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USD 348 Planning View

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Presentation of Financial Costs and Decision Making Models for the School Closing Debate

Presentation of Financial Costs and Decision Making Models for the School Closing Debate

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    USD 348 Planning View USD 348 Planning View Presentation Transcript

    • Presentation for USD 348 Board of Education Financial Planning Viewpoints of the School Closing Debate November 2010
    • Overview - Personal
      • Member of the Baldwin Community for 17 years
      • 18 years of practice in finance and accounting
          • 7 years as an auditor and CPA with the “Big 4” accounting firm, Deloitte & Touche LLP
          • Various positions held as controller, financial analyst, expert witness in litigation
          • Last 8 years spent with General Electric (GE) in various finance roles – Securities & Exchange Reporting Manager (responsible for the analyzation, preparation and submission of quarterly and annual results to the SEC); Finance Manager (responsible for the daily accounting oversight, reporting and planning of “orphan” entities – runoff remnants left after dispositions by GE)
      • I like numbers!
    • Objective
      • Intrigued by what some call “the $400,000 opportunity on the table”
          • Was “$400,000 opportunity” not present in 2007 during the recommendation of the Bond by Superintendant?
          • Reviewed analysis supporting the recommendation (Fact Finding Report)
          • Documentation of financial impact in the short term (1 year), mid-term (1-3 years), and longer-term 3+ years
      Couldn’t find information decision making or planning framework…So how is the best financial decision being determined?
    • Cost-Benefit Analysis Framework for Decision Making
      • Common framework used to present and review facts to ensure consideration of quantitative and qualitative factors.
      • Puts the facts into different viewpoints affected by:
      • Freezing variables
      • Time (short-term, mid-term, long-term)
      • Best case and worst case scenario
      • A good decision is one that meets the company’s parameters for “return” in all time periods as well as under different scenarios.
      • Next Steps:
      • Agree on basic financial facts and variables
      • Run the basic financial facts through various time periods
      • Run the basic financial facts through various scenarios
    • Just the Financial Facts Per USD 348 Fact Finding Report Above outlines the recurring annual savings of closing two elementary schools. Tentative plans are Pursuing the Maximum Savings ~ $400,000…This Looks Great!!!
    • Another Look at the Basic Financial Facts – Are They Complete?
      • Basic financial facts must be “fully weighted”. This means they must be all-conclusive and consider every financial cost and benefit from the decision.
      • Items cannot simply be discarded as “immaterial” without proof of immateriality (I.e. the calculation must be done).
      • Normally include all financial items regardless of size to get true financial view of savings – as the little benefits and expenses can add up to be a large number when combined. For example:
        • Transportation costs increase?
        • Debt and interest cost on last bond issuance as some of those funds went to VES and MSES?
        • Additional state funding for “packing” a new facility?
        • Special education funding and teacher resources?
        • What will it really take to maintain the school properties?
        • Severance packages?
      • Financial figures should rest on one of the principles of accounting – Conservatism. This is just also good public policy…better to be conservative than known as the person that couldn’t meet expectations.
      • Financial figures MUST be based on the most recent data available. Doesn’t the District have better financial data than ’08-’09?
    • Adjusted Base Financial Facts
    • Year One Savings – Adjusted for One Time Costs and Benefits Is this all the adjustments? “Devil is in the details”, so be conservative…
    • Year One Savings – Adjusted for One Time Costs and Benefits Explanations New Facility State Funding Benefit: Increase in State Funding by a weight of .25 for students in a new building during the first two years a building is open. Winterization or shut-down costs: Expenses to drain lines and prepare the buildings for abandonment. Moving Costs: Costs to move property and supplies between buildings. Even if this is done internally, need to consider overtime pay or how routine duties will be handled. Mobile Unit Repair and Moving: Costs to repair and move mobile unit at MSES. One Time Remodeling Costs at IC and PC: Costs to prepare IC and PC for movements:
    • Mid-Term and Long-Term Look at Savings Based on Adjusted Data Represents annual savings DOES NOT consider what happens if such savings is “spent” on other items within the district…
    • Short-Term and Mid-Term Look at Savings Based on Adjusted Data with Student Growth Based on some growth in the elementary level, action will have to be taken in Year 3 or Year 5 to expand capacity…what’s the next step??
    • Mid-Term Expansion Choices This will depend on how well buildings are maintained. Note that history in other districts does not favor this occurring. How will the expansion choices be funded? Bond? Capital Outlay? Actually “saving” the savings from the closing No No, annually on average $350,000 budgeted Winner!!! However, District has already put lists out to “spend” the savings.
    • Conclusion: What Does This All Mean? Need to have details and questions answered before being able to make a decision that is in the “financial best interest” of the District. Need to run this model through various scenarios to ensure USD 348 can live with the results as other variables change like enrollment. Need to answer questions now, not later. Later will be too late as your vote is sealing the fate of the taxpayers 3 to 5 years from now. You may not be on the Board, but I will still be a taxpayer here…