historically, fund balances for the school division have ranged between $2.5 million and $9 million. . . . When developing the 1994-95 budget, $2.5 million was targeted as the 1993-94 year-end balance.
Purchase orders from 1993-94: In order to offset revenue shortfalls in 1993-94 and to protect the spending integrity throughout the fiscal year, a decision was made to cancel 1993-94 purchase orders in the amount of $2.8 million and apply the charges to the 1994-95 budget. . . .
Department or program decisions: . . . (T)he bottom-line budget for Custodial Services was directed to not exceed the 1993-94 bottom line for the purposes of showing a decreased custodial cost as a result of Serv-iceMaster.
Capital Improvement Program: . . . Due to a lack of understanding of the CIP process, decisions were not made appropriately to realign . . . ``financing-to-date'' appropriations to cover project shortfalls for computers for Ocean Lakes High and Larkspur Middle schools. As a result, revenue (impact aid) intended for operational purposes was applied to finance a portion of the CIP.
. . . Without hesitation, development of the 1994-95 operating budget (mainly the expenditure side of the equation) was somewhat difficult due to the few hurdles mentioned above. The decision made (by the director of budget development) to safeguard the expenditure side through conservative revenue projections (budgeted) proved extremely positive and justified. The interim chief financial officer/director of budget development is confident in the (year-end) projection of $2.8 million. As a reminder, several additional teaching position(s) were authorized (absorbed) by the School Board several months ago ($1.5 million impact).
To: School Board members
From: James L. Pughsley
Date: Aug. 18, 1995
State aid: As referenced back in December of 1994, a shortfall equal to approximately $2.8 million was anticipated for 1994-95. This difference in budgeted versus actual revenues, which can be attributed to declining ADM numbers from September of 1994 to March of 1995, has been adjusted and should not be duplicated in 1995-96.
VRS reimbursements - . . . Our records indicate that these reimbursements, after received, will exceed $5.8 million.
To: James Pughsley
From: Mordecai L. Smith
chief financial officer
Date: Aug. 25, 1995
Capital Improvement Program - Funds in the amount of $1.3 million were transferred to the CIP based upon a prior commitment made to replenish the ``Renovations and Replacements'' project. This commitment negatively impacted the operating budget by the above amount by reducing the expenditure capacity.
As you know, the categorical grants and enterprise funds were not appropriated for 1993-94. . . .
Athletic fund - A budgeted transfer of $391,000 from the oeprating budget was not made due to obvious commitments related to the spending delay.
Textbook fund - A budgeted transfer of $1.4 million from the operating budget was not made due to obvious commitments related to the spending delay
Self-insurance fund - A $1 million transfer made to close the 1993-94 books and 1994-95 expenditures.
To: School Board members
From: James L. Pughsley
Date: Aug. 27, 1995
2. In the Aug. 18 memo, the year-end balance was stated as approximately $400,000. This amount referred to how much the actual expenditures for the operating budget was less than the appropriated expenditures. This amount did not include any fund balances or deficits in enterprise accounts. It also did not include any revenue shortfall.
3. Additional adjustments were made in state revenue. State aid adjustments resulted in a $1,479,520 deficit, which was less than expected. This deficit primarily can be attributed to the use of Sept. 30, 1994, ADM as opposed to March 31, 1995, ADM figures.
6. The Virginia Retirement System reimbursements were estimated at $5.8 million. After analyzing actual data, the estimate has been revised to $3 million.
7. Enterprise-fund accounts were not included in the year-end fund balance. Transfers from the 1994-95 operating budget to the enterprise funds were not made as budgeted. The transfers were not made to offset other operating expenses.
Outline for Discussion
By Chief Financial Officer
Aug. 28, 1995
Closing
a. How did this happen?
1. Examine the expenditure integrity in 1993-94
2. Note an ADM misfortune (shifted into 1994-95)
3. Remember that no July 1994 Financial Statement was provided to the School Board (which would have reflected the expenditures which were charged to the 1994-95 budget) . . .
5. Unbudgeted expenditures
6. 1993-94 transfers made from the self-insurance and textbook funds . . .
8. Lack of a budget transfer policy in 1993-94
Notes from Dr. Pughsley: Corrective actions for improved budget management
Aug. 28, 1995
Already in place:
(1) Budget management document . . . will ensure discipline among administrators and accountability for expenditures.
(2) Development and implementation of staffing standards and guidelines . . school system.
(5) Budget transfer policy. All budget transfers of $10,000 or more require (prior) School Board approval.
(6) Mainframe access to budget data for budget managers. Budget managers . status of accounts, with everyone having access to the same set of numbers. by CNB