- Monitoring Reports
OE-05 Financial Planning Interpretation and Monitoring Indicators
Monitoring Report - Operational Expectations (OE) Policies
Policy: OE-05
Title: Financial Planning Interpretation and Monitoring Indicators
Status: Active
Adopted: September 19, 2018
To: School Board, Ferndale School District (WA)
From: Dr. Kristi Dominguez, Superintendent
Date: January 30, 2024
Subject: 2024 Monitoring Report
Operational Expectations Policy 5 (OE-5)
Financial Planning
Superintendent’s Introduction
Because most of our Board and some administration has turned over in the past couple of years, I found it important for everyone to have a deeper understanding of not only our current financial situation, but also how we got here. The last OE-5 report, written by the former administration in July 2021, has a very thorough rundown of an eventful stretch of Ferndale School District finances – from the McCleary fix to the 2020 levy failure to COVID-19. That report can be found at this link.
Since that July 2021 report, Ferndale voters emphatically approved another two-year levy in February 2022. For the upcoming February 13, 2024 election, we’ll be asking voters to renew the levy for four years.
More than four years since the Board approved the original OE-5 policy, all of our bond projects are nearly complete. Our buildings have all received significant security upgrades, including secure entryways at each site, along with most schools also receiving capital improvements. And the new FHS campus, finally fully completed this month, has been well received by students, staff, and the community at large. More information about the bond process can be found on our website.
The 2023-2024 Budget you approved on July 25 ensures continuing fiscal soundness for the Ferndale School District. The responses to the indicators in the report that follows attest to that. In fact, they are mostly just simple attestations that we have complied with all of the legal requirements and accounting guidelines of the State of Washington and that we have kept you informed throughout the process. But the whole story of our financial planning is so much more than those simple answers convey.
Policy
The Superintendent will develop and present to the Board a multi-year financial plan that is related directly to the Board’s Results priorities and Operational Expectations goals and that avoids long-term fiscal jeopardy to the District.
Interpretation
This means that we will provide financial information to the School Board and stakeholders at regularly scheduled reporting periods. This financial information will include the annual budget and monthly financial updates on the state of the District budget as well as such debt service instruments. The financial information we present to the Board will display a balanced budget during the upcoming fiscal year.
Also, our budget reports to the School Board and stakeholders will show how funds are being allocated in support of the District’s strategic plan for the coming year as well as for the next three years.
The Superintendent will develop a budget that is in a summary format understandable to the Board and presented in a manner that allows the Board to understand the relationship between the budget and the Results priorities and any Operational Expectations goals for the year.
Interpretation
We understand this requires that the key components of the Annual Adopted Budget will be condensed and presented to the Board in a “user friendly” format. The Washington State standardized format we are required to use for the Annual Adopted Budget is difficult to understand for the average lay person. Since the Board places a high value on transparency, they expect the Chief Business Officer or designee to create a summarized version of the budget that explains (1) the total General Fund revenues and expenditures; (2) the main type of anticipated expenditures within the General Fund; and (3) the assumptions underlying the estimated revenues and expenditures.
Monitoring Indicator(s)
We will know we are compliant when:
We have delivered a presentation at the Annual Adopted Budget Board meeting which includes the information outlined in the interpretation above.
The budget was presented at the regular business meeting on July 25, 2023. The presentation included all of the information outlined in the interpretation.
The Board also discussed the upcoming budget for the 2024-25 school year during their study session on January 16, 2024.
We have presented OSPI-generated budget documents at the Annual Adopted Budget Board meeting.
The F-195, F-195F and MSOC (Materials, Supplies and Operating Costs) Disclosure were presented via BoardDocs as part of the July 25, 2023 School Board meeting materials.
We can produce evidence showing that we have shared the assumptions and allocations that led to the approval of the Annual Adopted Budget.
During several meetings, the Board has discussed enrollment, staffing, ESSER (Elementary and Secondary School Emergency Relief) funds, and new State budget impacts.
The Superintendent will credibly describe revenues and expenditures.
Interpretation
We understand this component requires that the Annual Adopted Budget will follow the Washington State required standardized format for documenting the various revenues the District expects to receive and the funds the District expects to expend during the period beginning September 1 of the following year and running through August 31. Also, the Board expects us to base our projected revenues and expenditures on realistic assumptions and the best information known at the time. Finally, the Board expects us to submit our Annual Adopted Budget, along with all required supporting documentation, to the Educational Service District and/or OSPI for review in order to ensure our assumptions and predictions are valid and reasonable.
Monitoring Indicator(s)
We will know we are compliant when:
The Annual Adopted Budget is available on the District’s website.
The 2023-2024 Adopted Draft Budget has been posted on the District website since July 2023, and it was labeled as final after it was adopted by the School Board on July 25, 2023.
The results of the District’s most recent financial audit verify that our budgeting methods are realistic and predictably attainable.
The exit materials from the State Auditor’s Office that have been provided to the Board annually since our last monitoring report reflect no adverse opinions.
We can show evidence that the Educational Service District (ESD) and/or the Office of the Superintendent of Public Instruction (OSPI) have received and reviewed the District’s Annual Adopted Budget.
Page 3 of the F-195 budget shows that Lori R. McLeod of the ESD and Lee Wlazlak of OSPI approved and signed the 2023-24 annual budget.
The Superintendent will ensure that the Budget shows the amount spent in each budget category for the most recently completed fiscal year, the amount budgeted for the current fiscal year, and the amount budgeted for the next fiscal year.
Interpretation
We understand this component requires that we regularly report to the Board a summary of General Fund budgeted and actual expenditures by major object code. We will use the format as defined by the Washington State School Accounting Manual.
We will also use major object codes defined by the Washington State School Accounting Manual, which are: Debit and Credit Transfers; Certificated Salaries; Classified Salaries; Employee Benefits; Materials, Supplies and Other Costs; Contractual Services; Capital Outlay; and Travel.
Monitoring Indicator(s)
We will know we are compliant when:
We can show an Annual Adopted Budget that includes all of the data outlined in the interpretation above.
The F-195 has been presented to the board and made available online.
We can show that we have provided Interim Financial Reports that include the data outlined in the interpretation above.
Each month at their regular business meeting, the Board has been presented with monthly financial statements via BoardDocs. This information is accessible online.
The Superintendent will disclose budget-planning assumptions.
Interpretation
We understand this component requires us to share with the Board in public meeting(s) the major assumptions we have used to determine projected revenues and expenditures. Such assumptions will reflect factors such as (1) changes in the revenue limit funding as determined by the State, (2) increases or decreases in State and Federal funding, (3) significant changes in negotiated compensation agreements (with “significant” defined as impacting the majority of the bargaining unit), (4) anticipated changes in student enrollment, and/or (5) anticipated cost increases in required commodities like insurance and utilities.
Monitoring Indicator(s)
We will know we are compliant when:
We can show evidence from public Board meetings showing we have made presentation on the budgeting process, assumptions underlying that process, and research supporting our assumptions.
Minutes from Board meetings and study sessions reflect discussions about enrollment, staffing, ESSER (COVID-19 school relief) funds, and new State budget impacts. These minutes can all be found on BoardDocs.
We can show evidence that Annual Adopted Budget documents for the upcoming year, as required by the State of Washington, have been presented to the Board.
The F-195, F195F and MSOC (Materials, Supplies and Operating Costs) disclosure were presented via BoardDocs as part of the July meeting materials.
The Superintendent will assure fiscal soundness in future years.
Interpretation
We understand “fiscal soundness” means that the Annual Adopted Budget we present to the Board will show a positive General Fund ending fund balance. This means the Required Reserve for Economic Uncertainties will be no less than the minimum percentage set by the Board unless an exception to that percentage has been specifically approved by the Board.
Monitoring Indicator(s)
We will know we are compliant when:
We can show unaudited Actuals for the prior year with a positive ending fund balance.
The beginning fund balance for the 2023-2024 budget is positive, and the monthly financial reports presented to the Board via BoardDocs shows a positive fund balance each month.
We can produce an Annual Adopted Budget and Interim Reports reflecting, at a minimum, the Board required percentage in the Reserve for Economic Uncertainties (also known as the Undesignated/Unreserved Fund Balance), or, as an alternative, we can produce an agenda item showing the Board has taken official action to approve a reduction in the Reserve.
Both the F-195 and monthly financial reports reflect an Undesignated/Unreserved fund balance that is in compliance with board policy.
The Superintendent will assure that the Budget reflects anticipated changes in employee compensation, including inflationary adjustments, step increases, performance increases, and benefits.
Interpretation
We understand this component means the Annual Adopted Budget and Interim Reports need to reflect current and projected compensation agreements with each of the District’s bargaining groups, up-to-date information on anticipated step and column increases, and changes in health insurance premiums or any other benefits.
Monitoring Indicator(s)
We will know we are compliant when:
We can show that summary information has been provided to the Board prior to ratification of any negotiated agreement with the District’s bargaining units.
Summary updates on the negotiations were given to the board at their regular business meetings, along with an opportunity for questions and answers.
We can show that Budget projections specifically identify increased costs for employee compensation.
All budget projections accounted for both known and estimated impacts of increases to employee costs from salary and benefits.
We can show that Budget preparation documents reflect negotiated settlement information.
All Budget projections accounted for both known and estimated impacts of increases to employee costs that result from contract negotiations.
We can show that Interim Budget Reports reflect the impacts of negotiated settlement information that was not available at the time of Budget adoption.
The monthly financial reports provided to the Board via BoardDocs reflect actual expenditures, including the impacts of any negotiated agreement that was not available at the time of Budget adoption.
The Superintendent will assure that the Budget includes such amounts as the Board determines to be necessary for its own governing function, including Board member training, consultation, attendance at professional conferences and events, and other matters identified by the Board.
Interpretation
We understand this component requires us to develop and maintain a Budget
Responsibility Center (BRC) within the District budget that provides for the operating expenses of the Board. The Board will present the Superintendent with a budget submission for the upcoming year so that it can be included in the District’s budget development process.
Monitoring Indicator(s)
We will know we are compliant when:
We can show Budget preparation documents that include the Board’s BRC and budget submission for the upcoming year.
Every month, the Board receives an update in their regular meeting consent agenda detailing the year-to-date expenditures from the Board’s budget. The Board also learned more about the BRC at their budget-focused study session on January 16.
The Board’s budget includes such amounts as the Board determines to be necessary for its own governing function, including board member training, consultation, attendance at professional conferences and events, and other matters they identify.
We can show that the Board’s BRC has been included in the District’s Adopted Budget.
The Board’s BRC (1110) is included in the 2023-24 District Budget.
We can show that we have made Interim Reports to the Board with updated status of their actual expenditures compared to their budget.
As mentioned above, the Board receives a monthly update on their budget in the consent agenda during every regular meeting.
The Superintendent will not develop a budget that plans for the expenditure in any fiscal year of more funds than are conservatively projected to be available during the year.
Interpretation
We understand this component prohibits us from developing a budget that projects spending to be higher than anticipated revenue plus available fund balance in any fiscal year. Furthermore, we understand the Board expects anticipated revenues for the year to be based on factual information wherever possible and to be estimated conservatively wherever factual information is not available. By “conservatively,” we believe the Board means that, when there might be a range of possible revenue from a particular source, our estimate will be from the low end of the range.
Monitoring Indicator(s)
We will know we are compliant when:
We can show evidence in the Annual Adopted Budget and Interim Reports that expenditures have not exceeded the total of budgeted revenues plus the portion of beginning fund balance that State law, accounting standards, and/or Board direction have deemed available for specified expenditures.
Both the F-195 and monthly financial reports reflect an Undesignated/Unreserved Fund Balance that is positive and complies with Board policy.
We can show evidence that the District has received a positive financial health ranking from OSPI meaning the District isn’t insolvent or in binding conditions.
The Financial Indicator Report on OSPI’s website shows a positive score, indicating that the District is not in binding conditions.
The Superintendent will not provide for an anticipated year-end fund balance of less than four percent (4%).
Interpretation
We understand this component requires us to create a budget that has at least 4% of the total General Fund in reserves at the end of the fiscal year. In other words, the Board expects us to set aside sufficient funds to protect the District from unforeseen circumstances, delayed apportionment payments, and/or any other emergencies that could put the District in financial jeopardy.
Monitoring Indicator(s)
We will know we are compliant when:
We can show evidence in the Annual Adopted Budget and Interim Reports that the reserve accounts have balances sufficiently high enough to comply with this policy.
Both the F-195 and monthly financial reports reflect an Undesignated/Unreserved Fund Balance that complies with Board policy.
We can show evidence that District’s credit rating has remained above average.
The district’s bond rating provided by Moody’s Investment Services is above the average for districts our size.
We can show evidence that year-end financial reports and financial statements reflect a cash balance that is in compliance with this policy.
Both the F-196 and monthly financial reports reflect an Undesignated/Unreserved Fund Balance that complies with Board policy.
Superintendent’s Final Remarks
We have successfully navigated tough financial waters during the past few years, and we are a better financial position than many of our neighboring districts. I believe, by maintaining our fiscally sound practices and by being responsible stewards of taxpayer dollars, we will remain on this path and continue to provide a quality education for Ferndale’s students.
- OE