These materials have been prepared by the CASBO Financial Services Professional Council, Sacramento Section. They have not been reviewed by State CASBO for approval, so therefore are not an official statement of CASBO. APRIL 3-6, 2013, LONG BEACH, CA FIN21 CASH FLOW PROJECTIONS
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These materials have been prepared by the CASBO Financial Services Professional Council, Sacramento Section. They have not been reviewed by State CASBO for approval, so therefore are not an official statement of CASBO.
APRIL 3-6, 2013, LONG BEACH, CA
FIN21CASH FLOW PROJECTIONS
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
CASH FLOW PROJECTIONS
Session ID FIN21
Financial Services Professional Council
Sacramento Section
Friday April 5, 2013
11:00 a.m. – 12:00 p.m.
Presented by
Diane Lacombe
El Dorado County Office of Education
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Agenda
• Cash Concepts and Challenges
• Building Cash Flow Projections
• Review and Analysis
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CASH CONCEPTS & CHALLENGES
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Cash Management is Vital• One of the 15 conditions that most
frequently indicates fiscal distress is poor cash flow analysis and reconciliation
• All districts that have been taken over by the state ran out of cash
• Cost of running low on cash is high
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Cash ≠ Fund Balance• Example:
• Cash is 10% of
• Fund Balance
714,636.96
7,716,085.10
Example:
Cash is 10% of
Fund Balance
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Cash vs. Fund Balance • Fund balance does not reveal what the
cash level will be Cash 100$ A/R
Assets 100$
A/P -
Fund Bal 100$
Cash -$ A/R 120
Assets 120$
A/P 20
Fund Bal 100$
Cash 120$ A/R
Assets 120$
A/P 20
Fund Bal 100$
Cash 40$ A/R 80
Assets 120$
A/P 20
Fund Bal 100$
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Cash vs. Fund Balance• High fund balance
does not necessarily mean high cash levels
• It is possible to have greater than minimum reserve levels, yet be out of cash
A/R DetailsRL State Aid 1,100,000 Federal (Spec Ed, Title I, etc) 100,000 State (CSR, Lottery, etc) 300,000 Local (Spec Ed fm SELPA) 100,000
Cross Year Deferrals @30% $ -0- $ 900,000 $ 2,100,000
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Cash Flows• Need to be accurate• List assumptions• If borrowing will be needed
– When & how much to borrow
• Analyze, monitor, update monthly – After cash is reconciled, update cash flow for the new
month’s actuals and re-project the rest of the year– Based on the latest version of the budget
• All funds• At least current year and subsequent year
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BUILDING CASH FLOW PROJECTIONS
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Cash Flow Format1 2 11 12 13
Object July August . . . May June Accruals Adjustments TOTAL Budget
A. BEGINNING CASH 9110 0 0 0 0
B. RECEIPTS
Revenue Limit Sources
Principal Apportionment 8010-8019 0 0 0 0 0 0 0 0
Property Taxes 8020-8079 0 0 0 0 0 0 0 0
TOTAL RECEIPTS 0 0 0 0 0 0 0 0
C. DISBURSEMENTS
Certificated Salaries 1000-1999 0 0 0 0 0 0 0 0
Classified Salaries 2000-2999 0 0 0 0 0 0 0 0
TOTAL DISBURSEMENTS 0 0 0 0 0 0 0 0
D. BALANCE SHEET TRANSACTIONS
ASSETS
Cash Not in Treasury 9111-9199 0 0 0 0 0 0 0
Accounts Receivable 9200-9299 0 0 0 0 0 0 0
Subtotal Assets 0 0 0 0 0 0 0
LIABILITIES 0
Suspense Clearing 9910 0 0 0 0 0 0 0
TOTAL BALANCE SHEET TRANSACTIONS 0 0 0 0 0 0 0
E.0 0 0 0 0 0 0
F.ENDING CASH (A + E) 0 0 0 0
G. -
Beginning Balances
(Ref. Only)
ACTUALS THROUGH THE MONTH OF (Enter Month Name):
NET INCREASE/DECREASE (B - C + D)
ENDING CASH, PLUS CASH ACCRUALS AND ADJUSTMENTS
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Revised SACS Form CASH• Revised format began in SACS2012 budget software• Section Changes
– Receipts • Revenue Limit Principal Apportionment and Property Taxes in
object code order
– Disbursements• 4000’s and 5000’s in two lines
– Balance Sheet Transactions• Renamed from “Prior Year Transactions”• Subsections for Assets, Liabilities, Non-operating with more
rows of detailed balance sheet accounts
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
New SACS Form CASH• New columns
– Beginning Balances (Balance Sheet Transactions)• Allows entry of beginning balances as reference• Example – enter beginning Accounts Receivable balance, can
compare to total ARs projected to be received during months of cash flow projections
– Adjustments• Noncash differences (not accruals) between cash transactions and amounts
budgeted• Example -carryover that is budgeted but will not be spent this year
– Budget• Facilitates comparison of cash flow totals to budget
• Subsequent year cash flow tab available
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Building a Cash Flow Projection• Projected budget/interim
– Best if it is done before starting
cash flow projection
• Columns– Completed months = actual amounts– Upcoming months = projected amounts– Accruals for cash in/out that will occur after June 30– Adjustments column – noncash adjustments
• Example: carryover that is budgeted but will not be spent this year
• Estimating cash inflows and outflows– Dividing the budgeted amount by 12 months
is not a good strategy
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Templates
• Can use a template to help prepare cash flow– Create your own, modify an existing one– FCMAT Budget Explorer Cash Flow tool– EDCOE Cash Flow Template
2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Revenue Limit – Property Taxes
• Paid based on actual collections– Main tax receipt months are
December and April– Does your county auditor-controller have an estimated
property tax schedule?
• Education Revenue Augmentation Fund (ERAF) apportionments
• Redevelopment Funds• Charter School In-Lieu Transfers
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Charter School In-Lieu Transfers• Education Code 47635 describes transfers
in lieu of property taxes to charter schools from the sponsoring LEA – Annual amount
Property Tax per ADA* x Charter ADA* Total District + Charter ADA
– Schedule of transfers P-2 Annual
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Feb6% 12% 8% 8% 8% 8% 8% 2/6 1/6 1/6 1/6 Balance PY adj
Based on Prior Year P-2 Based on P-1 Balance owed
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Charter School In-Lieu Transfers• EC schedule does not
correspond to actual property tax collections
• EC schedule was not affected by changes to RL State Aid schedule (5-5-9, deferrals)– Charter and District could
agree upon alternate schedule of transfers
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Federal Revenues• SACS object codes 8100-8299• Title I, Title II, etc• Special Education• When do you expect to receive these
revenues?– May depend on when you spend them and
when you report that you’ve spent them– Quarterly federal cash management reporting
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
State Revenues• Some programs paid in Principal Apportionment • Tier 3 programs - 5-5-9 schedule• Economic Impact Aid - 20% x 5• Lottery - quarterly• Class Size Reduction
– Partly deferred across fiscal years
• CDE provides an estimated cash flow schedule for select categorical programs– CDE Finance & Grants Allocations & Apportionments
Categorical Programs Estimated Cash Flow Schedule – http://www.cde.ca.gov/fg/aa/ca/estcashflow.asp– Can use to calculate percent by month
2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Local Revenues
• SELPA apportionment transfers• Interagency revenues• Transportation Fees• Other local revenue• Consortium revenue• When do you expect to receive
these revenues?
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Salaries• Historical percentage outflow by month is a reliable indicator
– Will include periodic payments e.g. longevity, stipends– Takes into account salary roll backs or other % changes
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Salaries
• Certificated and classified monthly patterns differ• Recent changes may not be reflected in prior year
trends and should be addressed– Furlough days when not converted to a salary decrease– 10 paychecks to 12 paychecks– Program redesign, e.g. summer school– School year changes, e.g. instructional days, staff
development days– One time restoration payments
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Benefits• Mostly driven by payroll• Prior year trends or consistent with
salaries• Some independent of payroll
– Retiree benefits– Golden handshake payments
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Supplies & Services• Prior year trends are more erratic but still
better than dividing by 12– Less working days in December to issue warrants– June crush to pay invoices instead of accruing– School year start-up ordering in early summer with payments
coming due in August or September
• Best to analyze big outflows separately– Utilities & phones…seasonal fluctuations, two payments in a
month
– Pass-thru/subagreement outflows link to inflow
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Capital Outlay• Capital expenditures in the general fund
– Few
– Infrequent
– One-time
– Some leases…recurring and predictable
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Other Outflows• Interfund transfers out
– Should be in the budget
– Some funds regularly receive annual transfers from the general fund, e.g. food services
• Debt payments– Be sure to include these …make a big difference in cash
balance
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Balance Sheet Accounts• Assets
– Accounts Receivable• When will you receive them?• If cleared to revenue before receipt,
consider tracking separately in revenue section of cash flow projection
– Due from Other Funds• When will the other fund pay this fund?
– Prepaid expenditures• When you clear, hits the expenditure and
the balance sheet account (object 9330) – net $0 cash
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Balance Sheet Accounts• Liabilities
– Accounts Payable from prior year• When will you pay them?
– Use Tax Liability• Accumulates during the year, paid quarterly or yearly
– Workers Compensation Liability• Accumulates when payroll is processed• Paid periodically, such as twice a year
– Health & Welfare Liability• Accumulates when payroll is processed
– May be higher in some months than others due to 10, 11, 12 month employees, etc
• Paid to vendor monthly• Plans may not align with July to June fiscal year
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Balance Sheet Accounts• Liabilities (cont.)
– Dues Liability– Voluntary Deductions– Summer Set Aside
• 10 or 11 month employees paid in 12 months• Set aside amounts during the year from payroll• Paid out at the end in the summer
– Due to Other Funds• When will this fund pay to the other fund?
– Current Loans (TRANs)• When will you receive TRAN proceeds?• When will you have TRAN repayments?
– Deferred Revenue • When you clear, hits revenue and deferred revenue
(object 9650) – net $0 cash
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Balance Sheet Accounts – Example
• The cash flow report from your financial system shows the following for Liability accounts 9500-9630
• Does this makes sense?
July August September October November Accounts Payable............9500-9630 179,777 217,962 46,955 326,656 (246,041)
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Balance Sheet Accounts - Example• Here’s the detailed breakdown you didn’t see
July August September October November9510 - Accounts Payable 26,601 191,647 69,964 103,701 16,475 9512 - Use Tax Liability - (135) (12) (255) (15)
H/W - payroll amounts (37,804) (193,275) (181,250) (217,544) (222,669) 9570 - Health and Welfare net 155,525 (8,985) 9,016 205,455 (220,924) 9573 - Dues - - 45 - (9,000) 9576 - vol deds - 1,707 (171) (14) (328) 9585 - summer set aside - (23,082) (23,245) (23,238) (23,246) 9597 - NSF (150) - 182 - 307 9598 - cancel / stale - - - (76) - 9599 - COE transfers - - - - - 9610 - Due to other funds - 65,171 - - - TOTAL AP (Liabilities) 9500-9630 179,777 217,962 46,955 326,656 (246,041)
Timing of H/W payments
Timing of WC payments
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Multiyear Cash Flow• Use current year cash flow and multiyear
projection to build a multiyear cash flow projection– Projected ending cash for current year is
beginning cash for subsequent year– Similar trends but adjust for changes
• For example, EPA arrives in June in 2012-13 but quarterly in 2013-14
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REVIEW AND ANALYSIS
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Review the Cash Flow Projection
• Totals column sums the cash in/out, accruals and adjustments for each type of category (revenues, expenditures, etc)– Do amounts match totals in budget?
• Revenues• Expenditures• Net Increase/Decrease
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Is the Cash Flow Projection Reasonable?
• Comparison to Fund Balance– Is the total ending cash plus accruals and
adjustments shown in the cash flow projection reasonably close to the ending fund balance shown in the budget?
Example• In the spring, district prepared cash flow
projection to look at potential cash borrowing needs for the following fiscal year
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Comparison to Fund Balance• District’s initial cash flow
– Negative balances in Oct, Nov, Feb, Mar, May, Jun
– June ending cash $(113,335)– Accruals $ 366,699– Total $ 253,363
• Looked like district would need some in-year and cross year borrowing
• Looked like once all accruals received, the district would have $253,363 fund balance
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Comparison to Fund Balance• However…
– Budget ending fund balance $521,792– Cash flow total $253,363
• Why the difference?
• After research, found– July 1 beginning balance was entered incorrectly– Estimated payables of $45,000 were not listed
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Comparison to Fund Balance• Revised projection
showed◦ Negative balances only in Nov, Mar◦ June ending cash $ 200,094◦ Accruals $ 321,699◦ Total $ 521,792
• No cross year borrowing needed
• Some in-year borrowing needed, able to borrow from other funds
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Negative Balances?• Look to see if there are projected negative cash
balances• If so, what borrowing options
are being considered?– Inter-fund borrowing
• Need to know cash availability• May need separate cash flow
projections for other funds
– Borrowing from COE / County– TRANs
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Borrowing Options• Internal borrowing
– From other funds of the LEA – EC 42603– Up to 75% of the cash in the lending fund– Borrowing fund must earn enough to repay– Paid back generally within a year
• External borrowing– From COE - EC 42621, 42622 and 47603 (thru 7/1/17)
• Up to 85% of anticipated revenues• If COE is willing and able
– From County Treasurer – EC 42620, CA Const. Art. XVI, § 6
• No loans after last Monday in April• Up to 85% of anticipated revenues
– Tax and Revenue Anticipation Notes (TRANs) – GC 53852
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
Multiyear Cash Flow Analysis• Use cash flow, MYP, and information about
other funds to build a multiyear view of cash– This sample shows the district will be using
inter-fund borrowing to cover cash shortfalls in the General Fund
08-09 09-10 10-11 11-12 12-13 13-14 $(500,000)
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$(267,794)
$623,831
Cash Balance - June 30
General Fund All Funds
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2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO
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