What the New Superintendent Needs to Know About Financial Leadership

1. What the New Superintendent Needs to Know About Financial Leadership WASA New Superintendent Workshop July 30, 2013 Dr. Ken Hoover

2. Superintendents need to know: • Basic K-12 Finance • Critical Financial Indicators to Monitor • Areas Where Your Financial Leadership Matters • How to Avoid Financial Pitfalls • Where to go to get help if you need it

3. Basic K-12 Finance Some basic rules never change: • Revenues > or = Expenditures (most of the time) • New expenditures require new revenues or offsetting cuts to existing programs. • Financial planning (short-term and long-range) • Be vigilant (don’t use autopilot). Review variances for clues to what is really happening. • Ongoing communication with stakeholders needs to be accurate • Know where to get financial help

4. Critical Financial Indicators to Monitor • Enrollment – pay attention to in and out migration during the year. Know if you are growing or shrinking (different financial stresses caused by each) • Fund balance trend over time. • Historical spending patterns for utilities, fuel, salaries and benefits. • Your levy capacity (understand how your levy relates to this over the next few years).

5. 11 Areas Where Your Financial Leadership Matters • Align resources with board priorities. Invest in strategies to improve student learning even if you have to cut something else. • Set the financial tone (for the district as well as for schools and programs) • Values trump skills, but skills are needed. Get the right people in the right places. • Cash is king. • Know your financial status. Be able to project status into the future. Be aware of how you impact both. Track your decisions.

6. 11 Areas Where Your Financial Leadership Matters • Learn how to deal with uncertainty. • Give everyone the same financial picture. • Collaborate for success. Use working budgets. • Stay competitive. Benchmark the best and learn from them. • Run a clean financial operation. • Use redundancy to catch errors.

7. John Dekker’s “Top Ten” – Ways to get into Financial Hot Water #1 – Bet your job that current shortfalls will be addressed in the next legislative session. #2 – Assume that enrollment will increase at the same rate every year. #3 – Solve staff morale issues with money. #4 – Commit to new programs or salary adjustments after the budget is adopted. #5 – Think of an “ending fund balance” as start-up funds for new programs or services. #6 – Be confident you can accurately anticipate all the costs of operating new programs and/or facilities. #7 – Assume that staff mix doesn’t change that much from year-to-year. • #8 – Forget that: • Schools pay sales’ tax • benefits need to be added to every new salary • sick/annual leave cash-outs need to be budgeted for retirees #9 - Expect that all administrators/supervisors will live within their budgets #10 – Assume district financial officer/business manager will take care of finances without your involvement

8. Ken’s additional tips • The numbers change whenever an assumption or variable changes. Understanding why is more important than sticking with a number that isn’t real. Train your audience – tell them the numbers will change. • Use care with end of year adjustments to your financial records. • Do monthly forecasts of revenues, expenditures, cash and fund balance. Each month ensure your fiscal team compares actuals to estimates and understands or can explain the variances.

9. Ken’s additional tips • Understand how state funded pay or benefit increases have a negative impact on your budget.

10. Where to get help • WASA can put together a team to review programs or functions. • ESD’s employ staff with strong financial skills. • WASBO • OSPI provides lot of great resources on their website and will answer questions too. • SAO (sometimes).