DESCRIPTION 2003-04 2004-05 2005-06 CHANGE BETWEEN 2003-04 AND 2005-06 Beginning Balance $4,343,770 $2,438,297 $1,712,590 ($2,631,180) Revenues $105,807,105 $117,386,498 $122,132,721 $16,325,616 Expenditures ($105,659,484) ($115,707,277) ($121,465,675) ($15,806,191) Transfers Out to Other
Funds ($2,053,094) ($2,404,928) ($1,245,652) $807,442
Ending Balance $2,438,297 $1,712,590 $1,133,984 ($1,304,313)
Source: RCPS Comprehensive Annual Financial Reports 2003-04, 2004-05 and 2005-06.
Many school divisions establish a goal attaining a specific appropriated fund balance and guidelines that instruct the superintendent and director of finance how to implement the policy. Some policies include items such as:
Develop and submit for Board approval a balanced budget with input from site-based decision making (SBDM) committees and instructional programs.
Develop staffing patterns and funding formulas based on a per pupil basis.
Restrict any surplus funds towards the fund balance.
The process that many school divisions follow when establishing a fund balance policy includes the following:
The Board establishes a fund balance policy that contains a target general fund balance that will best meet the long-range division strategic plan.
Difficult decisions are made to prioritize the division's goals and the Board directs the superintendent to develop a three-year plan with detailed strategies to meet the fund balance target while achieving division goals.
The plan normally includes a five year forecast of the division's anticipated enrollment projections, revenue projections, and expenditure projections.
The forecast uses the most current comprehensive annual report as the baseline.
The policy also requires that every agenda item contain a fiscal impact statement showing how the item will impact the fund balance. Once the fund balance target has been established, the
superintendent develops procedures that help the division stay on target. These administrative procedures present clear direction on how the target will be met and how it will be maintained.
The Board then authorizes the superintendent to reduce budgeted expenditures to the necessary level and establish annual procedures to ensure that the fund balance target is maintained.
RECOMMENDATION 4-5:
Establish a general fund balance policy, develop a plan to achieve and maintain a target fund balance, and require reports to the Board.
Developing and implementing a general fund balance policy will enable the division to better manage its general fund resources. Reports to the Board will keep the Board informed and enable them to make more informed decisions when the division’s general fund is involved.
FISCAL IMPACT
It is estimated that it will take between ten and twelve hours to develop a fund balance policy for the division.
4.4 Payroll
School divisions require accurate and detailed payroll accounting to ensure that employees are paid for their services correctly and on time. Payroll is one of the division’s most visible responsibilities. When an error occurs with an employee’s check, it quickly becomes public knowledge.
Accurate payroll data is vital to the division’s budgeting process as payroll is generally the largest single expenditure category. If the division does not have access to accurate historical payroll data, it becomes difficult to project future payroll expenditures with any degree of certainly.
FINDING
The division operates a mandatory direct deposit program for employee payrolls. The mandatory process was implemented in 1987 and all new employees from that time forward have been required to have their payroll checks direct deposited. According to the payroll coordinator, more than 90 percent of all payroll checks are direct deposited. Hard copy checks are provided to new employees the first month they are on the division payroll while their accounts are being established and a few that were employed in 1987 when the system was initiated are still allowed to receive hard copy checks. Direct deposit offers employees a safe and convenient way to have the net amount of their pay deposited directly in their designated bank account. Deposits are posted on payday for most major banks and credit unions.
Effective school divisions use direct deposit to streamline their payroll process and save money by eliminating the need to prepare and secure physical checks. These divisions also save money on supplies, since check stock costs more than regular paper and require special handling and security. In addition, employees save time by not having to go to the bank to deposit their check.
COMMENDATION 4-B:
Roanoke City Public Schools is commended for establishing a mandatory direct deposit program for all new division employees.
FINDING
RCPS payroll system does not interface with the human resources system. Staff of the human resources department enter employee information into the human resource system when employees are hired and the information is updated when changes to employee information is necessary. Certain information maintained in the human resources system is also needed by payroll staff in order to process payments to employees. Employee information contained in the human resources system and needed by the payroll staff cannot be electronically transmitted to the payroll system. The information needed for processing payrolls must be reentered by payroll staff into the payroll system.
Payrolls are processed monthly for approximately 2,300 employees and 450 employees are paid bi-weekly. Bi-weekly payrolls are processed for employees in food services, security, and building maintenance. Human resources prepare a weekly listing of changes to employee payroll information which are used by payroll staff to make updates to the payroll system. These weekly listings are also provided to the Board for their information and review.
Entering the same information more than once into the division's financial management system is inefficient. Each time the same information is entered also increases the potential for errors that must to be found and corrected. The division and the city plan to upgrade its financial management system that includes both a human resources component, a payroll component and possibly an automated employee time system. The division uses the same payroll system used by the city. The division and city began using the payroll system in 1981. The system has a human resources component that the division elected not to use; however, the city’s human resources department uses the component. The division and the city have begun planning for a new payroll system and hope to have completed in 2010.
Divisions that have efficient payroll processes ensure that their automated systems are integrated with automated time and human resource systems. The most opportune time to make sure systems are integrated in the most efficient manner is during the request for proposal process that identifies all the requirements of each system.
RECOMMENDATION 4-6:
Ensure that the request for proposals for the new payroll system provides for electronic interfacing with human resources, position control, and an employee time component.
Including requirements in the request for proposals for interfacing capabilities will ensure that the new system meets the division’s needs in the most effective manner. Ensuring that interfacing between payroll, human resources, and employee time is included will reduce the administrative work associated with duplicate entries and errors caused by multiple entering of the same data.
FISCAL IMPACT
It appears that this recommendation can be completed with existing resources.
FINDING
The payroll office does not have formal procedures for completing the very important functions associated with processing payroll for division employees and completing reporting requirements to governmental agencies.
The payroll accounting specialist and her two assistants have informally documented some of their processes, but in different ways. The payroll accounting specialist has most of her processes in informal documents kept on her computer. The two assistants
keep hard copy instructions in file folders next to their desk. The assistants’ files also include examples of the documents and reports used in completing their responsibilities. Written procedures serve various functions. They provide employees with written communication of an organization's expectations and practices; give direction in the correct way to process and record transactions; serve as reference material; and act as a training tool for new employees. Written procedures also provide consistency and uniformity in handling financial transactions. Without clear, written, and up-to-date procedures, RCPS internal control structure is weaker because practices, controls, guidelines, and processes may not be applied consistently, correctly, and uniformly throughout the division.
Without written procedures, delays can occur in performing important activities like payroll when key staff are unable to come to work for an extended period of time. Also, written procedures help ensure that proper controls are documented and communicated to staff to safeguard division assets, reduce training time for new employees, improve productivity, satisfy regulatory requirements, speed up decision-making, improve communication, eliminate confusion, develop management consensus, communicate management expectations, and define employee tasks and responsibilities.
RECOMMENDATION 4-7:
Document payroll processes in a consistent manner and consolidate in a payroll processing manual.
Documenting the division’s payroll processes will help ensure that the payroll process can be completed when payroll staff are out for an extended period of time. Having procedures written and approved will help ensure that the processes are completed in a manner that has received management’s approval.
FISCAL IMPACT
It is estimated that it will take between two to three weeks to implement this recommendation.
4.5 Risk Management
Risk management primarily includes the identification, analysis, and reduction of risk through insurance and safety programs to protect the division's assets and employees. Workers' compensation is intended to protect division employees in case of work-related accidents or injuries. Property and casualty insurance protects the division from liabilities arising from property damage, bodily injury, and other situations in which the division may be at risk. A group health plan ensures that the division's employees are protected from catastrophic illness and financial ruin by spreading the risk of serious illness across the pool of employees.
The division self-insures its employee health program and workers’ compensation program while liability and property damage are provided through insurance policies primarily through the Virginia Municipal Liability Pool. Exhibit 4-9 presents RCPS insurance coverages as of June 30, 2006.
EXHIBIT 4-9
RCPS INSURANCE COVERAGES