Change to Lead and Lead to Change

Larry Finney, GF&H [email protected]

Change to Lead and Change to Lead and Lead to ChangeLead to Change

SASBO-APRIL, 2007SASBO-APRIL, 2007

864-423-5752

The Speed of ChangeThe Speed of Change

Remember Alvin Toffler and “Future Shock”? Population

1858-4 cities of one million plus 1960-141 cities of one million plus 2005-437 cities of one million plus

Increasingly urban, which changes the way we live and “see” things; it also impacts how governments provide services


Remember Alvin Toffler and “Future Shock”? Speed of travel

600 BC-8 miles per hour by camel 1930-35 miles per hour by car 1960-4,000 miles per hour by rocket 2000-10,000+ miles per hour by plane

The world is becoming smaller and we are very mobile now; government must be more mobile and responsive (people expect more with less)


Remember Alvin Toffler and “Future Shock”? Information

1500-1,000 years to produce 100,000 books 1960-2 years to produce 100,000 books 2000-100 days to produce 100,000 books

Information explosion is so great, you can’t even begin to keep up with it all as an individual; governments must have systems and teams in place to efficiently and effectively gather, evaluate and disseminate information. Individually, we must learn to deal with “information overload”.


Remember Alvin Toffler and “Future Shock”? Science

Over 90% of all scientists who ever lived are alive today

The knowledge explosion is continuous and will become even greater-get used to it! Government must adapt, change and stay up-to-date; can’t keep doing things the same old way.

Those who desire change, grab hold of the benefits of change, and make positive change happen are and will be the leaders in government.

ChangeChange

But most of us don’t want to change and/or aren’t willing to acknowledge the benefit-why?

Comfort zoneJob, not vocationFear of taking risksFear of failureFear of successNo motivation to improve-intrinsic or external

ChangeChange

But most of us don’t want to change and/or aren’t willing to acknowledge the benefit-why?

No commitment-to improveQuit-let roadblocks become permanent

instead of temporaryDon’t learn from our mistakesDon’t take responsibility for actions

ChangeChange

So if that is me-not wanting to change-what do I do? Understand:

that feelings don’t change behavior, but behavior can change feelings

you have no choice; change is going to happen-either you have some control over change or change controls you

that most change is great

Start with your attitude-be honest Attitudes can change-takes hard work


The ChallengeThe Challenge

So what is required of me to lead (in excellence)?

And how do I take that understanding and actually change and improve myself, as well as my organization, department, group…?

How do I create a culture where everyone is challenged to seek innovation and improve the way we do things?

A leader is…A leader is…

AUTHENTICTrustworthy, genuine, realBe open about struggles, mistakesCreates an organization, division or

department where everyone is free to be open, try things (and even fail), be innovative

A leader is…A leader is…

VISIONARYKnows where going-personallyPassionateDoesn’t have a “job”Can then create shared vision that can be

caught

A leader…A leader…

Leads by values-VALUESHIPMust have personal values firstHelps create organizational valuesThese values govern behavior and enable

people to make decisionsHelps provide balance between the vision

and the resources

Let us suppose that we were asked for one all purpose bit of advice for management, one truth that we were able to distill from the excellent organization’s research. We might be tempted to reply, “Figure out your value system.” Decide what your organization stands for. Clarifying the value system and breathing life into it are the greatest contributions a leader can make.

Peters and Waterman

A leader…A leader…

CARESKnow your peopleUnderstand what motivates themWant the best for themLead them to reach their goals-personally

and professionally

The ChallengeThe Challenge

So what is required of me to lead in excellence?

And how do I take that and actually change and improve myself and my organization, department, group…?

How do I create a culture where everyone is challenged to seek innovation and improve the way we do things?

To start…To start…

Get awayHonestly evaluate yourself-attitudes, gifts

and abilities…Think about a personal visionWhat are your personal values that guide

and direct you?Then set goals

To start…To start…

FIND ACCOUNTABILITY!!!!!!!

As time goes by…As time goes by…

Evaluate and measure Learn from mistakes Adjust goals as needed Celebrate your victories!!!!!

Organizationally…Organizationally…

Successful organizationsKnow where they are going Identify core values and train/develop

people based on these valuesCreate a learning organization (requires

authenticity in culture)Continually improve


Authenticity requires opennessMuch easier to do when you know where

you are going personallyYou can guide your team, group,

department…through a similar process


Authenticity requires opennessYour team, group, department…should

ask yourselves some questions and brainstormDo we understand how what our team, group,

department… does relates to the mission, vision and goals of our school district?


Authenticity requires openness Your team, group, department…should ask

yourselves some questions and brainstorm Are we really passionate about wanting to improve

and be the best at what we do? If not, why not? How can we be the best team, group, department…

at what we must do? What would the best actually look like? What is causing us not to be there? What mistakes

have we made and what can we learn from them? You must lead in this area by example!


Authenticity requires openness Some more questions to consider…

How would you rate your team’s, group’s…performance right now?

What organizations are out there that are leaders in what we do?

What technologies and other resources are available that would help us?

What have you wanted to change, experiment with, etc. but have not?


Authenticity requires opennessThis is not a one time brainstorm; this is

the beginning of creating the kind of environment where this is happening continually

How much time do you take and do you encourage your people take to read, to research new ideas, to talk with your peers, to experiment?


Examples from recent government retreat Why no passion, Why do people not seem to

enjoy their work? No vision, tyranny of the urgent, who is leading, what kind of communication is occurring…

Why not where we want to be? Too high of cost, lack of economic development, poor communication, no innovation about how to do things better…


Examples from recent government retreat What want to look like? Regular communication

to employees and customers, no DHEC issues, have own facilities, constantly upgrading and improving, not afraid of technology…

What have wanted to do? Regular meetings with other local governments in area, not hold on to poor employees, focus more spending on technology…


Examples from recent government retreatSo why aren’t we doing these things?

Lack of leadership, poor culture, fear of “me looking bad”, negative attitudes, lack of motivation…


What is the vision for our team, group, department…?Again, what is the vision for the school

district?How does what our team, group,

department does…related to that vision?So what should be included in our team’s,

group’s, department’s…vision?Start with single words or phrases


Examples from a recent government retreatSafe, compliance, cost-effective, efficientDevelopment, clean, quick fixMaintain, replacement, maximize citizen

satisfaction, communication…


VISIONOnce it has been created-communicate it!Provides a sense of purpose and directionThe basis for setting goalsShould cause you to create your “To Don’t

List” (things that we are not going to do any more) that is just as important as your “To Do List”


Government example ABC Government will provide quality, reliable

and efficient services, while: Providing honest, consistent, accurate and timely

customer service Providing a safe work environment Maintaining compliance with state and federal

regulations Expanding systems and services, according to a

strategic plan, where economically feasible to meet current and future customer needs


VALUESHIP Identify core values of team, group…

Commonly held values critical to success Prioritize those identified values Communicate them throughout your team,

group, department… Enables people to confidently make decisions Sometimes need to change some positions and

find people that agree with those values Live those values out-set the example


Government examples Accessibility and dependability of service Integrity Responsiveness Safety of employees Efficiency Reliability


The vision and values become the basis for setting goals and objectives


Caring How well do you know the people in your team, group,

department…? Length of service Prior vocations Hobbies and special interests Children-names, ages, interests Spouse-name, vocation, interests Religion, politics What things outside of work they want to do but have not done Personality type, which leads to strengths, weaknesses, tasks

and jobs for which better suited


CaringWhat motivates your people?

AchievementPowerAffiliationAutonomyEsteemSafety and securityEquity


CaringCare enough to expect the best

To have a disciplined team, group, department… that people enjoy being a part of

Mercer, Inc. studyOn average, people said they could do 26%

more work than they actually were doing


Caring4 major reasons they were not doing more

Not involved in decision makingLack of reward for good performanceDid not see enough opportunity for

advancementLack of supervision, training and

development


CaringHelp them be successful personally and

professionallyMust have balance over long-termEncourage and even lead them through

personal vision, goals, accountability…Will result in learning new skills, developing

new processes…


CaringCommunicate

Be authentic-share about yourself-weaknesses as well as strengths, failures as well as accomplishments

If not sure or don’t know-askGet input and include in decisions as much

as possibleTake the time!

SO WHAT?

So What?So What?

School District in Maryland-each principal has 100% autonomy and authority with school budget; this gets passed down to other school employees; has significantly reduced administrative costs.

School District in California-costs have decreased in total dollars for each of the last three years (with increased student enrollment) and test scores have improved-ideas at all levels, change, technology

So What?So What?

Other ideas and changes from government: Departments get to keep 50% of savings below

prior year expenditures-50% of that can be used on bonuses if department performance measures are met

If idea from any employee saves at least $x in money that is measurable, award of additional vacation day(s); if not measurable, names go into a hat for prizes and awards that are given monthly

So What?So What?

Other ideas and changes from government:Monetary and other awards given for

reducing:Amount of time and costs spent on

complianceNumber of compliance reports issued (cut by

30%)

We like to talk about “thinking outside the box”, but do we really ever do it, and if so, do we ever really do anything about it?

Individually…Individually…

A leader… Is authentic Is a visionaryLeads by valuesCaresLoves and embraces change


Successful organizationsKnow where they are going Identify core values and train/develop

people based on these valuesCreate a learning organizationContinually improve through change

Excellence in leadership in any Excellence in leadership in any organization means you…organization means you…

Care more than most people think is wise

Risk more than most people think is safe

Act on dreams more than most people think is practical

Expect more than most people think is possible


DOES THAT DESCRIBE YOU?

LEADING AND CHANGINGLEADING AND CHANGING

So how effective am I as a school business official?

Am I leading in excellence? How do I need to change?

WE’RE FLYING AT 50,000 FEETWE’RE FLYING AT 50,000 FEET

A finance officer is charged with the responsibility of: Ensuring the ongoing financial viability of the

school district (short-term and long-term) through:

The effective and efficient use of resources Minimizing risk Compliance with laws and regulations


So how does a finance officer do that? What policies and practices need to be in

place to accomplish that objective? What are outsiders looking for to give them

comfort that the objectives are being accomplished?


Everyone would answer those questions differently

But there are some basic habits that have been consistently seen with successful governments

And some of these basic habits have been missing in some governments that have struggled financially


Many sources used, but two primary ones in addition to our own experience were: Bond world Finance Officers


Many of these habits will seem basic to you, but it is amazing how many people do not do what others of us would consider the basic fundamentals

My goal is to give you some new ideas remind you of some old ones, and to get you thinking about whether or not you are doing the right things


These are not the one minute manager type habits. We all know we should prepare a to do list at the beginning of day, use MBWA, delegate when it makes sense…

We are talking about what you need to be doing to keep your government financially healthy


The bond world used to just look at the numbers and forecasts; little weight was given to practices and policies

Management practices are becoming more important and gaining more attention regarding the prediction of financial and credit performance


It is easy to look good when the revenue is growing

But your character is shown in the tough times The bond world is now looking to management

policies and practices to better understand how governments may handle the tough times


What the bond world is finding is that successful governments are not abandoning those policies and practices during the tough times, but instead, rely on those policies and practices to help get them through

Habit #1Habit #1

Fund balance reserve policy/working capital reserves

#1-Fund balance policy and #1-Fund balance policy and reservesreserves

Most commonly practiced of the habits This rainy day fund is the first defense

against unanticipated expenditures and/or reduced revenues


What is considered a reasonable or appropriate fund balance?


Amount of reasonable fund balance is dependent on several factors, including: Variability of revenues and expenditures Seasonal nature of revenues and expenditures Economic conditions Anticipated future expenditures Political climate Planning for contingencies


You must determine what is reasonable for your school district, considering all of the factors involved!

Consider reserving or designating funds separately for specific uses rather than one lump sum


What about the use of TANs, RANs and BANs?


While you would rather not have to use these cash flow instruments, they can be a reasonable method of smoothing out unbalanced cash flows

Be careful though! You don’t want to mask financial problems

by using these instruments

#1-Fund balance and working #1-Fund balance and working capital reservescapital reserves

You are hiding financial problems if: The amount of your TAN or BAN issues from

year-to-year are growing (trend) You regularly issue TANs in good economic

times

#1-Fund balance and working #1-Fund balance and working capital reservescapital reserves

Make sure you know how your fund balance compares to your cash and investment balances, especially if they are not reasonably close in amount

Educate your boards and management on what fund balance is and what it is not

Habit #2Habit #2

Cash management and debt analysis policies and procedures

#2-Cash and debt analysis#2-Cash and debt analysis

We are talking about cash and investment, and debt management, practices that have the goal of:

Maximizing the net results of your interest income and interest expense

While also ensuring: Safety of principal Proper liquidity Compliance with investment and debt laws and

regulations


Cash management policy considerations Legal constraints Risk tolerance (credit, market, interest) Diversification Address the needs of different sources of cash

(operating, bond proceeds, agency) Collateralization Internal controls

This should all be spelled out in writing


Debt policies Types and methods of financing Legal constraints Controls and procedures for analyzing and

authorizing debt Your political and cultural climate

This should be in writing


Monitoring and reporting practices Cash management liquidity tied to both

operating needs and debt maturity Watch interest rates closely Develop report that shows cash and debt

working together to achieve goals Report regularly so no surprises, especially as

interest rates change rapidly


In summary: Determine what makes sense for your

government regarding amount of outstanding debt, debt service requirements, types of debt, and related cash and investment options.

Develop policies Ensure policies being followed Report results regularly

Habit #3Habit #3

Excellence in debt disclosure practices

#3-Debt Disclosure#3-Debt Disclosure

I am not talking about the disclosure requirements necessary for the issuance of debt; I am assuming you do that already.

I am talking about when your government has no near-term plans to issue debt; do the analysts, bondholders, etc. have access to financial information to help them decide whether to buy, sell, or hold your government’s debt


A lot of debt! It is estimated there are approximately 55,000

issuers in the municipal securities market About 1.7 million issues outstanding Representing about $2 trillion in securities


Rule 15c2-12 (SEC 1934 act) is the beginning point (the minimum) Make sure you are familiar with this regulation There are bond attorneys and organizations to

help you with this Written as part of the antifraud provisions of the

federal securities laws


Rule 15c2-12 The first problem is some people are still not

doing it and many are not familiar enough with the requirements to know what and when they should disclose information and data


Rule 15c2-12 The second problem has arisen over the

last 20 years as most municipal securities bondholders have changed from being institutional investors to individual investors

1983-44% were individual investors By 1992-73% were individual investors


Rule 15c2-12 Individual investors have not had access to

the same information on the secondary market as institutional investors and therefore had difficulty deciding when to buy or sell these securities

Therefore, we now have rule 15c2-12


Highlights of Rule 15c2-12 Applies to issuers, underwriters, dealers in the municipal

securities market Requires underwriters of primary offerings of municipal

securities with an aggregate principal amount of $1 million or more to obtain and distribute to their customers the issuers’ official statements for the offerings and to ensure the issuer will provide certain annual financial information and operational data, as well as event notices for certain events to various information repositories


Highlights of Rule 15c2-12 The financial information does not have to be

audited (but it should be if possible) The operational data should mirror that in an

official statement There are 11 events that trigger notices There are some exemptions


Highlights of Rule 15c2-12 There are eleven events that trigger notices:

Principal and interest payment delinquencies Non-payment related defaults Unscheduled draws on debt service reserves that

reflect financial difficulties Unscheduled draws on credit enhancements that

reflect financial difficulties Substitution of credit or liquidity providers, or their

failure to perform


Highlights of Rule 15c2-12 There are eleven events that trigger notices:

Adverse tax opinions or events affecting the tax-exempt status of the security

Modifications to the rights of security holders Bond calls Defeasances Release, substitution or sale of property securing

repayment of securities Rating changes


So what would be considered excellence in disclosure? Complying with 15c2-12 even if exempt Additional information other than minimum in

the official statements or the financial statements

Some governments prepare annual debt disclosure statements


Examples of additional information to consider disclosing includes Debt management policies Histories on pledged tax or revenue streams

that back revenue bonds Performance on revenue bond coverage Use of short-term borrowings that occur within a

year, but paid off by year end Information on compliance with covenants

Habit #4Habit #4

Multi-year financial forecasting

#4 Multi-year forecasting#4 Multi-year forecasting

Many governments who do multi-year forecasting well, started because of significant financial stress; forced into it out of necessity

That is when they realized what a beneficial tool it could be-financial difficulties or not


Advantages Anticipate financial impact of potential

problems, issues…before there is a crisis Allows for time to plan a response and not just

react to a budget crisis Shows citizens, legislators and others that you

are not just focused on today


Disadvantages Takes time

Involves numerous people Needs to be detailed enough to be meaningful

There is a learning curve The further out you go, the more difficult and

less accurate you tend to be in your measurements and assumptions


There are several governments with good examples of this www.phila.gov

Consider “rolling” your forecasts

Habit #5Habit #5

Rolling cash flow projections

#5-Rolling cash flow #5-Rolling cash flow projectionsprojections Preparing just an accrual/modified accrual

budget is not enough; especially if it is an annual budget your cash flows are not even through out the

year A monthly cash budget or projection is key

to effective financial management

#5 Rolling cash flow #5 Rolling cash flow projectionsprojections DETERMINE CASH AVAILABLE IN BUSINESS

CYCLE FISCAL YEAR QUARTERLY MONTHLY

DETERMINE POTENTIAL FOR REVENUE FLUCTUATIONS ECONOMY ADDITIONAL FEES AND CHARGES NEW OR LOST REVENUE SOURCES

#5 Rolling cash flow #5 Rolling cash flow projectionsprojections DETERMINE CASH NEEDS IN BUSINESS

CYCLE BUDGET AND SPENDING PRIORITIES PREDETERMINED OBLIGATIONS CYCLICAL EXPENDITURES

NEGOTIABLE?

#5 Rolling cash flow #5 Rolling cash flow projectionsprojections Notice the differences between the budget and

cash flow As a month or quarter is completed, add a month

or quarter so you can always look 12-24 months out and see where you will be

Do for all funds with cash, especially if cash in various funds can be shared,

Update your projections like you change your budget For changes not originally contemplated Input actual results after closing a month

Habit #6Habit #6

Regular financial reporting and monitoring

#6-Regular reporting and #6-Regular reporting and monitoringmonitoring

Regular means preferably monthly, but at least quarterly Some will even do a certain level monthly and

then a more detailed level quarterly


Pitfalls It must be detailed enough to be meaningful

Comparisons to prior year and/or budget Truly understand the reasons for the variances

(quantify them) Are you just doing an annual budget and then

dividing by 12 months?


Pitfalls It must be detailed enough to be meaningful

Do you have any significant year end transactions that might be better accrued or deferred throughout the year to present a more accurate picture?


Pitfalls Creating a report that is too detailed or not

detailed enough, depending on your audience The board or council does not need to see the same level

of detail as management-keep them focused on the big picture

Management needs to see enough detail to do their job properly

Do you have 5-10 ratios and/or performance measures that can quickly tell you how your government is doing financially?

What about trend information?


Pitfalls Not responding to the results on a timely basis

Why are we doing regular reporting and monitoring? So what should we do?

Ask ourselves what we should change, if anything? What would I recommend to the head person of our government to

do? Examples include:

Reduce future expenditures Transfer monies from one fund to another Investigate why certain revenues are down and respond

accordingly Change general operating or debt service millage…

Habit #7Habit #7

Contingency planning policies

#7-Contingency Planning Policies#7-Contingency Planning Policies

The goal is to avoid surprises, particularly negative ones

Cannot anticipate everything, but can have financial policies and practices that make the surprises much easier to handle


This involves: some thinking, anticipation, and staying up to

speed with potential future changes, whether political or operational

Developing a plan B, C…and communicating those plans

“What if” brainstorming and analysis


What are the events or transactions that could impact the financial condition of your government?

Local politics? State-legislative and otherwise? Federally? Environmentally? Locally with tax revenue?


Some examples include: Local tax collections are down (collection %, mill

value, loss of industry) A referendum to eliminate millage increases

without a vote The state legislature decides they are going to

cut funding by 10% to all state agencies and local governments


Some examples include: Unfunded federal and state mandates The EPA finds environmental problems with a

site you own An act of God demolishes a facility The Board decides to start an expensive new

program without adequate resources


What you should ask is, “What are potential contingency plans for these events or transactions?”

It should be more than just trying to have a certain level of fund balance Having action plan ready to go that everyone

understands when something goes wrong; may have to make difficult decisions very quickly

Having good relationships with key outsiders-county, state, federal, key local citizens


Designating a certain portion of fund balance for contingencies can help your board understand that portion of fund balance is to be left alone

The hard work is the strategic planning and thinking necessary to identify the contingencies and how to be ready if they happen

Habit #8Habit #8

Policies regarding noncurrent revenue

#8-Nonrecurring revenue #8-Nonrecurring revenue policypolicy Becoming more important in last five years

as one-time resources are becoming more prevalent

one-time revenue, especially when unexpected, is hard to save!

#8-Nonrecurring revenue #8-Nonrecurring revenue policypolicy Tobacco funds Certain federal, state or local grants and

contributions Be careful when a significant amount of

delinquent tax revenue is received

#8-Nonrecurring revenue #8-Nonrecurring revenue policypolicy Goal is to have a policy to the effect of

nonrecurring revenue should be used for ongoing operating costs

#8-Nonrecurring revenue #8-Nonrecurring revenue policypolicy WRONG! Any reliance on nonrecurring revenue for

operating costs is discouraged Why? Puts financial stress on the government the

next year-and it can hurt! Biggest challenge can be getting

management and Boards to understand this

#8-Nonrecurring revenue #8-Nonrecurring revenue policypolicy Many times we use nonrecurring revenue

for recurring expenditures thinking that next year our recurring revenue will be higher to cover it…

But life is not fair!

#8-Nonrecurring revenue #8-Nonrecurring revenue policypolicy Thoughts:

segregate recurring versus nonrecurring revenues in budget preparation

communicate to your board how much state or federal funding is recurring versus nonrecurring

Consider comparing nonrecurring revenue versus nonrecurring expenditures

Consider a policy-makes it easier when the issue is raised; you have something to fall back on when the pressure rises!

Habit #9Habit #9

Five year capital improvement plan integrating operating costs of new facilities

#9-Capital improvement plan#9-Capital improvement plan

A capital improvement plan is so common, that not having one is considered a “negative”

School Districts generally do an excellent job of this


What is considered more beneficial is to determine operating costs associated with the new capital assets and then integrating those costs into your multi-year forecasting and cash projections


Actually, this is an absolute necessity if you are going to not only do multi-year forecasting and cash flow projections, but also rapidly pay debt


Involves a lot of people as the key is to be detailed enough to ensure accuracy and completeness. If the plan is understated, it can significantly affect a district’s financial condition

Don’t forget to account for inflation-use construction numbers, not general CPI

One area we see estimates/budgets significantly under actual is energy costs

Habit #10Habit #10

Rapid Debt Retirement

#10-Rapid debt retirement #10-Rapid debt retirement policiespolicies This is looked upon very favorably by the

bond world Rapid is considered 65% or more of debt

(principal) paid off in no more than 10 years Retiring less than 35% of debt in 10 years is

considered a “weak fiscal practice”

#10-Rapid debt retirement #10-Rapid debt retirement policiespolicies Basic rule #1 is that the life of your debt

should never exceed the useful life of the related asset(s)

It would obviously be better if the life of the debt was significantly less than the asset’s useful life

This is assuming reasonable useful lives are used!

#10-Rapid debt retirement #10-Rapid debt retirement policiespolicies If a government has to continually issue 30 year

debt or extend the maturity of the debt through refinancing (even if it is still within the asset useful life), this is a sign of possible poor financial health

On the other hand, rapid debt retirement provides provides a lot of flexibility in case of significant unanticipated expenditures or sudden revenue drops

#10-Rapid debt retirement #10-Rapid debt retirement policiespolicies There are many ways a policy could be adopted

that results in rapid debt retirement For example, there is a government that restricts

final maturities on its tax-supported debt to 15 years; the result is that, even through one difficult financial cycle, 89% of its debt was paid off in 12 years

#10-Rapid debt retirement #10-Rapid debt retirement policiespolicies There are many ways to accomplish this:

Establish a policy Practice of issuing short-term debt combined

with long-term debt to “smooth” cash flow and property tax millage

Practice of paying debt off more quickly with excess funds

Habit #11Habit #11

Paying Attention to Your Balance Sheet

#11-Balance Sheet#11-Balance Sheet

General focus in government is revenues and expenditures-that is what is budgeted

But can’t ignore the balance sheet If the balance sheet is wrong, it will likely

impact the revenues and expenditures So what should you do?


Know what is in your balance sheet Review the activity monthly as part of

month-end procedures Perform independent analysis

quarterly/annually Determine what should be in each account Calculate what you think the balance should be

and compare to actual balance


Pay particular attention to major accounts at year end

Payroll accruals Many of the balances are not significant But there are always debit balances in the accrual

accounts Begs questions about all balance sheet accounts

Insurance accruals

Habit #12Habit #12

Internal Control Reviews

#12-Internal Control Reviews#12-Internal Control Reviews

Too many times, especially in today’s environment where everyone has more to do than time available, this area is ignored.

People come and go, policies and practices change, but rarely do we continually and periodically evaluate the cost/benefit of internal control processes and systems.


Risk of inadequate internal controls has increased as technology has improved and as productivity expectations have increased

Risk of fraud continues to increase Misuse of assets Misstatement of financial information

Public more aware of risk of fraud Sarbanes-Oxley coming government’s way in some form

New SASs


The question that can be difficult to answer is, “how do I stay current?”


One option is bring an outside CPA firm in, but that costs $$

Remember, a financial statement audit does not provide an opinion on adequacy of internal controls


Better options might be: Get an internal finance employee from one area

to do an internal control review for a process with which they are not involved

Good training tool Can help with cross training Can break up monotony of someone’s job through a

special project like this


Better options might be: Agree with another school district that you will

help each other You review their internal control processes and

they review yours You will each learn something Little to no cost other than your time You can get a lot done in one to two days

Consider using high level people to do review

Habit #13Habit #13

Financial and Budget awards

#13-Awards#13-Awards

Still not wide participation, but growing each year

If currently doing, does it makes sense to continue?

If not doing, should you start?


Goal of CAFR program is to encourage the preparation and publishing of an easily readable and understandable comprehensive annual financial report (CAFR) covering all funds and financial transactions of the government during the fiscal year

GAAP plus additional requirements


GFOA states the benefits as: Education Recognition Securities marketing aid Clarity Comparability Completeness


Which means that there will be more benefit to some governments than to others


Statistics for fiscal years ending in 2004 Total submissions were 3,506 Total awards were 3,482 (99.3%) New submissions were 112 and awards were

101 (90.2%) 647 total reviewers


Statistics for fiscal years ending in 2004 Longest running award streak

City of Oak Ridge, Tennessee-44 years Montgomery County, Maryland-35 Houston School District-31 Several SPDs-31 Illinois Retirement Fund-31 State of Tennessee-26 Waukesha County Area Tech (WI)-23


Budget program (2004) Longest running are three cities at 22 years Total submissions 960, awards 875 (91%) 569 municipalities, 157 counties, 85 SPDs, 42

school districts, 11 colleges/universities, 10 states, 1 PERS

Habit #14Habit #14

Effective and efficient use of technology

#14-Technology#14-Technology

Not talking about basic hardware and financial software-that is a given

How are you using the internet and other technology that can improve your efficiency and effectiveness in the long-term?


Using the internet/web sites Software for employee communication

Communicate with employees-forms, policies, personnel and payroll changes

Citizen communication Password protected partitions and public

partitions PDF for documents and putting on web site


Using the internet/web sites Publish and post documents (saves $$)-remember, you

can partition web sites to restrict access to specific areas

Annual audited financial statements Budget Multi-year forecasts Five year capital improvement plan Annual reports Operational documents


Using the internet/web sites Communicate with citizens, other governments,

other organizations Send/receive documents, such as property tax

information from County (since deposits are made electronically to District bank account)

Ask-what can we do to improve communication as well as potentially save money


Other technology Procurement cards Laser check writing Positive pay, reverse positive pay 100% Direct deposit (even those without bank

accounts) Schools going electronic-Kershaw


It may not make sense to do it all, but you need to know what is available so you can make the best decision for your government

Should run return on investment calculations to help make decision If the ROI is not good, it does not mean you do

not do it, but it means there should be some other overriding reasons to do it

Change to Lead and Change to Lead and Lead to ChangeLead to Change

Desiring to change, grabbing hold of the benefits of change, and making positive change happen will lead to being effective school business officials and leaders in your organizations and in your lives personally.

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Change to Lead and Lead to Change