James Terry PhD, CPA, CTSBO

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Controllership Function in School Districts
Texas Association of School Business Officials
Annual Conference - Austin Texas March 2008

• James Terry PhD, CPA, CTSBO
• Executive Director of Finance and Accounting
  Services
• North East ISD

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Controllers Job More than Financial Control
Systems

• Accounting controls
• Safeguarding of assets
• Reliability of the financial records
• Administrative Controls
• Plan of organization
• Operational efficiency
• Managerial policies
• Operational Controls
• Achieving the business objectives

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The Controllers Job Functions

• Planning
• Organizing
• Directing
• Measuring/Reporting
• Financial analysis/Modeling
• Process analysis/Statistical analysis
• Forecasting

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The Organization
Annual Planning (Budgeting)
Strategic Planning
Strategies
Execution
Processes
Revisions
Activities Tasks
The Community
Evaluation
Six Sigma
Balanced Scorecard
Dashboard
Source Robert N. Anthony and Vijay Govindarajan,
Management Control Systems
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The Controllers Job Functions

• Planning
• Organizing
• Directing
• Measuring/Reporting
• Financial analysis/Modeling
• Process analysis/statistical analysis
• Forecasting

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Department Of Finance
Executive Director of Finance Accounting
Services E9
Departmental Secretarial Pool Secretary to the
Executive Director C9 Administrative Support
Specialist C7 Finance Secretary C3
Director of Accounting Services Payroll E8
Director of Budgets Financial Control E8
Director of Procurement eCommerce E7
Director of Risk Management Employee
Benefits E8
Director of Grants Administration /
Comptroller E6
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Office of Accounting Services and Payroll
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Office Of Grants Administration
Assoc. Supt. of Campus Support
Assoc. Supt. of Instruction
Director for Grants Administration/Comptroller E6
Secretarial Pool
Executive Director of Athletics
All Executive Directors and
Principals
Athletic Accountant Reports to
Jerry Comalander E1
Grant Writer Consultant
Executive Director of Finance Accounting
Services
Senior Accountant Grant
Administration E2
Corporate Development Consultant
Special Education Accountant E1
Instructional Program Specialist
C9
Senior Accountant Curriculum Compliance
School Improvement E2
Executive Director of Curriculum Compliance
Senior Accountant Continuing Education / KIN E2
Director of Community Education
9
Office of Procurement eCommerce
DirectorE7
Secretarial Pool
Assistant DirectorE6
Technology Specialist C9
Financial Technology CoordinatorT3
Finance Clerk C3
Textbook CoordinatorTemporary X1
ManagerE3
Procurement CoordinatorE2
Specialist/OWS InventoryC9
Specialist/TWS InventoryC9
Specialist/GWS InventoryC9
Procurement SpecialistFrozenC9
Contract CoordinatorC10
Specialist/PO ProcessorC9
Specialist/PO ProcessorC9
Specialist/PO ProcessorC9
Material HandlerO4
Material HandlerO4
Material HandlerO4
OWS WarehouseSupervisorE1
Material HandlerO4
Material HandlerO4
Material HandlerO4
Material HandlerO4
Material HandlerO4
Material Handler/TestingO4
Procurement Warehouses
GWS WarehouseSupervisorE1
Material HandlerFrozenO4
Material HandlerO4
Property ManagementTechnicianO1
Property TransferCoordinatorPending
Property ManagementTechnicianO1
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Office Of Budgets Financial Control
Secretarial Pool
Director of Budgets
Financial Control
E8
Budget Analyst
Vacant
E1
VOE Student
Assoc. Supt. of Auxiliary Services
Div Comptroller for Operations
E5
Assoc. Supt. of Business Services
Senior Accountant
E3
Executive Director of School Nutrition
Sr. Accountant for School Nutrition
E2
Assoc. Supt. of Campus Support
Comptroller for Campus Support
Assoc. Supt. of Business Services
E5
Campus Support Technician
C10
Comptroller for Business Services
Assoc. Supt. of Business Services
Treasurer
E5
Staff Accountant - Treasury
E2
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The Controllers Job Functions

• Planning
• Organizing
• Directing
• Measuring/Reporting
• Financial analysis/Modeling
• Process analysis
• Forecasting

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The Controllers Job Functions

• Managing
• Coaching
• Managing by Objective (MBO)
• Priorities
• Mediation
• Praise
• Reprimand

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The Controllers Job Functions

• Planning
• Organizing
• Directing
• Measuring/Reporting
• Financial analysis/Modeling
• Process analysis/Statistical analysis
• Forecasting

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• The administrative cost ratio administrative
  costs divided by instruction costs, expressed as
  a percentage.

Year 97-98 98-99 99-00 00-01 01-02
NEISD 5.80 6.21 6.04 6.23 6.30
The state standard for the administrative cost
ratio is 11.05
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INSTRUCTIONAL EXPENDITURES PER REFINED ADA
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CAMPUS ACADEMIC RATINGS
77 of NEISDs districts are rated Exemplary or
Recognized. Fort Bend is the only large district
with similar results.
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SUBSTITUTE DAYSPARAPROFESSIONALS HS MS
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HS ADA by Year by Campus
A/B Schedule
Automated Calling System
TTAD
Linked to PEIMS Discipline
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Auxiliary Services
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Capital Expenditures
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The Controllers Job Functions

• Planning
• Organizing
• Directing
• Measuring/Reporting
• Financial analysis/Modeling
• Process analysis
• Forecasting

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Financial Analysis

• Statistical Section of CAFR
• Inventory Carrying Costs
• Bank Earnings Credit vs. Investments
• Cash inflows and outflows
• Benchmarking ERG
• Desktop Analyst
• APi
• FPI

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Financial Analysis

• Variance Reports
• Staffing Analysis
• Teacher Utilization
• Classroom Utilization
• Magnet Program Costs
• Utility Usage

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Financial Analysis

• Course Costs
• Mindsphere
• Performance Measures
• APQC
• OSBC

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The Controllers Job Functions

• Planning
• Organizing
• Directing
• Measuring/Reporting
• Financial analysis/Modeling
• Process analysis/Statistical
• Forecasting

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Measure what you want to change.
Performance Measures
Source NEISD Finance Department
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E X E C U T I O N
Processes

• Planning/Budgeting
• Teaching
• Reading
• Writing
• Arithmetic

A C T I V I T I E S
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Determining Performance
y f (x)
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Using actual data to identify world-class
performers in Enterprise Performance Management

• Effectiveness (Examples)
• Industry relative total excess return
• Operating profit volatility
• Analysts seen as business partners
• Balance of both financial and non-financial
  performance measures
• Quality metrics
• Accuracy of forecasts and analysis
• Use of balanced scorecards, simulation models
• Percent managers describing budget process
  convenient and easy
• Percent of time analytic focus is on proactive
  decision making
• Percent of time reports and commentaries address
  future actions

• Efficiency (Examples)
• Overall planning cost as a of revenue
• Process cost as a of revenue
• Percent of business reports distributed
  electronically
• Operations managers use of on-line budgeting
  tools
• Staffing levels of process
• Cycle times
• Budget iterations
• Performance reporting productivity
• Utilization of self-service for inquiry
• Application complexity

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Value Stream Maping
High Level Process Flows (HLPF)
Transportation
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PEIMS Reporting Process
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Expenditure Reclassification Process
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The Controllers Job Functions

• Planning
• Organizing
• Directing
• Measuring/Reporting
• Financial Analysis/Modeling
• Process Analysis/Statistical Analysis
• Forecasting

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Forecasting Into the Future

• Big numbers vs. small numbers
• One number vs. many numbers
• Multiple periods over time vs. limited periods
  over short periods of time

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Linear Correlation

• Two distributions are correlated when a change in
  one causes a change in another
• Example People who eat lots of peas may eat less
  broccoli (or may eat more)
• Usually doesnt have much effect unless
  significant correlation (?gt0.75)

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• Correlation is a dependency between your Xs
• Correlation does not mean causality!
• Correlation coefficient
• Always lies between -1 and 1
• Measures strength of the linear relationship
  between two Xs

Correlation coeff lt 0
Correlation coeff 0
Correlation coeff gt 0
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Crystal Ball Forecasting

• Crystal Ball offers opportunities to quickly run
  Monte Carlo Simulations in Excel to improve
  services
• Crystal Ball can be customized to do several
  what-if analyses to achieve quality performance
  and reduce cost

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Monte Carlo Simulation

• Computer-based experimental method estimating
  statistical distribution of output (Y)
• Steps for Crystal Ball Simulation
• Assign each input (X) a value chosen at random
  from its assumed distribution
• Substitute values of inputs (Xs) into the system
  transfer function and compute a value of output
  (Y)
• Record value of output (Y)
• Repeat until enough samples of output (Y)
  characterize its statistical distribution

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Controllers Functions Example

• Measuring/Reporting
• Financial Analysis/Modeling
• Forecasting/Statistical Analysis
• Planning

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Identifying Inputs Outputs
Cash Inflows
Concentration
Cash Outflows
Sales
Employees
Fees
Bond Holders
Subsidies
Vendors
Inv. Income
Stock Holders
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Enter Historical Daily Rates into a Spreadsheet
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Create a Line Graph Using the Information in
Your Spreadsheet
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90 Days of Rates from Three Different Sources -
Example
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Forecast New Chart with Information
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The Break Even Point
Break Even Point (2/4/02)
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See the Additional Earnings after Break Even Point
Break Even Point (2/4/02)
Potential Additional Earnings
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Actual Rates vs. Projected Rates
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Example of the Model Showing Potentially Higher
Earnings
Break Even Point (7/1/02)
(after maturity date!)
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Cash Flow Forecasting

• Ensures liquidity
• Enhances cash management practices
• Forecasts problems
• Revenues not being collected properly
• Expenditures exceed budget
• Increase investment income
• Amounts available for investment
• Period of time to hold the investment

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Controllers Functions Example

• Developing Cash Budgets
• Measuring/Reporting
• Financial Analysis/Modeling
• Forecasting
• Statistical Analysis
• Planning

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Assumptions

• Cash flows for the current year will follow a
  pattern similar to that of the previous year
• All of the budgeted revenues will flow in as cash
  within the fiscal year
• All budgeted appropriations will flow out as cash
  during the fiscal year

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Assumptions

• Increase (decrease) in cash balance at the end of
  the year will be approximately equal to the
  excess (deficit) of budgeted revenues over
  budgeted expenditures

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The Theory

• Identify an optimal allocation of Funds
• Funds that need to remain short-term for upcoming
  disbursements
• Balance that could be invested longer-term
• Management of short-term funds based on cash flow
  analysis
• Management of longer-term funds based on market
  conditions

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The Process

• Review historical cash balances (typically
  monthly data for 2-5 years)
• Determine if there are any statistically
  significant seasonal changes in monthly balances
• Identify any growth trends
• Project future balances

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Current Year Cash Flows

• Use the percentages calculated and the current
  budgets for revenue and expenditures to determine
  the cash flow for the year
• Determine next years cash flows by multiplying
  percentages times next years budgeted revenues
  and
• expenditures

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Information Required

• Beginning cash balance of liquid investments
• Bank Accounts
• Pool Accounts
• Money Market Accounts, etc.
• Par value of outstanding investments

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Current Year Cash Flows

• Using the Forecasted Excess (Deficiency) of Cash
  along with the beginning cash balance and
  expected fixed income maturities, determine if
  there are any cash shortages
• If there are no shortages, determine where fixed
  income securities could be purchased and when
  they should mature based on the forecast

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DAILY CASH MGT.SPREADSHEET
Purch Sold Int. CFO CFI 9/01/93
( - ) ( ) ( ) ( - ) (
) ...
8/31/94 ( - ) MEANS
REDUCING THE BALANCE (
)MEANS INCREASING THE BALANCE
CASH MANAGEMENT PROGRAM
Weekly Cash Flow Management Spreadsheet
Cash Budgets
ACTUAL CASH 93-94
FORECASTED RECEIPTS
RECEIPTS SEPT 93AUG 94 Week
1 2 3 4
SEPT. ? AUG 95 1 4

ACTUAL CASH
RECEIPTS SEPT 93
AUG 94 1
2 3 4

PROJECTED MATURING INVESTMENTS
SEPT. ? AUG 95 1 4


ACTUAL
EXPENDITURES SEPT 93AUG 94 Week
1 2 3 4
GRAND TOTAL 100
FORECAST EXPENDITURE
SEPT. ? AUG 95 1 4

-
ACTUAL CASH
EXPENDITURES SEPT 93
AUG 94 1
2 3 4

ACTUAL
EXCESS/DEFICIT SEPT 93AUG 94 Week
1 2 3 4
FORECAST CASH Excess/Deficit
SEPT. ? AUG 95 1 4


GRAND TOTAL 100
FISCAL YEAR
FISCAL YEAR
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Actual Receipts Cash Flows in
Actual Disbursements Cash Flows Out
Excess (Deficiency) of Actual Cash Flows
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of Receipts Cash Flows in by Week
of Disbursements Cash Flows out by Week
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Forecasted Receipts Cash Flows In
Forecasted Disbursements Cash Flows Out
Forecasted Excess (Deficiency) of Cash
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• To help make Investment Decisions
• Short Roll vs. Going Out
• Make Payroll (Do we have enough money)
• Matching Maturities to Cash needs
• End of Year Forecasting
• Determining Final Budget Amendment
• Or Fund Balance

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Forecasting End of Year

• Using the calculated cumulative cash flows to
  project end of year expenditures

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Forecasting End of Year
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Forecasted Ending Cash Balances(before purchase
of any investments)
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The Controllers Job

• Jack Welch of General Electrics once said, If
  the rate of change outside your organization is
  greater than the rate of change inside your
  organization, then the end is in sight.