What kinds of questions should board members ask in order to provide good fiscal oversight?

The following list of questions was provided to OSBA by Charles Trainor, the keynote speaker at OSBA’s Summer Board 2010 conference.

Monthly Financial report questions:
Is there any information on this report which indicates a trend, either positive or negative that could effect our financial plan for the year?
(This question gives the business manager or superintendent an opportunity to evaluate the financial information for possible over-expenditure or unrealized revenues.)

Are expenditure forecasts expected to be within our appropriations?
( Budget law requires districts to stay within their appropriations or transfer appropriations prior to making any over expenditure.  (ORS 294.450))

Are we outspending our current year revenue?
(For a stable financial plan, districts should not outspend their revenue. If they do, it should  be a planned process that recognizes use of reserves are a one-time source of funding.)

Is our current ADM consistent with the estimates provided to ODE last year?
( Since SSF is the major funding source for school districts and the formula is dependent upon our ADM, It is critical that you know if your ADM is on track with estimates. Even though there  is a hold harmless provision in the formula, differences in actual ADM and reported ADM can  have a significant, and potentially negative impact on a district’s resources.)

Q. Are checking accounts being reconciled every month?
(The answer better be yes.)

Employment Questions
Q. Are collective bargaining agreements funded within our current budget?
( If the district has recently settled a contract you may need to modify appropriation levels in your budget.)

Q. Is our hired FTE (personnel) within the limits of our adopted budget and appropriations?
( Personnel represents 83% (plus or minus) of your annual operating expenditures. If your FTE are higher than you anticipated in your budget you may need to adjust appropriations.)

Investment and Overview Questions
Q. What is our current investment portfolio and does it meet our investment objective?
( It is important that reserve funds be prudently invested to maximize investment income.)

Q. Is there anything unusual in these statements you want to explain? (This could be either
positive or negative)
(This question gives the business manager or superintendent the opportunity to expand on any part of the report that needs further explanation or is unusual.)

Audit Questions:
Q. Did we receive a “qualified” or “unqualified” audit?
(A qualified opinion by your auditor indicates the auditor cannot judge the financial statements with a professional degree of accuracy. The board should discuss the qualified opinion and determine if corrective action should be taken.)

Q. Is our audited fund balance consistent with our budgeted estimate?
(A stable financial plan requires the district to accurately forecast their beginning fund balance. Insufficient fund balance can indicate a potential problem with adequate resources to meet the current year budgeted expenditures.)

Q. Is cash carryover sufficient to fund operating costs for several months?
( Inadequate cash balances can create a situation that will require the district to borrow money to meet payment of operating expenses.)

Q. Does our audit report indicate any of our Funds have expenditures in excess of revenue?
(If you are spending more than your revenue, your fund balance will decline and you may find yourself in a negative fund balance situation.)

Q. Are there any unfunded liabilities, like early retirement? If so, has an actuarial valuation been done to determine the amount needed to fund the liability?
(This question will probe into contractual obligations that will require the district to fund in the future. These are amounts the district should be setting aside in order to fund the potential liability.)

The following additional questions have been suggested by Oregon school district business managers:
1. Audit 
    a. When is our audit due? 
    b. Ask to see the annual management letter and the audit report (this year and previous years) 
    c. Meet with the auditor: 
        i. Request a presentation from the auditor explaining the audit process. 
        ii. What issues did you uncover? 
        iii. What process or procedures can we improve upon? 
        iv. How or what do you recommend we do differently? 
        v. Did you find anything out of the ordinary? 
        vi. Do we do anything that is different from what other districts do? 
        vii. Are our reserves within the recommended range? Why or why not?

2. Request regular monthly reports and ask to have them explained 
    a. Compare Budget to Actual to Projections. 
    b. Why are the actual numbers different from budgeted, or projections? 
    c. What is projected going forward and why?

3. How are mid-year projections prepared? 
    a. What are they, what do they mean? 
    b. What in them is of concern? 
    c. What is particularly strong or good?

4. Explain/understand the ending fund balance and the beginning fund balance.

5. What are our budget priorities? How do these align with our district goals?

6. Ask for a definition of terms or ‘jargon’.

7. Explain understand where the district revenue comes from and how it is projected. 
    a. What assumptions have we made in projecting revenue? 
    b. How reliable have our projections been in the past? Why?

8. How/why are funds transferred between accounts and funds? 
    a. What are the policy and legal requirements to transfer funds? 
    b. Why are transfers made (examples of situations that call for it). 
    c. What kinds of transfers require board approval and why?

For more information on this question, Ask OSBA.