October 28, 2010

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January 21, 2010October 28, 2010

October 28, 2010

October 28, 2010

• Governmental Funds– General Fund $1,533,283,498– Special Revenue $ 341,016,845– Debt Service $ 208,616,298– Capital Renovation $ 224,000,000

• Enterprise Funds– Food Service $ 111,834,796– Other Enterprise Funds $ 12,068,784

• Internal Service Funds– Health Insurance $ 139,744,988– Worker’s Compensation$ 15,822,490– Other Internal Service Funds $ 20,398,169

• Additionally the district is responsible for several fiduciary funds

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Total Budgetary Appropriations

October 28, 2010

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The Financial Governance Pyramid

HISD Administrative Regulations

HISD Board Policy

TEA Regulations

Texas State Statutes

Federal Regulations

Governmental Accounting Standards Board (GASB)

October 28, 2010

• Safeguard assets

• Ensure validity of financial transactions and financial reporting

• Promote adherence to policies and procedures

• Improve effectiveness and efficiencies of operations

• Ensure employee turnover will not disrupt operations

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Internal Controls—What and Why????

October 28, 2010

By the Governing Body:– Create strong internal audit function

– Implement rigorous external audit requirement

– Require rotation of external auditors

– Require a board audit committee

– Adopt control related policies

By the Central Administration:– Develop and implement control related procedures

– Implement risk assessment policy

– Develop & implement formal accounting and reporting procedures

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Internal Controls-Best Practices

Source: Governmental Finance Officer’s Association

October 28, 2010

CAA– FINANCIAL ETHICS

– Fraud and Financial Impropriety

– Financial Controls and Oversight

– Fraud Prevention

– E-Rate Compliance Policy

– Code of Silence

CDA– CASH MANAGEMENT AND INVESTMENT POLICY

– Annual Review and Resolution

– Annual Compliance Audit

– Investment Officer Training

– Quarterly Reporting

– External Investment Committee

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Board of Education Policies-Financial Operations

October 28, 2010

CE–ANNUAL OPERATING BUDGET

– Budget Adoption

– School Policy Carryover

– Mid-Year Reporting

CFA– FINANCIAL REPORTS

– Annual Financial Report

– Single Audit Report

– Schools FIRST Management Report

CA– DEBT MANAGEMENT

– Debt Management Policy

– Financial Management Policy-Reserve for Operations

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Board of Education Policies-Financial Operations

October 28, 2010

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Chief Financial Officer

October 28, 2010

• Advise the Board of Education, Superintendent of Schools and senior staff on financial matters

• Continuous improvement in financial reporting to ensure transparency of financial information

to the public

• Oversee investment practices for over $1 Billion of revenues

• Oversee the development of the annual operating budget for all funds of the district

• Develop debt structure for issuance of bonds; seek opportunities to refund outstanding debt

and maintenance of bond ratings

• Provide strategic direction for improvement of financial procedures for all schools and

operating divisions

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Role of the Chief Financial Officer

October 28, 2010

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Finance Division – Awards & Ratings

Distinguished Budget Presentation Award 18 years

Meritorious Budget Award 11 years

Texas Comptroller Leadership Circle 1 year

Superior Achievement Rating 8 years

Certificate of Achievement for Excellence in Financial Reporting (CAFR Program) 36 years

Certificate of Excellence (COE) in Financial Reporting 22 years

The National Institute of Governmental Purchasing 3 years

October 28, 2010

Controller’s Office

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October 28, 2010

Controller’s Office - Facts

ACCOUNTS PAYABLE• Processpaymentsformorethan9,000active

vendors.• Processover8,000prepaidtravelrequests

andemployeereimbursements.• Printapproximately300checksdaily.

BOND FUND ACCOUNTING• Managefinancialaccountingforallcapital

projectfunds,includingthecurrent2007FacilitiesCapitalProgramtotaling$1.045billion.

• Ensurethatprojectfundingisbalanced,newcontractsareappropriatedandencumbered,andfundsareexpendedconsistentwithestablishedbudgets.

• Processpaymentstocontractors,architects,engineers,andotherconstruction-related vendors.

• Provideinformationtobondingcompanies,contractors,subcontractors,taxpayers,andgovernmentagencies.

ENTERPRISE FUND ACCOUNTING• Managetheaccountingfora$91.7million

FoodServiceoperationforthebreakfastandlunchprograms,includingmonthlyprofit-and-lossaccountingbyschool.

• Managetheaccountingfora$10.6millionMedicaid Dept. of special reimbursement programs.

• Manageaccountingforrevenuesof $12.8milliongeneratedbytheBusinessDevelopmentoperationsoftheDistrict’sMarketingOffice.

GENERAL FUND ACCOUNTING• TheGeneralFundis theDistrict’sprincipal

fund,accountingforthemajorityofoperatingexpendituresandrelatedrevenues.

• Consulting/ContractClearinghouse.• Expendituretransferrequests.• Schoolandthird-partyreceivables

(tuition,grants, insurancesettlements,etc.)• Monthlybalancingandreconciliationof

generalfundandpropertytaxes.

INTERNAL SERVICE FUND ACCOUNTING• Manageaccountingfortheprintingand

distributionactivitiesofthePrintShop’sfourlocations.

• ManageaccountsfortheHealthInsuranceplanadministeredbytheDistrict.

• ManageaccountfortheDistrict’sWorkers’Compensationprogram.

• Manageaccountingforfee-for-serviceoperations,scholarshipfunds,andspecialactivityaccounts.

• ProcessStudentActivityFundstransactionsandreconcilebankaccountsforsecondaryschools.

PAYROLL• Processbi-weeklypayrollfor30,000

employees.• Processdeductionbillingsformorethan

100differentpayrollvendors.• Processdirectdepositsandgarnishments.• Process retirementpaperworkandleave

payoutsforretirees.

PROPERTY MANAGEMENT• Manageaccountingfor$3.8billioninfixed

assets,includingland,buildings,constructioninprogress,equipment,vehicles,andfurniture.

• Reviewandprocessmonthlyacquisitions,retirements,transfers,anddepreciationentries.

• Coordinate,review,andprocessphysicalinventoriesoffixedassetsforschoolsanddepartments.

SPECIAL REVENUE ACCOUNTING• Manageaccountingformorethan$300

milliondesignated-purposegrantsreceivedfromfederal,state,andlocalagenciestotalinginexcessof$300millionannuallyforthe purposeofaccomplishingspecifiededucationaltasks.

• Fileover100monthlyandquarterlyfinancialreportstograntoragencies.

• Monitorfundbalancesandrevenuecollections.

• Auditandprocessexternalbillingssubmittedforreimbursement.

TREASURY• ManageDistrictdebtservicecomprisingover

$2.4billionindebtprincipaloutstanding.• ManageInvestmentofDistrictfundswithan

averagebalanceof$1.5billion.• Managecashandliquidityaveraging

over$1.1billionintransactionsper month.• Receiptanddepositcashandchecks

totaling$45millionannually.• Reportpayrollandsalestax.• Manageprimarybankingrelationships.

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October 28, 2010

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Controller’s Office

October 28, 2010

• Current Annual Budget - $5.2 M– Personnel & Benefits - $4.97 M– Operational Cost - $.23 M

• Funding Sources– General Fund - $2.95 M– Special Revenue - $.71– Capital Projects - $.66– Food Service & Internal Service Funds - $.88 M

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Controller’s Office – Budget & Funding Sources

October 28, 2010

• Compliance Controls

– Fully implemented Phase I of the Governance, Risk Management & Compliance (GRC) software platform.

• Treasury Controls

– Implemented twice daily current day review of account activity

– Implemented machine registration at Chase

– Implemented Post No Check service on non check issuance accounts

– Implemented “Virtual PC” system

– Developed of a Treasury Procedures Manual

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Controller’s Office – Key Accomplishments

October 28, 2010

• Met quarterly reporting requirements for ARRA Section 1512 Reporting

• Implemented tracking of personal discretionary leave, assuring employees use state and local personal leave in the manner as mandated in Board Policy – DEC (LOCAL).

• 98% of Staff participated in 8 hours or more of job related professional training

– Seminars

– Webinars

– Online Training

• Participated in pilot of 2009-2010 ePerformance appraisals

• Reduced school receivables by 26% when compared to FY2009.

• Developed Procedures Manual for School and Department Closures.

• Successfully conducted four (4) In-Service – Activity Funds Training for Schools financial staff

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Controller’s Office – Key Accomplishments – Cont.

October 28, 2010

• Launched Pilot Project – to streamline the centralized activity funds operation overall deposit recap process

• Developed and implemented a business process for the four replacement construction projects funded by the Public Facility Corporation.

• Developed a key word index consultant and contract payment database, linking key words to the corresponding consultant agreement or contract.

• Implemented scanning of financial documents

• Facilitated the reduction of the projected $13M loss to $5.9M.

─ Monitor food cost reduction through inventory control.

─ Help implement the “flex hours” program introduced by Aramark

─ Developed and implemented an electronic budget template Food Service to improve the timeliness, efficiency, and effectiveness of budget to actual variance reporting, aligned with the district’s budget office allocation methodologies

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Controller’s Office – Key Accomplishments – Cont.

October 28, 2010

• Develop and implement a new capital improvement structure for establishing budgets, recording commitments, and reporting financial information to upper management, oversight committees, and outside organizations.

• Implement the recommended organizational changes by the Council of Greater City Schools for the Finance component in the Construction Services Department.

• Host the following activity fund in-service:

Elementary Schools

Secondary Schools

New Principal

•  Implementing new work flow process:

• School Pilot Program - Phase II – cash deposits and internal transfer of funds.

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Controller’s Office – Efficiency & Effectiveness Projects

October 28, 2010

• Research alternative business process to further enhance accounts payable automation.

• Develop a tool to consolidate grant/financial status data into a report for internal and external customers

• Perform fixed asset spot check audits at a least 25% of all district locations.

• Implement the new production planning module to affect a proper planning and utilization of inventory.

• Develop and implement a cafeteria cash audit procedure.

• Implement a web based solution to accepting payments (credit and debit cards) for various District initiatives.

• Initiate review of District payment methodologies for increased efficiency and reduction of costs through electronic payment systems (i.e. ACH, wires, payment by check).

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Controller’s Office – Efficiency & Effectiveness Projects – Cont.

October 28, 2010

Budget & Financial Planning Division

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October 28, 2010

Budget & Financial Planning - Facts

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SCHOOL BASED BUDGETING

Develop, implement and monitor annual budgets, totaling over $800 million.

Provide budgetary support to for over

300 schools and 24 School Improvement Officers.

Process over 5,000 position

management actions annually to facilitate, control and monitor staffing changes at the campus level.

Conduct six bi-annual district wide

workshops related budget coding, position management, and general information topics to principals, business managers and financial support staff.

Conduct over 200 school visits a year

to assist, consult, and trouble-shoot fiscal, staffing, and operational deficiencies.

Conduct annual Comparability

Compliance test, calculate Excess Costs and other functional categories to ensure fiscal compliance.

Prepare and present for adoption by the Board of Trustees the Resource Allocation Handbook used for campus budget development.

Prepare campus model budgets when new programs are being considered for cost impact and other management reports requested for programs evaluation.

BUDGET TRAINING

Prepare and Present Budget Training: o Budget Development o Managing Your Budget

Campus Level Departmental

Develop alternate delivery methods of

training: o Online modules o Webinars o Video presentation

Work with all Finance Divisions on

development of training opportunities

SPECIAL REVENUE BUDGETING

Develop, implement and monitor annual budgets, totaling in excess of $300 million annually for more than 300 specific purpose grants received from federal, state and local agencies.

Monitor expenditures for compliance to grant requirements and timelines.

Process position management actions and validate compliance with approved grant positions.

Prepare management reports to facilitate timely expenditure of grant funds.

Assist with all federal and state audits of grant budgets and expenditures.

BUDGET OPERATIONS

Develop, implement and monitor annual budgets, totaling over $2.3 billion.

Provide budgetary support to for over 140 Departments, 7 Internal Service Funds, 3 Enterprise Funds and all district wide programs.

Process all district position management actions in accordance with district policy and procedure and budgetary constraints

Monitor, validate and process corrections to district payroll for submission to the SAP finance system.

Submission of required PEIMS reports and other Texas Education Agency report for compliance with state law.

Prepare annual state and local revenue projections and prepare Truth-in-Taxation calculations and notices required by state law.

Prepare annual budget book, budgetary updates, and financial surveys.

Maintain SAP and PeopleSoft account code master data.

Special projects as requested by the internal and external sources.

October 28, 2010

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Budget & Financial Planning

October 28, 2010

• Current Annual Budget - $2.2 M– Personnel & Benefits - $2.12 M– Operational Cost - $.08 M

• Funding Sources– General Fund - $1.8 M– Special Revenue - $.39– Food Service & Internal Service Funds - $.01 M

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Budget & Financial Planning – Budget & Funding Sources

October 28, 2010

• Adoption of 2010-2011 budget on time

• Full implementation of ARRA Stimulus fund budgets

• Participated in performance management scorecard & e-performance pilot programs

• Successful transition of budget from 5 regional offices to 3 school level departments

• Developed additional training module for campuses: “How to Manage Your Budget”

• Successful recapture of TIRZ state revenue for 2006-2007 thru 2008-2009

• Identification of maintenance of effort issues and potential savings

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Budget & Financial Planning – Key Accomplishments

October 28, 2010

• Online Position Management Process

• Redesign of Authorized Position Report

– Improved vacancy monitoring

– Improved timeliness of information

• Expanded Training Opportunities

– Online Modules

– Webinars

– Video

• Online Federal Time & Effort Tracking Process

• Expansion of Adopted Budget Book – Campus Data

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Budget & Financial Planning – Efficiency & Effectiveness Projects

October 28, 2010

Procurement Division

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October 28, 2010

Procurement Services – Facts & Figures

PROCUREMENT• Processed 127,700 purchase orders (PO’s)• Average lead-time to process a purchase

requisition: 5 business days• Conducted 155 Annual Bid projects• Facilitated 130 Cross Functional Procurement

Teams• 36 Spend Categories with 375 Product

Classifications• Leveraged Acquisitions = Cost Savings• Created district wide newsletter - “BuyLines” as

method of announcing bid vendors

PROCARD• Total number of PROCARDS in use: 1,374• Total number of PROCARD transactions:

118,281• Total dollars spent on PROCARDS:

$20,107,217• Conducted 6 training sessions a year• Annual review of merchant code categories• Daily audits of previous day transactions• Monthly review of PROCARD transaction

receipts• Publishes quarterly “ProCents” Newsletter

highlighting cardholder policies

TRAVEL• Total number of travel requisitions processed: 3,381• Average lead-time to process a travel requisition: 5

business days• Provide on-going Travel training• Negotiated discounts with airlines and rental cars

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October 28, 2010

Procurement Services

Houston Independent School DistrictORGANIZATION, OCTOBER 2010

General ManagerProcurement Services Procurement Services

General Manager

Stephen M. Pottinger

ProcurementManager

7 FTE

Buyer

9 FTE

SRM Designer

1 FTE

Business Operations Team Leader

1 FTE

SRM Catalog Content Administrator

1 FTE

General Clerk III

1 FTE

Customer Service Representative

1 FTE

PROCARDRepresentative

4 FTE

Travel Service Representative

2 FTE

General Clerk IISenior Buyer

7 FTE

Food Services Funds (FD1)

Position funded through the Facilities Bond Program Capital Projects

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October 28, 2010

• Current Annual Budget - $2.6 M– Personnel & Benefits - $2.4 M– Operational Cost - $.2 M

• Funding Sources– General Fund - $2.28 M– Capital Projects - $.08– Food Service - $.24 M

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Procurement – Budget & Funding Sources

October 28, 2010

Procurement Services – Key Accomplishments

• Re-engineered spend categories (material groups)• Documented and flow-charted major business processes• Customer service initiative

– Developed “How To Do Business With Houston ISD” brochure– Developed desk reference manual for campus administration

• Staff Training – National Institute Governmental Purchasing webinars

• Developed supplier scorecard• Implemented annual proposal calendar

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October 28, 2010

Procurement Services – Efficiency & Effectiveness Projects

• Launch supplier relationship management (SRM) catalog shopping for schools

• Obtain professional certification all managers

• Host supplier fairs for each commodity team

• Conduct customer satisfaction surveys

• Focused MWBE outreach

October 28, 2010

Procurement Services – Supplier ScoreCards

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October 28, 2010

Procurement Services – Annual Proposal Calendar

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October 28, 2010

Finance & Procurement Key Performance Indicators

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October 28, 2010

• Controller’s Performance Management Scorecard Fall 2009

• Budget Department Performance Management Scorecard Spring 2009

• Association for Financial Professionals Benchmark

• Council Great City Schools Key Performance Indicators

• Departmental Dials35

Key Performance Indicators

October 28, 2010

• Decentralization• Size of the district• State funding• Health insurance reform• Unfunded mandates• Competition “School Choice”• Loss of local control

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Challenges and Risks

October 28, 2010

QUESTIONS & COMMENTS

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