BUDGET AND FUND RESERVES
I. GENERAL STATEMENT OF POLICY
The Board will provide direction regarding school district budget and financial affairs which reflects the general philosophy and goals of the community and which provides a framework within which the school system's administrative team can operate.
The budget and finance processes will conform to all state and local requirements as set forth by State statutes, State Department of Children, Families and Learning and Board policies.
II. PURPOSE AND GOALS
A. The purpose of district budget and finance policies will be to provide direction for a systematized procedure such that continuity is maintained from year to year, and the public is kept informed regarding the educational and financial operations of the school district.
B. In the district's fiscal management, the Board will seek to achieve the following goals:
1. To establish levels of funding which will provide quality education for the district's students.
2. To develop budgets and to guide expenditures so that the greatest educational returns and the greatest contributions to the educational program in relation to dollars expended may be achieved.
3. To use the best available techniques of long-range planning, budget development, and budget administration, and to establish efficient procedures for accounting, reporting, purchasing, contracting, payments, auditing, and all other areas of fiscal management.
4. To maintain adequate fund reserves so that the district remains debt free and avoids the negative financial impact associated with borrowing for normal operational needs.
III. PREPARATION OF THE BUDGET
Preparation of the budget shall include the following phases:
A. Preliminary Budget
The preliminary budget is a rough estimate of total revenues and expenditures in each fund. It will be prepared in May of each year.
B. Adopted Budget
The adopted budget will be approved in June of each year and will include the following:
1. Current and projected year-end balances
2. Statements of estimated revenues by fund and source
3. Statements of estimated expenditures by fund and program.
C. Revised Budget
The revised budget will incorporate itemized amendments to the adopted budget. Said amendments, insofar as possible shall reflect changes in enrollment, legislation, negotiations, and other circumstances having a material impact on the district's finances. Typically, the revised budget will be approved in March; however, budget amendments may be submitted for Board approval whenever material deviations are recognized and quantified.
Upon acceptance by the Board, the budget represents the granting of authority to the administration for all expenditures, which are to be made during the fiscal year.
IV. BUDGET RESERVE POLICIES
In preparing budgets, the administration shall be guided by the following budget reserve policies:
A. It is desirable to have an unassigned balance in each of the district's operating funds in order to:
1. provide a positive cash position at all times,
2. provide a cushion to smooth out revenue and expenditure variances,
3. cover appropriation deficiencies,
4. retain credit worthiness and a high bond rating, and
5. provide for unexpected or emergency expenditures.
B. Therefore, the Board of Education desires to maintain an unassigned balance in each operating fund in the range of 4% to 8% of the annual expenditure budget.
1. When a fund balance is at or below 8% but greater than 4% of projected annual expenditures, the superintendent shall specifically alert the Board to this condition and propose options for the Board to consider. Options might include actions such as:
· limiting new program proposals
· reductions in per-pupil allocations for non-personnel expenses
· adjustments in staffing ratios
· other economy measures which do not materially degrade quality of program offerings or services
2. When a fund balance is at or below 4% of projected annual expenditures, the superintendent shall specifically alert the Board to this condition and shall propose measures to improve the balance. Such measures could include:
· eliminating new program proposals
· reductions in program offerings or services
· increases in student/staff ratios
· seeking additional revenues through referendum or other means
3. Annually, the Board will consider the superintendent's recommendation, review economic conditions and financial prospects and decide if the 4-8% reserve is realistic.
V. FUND BALANCE CLASSIFICATIONS
The Governmental Accounting Standards Board (GASB) issued Statement No. 54 to enhance the usefulness and to achieve more consistent fund balance reporting.
Fund Equity – A fund’s equity is generally the difference between its assets and its liabilities.
Fund Balance – An accounting distinction is made between the portions of fund equity that are spendable and nonspendable. These are broken into five categories:
1. “Assigned” fund balance amounts are comprised of unrestricted funds constrained by the school district’s intent that they be used for specific purposes, but that do not meet the criteria to be classified as restricted or committed. In funds other than the general fund, the assigned fund balance represents the remaining amount that is not restricted or committed. The assigned fund balance category will cover the portion of a fund balance that reflects the school district’s intended use of those resources. The action to assign a fund balance may be taken after the end of the fiscal year. An assigned fund balance cannot be a negative number.
2. “Committed” fund balance amounts are comprised of unrestricted funds used for specific purposes pursuant to constraints imposed by formal action of the school board and that remain binding unless removed by the school board by subsequent formal action. The formal action to commit a fund balance must occur prior to fiscal year end; however, the specific amounts actually committed can be determined in the subsequent fiscal year. A committed fund balance cannot be a negative number.
3. “Nonspendable” fund balance amounts are comprised of funds that cannot be spent because they are either not in spendable form or are legally or contractually required to be maintained intact. They include items that are inherently unspendable, such as, but not limited to, inventories, prepaid items, long-term receivables, non-financial assets held for resale, or the permanent principal of endowment funds.
4. “Restricted” fund balance amounts are comprised of funds that have legally enforceable constraints placed on their use that either are externally imposed by resource providers or creditors (such as through debt covenants), grantors, contributors, voters, or laws or regulations of other governments, or are imposed by law through constitutional provisions or enabling legislation.
5. “Unassigned” fund balance amounts are the residual amounts in the general fund not reported in any other classification. Unassigned amounts in the general fund are technically available for expenditures for any purpose. The general fund is the only fund that can report a positive unassigned fund balance. Other funds would report negative unassigned fund balance should the total of nonspendable, restricted, and committed fund balances exceed the total net resources of that fund.
B. CLASSIFICATION OF FUND BALANCES
The school district shall classify its fund balances in its various funds in one or more of the following five classifications: nonspendable, restricted, committed, assigned, and unassigned.
C. ORDER OF RESOURCE USE
If resources from more than one fund balance classification could be spent, the school district will strive to spend resources from fund balance classifications in the following order: restricted, committed, assigned, and unassigned.
D. COMMITTING FUND BALANCE
A majority vote of the school board is required to commit a fund balance to a specific purpose and subsequently to remove or change any constraint so adopted by the board.
E. ASSIGNING FUND BALANCE
The school board, by majority vote, may assign fund balances to be used for the specific purposes when appropriate. The board also delegates the power to assign fund balances to the superintendent and business manager. All assigned fund balances shall be reported to the board on an annual basis.
VI. POLICIES REGARDING EXPENDITURES AND EXPENDITURE REDUCTIONS
The following guidelines have been adopted by the Board of Education for consideration when making budgetary decisions regarding expenditures and expenditure reduction.
A. General Considerations Impacting More Than One Fund
1. Budgetary decisions should be focused on meeting student and community needs and supporting the school district’s mission and goals.
2. Budgeting should be based on a comprehensive needs assessment that considers:
a. Current and emerging instructional needs and trends
b. Research and best practices that support student learning
c. Demographic changes
d. Enrollment fluctuations
e. Programmatic changes
f. Community values and needs
3. Additional factors to be considered when making decisions regarding expenditure reductions include:
a. Services which other governmental agencies, private groups, or families themselves can assume (at least potentially) should be given extra consideration when making budget reductions.
b. Apply budget modifications objectively across all buildings in the district.
c. Where possible, make personnel cuts through attrition as opposed to layoffs.
d. Do not restore or add programs/services/personnel unless they can be sustained on a long-term basis.
e. Uphold Federal and State laws and regulations, policies and administrative regulations of the Richfield Board of Education, and contractual obligations with employees.
f. Consolidate programs or operate on a reduced basis in order to retain programs, eliminating them only when program funding is so minimal that public expectations cannot be met.
B. Budgetary Considerations Regarding Education-Related Items (General Fund)
1. Educational priorities and use of education resources should be grounded in the District’s Strategic Plan, including the district’s mission, beliefs, strategic policies, objectives and strategies.
2. Factors to be considered when making decisions regarding education-related expenditure reductions include:
a. Despite budget reductions, the educational system should remain progressive and dedicated to quality, serving the various capabilities and interests of all students. Efforts to promote student learning, advance administrative and instructional uses of technology, promote professional development, and improve programs should persist.
b. Maintain the integrity of basic programs. If programs need to be reduced or eliminated, use the District's Mission, Beliefs, and Strategic Policies as a guide in establishing priorities.
c. Within the General Fund, seek methods of cutting expenses that minimize the impact on the educational program.
d. Consider budget reductions, which adversely impact the fewest pupils.
e. Consider expanding class sizes to avoid total elimination of specialized programs such as art, music, technology education, and enrichment activities.
f. Consolidate programs or operate on a reduced basis, rather than totally eliminating programs.
g. Rather than funding a program at a very minimal level, eliminate the program altogether to avoid misconceptions and misplaced expectations.
h. Where possible, allow desired services to remain on a "pay-as-you-go" basis or via user fees; regularly update fees and rental rates to reflect market conditions and reasonably reflect actual costs.
i. Make cuts in services that might be subsidized by other groups such as parent/teacher organizations and booster groups.
C. Budget Considerations Regarding Facilities, Operations and Maintenance and other Capital Expenses
1. Facility changes should reflect comprehensive facility planning that reflects the following goals and criteria:
a. Criteria such as enrollment and deferred maintenance thresholds will trigger facility changes.
b. Facilities will be designed and used in ways that make Richfield Public Schools exciting, attractive, and productive, while maximizing efficiency.
c. Facilities will meet building and life safety codes and protect the safety and well being of students, staff, and occupants.
d. Proposals for facility change will have reasonable cost implications.
e. The community will have a sense of ownership of the comprehensive facility plan.
2. Additional factors to be considered when considering capital expenditure reductions or revenue increases include:
a. Avoid cutbacks in areas such as preventative maintenance which, if not conducted on a timely basis may lead to greater costs over the long term.
b. Reduce the use of purchased or contracted services, using existing personnel wherever possible.
c. If cutbacks are made in the area of housekeeping, attempt to spread the reductions in service such that the impact of the reductions is as minimal as possible.
d. Revise building user fees and rents to reflect actual costs of operating the buildings.
D. Budgetary Considerations Regarding Transportation Services
1. Transportation resources should be used efficiently meet legal requirements and facilitate student participation in school programs and activities.
2. Additional factors to be considered when considering transportation expenditure reductions or revenue increases include:
a. Consider eliminating or consolidating services where possible.
b. Review all transportation services not required by law.
c. Consider providing some services on a fee for service basis.
E. Considerations Regarding the Process for Budgetary Decision-making
1. Each recommended adjustment will be accompanied by an impact statement for consideration prior to making budgetary decisions.
2. Recommendations may take several forms, including but not limited to elimination, consolidation, delay, increasing revenues, and alternative methods of delivery of service. The impact statement will address implications of the type of reduction.
3. The judgments of employees relative to consequences and likely impact of proposed budgetary reductions are to be considered.
4. When budget cuts are site-specific, implications of the cut on other sites and on programs and services across the district are to be considered.
5. Community expectations regarding types and quantity of educational services needed are to be considered; that is, budgetary decisions ultimately are to recognize community values and priorities as expressed through individual citizens, organized groups, employees, and elected school officials. Whenever possible, opportunities for communication and consultation with multiple stakeholders will be provided prior to making budgetary decisions.
F. Communicating Regarding School Finance Concerns
1. Lobby for adequate funding of public schools.
2. Work to increase public awareness of Richfield Public Schools financial concerns.
ADOPTED BY THE BOARD OF EDUCATION: August 6, 1990
AMENDED BY THE BOARD OF EDUCATION: July 10, 2000, January 8, 2001, October 15, 2007, April 7, 2008. May 16, 2011
REAFFIRMED BY THE BOARD OF EDUCATION: November 19, 2001, June 24, 2003