by Samantha Lynch –
The General Fund ending fund balance is also better than projected, by 1.5 million dollars. This is all due to favorable updates in final funding allocations, shifts to exploit all of the federal stimulus funds, and focused under-spending and savings.
The majority of our reserves are account receivables (IOU’s) from the state and federal governments. The district needs to meticulously monitor our cash levels on a monthly basis during the year and project cash levels in the future for our multi-year budget planning.
The board needed to approve the 2009-2010 unaudited actuals report and the 2010-2011 budget revisions. The revisions consist of giving carryover to sites that have carryover coming, moving beginning balances forward, and updating revenue assumptions on the federal revenue by moving some money forward.
The major budget revision that will take place is the first interim (where you actually rebuild the budget with physical control and site spending where the actual payroll is going to be.)
There is a fund balance (an accounting dollar, not all of which is cash), which is the difference between current assets and liabilities. When it’s positive, that means that there are more assets than liabilities, which creates fund balance. In total general fund, there were $18 million in assets and $7 million in liability, which creates a fund balance of $10.8 million dollars.
The next question, then, is what is the fiscal health (fiscal health meaning: the quality of the assets) of the district? One thing to look at is that there is cash in the county; $7.7 million. However, of that $7.7 million, there are accounts payable—most of which is deferred payroll ($5 million) which will have to be paid out, so there really is about $2 million.
Of the $2 million, over $1 million of that was the payment of Davis school foundation. The big and major point that was made is that the district really needs to monitor cash—a serious cash watch for the first time. The restricted side of the cash is a minus $2 million dollars, and the cash on the unrestricted portion needs to be able to cover the restricted. This means that all categorical spending (special education spending), all the money was spent, and the money will be given back later, but the cash balance on the restricted side is currently negative.
The district looked at where the cash will go next year, and looking at the numbers for the general fund reserve and fund equity, most of the equity was all in accounts receivable. It’s an accounting IOU from the state and federal government.
This makes it really challenging, as the district waits to get paid this year for last year’s money, to pay the bills. The real challenge for the 2010-2011 school year is, how low with the cash actually go?
When asked if the district has ever been on a cash watch this serious before, Mr. Colby commented, “No, the continued budget reductions and cash payment deferrals (25% of state funding) have depleted cash reserves.”
So, as the state begins to do cash accounting, the district needs to, as well. This means that the district has to really think about what it can spend, and what to make decisions on. It can become confusing because it doesn’t really matter how much accounting money the district has (because accounting reserves aren’t spendable), it’s all about the cash and how much is available at every point in time.
At this point in time, there are not enough available cash reserves to cover the budget of 2011-2012. There is enough for the ’10-‘11 school year, but for ’11-’12 there is not enough cash to cover deficits.
The district did meet its 3% reserves: which is 3% of the budget set aside for any economic uncertainties. And although this is a state requirement right now, the board voiced that it doesn’t seem to be enough.
Because this 2009-2010 Unaudited Actuals Report and 2010-2011 Budget Revisions were approved, it will go to the Yolo County Office of Education for approval and from there it is forwarded to the State of California. At the same time it’s sent for approval by the district’s external auditor. In January the district gets the response with an audit report.
“The underlying increase in revenue assumptions and expense reductions appear to be optimistic.” Bruce Colby told the Vanguard. “They have a track record recently of missing these projections. Any mid-year reductions from these assumptions usually impact education funding, since we are the largest budget line for the State.”
Additionally, this state budget pushes a large budget deficit forward to next year that could turn into more state funding reductions for education. This budget creates a huge balloon cash payment to education in July/August (25% of our state funding).
They have created a process now that forces the state controller to delay these payments further as the payment date comes, due to state cash flow challenges.”
The next steps are toward moving the budget forward; this is where the budget is reviewed and updated for changes.
There will be an increased budget of $2 million for the district, but not until July of 2012, because, according to Mr. Colby, “The state is deferring the payment of the actual cash from this increase to the summer of 2012, which is in next year’s budget cycle.”
However, as Colby explains, “The revenue is only down about $100,000 from the projection of $6.5 million, so the impact is minimal.”
This secures a positive outcome from both Measures Q and W, and will (at least for now) keep discussion of another measure in the near future out of the district’s mind.
This is Samantha Lynch reporting.