001Good evening everyone. I call this meeting to order. Roll call please. >> Miss Miller >> here. >> Miss Williams >> here. >> Miss Chzny here. >> Miss Karns >> here. >> Miss Lanning here. >> Mr. Moore >> Mr. Richmond. >> I'll stand for the pledge of allegiance, please. I pledge allegiance to the flag of the United States of America, and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all. Is there a motion for the approval of the agenda? >> I have a motion. Is there a second? Are you seconding? Have a motion to second. Would you call the vote, please? >> Miss Miller? >> Yes. >> Miss Williams? Miss Chzny? >> Miss Karns? Yes. >> Miss Lanning? Mr. Moore? >> Mr. Richmond? Okay. All approved. Items
002for discussion. Hedge court. >> Yes. Thank you, Mr. President. Uh wanted to introduce Miss Linda Quinley. Uh Linda is the executive finance director of MSBA. Uh she also has a CPA and is a longtime CFO of Columbia School District and Kansas City, Missouri School District. And so just to kind of set the stage a little bit, um in July when we came to the board and talked about our financial reserves for the end of this last fiscal year, uh we talked about, you know, the surprise of that number. We thought we would end the year in the mid20s as far as our um operating fund balance percentage and we wanted to have a third party come in and do a financial review of the district and to give us some information as we had a
003lot of pending um decisions to make going forward this year and uh Miss Linda Quinley came on site and talked to many of us in the business office uh talked to uh Dr. McInness, myself, and others. And so, um, Linda is here to present tonight for her findings and to give some recommendations for the district going forward. So, I'll turn it over to Linda. >> Thank you, Dr. Hedgecore. Good evening, board, and Dr. McInness, and all the leadership. I am happy to be here with you this evening. Is this too echoey? Do I need to stand back or is this just how it is? This good. Okay. I just want to make sure it sounds good. I did come in at the request of um your board leadership and your board as a whole I
004believe to give a little background on sort of I would say the how we got here. So we're going to work through this. Can we go full screen or is that thinking about it? >> Okay, there we go. Great. That's the delay. Okay, so I will just get started because Dr. Hedge did a good introduction of who I am. And as we get rolling, I want you to think of what I saw as the purpose of this work. And there's a little delay, so it's coming up. I'll be a little faster as I get used to the clicker here. Yeah, we'll wait. Okay. So, what I did was an external review of your June 30th financial position at the end of last school year. I do want to make really clear this is not an
005external audit. You have external auditors that do your actual audit work. What I did was really just to review to again help understand that how we got here. My goal uh was to give you some assurance of the accuracy of the current financial data you're receiving and assess the capacity of financial leadership going forward. This is a little bit of a timeline of kind of what has occurred and we're going to talk through each of these phases as I go along. But in the spring, as you know, MSBA wrapped up um your search for your new superintendent of schools. And as a part of that search, we do a post search workshop where we met with board leadership and your three of your leaders for administration and we just started working on some of those
006key things to focus on. My role in that as a finance officer was to bring forward some information related to your financial trends to give you an idea of where you were headed. And so we went into that that day. It was a really great workshop. you hired your new leadership then we met as this governance team your after that the board requested this formal review and so as Dr. Dr. Hedge court said I came on site in October and then I just last Friday afternoon presented the board with a written report. Now I'm here tonight to talk to you about that work. So it was July 23rd when we met in Kansas City for this workshop and you can see here I won't read to you who was present but board of education administration
007and then some Missouri school boards association staff. And again, we were looking to look at us flying fast now that it's gotten its legs under it. Clicker's working. Look at some review of your financial trend. So, what I do when I really want to hone in on what are those key trends that are going to finance and have impacted your financial position. These are four of those key trends. We're going to talk about each of these a little more. I am going to get a little weedy and go into some numbers that I hope are not impossible to read. This large screen may help that. But your average daily attendance and your weighted average daily attendance, really your student counts, right? Assess valuation and tax levy, federal funding trends. We put that on the list
008in July because if you recall in July, we didn't know for sure what funds we were going to get from our federal programs or when they were going to come because they had been frozen at the federal level. So, it was critically important we talk about those at our July workshop. So, we knew the potential impacts of any of that activity. Turns out that was a very important piece of the conversation. And then, of course, your operating reserves and fund or fund balance as some may call them. We also talked a little bit that day about the importance of accuracy around your budget to your actuals and we're going to focus on that a little bit this evening too. It's one of the key pieces of work that administration can and should be doing for
009a board of education in my opinion. So in just a second a big chart is going to pop up here and I'll kind of prep you for what it's going to look like on the it's going to be on the left and it's where we're going to start looking at these student count data and looking at some of your trend. And again, I apologize because I have a lot of numbers on here, but we it's important to take a nice historical trend to know where how you've gotten to where you are. And as we look at ADA and weighted average daily attendance, let me explain what that is. Average daily attendance is basically your student count times their attendance rate. So, if you had 100 students, Wow, that is really hard to read. I may
010have to get my notes. Um, if you had 100 students and they attended 100% of the time, your ADA would be 100. 100. If they attended 90% of the time, your average daily attendance would be 90. Weighted average daily attendance is that number then weighted upward for student certain student groups beyond thresholds in Missouri. So specifically when you have a large number of IEP students or special education students, you get a little more waiting for them. Same is true for free and reduced lunch and English language learners or LEAP students because the idea is they take more resources and need more supports in order to get the education they deserve. The reason these numbers are so important to you in your current year and long-term planning in in kind of the how you got here
011picture is that these numbers drive both state and federal revenues. And so as you see a decline in these counts or a rise in these counts, you should see the same correlation in your funding. So I'm going to try to use this pointer in case you're looking online. So this very top line is just your ADA and you can see it's down over this time period by,236 students. That's a really large decrease in average daily attendance. We did see a decrease across the country postcoid in number of students enrolled in public school and our attendance rates and those declining factors as attendance and enrollment both decline. it has a negative impact on your financial um re particularly your revenue streams and I think you're highly aware of this slide because of the conversations you've been
012having around closing schools right but that's the very first component your summer school is down 125 during the same time period free and reduced count down 814 so of this 1236 decline 66% of them were free and reduced students sorry I missed a closed pair here. And here, your IEP or special education count is down 107. So 9% of that decline comes from IEP students, which tells me that while you've had a large decrease in students, you've not lost some of that highest need group, which is your special education students. They're still coming every day for education and services. your LAP or language an language English proficient your English language learner students it's actually up by 299 so while you have a collective decrease of 1236 students that increase of almost 300 higher support need
013students who are learning English while they're learning everything else will have an impact on your resources and what you need on a day-to-day basis prek is up that's because um in 2324 you added prek to the average daily attendance count. There are several factors that drive that, but that number is up for that reason. And while your ADA was down, 1236, your weighted average daily attendance, again, taking into account these higher need students is only down 857. But the water used in 2425, came from 2019 and was down 771 students. And that's critically important because the way the formula in the state of Missouri works, we get to use today's numbers, this year's counts, or the two previous, whichever is greater. And what that does is let districts, particularly like St. Joseph, who have experienced
014a large decrease in student counts, have a little time to adjust to it before the revenue is yanked away completely. Right? And so the fact that last year you were using your 201920 counts gives you an indication of how significantly and how quickly those student counts have dropped. And you were fortunate that prior to this year you were able to go all the way back to 201920. This year you're set on the most recent declining numbers which is 771 less. This is an important financial driving factor. So we started here. There wasn't a lot of surprise in the room at the workshop when we did this because I think you guys have really been aware of what was happening with your enrollments and your student counts. I do want to then talk about that how
015these roll into a whole another factor which is what does that mean in the way of real money for you. So when we look at those counts that we just talked about, this section of this worksheet takes that change in student accounts and it says what does that mean in the way of revenue? And the real number is here at the bottom of 2425. We can see that since 1920 you're getting $2.8 million less in f in state revenue. That $2.8 8 million less revenue is an average decline each year of $560,000 less state revenue and that's been addressing that loss of student. So as student count and student attendance decline, the revenue has significantly declined from the state which is a little piece of the how we got here story um to a certain
016extent. Please stop me along the way if you have questions. I'm happy to take them or just save them for the end whichever whichever you prefer. you have one or you're good. Okay, great. So, the next topic then that's our student count big driver. We saw that we're down $2.8 million where where ideally over time you are up in state revenue, right? You see that going up. That is not the case for St. Joe. Another big factor, big driver is your assessed valuation and tax levy. I found this to be incredibly interesting as I looked back. You've heard the stories. You've heard the media stress about rising assessed valuations and rising tax bills. St. Joe is interestingly sort of opposite of what we're seeing here as well where you see that green that kind of
017shows up as a yellow green on here. Those years are reassessment years. Those are the year where the assessor goes out, reassesses properties, and we tend to statistically see larger increases in assessed valuation in those reassessment years. You'll notice as you look down in 21-22 that was a 2.58% average increase and then a 0.81 and then a 1.49 in those reassessment years. Over this six-year period, your assessed valuation increased a total of 13%. That is kind of a number typical to 10 20 years ago. What we've seen more recently or in most districts in the state is a much higher number than that. So assessed valuations have not risen in St. Joseph at the same rate or pace that they have for most districts across the state. Yes, ma'am. >> So why not? I don't
018know that since that's a question really for your assessor. Why has your assessment not looked similar to others across the state? And it could be that Dr. Hedgecore or Dr. McGinness or someone has a better insight into that. I didn't see anything that told me the answer to that, but I also didn't drive deeply into the why on that either, but I thought it was interesting to look at. Yes, you've had some improvement here, but you have not had the kind of improvement that we've seen across the state, which puts you at a little bit of disadvantage of offsetting that loss of state revenue that we saw. The other arrows on this page, this is your levy. So, we can see that your levy rose by 55 cents during this time period. And it looks
019to me like that occurred right here in this 2425 year because of your successful Prop S, that roll back of the Proposition C that your voters authorized, which is a great piece of news because while your assess valuation was really relatively low to almost flat, the fact that your voters approved this tax rate increase in 2425 did give you a revenue boost that you would not have gotten were it not for that and the majority of that ended up in operating we've got a tiny little change in your debt service which just relates to the calculation can't tell for sure if I have switched Yep there we go okay so the next so that's our first two financial facts that we looked at and dug into the third as I mentioned earlier was that federal
020funding trends. And again, this is a lot of numbers and hard to read. There are multiple lines of federal um funding for federal programs available to our school districts. And these are what we call a um these are all reimbursement grants. So, you spend the money and then you claim it. You have to spend it, claim it, spend it, claim it. Right? And so we're going to look at a few of those big ones just to kind of and I'll use that box on the right because it's so much easier to read. But important to know that this July column 2425 is a projected actual that I got from Dr. Hedgeorth after he had gotten here and he had very quickly discovered that you did have some federal claiming challenges and some issues that definitely
021impacted your June 30th of 25 numbers. And as I was looking at the ASBR, he and I were seeing the exact same thing. Your Medicaid is up 114% over this time peri time time period. Now, that's not significant dollars, but it is, I think, $800,000. Medicaid is a reimbursement that you can request for services you provide students that are Medicaid eligible. So, OTPT, speech, language pathology guidance, some counseling, those kinds of things are reimburseable from the federal government if that student qualifies for Medicaid services. And so, that's a nice big increase. It does just so show also though that you've had a significant increase in services that you're offering children. Perkins is a career and technical grant, not a significant line of the budget. IDA is special education. it is up significantly. And you'll remember
022when we looked at your student counts, your counts dropped a lot in total, but not in IEP. And those, of course, are um more expensive services to offer. So, we're not surprised to see that up. CNS stands for Child Nutrition Services. That is up as well. That goes a lot to cost and a variety of things. Um although I'd venture to say even though your revenues are up, your costs have risen even more and you're actually losing money in child nutrition services. That's my current PET project studying that across the across the state how much we're losing doing one of the most important things we can do which is feed children. That's a different soap box for another day though. Title one is the one that um was most alarming and it's right here and
023which again is hard to look across but it was down 97%. Dr. Hedgecore had already studied that or already found that when I called and said hey what's going on and we're going to talk a little more about that but that was very very significant. So collectively in your federal program dollars you were down $2 million as compared to five years previously. So we were down 2.8 on state aid and two million more on your federal program dollars. So that's almost $5 million less revenue in the system last year than five years ago. While year-over-year you incurring increases in cost in all of these programs and services. I took out if we take out the um ESSER funding it's down a net of $1.6 million which is largely the title line. So let's look at
024that just a little. Well, we're going to talk about that a little more. Okay, this is the fourth of those four metrics that I really focused on, which are your operating fund balance or your reserve balances. Some people may choose to use to say and again a multipleyear history. I won't go through each and every component, but as you look at these numbers across the top, you can come down here and find out what the message is. In 2122 and 2223, you had significant increases in your reserve balances as did everybody because you had all that ESR funding that related to CO the fed federal dollars coming in that related to COVID. We saw that increase reserves across the state and the nation in public ed. Then in 23 24 and 2425 you um ran
025into that loss of esser. So you can see on number three and number five, you lost 12 million in reserve balance and 10 million in reserve balances partially due to that loss of esser and not necessarily coming in and making the reductions behind what you had put on the books for esser supports which again is very common. Column four is the operating budget from 2425 and I want to talk about how it differs from column five. Column four was the operating budget that was used when your budget was built moving forward. And you can see, although it's hard to that it called for an increase in reserves of $14 million, but right after June 30th of 25 after the 2425 year ended and Dr. After hedge had started on July 1st, they were immediately, of
026course, working to close the books and figure out what last year's numbers really looked like. Again, the budget said we were going to increase reserves by 14 million, but in fact, there was a decrease of 10 million. That's a $24 million variance between what was expected when you received and approved the budget and what actually occurred. We're going to talk a little more about that. That timeline is important. And then of course going forward you have some expectation to spend down where we know you actually ended up the year was at 10% reserves 10% just as an indicator and because we have a lot of people here um in the room I do a lot of training well I do the training for school boards across the state in school finance. I get the question
027all the time, what should our reserve balances be? And all the time I give my expert op expert opinion that's unimpressive of I don't know because every district is different. Every district has a different cash flow. If you're more highly reliant on local versus state, if you don't get much federal, it's going to change how much you need in reserves. But what you need in res reserves on June 30th is enough cash to pay your bills on time before that big influx of revenue starts coming again in December, January, February when people have paid their property taxes and enough cash to make sure that if the state doesn't make a payment in October, you're still okay and you can meet payroll. So, you've got to figure out what that right balance is. And it's different
028for every district, but what happens at 10% and you end it at 10.02 O2. So please Dr. Hedgeorth, tell me if I say anything that's not correct here. What happens at 10% is you get a letter from Desi and I assume you have not gotten one of those. Okay. You get a letter from Desi at 10% that says we are concerned. You do not have adequate reserves and you are headed toward a path that has us concerned. The only rule in the state of Missouri around this is that if that number gets to 3%, you're considered fiscally distressed and the state comes in and takes control. So, you certainly aren't there, but you took a really huge drop from the 18% that you ended 23 24 to get to 10, right? And you just stayed
029above that warning mark from Desi. Had that been 9.98, I'm very confident you would have gotten the letter because I have gotten a lot of calls from people just below 10% who got the letter this year and they're trying to figure out what they're going to do about that. The more concerning component on this slide besides this miss of we thought we were going to be 27% and we came in at 10 that we're going to talk more about. The more concerning thing is that what what this year's budget says now that we have a correct starting point. And when I I want to speak to that real briefly because the best practice in good school budgeting is to start at a good point. So we have to project this year or last June. we
030needed to project what last year's actuals were going to be and use that to springboard our budget because that gives us the most current information. If we don't do that and we use a budget that is way off, next year's budgets off even more. So that good current projected actual for this year is what helps us not have these surprises between column four and column five. That original budget compared to how things actually ended up. And again, we're going to talk about that just a little more. Okay. So, this was what we did in the workshop. I want to tell you that I felt like it was a great day. Everyone in the room was highly engaged. Um, we had real honest, transparent conversation. I um some of it was brand new, particularly for the
031board members. They were seeing and hearing information they had not heard before. Dr. Hedgeworth had been here 23 days if he worked the weekends and had been digging in and so he was not as surprised at what I was sharing because he was doing this work kind of at the same time I believe just for his to get himself familiar with the district. So our goal again was to determine how did we get here June 30th of last year and why was it a surprise? That was our goal after we'd had that workshop. So, I did as Dr. Hedgeworth said, I came on site in October. I met with the superintendent, the um Dr. Hedgecore as your leader of finance and your finance staff. I want to first of all thank them and commend them.
032We had a highly transparent um collaborative, helpful conversation. Everyone was really great and very interested and happy to share with me anything I asked for. Um, I was here the better part of the day looking and having conversations and digging and asking questions. I looked specifically at the projected actual files that became this year's current budget because immediately I knew those two numbers had too wide a variance and we'll look at that in just a second. I looked at Desi data that has compared to board reports. So, I did not necessarily use data that came out of your accounting software and that was given to me that day, although I have a lot of it and it's good, but I wanted to make sure that I was using publicly available, verifiable data. And so, I
033used your budget that was posted on your website and part of your board packet for June so I could see what specifically had been brought to you when the bo when the budget was approved. and I used the annual secretary of the board report which is basically the annual financial report as is available to anyone in the public on the DESIE website. So I was comparing those pieces of data and then specifically reviewed the title program funding because we found on that previous slide that title funding was a huge decrease almost non-existent in revenue in the 2425 school year. So what did I find? I found that late claiming of your title federal programs was a problem and a challenge that had to be addressed. In fact, it resulted in virtually no revenue last year
034from title program when you should have had millions of dollars of revenue. And then I also determined that the information that came forward to the board during your April, May, June budget conversations where you were looking at that good starting point for next year of what is this year going to truly be. That information unfortunately was not highly accurate. It was inaccurate. And so it created a bad starting point for this year's budget and created a false sense of security in what reserves were going to be on June 30th of 25. Yes, ma'am. We're going to look at that in detail in just a second. Good question. Yeah. So, since last year's data was inaccurate, it set this year's budget up to also be inaccurate. And that's that's what we have to become considerably better
035at. But that did make a good quality budget review by the board ver virtually impossible because you didn't have good starting point information. So let's look at that. And I can't tell if I flipped the page. I did. Yeah. We're going to look at first when it gets ready to go title program reimbursement. So, when I was here in October, I wanted to figure out what was going on. I don't know what happened with that slide, but that slide is not what I want it to be. So, I hope the next one is. Here we go. This next one is what I want. I think I duplicated that slide. Put it in there twice. That's not very helpful. So, the title program reimbursement, again, we spend our money and we claim our money. A best
036practice is at a minimum we claim once a quarter spend and claim. Best best practice spend a month, claim a month, spend a month, claim a month. Now, you don't claim in August normally because school's not really happening. We aren't spending our title dollars that much, but certainly by September, you should be claiming. And what I found was the 2324 title dollars 2324 had not been claimed nor had the 2425 title reimbursement dollars been claimed which is why you basically had zero revenue last year in title in in that final number of 10% reserves. So it was 4.6 6 million from 2324 and 5.1 from 2425. Um again Dr. Hedgecorth had discovered this and he claimed those dollars in July and you received them in July. So it must have been like the what he
037did on day one because by the end of July you had received that 4.5 million of 2324 that should have been received in 2324 and if not then very early in 2425. the 24 $25 he then you have to get through one before you get to another right claimed in October and you received it in this most recent October so today you have $9.7 million of title revenue in your bank that should have been in your bank on June 30th had it been in your bank on June 30th instead of being at 10% reserves you would have been at 16% reserves well above that really frightening mark of 10% still below the 20% that your budget estimated but this played a major factor in you not being at that 20% that was presented to you
038when the budget came to you in the in June. So this is was a problem. It was a problem that needed correction and I feel like in conversations I've had with Dr. hedge. He has taken ownership of this responsibility. Clearly, we've gotten two years caught up very quickly. We're on a better track to make this more consistent. But when I was in banking, we always said the rule of OPM, other people's money. Spend other people's money first. That's how we need to treat our federal program dollars. Spend it, claim it. Spend it, claim it, right? Before we spend our own. you in fact had been doing just the opposite and using your own reserves to fund those federal programs that should have been being reimbursed in a timely regular basis from the feds. The other
039challenge then relates to the accuracy in budgets. And if you've been in workshops I've done, you've seen this slide because it's still my favorite. Um, there's a long story behind this that I won't go into, but it was one of my early learnings when I left banking and came into public education at Columbia Public Schools. We had a challenge of not being highly accurate in our budget year-over-year and we were building reserves and that was creating internal frustration with our teachers because our teachers were like, "Well, you tell us every year you don't have money, but then when the audit comes, you put up a whole bunch of money in reserves." So I asked our then auditor who is now retired who was one of the highest sought-after school auditors in the state of Missouri,
040what should my goal be? Give me a target. Help me set myself on a path of being more accurate. So he said that top bold statement, your original budget to your final actual should be within one to 2%. Then you know you've done a decent job of budgeting and you came within a reasonable range. as the year progresses and you amend your budget because now you know what your final assess valuation is. You know what your final student count is. You know who you hired and what they cost and what their benefits cost. As you amend your budget and go throughout the year, you should get to where you're within a half a percent. That would be the final budget that would come to you in June with next year's budget. this year would be
041practically spot-on, right? Particularly in June because in June, we know our final current property tax revenue. That number's done. We know what our state aid's going to be. That's almost done. We have a lot of things we know in June, which gives us the ability when the work is done to be highly accurate in June. And that's what a board needs and should get and should expect when the June budget comes to them. The year current year numbers should be highly highly accurate. So let's take a look before we go into that. Let's talk about what are the roles in budgeting. And sometimes boards don't like this, but I always tell boards this the budget is the superintendent's financial plan, not the board's financial plan, but the superintendent's financial plan for how they're going to
042meet the academic and operational promises they've made to you and to the community. They the administration is responsible for preparing, vetting, presenting a highly accurate, transparent budget document. That is the job of administration. The board is the governing body and they're the final approver. That doesn't mean that you just approve what comes before you, right? But you should be provided, the law actually says you will be provided with historical comparison data and you get that in your historical budget that you've gotten. I would maybe present it a little differently to make it a little more um consumable, but you get it and you have been getting it. But what you have there then is the opportunity to look for reasonable trends. And then you really have to expect that those June projections that come to
043you are highly accurate and that in June you're doing your final budget amendment. I know that your practice has been to have a budget amendment in September. That is the final budget for last final amendment for last June. that's a little late to set you up for a good budget work for the coming year because it's past the year. And so those are just some role things I want to talk about before we look at these numbers. And these again are hard to read, but I'm going to talk you through them. So what I did was I went again to those historical resources, what's available to me on DESIE, and I looked at your revenue by type. So that top section says local, county, state, federal, other and total revenue and the expenditures by primary
044object which is certified salaries non-certified benefits, professional service, service and or supply, capital outlay and debt service. And so these columns that I've highlighted, this one is what came to the board in the 2526 budget as to what last year was going to look like in the end. The second column with this teal color shows what actually the 2425 looked at. And then the pink column is the variance. And going back to that slide where I asked Mr. McInness what kind of variance targets you should have. You'll remember that toward the end of the year when we know so much fact you should be within a half a percent. That was what we looked at, right? I'll give you 1% because I know a lot of people think a half a print is too tight.
045Um but that somewhere in that range. So we can see when we look down through here, we were within two and a half percent on local. We were within 14% on county, a little over two on state, and I think that says five. I'm not sure what percentage. Yeah. Well, it's even more. It's almost 10% on federal. Collectively, we were within you were under 2%. But frankly, in June, I should have local within half a percent. Collected the current property taxes for the year. have one more delinquent payment, a little bit of interest, most of your locals in. County should virtually be spot on because most of those lines come prior to June and state should be within 1% probably the real variance being what the final transportation payment looks like and federal should be
046similar. So in total, your variance on revenue not incredibly alarming. Not what I would want it to be. not maybe the quality and the standard that I would set for myself, but not incredibly alarming. The expenditures when we get down here, however, brought me great pause. And so what they are, let's see if I Oops, I maybe hit that twice and didn't mean to. I think there's something that'll pop up. Yep, it's gonna come in. Okay. So, when we look down here, our certified salaries were off by 8%. Our non-certified salaries by six. Our benefits by 14. Our purchase services, I think that says two. And then a little over two for supplies. Capital and debt service are off significantly by over 100%. And they don't influence they don't impact the operating reserves, but that's
047still significant. I'm focusing on your operating reserves, which are these collectively here with the green arrow pointing at them. Well, no, they're not. They're these one, two, three, four, five on top. But remember, we on June 30th, we want to be within half a percent. when I add up all of these variances for your expenditures were off by 19%. And so those projections that originally came to you in this column during the budget time, we missed the mark by almost 20% of estimating last year's actual expenditures. And again, if that's the baseline for next year's budget, we've just set ourselves up to not have a highly accurate budget for the coming year. I was hopeful that I would find this to be in one or two categories and there might be a really good explanation
048for it. Um, the work was done by people that aren't here today, so I can't tell you exactly what caused these variances, but I can tell you that they are well beyond what you should expect and what you should receive regardless. So this is where in dollars in June the budget told you that you were going to spend seven million into reserves and what actually occurred at the end of June was is that 38 million or 28? Can you know and read that number? Tell me what it is. 38 million. So we missed the mark by $30 million. The bulk of it being in expenditures. So I suggest that Yes ma'am. >> If there are issues like this and the board is receiving information like this. Okay. So what can we do? >> Yeah. You
049keep leading me into the next questions. Thank you. >> So we're going to go there. All right. So, one thing I suggest that you do is expect that um your administration's going to do better. So, I I don't know what what your practices have been, but if you've not been holding an annual budget workshop, I strongly encourage you to do that and really look at those projected actual variances. Ask for a variance column. If the column isn't in there, ask for it because what a board of education needs to do is come across those reports and look for highlights. Right? It is not your job to get in the weeds of the budget. It is the job of administration to manage the weeds. Bring you a highle consumable document that you can get to. Yes,
050I know I keep interrupting and I do apologize. Okay. But I do understand it's not our job to get in the weeds of the budget and believe me I'm not interested in that at all. Okay. But the weeds are what create the budget and so if the weeds are not accurate again my question is what do we do? So I think if you come back to this previous slide which I know it takes a minute or two to do and if you get highlevel data with variances you should see places to ask a question. If you had seen this presented last spring in this fashion, um you might have said, "Well, how come this year we're only going to be spending 58 million in salaries when last year we spent 58 million?" And we know
051we gave raises, right? If we start here, then it lets you ask questions that can drill down. So, if salaries is my problem, come back next time and explain to me what's going on here. So, I want you to start high and then give them those questions that will drill down to the weeds because I don't know how many general ledger line items you have, but I would say 25,000. And so, that's too much for you guys to consume, right? That's too much for you guys to be responsible for as a board of education. So, one of my greatest suggestions is that this information needs to come to you in a consumable format. I would suggest that you ask Dr. Hedgecourt to bring this back to you in December and say, "How's it look different
052from what we thought then?" Like, let's start keeping a regular check-in. A regular check-in, not just a check-in at year end. Let's do one in October. Let's do one in January. Let's do one in March, April. So at that annual budget workshop, expect good data that lets you read across, find big variances, and gives you the opportunity to ask questions. Expect budget amendments throughout the year that keep things current, that are highly transparent, that help you understand. I definitely want to see that final amendment in June rather than August. Yes, ma'am. can never get this on. My apologies. Okay. So, just to clarify, asking lots of questions about this is a good thing. It is a good thing. Yeah. Asking at that high level and expecting information to come back, right? >> I appreciate that.
053Thank you. >> Yeah. I um I can tell you this story of I had a board member call me once really distressed over the food line at a particular building and I'm like, "Whoa, whoa, whoa. You're talking about a $12,000 line on a $200 million budget. You know, stay up here kind of high, but have good questions. Expect responses to those questions. Yes, these budget amendments should come in a highly transparent fashion. I don't know if you've had an official budget amendment yet or not this year. Um, you have. Yes, that's good. I love like an October, November budget amendment. That's the best time to do it. really helps you reset from that original budget to where you are. You've got to com um continue again. I know Dr. Hedgeorth has taken responsibility for that
054federal claiming and that clearly you've made huge strides since July one in that um has there been a claim made yet this year for title? Okay. Oh, that's right. Yeah, that delay caused people's budgets not to get approved, so we're all struggling to claim this year. Thank you for that reminder. Yeah. So again, ask questions for understanding and transparency. Highly encourage that. Let's look at a little bit of just kind of the last thing that I want to say to you and then take questions. That goes to that requesting data in consumable manner. It's okay to tell us as finance people that the way you're presenting it doesn't make sense to us, right? It's okay to say, can you rephrase that? Can you put that in a picture instead of a whole bunch of words?
055Can you put that in a graph? It's okay to ask for that and I encourage boards to do that because we get in the habit of bringing you what's been brought to you. Now, you've got a transition in administration this year, which I think will give you a great opportunity to see things in a different way than you've been seeing it historically. That change is healthy and that change is helpful. But I've presented to boards many, many years where I knew I stood before them talking about a complicated subject and sometimes they were nodding, but I could tell in their eyes it wasn't hitting because it's not their job to be that expert, right? And so how I presented it mattered. How I shared it and how I explained it mattered. And that's what I
056really think is the need for you to do what you're doing now. Kudos that this is the second time this year that I've had a conversation with board members and administration about this. That's unusual. I maybe get invited once a year to a district. This is the second time since July 1st that you have intentionally said, "We want someone to come in and give us some information." So continue this path of having financial workshops, having high expectations. I have every confidence that your leadership is going to bring that for you. I feel like that's already been proven to be honest. Just a reminder, I'm not an auditor. You'll get your audit report probably next month. Yeah. Um, but here are some of your real opportunities for improvement. Quality and type of data that's provided to
057the board, timely reimbursement, a continued desire to focus on the system improvement, which you do collectively, both your administration and your board. I've had fabulous conversations with both entities here around a desire to do that. and then working collaboratively. But test and utilize good financial projection data. Ask questions. Um, you know, ideally if it's very weedy, asking it advance so they're prepared to bring you good information. Rule of thumb, if you're not 100% sure, we say, "I don't know." We'll get that to you next time because once a number said out loud, you can't take it back and somebody will print it in the paper or repeat it and then you're in trouble, right? So, um, you are not in crisis. Things could have and should have been better on June 30th. All right. Can
058I Can you hear me? Can you hear me? Hey, stop. Stop. She is a guest here. She's a guest here and this is our meeting and we're trying to get information for ourselves and for the public. So, if we want to talk about St. Joe Pride and Lafayette Pride and Benton Pride and Central Pride. Be respectful. Be respectful. She's a guest. Okay, >> I am going to take you back to as I said that because that was Oops. Where is my the slide I want to look at? It's going to take me a second. Okay. You are not in crisis. However, you aren't as healthy as you need to be financially. 16% reserves June 30th of last year is not adequate to keep you going and paying your bills on time and to keep you
059strong. I want you to think about this. Regardless of size of community and you're a large one and you're a large school district, regardless of size of community, the school district is one of, if not the largest employer and largest budget in the community. You have to have adequate reserves to pay your bills on time. You can never risk not making a payroll. You can never risk not paying your partner vendors timely to keep their small businesses open and going so they can pay their people. Right? So I do believe that a study of what your needed reserves are is important. You have got to turn off this tap of spending into reserves. You have to get to a break even budget. In fact, you need to put a little money back in the bank
060over the next couple of years. So, you cannot, in my opinion, have a budget next year that deficit spends. Ideally, you make enough corrective action this year that you don't take your reserves below that 10% that you started the year. That's hard work when you're midway in. So again, you're not in financial crisis, but you will be if we don't really take some good practices and some actions that that move you in the right direction. All right, I think that's the end of it. So questions. I have a couple questions. So I I don't I appreciate this information. Um, I don't think any of us that have been on the board for um, a year or more are overly surprised by it. I think that um, while it hasn't been presented um, so specifically or
061in the same presentation, I I it's not surprising. Um, but I do appreciate it. Um, I think what I had expected for this evening was to get some feedback on our internal processes. >> Um, because I think as we've all seen and know, if we don't have good information going in, then we don't have good information coming out. And obviously, as board members, um, I I can only trust the information that's given to me. I can ask questions but then you know those types of things. So I guess there there are two questions then that I have question that I am concerned have always been concerned about that I'd like um both of your opinion on. One is our decentralized process for creation of the budget >> um that each department is creating their own
062budget. Um and what I know about people outside of the finance department that's not always something that they enjoy or have the expertise in doing. Um, so that's my first concern. My second concern is how we do um contractual review and payment. Um, I understand that some of that has happened out again outside of the finance department. So, if we have staff that are outside of the department, the finance department that are obligating funds or that are incurring expenses that the finance department does not know about or if there's a piece in a contract that they didn't catch, it seems like that that can be problematic. And I think that's specifically what happened with the benchmark per purchase. So, could you talk about how is that common? Do we need to change that? What does
063that look like? I will and then I would like because Dr. Hedgecort knows more specifically about your pro processes. So to the first question about budget creation and decentralized my personal opinion is that a budget is best built by inter interacting and engaging every budget manager which would be a principal who has a a budget, a department chair who has a budget but prior to that there has to be a lot of education. They have to spend time in the room with Dr. Hedgecore and Dr. McGinness and they have to know and understand where you are and know and understand what limitations you have going forward because I'm a firm believer and I don't want to squaltch you from telling me what you need for your building or your program. So tell me everything, prioritize
064it because we're going to struggle to do much of it at all. And so I need to know from that program or department leader what's a real priority. But the budget is created at the central office level with input from the board buildings and reporting back to the buildings about how it how what they ask for did or didn't end up in the budget and a why. A lot of I mean we have to say no a lot in this business. Like the role that I sat in and that Dr. Hedge court sets in gets a a bad rap about being the cold water, but we do have to say no a lot of times. Otherwise, we'd have everything everywhere and every teacher would have, you know, the smallest class sizes possible and every building
065would have access to everything, which is what we want for children and for families, but it's not sustainable with the threats that public education's under for funding. So, I do believe in engagement and involvement of every department in the process, but they have to understand that it's a limited involvement because the work's pretty hard at the top. Um, so for what it's worth, I think that your administration will find a good way to manage a process like that this year. As far as um obligations and contracting, I assume that all procurement also funds falls under you, Dr. Hedgeorth. Yeah. So the law is that in the state of Missouri only the board of education can authorize a contract. All contracts need to come to the board for approval, which which does give you an an
066opportunity to read and review those contracts and know what's in them. If we've gotten away from that best practice of that walking a good process and making a pass over Dr. Hedge desk before any promises and commitments are made, that's a procurement process that definitely needs review and reevaluation. And this could have been a learning curve for me, but um you know, one of the things that happened at the end of June when we got the um um tenative June actual numbers um that ended up being wrong was is that we looked at the I looked at some of those benchmarks and I I can't tell you the percentage right now, but right June 28th we were within we had spent 93% of budget on salaries. We'd spent similar on something like that, 92 93%.
067And working backwards saying, well, um, we may be, you know, 11 11 out of 12 months in, we may be, um, we may not be right on track, but we're in that close range. You know what I mean? And but what I came to find out and um it seemed that came to a surprise to the board is that we pay two months worth of expenses in June. Is that typical of? And so my question is one is that's still just been alarming to me to be honest. Just the second thing is though how do you um what are the what are the guideposts that help us as a board then because percentage isn't going to be right because because we're always going to be one month short. What what do people use for the
068guidepost to say are we on track or not on track? So I I have two opinions on that. The first is you're absolutely right. It is very typical in the state of Missouri. If a teacher is contracted or a principal is contracted through June 30th and they don't come back to work until August, they get a paycheck at the end of June, end of July, and maybe even August. That is actually for this year's contract. That's a fact. That is standard. Our payroll systems are smart enough to tell us how much is left on a contract. Right? So, if I pull those numbers in June, there's not a lot of not a lot of reason for me to not be able to add what's left on that contract before I bring you those numbers. And
069that's what you need to expect. And that's why instead of just looking at a year-to-ate expenditures, I want you to look at the budget, year-to- date expenditures, and projected actual that includes everything. And then compare that column back to the prior year actual and say, "Oh, wow. This number's less than a year ago." That makes no sense to me. >> Yeah, that that's the part that just um that caught us so far off guard. I mean, the federal funds, you've outlined that, >> right? >> Um but that other and that then the biggest hurdle of that is and you've done a good job of stating that it caused us to have an inaccurate um 25 or result and a terribly inaccurate 2526 projection. >> Right. And um because again we projected off of >> um
070what what we'd been told would be those actuals. And so that that is the part that troubled me. There's one other element and I don't know if you looked at that or not where we we um we overspent on on some um capital expenditures. >> Did you look at that as >> I saw that you >> it wasn't as big a number but it's still a significant number. >> Right. I did see that your capital projects um was overspent as compared to budget and that wasn't known in June that that was going to happen. That became known in that later amendment. So again, it is hard. I can tell you it's very hard to do the work in May and June and project what capital's going to actually be because you don't know for sure
071what bills are coming when. Um but you've got to dig into each project and try to do that because no fund can end in the negative. That's the law in the state of Missouri. No fund can end in the negative. And so again, it goes to expectation for administration. >> So I know that we've talked a lot about an audit and you've mentioned several times in your presentation that you're not an auditor, right? >> You're very smart, though. Um and that this wasn't an audit. Um >> I know, you know, we'll have our our external audit next um month. Um, but I'm sure many people are concerned about that. So, I've been concerned about um the validity of the audit that we've received. Um, because that's the point for them to be able to say,
072"Hey, here are some things that are concerning." Um, so can you talk about the difference between what you've done, what our auditor will do, >> um, the role that the auditor plays in not alerting to this? I mean, the audits that I've been a part of, there's typically some sort of um management meeting that says, "Hey, here's what we found. Here are some things to look at." I don't know. I wasn't a part of board leadership to know whether or not that ever happens. Um but I would have expected something in uh the letter to management about those things. So, can you talk to that? >> So, the role of the auditor is twofold. uh your external auditor which you are required to have at least every two years. We all do it every year
073because you can't get some federal dollars if you don't do it every year. Um but the role of the auditor is to audit the numbers presented to say they were accurately the the end of the year financial statements that are presented to say they were accurately presented and by by that I mean not the numbers that were a part of your budget but the numbers that are part of the final financial statements that go to DESIE and become part of the audit. So they're looking to make sure that what ended up in that was actually correct. That skips over the challenge you had. Right? Now they will look for things like they have an obligation to say did the budget um was the budget exceeded? Well, the answer will be no because in August you
074made an amendment to make sure that it was not right. Um, and so that's why I like that amendment to be in June so that it legitimately happens prior. The other part of the audit is for them to look for compliance issues like are we doing um attendance properly and student counts properly and transportation properly and all of those state compliance given pieces. So I hear um a little more of a concern about a third category which is maybe what you hoped that I was doing which is really a procedural review like what is your internal procedure process? >> I guess the thing that I keep being hung up on like I understand the the personnel budget issue. I understand that >> um I don't like it but I understand it. I understand the benchmark
075issue. I don't like it but I understand it. What bothers me probably the most is the the federal funding that how our auditor could come in and see that we had not had any reimbursements and not even say, >> "Oh, you may want to look into that." You know, that how we didn't know that and weren't reported to that um is very very concerning and upsetting. Yeah, I I respect that and I do think that's a fair question to your auditor this year is how did that go unmentioned? >> I have another question, Miss Linda. Okay, so you mentioned >> um after looking at everything, it's not a crisis, you know, but cuts are needing to be made. I know that you work with lots of school districts and everything. Okay. So, in your expert
076opinion, if we're making cuts, where should we do those cuts? >> Where should you make those cuts? Well, I'm going to answer a question you didn't ask first, and then I'll come back to that. Make sure and hold me to come back to that. >> Thank you. >> I do think that step number one, and I don't know if you guys have done this or not, is for you to figure out what is a good solid target fund balance for you. I don't know if it's 20%, I don't know if it's 24%, I don't know if it's 18%. But I really recommend a good solid workshop around what is our target. I know you have a range >> every year. I think that range should be re-evaluated based on the current growth of the budget
077because a percentage changes as a total dollars of a budget do. So I like that to be kind of a part of that spring budget workshop is a fund balance review. >> So then to your question about where should those cuts be made? Similarly to my expert opinion on what should your reserves be, I will tell you I don't know because I'm not in your system. But I can tell you from experience of making significant cuts in an operating budget, um, people show up at board meetings when you're going to make cuts. Um, you get a crowd because that gets attention because people are going to be adversely impacted when you make cuts. There might be a change in class size. There might be a change in opportunities for students. There may be a change
078in number of school buildings. Those are the things that have to be on the table for the conversation. my opinion, you want to work as far away from the daily teaching and learning as possible. And I always start at central office. I want to clean my own house before I go deeper into the system because eventually the big money is in what's happening in our school buildings. You sell a service and that service is education and supports for children and that's where the bulk of the money is. So, you're going to go there. You're going to go there and it's going to be painful and it's going to be um dissenting. There will people who will agree with one and not the other >> for normally emotional decisions because this is emotional, right? I was
079at Kansas City public schools when we started talking about closing schools. It was highly emotional. >> Um and it was more emotional, frankly, from alumni a lot of times than it was from our families. But you have to get to a level of appropriate efficiency that is long-term sustainable. And I can tell you that when I was at Columbia Public Schools and we needed to cut 9 million out of the budget one year and 9 million the next year immediately what leaders did was bring me the list of people who were retiring and say we can cut that position because Linda's retiring. Well, if Linda is the one and only CFO you have, you probably can't cut the position, right? That was an emotional response to help us get to the end result that they
080thought we needed. And so what happens if you use that route is then in August, September, they're coming back say, you know what, I cut that second kindergarten section and I've got 40 kids. I've got to have a kindergarten teacher. I don't know why I suggested that. Right? So there's no right or wrong answer. I do highly encourage you start with the target fund balance in mind. Make a multi-year plan. >> Start at central office and then go down into your schools and look for that long-term sustainable. I'd say you need a five-year projection that says where are we going to be in five years. If your enrollment and attendance continue to decline at the pace they have, >> you will have a state and federal funding crisis well ahead of everyone else in the
081state of Missouri. >> Thank you. So to kind of piggyback off of that one, what and I don't think this gets talked about enough if we hopefully we never will get there. I'm sure you've been a part where they've been at 3% and the state has came in. Can you explain the process of what happens? >> Sure. Um so the board gets removed, not Administration stays in place. The board gets removed. the board, the state appoints a new board and then that new board's job is to do is to do exactly what the old board was probably working on, which is bringing things back. What happens when you get to 3% is you basically can't pay your reserve, you can't pay your bills by about August, right? You got money to pay your July bills.
082Maybe your August, by September, you're borrowing money to pay bills. um which is possible but not a good practice and now you're paying interest that kind of seems silly to pay, right? So you're just going to get a new board that redirects what's happening with administration and frankly they have to get up to speed. So it tends to be a little bit of a slide back and a slowdown of progress. The good news is here you guys are nowhere near 3%. But if this year's budget did come in at seven and a half, you're a year away from 3%. Which is, in my opinion, incredibly risky, not where you want to be. So you've got to turn this now. Like I said, you need a break even year this year if you can do it.
083And you need to put money in the bank the next year or two after that so that you're on rock solid footing and you can begin making progress again. Are there any additional questions? >> Okay, if there aren't, and I appreciate your time, Miss Linda, thank you so much. >> Okay, guys. Meeting number one. Is there a motion for adjourn? >> Thank you. I have a motion in a second. Would you call the vote, please? Miss Miller. >> Miss Williams. Yes. >> M Chzn. >> Yes. Mr. Richmond. >> Okay. All approved. This meeting is adjourned and we will reconvene in four minutes.