CASH MANAGEMENT & RISK MANAGEMENT ISSUE / SUMMER 2012
SPECIAL DOUBLE ISSUE www.iasbo.org
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Update Magazine / Summer 2012
INSIDE
Illinois Association of School Business Officials Update Magazine / Summer 2012 / v.19 / i.04
RISK MANAGEMENT
DEFEND
your
DISTRICT
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Defend Your District Your district’s insurance portfolio is your first line of defense in a solid Risk Management Program. Make certain that you are properly protecting your district's assets including your physical plant, children you educate and community stakeholders. Cover Story by Michael J. McHugh
Accident Investigation: Piecing Together the Puzzle to Reduce Risk Five important steps in accident investigation will bring your school district valuable information that can ultimately prevent the same or similar events from occurring again. By Lynn Tulke
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THE NEXT ISSUE: TEC H NOLOGY Technology to enhance and support the future of education.
SPECIAL DOUBLE ISSUE: Risk Mgmt. articles: pg. 21-36 Cash Mgmt. articles: pg. 37-49
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PERSPECTIVE
FROM-THE-PODIUM We can never be over prepared:
Attention to detail and preparation are key to manage risk. 07 FROM-THE-OFFICE A tangible investment in a safe school:
Every district needs a highly trained risk and cash manager. 09 FROM-THE-FIELD The banking world has changed: A
review of your current relationship is needed annually. 11 FROM-THE-TABLE: CASH Cash Management PDC helps districts keep Student Activity Accounts out of the headlines. 13
NOT ENOUGH! ARTICLES
Hazardous Recognition Inspection at the Facility Level
For too long school security has been looked at as a necessary evil. Gain a new perspective, an effective approach and some helpful resources to address your district’s security program and reduce incidents. By Paul D. Timm
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CASH MANAGEMENT
A Balanced Approach
FROM-THE-TABLE: RISK Risk Management Seminar gives districts the right combination to safeguard their assets. 14 CASE STUDY Low Cost Ways to Reduce Energy Consumption: Four simple and
financially-responsible strategies implemented by districts. 16 SCHOOL BUSINESS 101: RISK Key Risk Exposures in Schools:
Accidents, footwear, student travel and sexual harassment. 21 SCHOOL BUSINESS 101: CASH Student Activity Accounts:
Should they be centralized or decentralized? 37
Financial Sustainability and Debt Management Debt can be a powerful tool for any school district, but can also become a destructive weapon. A balanced budget, conservative approach and long-term planning are the cornerstones of debt management. Cover Story by Mohsin Dada
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RESOURCES
Managing Banking Relationships A bank is a virtual member of the school district operating team. Find out the expectations from both sides and the keys to a strong ongoing relationship.
ON MY LIST
By Kimberly M. Feeney
42 Using the Financial Profile for Goal Setting Using a financial planning program helps districts make data-driven decisions based on factual data rather than the emotion of the hour. By Donald E. Weber
The “little” things matter:
Change can spread like wildfire with a few key people, a “sticky” message and the right environment.
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50 THE FINAL WORD Great Ideas from Great Illinois ASBO Members Dean L. Gerdes
ON TOPIC: RISK In and outs of insurance, accident investigation and school safety.
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Dir./Finance Summit Hill SD 161 As the head of business operations, Dean is responsible for protecting all of the assets of the school district: people, finances, property, and data. He sees an immediate need for each district to update their current risk management plan, while raising awareness among key stakeholders that districts need to be prepared for today’s known and unexpected risks.
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ON TOPIC: CASH Preparing a debt policy, School District Financial Profile and banking solutions.
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Did you know... For each $1.00 that a member pays in dues, Illinois ASBO generates and underwrites $6.76 in additional member benefits.
That continues to be an extraordinary return on investment in any economy.
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Illinois Association of School Business Officials
Update Magazine / Summer 2012
Share the value of membership Find out more at iasbo.org
PERSPECTIVE / Board President
FROM-THE-PODIUM We Can Never Be Over Prepared “Ovaltine… Have you ever had this stuff? Why do they call it Ovaltine? They should call it Roundtine. You know what I’m talking about.” If you are a Seinfeld fan you probably remember these lines. In the episode “The Fatigues”, Jerry Seinfeld’s friend George Costanza was working for the New York Yankees. George was given the assignment to give a lecture to his co-workers on, of all subjects, Risk Management. In typical George Costanza fashion he shuns his responsibility and cons other people into doing his research and preparing his lecture. Of course, his lecture gets mixed up with a routine that comedian Jerry Seinfeld was writing. At the podium George unfolds his notes and to his surprise opens his speech with “Ovaltine…”
SIMPLY SAYING
Richard A. Lesniak DIR./BUSINESS SERVICES LOCKPORT TWP. HSD 205
A successful Risk Manager is a person who gives attention to details and is prepared to immediately implement corrective action. It was no accident that the writers of this episode chose Risk Management as George’s lecture topic…in fact it is ironic. A successful Risk Manager is a person who gives attention to details and is prepared to immediately implement corrective action. Attention to detail and preparation are not words that would be used to describe George Costanza and this is why the episode was so funny. As school business officials, we all need to be the “Anti-George.” We need to be the leader in our school district who creates not just a culture of safety, but a culture of safety that is contagious among all our employees. We can never be over prepared and if our procedures prevent just one injury it is well worth the effort. In this edition of UPDATE, you will find detailed information on how to improve your Risk Management program, as well as information on the subjects of debt management and banking relationships. I hope you enjoy this last UPDATE issue of the 2012 Fiscal Year.
This is my last “From the Podium” as this year’s Illinois ASBO President. Being an officer on the Illinois ASBO Board was truly a humbling experience. Our membership elects only the best to serve on the Illinois ASBO Board. I have always believed that your professional self-improvement plan must include associating and networking with the best individuals in your profession. At the conclusion of my tenure on the Board, I will have served with 25 other school business officials from across the state – 25 other professionals to share ideas, discuss the latest trends and influence future policy. Most importantly, I now have 25 new friends. I would like to thank the Illinois ASBO membership for having trusted me to lead our organization this past year. I encourage all our membership to consider becoming a leader in the Association. It is an experience that you won’t regret. I wish Illinois ASBO continued success in the future and welcome Mark Staehlin as your new Illinois ASBO President.
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THE
MAGA ZINE
COMING SUMMER SEMINARS
Illinois Association of School Business Officials
Check out www.iasbo.org For full seminar listings including location and PDC sponsorship and register for professional development today.
Update Editorial Advisory Board
Northern Illinois University, IA-103 108 Carroll Avenue DeKalb, IL 60115-2829 P: 815.753.1276 / F: 815.753.9367 / www.iasbo.org
PDC COORDINATOR MEMBERS Richard A. Lesniak, Ancillary Services Kristopher P. Monn, Educational Enterprise Grant L. Sabo, Facility Management
UPCOMING
Cathy L. Johnson, Financial Resource Management Ann C. Williams, Human Resource Management
The 21 Irrefutable Laws of Leadership June 11, 2012 DoubleTree Guest Suites & Conference Center; Downers Grove, IL Developing the Leaders Around You June 12, 2012 Carbondale Area (TBD) School District Auditing & Reporting June 12, 2012 Fairview Heights, IL School District Auditing and Reporting Webcast Available June 13, 2012 Crowne Plaza Springfield; Springfield, IL The 360 Degree Leader: Creating a Positive June 18, 2012 Leadership Culture Collinsville Area (TBD) Developing the Leaders Around You June 19, 2012 Effingham Area (TBD) School District Auditing and Reporting Webcast Available June 20, 2012 DoubleTree Guest Suites & Conference Center; Downers Grove, IL Leadership Requirements for Moving from Good June 20, 2012 to Great Springfield Area (TBD) Leadership Series: Managing The Change Process July 10, 2012 DoubleTree Guest Suites & Conference Center; Downers Grove, IL ISDLAF+ User Group Seminar July 24, 2012 NIU Naperville Campus; Naperville, IL ISDLAF+ User Group Seminar July 25, 2012 Embassy Suites; East Peoria, IL ISDLAF+ User Group Seminar July 26, 2012 Hilton Garden Inn; O'Fallon, IL ISDLAF+ User Group Seminar October 14, 2012 Embassy Suites; East Peoria, IL Techcon: 6th Annual Technology & October 26, 2012 Financial Issues for the 21st Century NIU Naperville Campus; Naperville, IL 5th Annual Midwest Facility Masters Conference October 29-30, 2012 Kalahari Resort & Conference Center; Wisconsin Dells, WI
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Update Magazine / Summer 2012
Robert J. Ciserella, Information Management Paul A. O'Malley, Sustainability
BOARD & EXTERNAL RELATION MEMBERS Richard A. Lesniak, President Aimee L. Briles, SAAC Chair
AT-LARGE MEMBERS Angie Peifer, Illinois Association of School Boards Phyllis A. Hanna, Glen Ellyn SD 41 John A. Gibson, Homewood SD 153
STAFF MEMBERS Michael Jacoby, Executive Director
815.753.9366, mjacoby@iasbo.org Susan P. Bertrand, Assistant Executive Director
815.753.9368, sbertrand@iasbo.org Angela D. Lehman, Communications Coordinator 815.753.9371, alehman@iasbo.org Rebekah L. Weidner, Staff Writer/Editor 815.753.9270, rweidner@iasbo.org Brett M. Olson, Designer 815.753.7654, bolson@iasbo.org Tammy A. Curry, Designer 815.753.9393, tcurry@iasbo.org
Illinois ASBO Board of Directors Richard A. Lesniak, President Mark E. Staehlin, President-Elect Hillarie J. Siena, Treasurer Garrick C. Grizaffi, Immediate Past President 2009–12 Board of Directors
Dennis Burnett, Nelson W. Gray, Raymond P. Negrete 2010–13 Board of Directors
Susan L. Harkin, Beth L. Millard, Curtis J. Saindon 2011–14 Board of Directors
David Bein, Jennifer J. Hermes, Glayn C. Worrell
Illinois ASBO Board Liaisons Aimee L. Briles, Service Associate
Advisory Committee Chair Kurt Hintz, Service Associate Advisory Committee Vice Chair Terrie S. Simmons, ASBO International Liaison Gil Morrison, Regional Office of Education Liaison Debby I. Vespa, ISBE Board Liaison Dean M. Langdon, IASB Board Liaison
Privacy Policy All materials contained within this publication are protected by United States copyright law and may not be reproduced, distributed, displayed or published without the prior written permission of the Illinois Association of School Business Officials. You may not alter or remove any trademark, copyright or other notice from copies of the content. References, authorship or information provided by parties other than that which is owned by the Illinois Association of School Business Officials are offered as a service to readers. The editorial staff of the Illinois Association of School Business Officials was not involved in their production and is not responsible for their content.
PERSPECTIVE / Executive Director
FROM-THE-OFFICE Risk comes from not knowing what you’re doing. -Warren Buffett In this issue of UPDATE we explore two fundamental functions that school business officials perform. Putting aside the elements of the day-to-day management of a school district, one could argue that risk management and cash management stand as two primary pillars that hold up any banner that signals a sound financial status and a productive future for a school district. Michael A. Jacoby SIMPLY SAYING
EXECUTIVE DIRECTOR ILLINOIS ASBO
Someone might be able to do many things well... But, if they are not skilled at managing risk and money – the future is cloudy at best. Here are those terms defined: Risk Management The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks. An organization may use risk assumption, risk avoidance, risk retention, risk transfer, or any other strategy (or combination of strategies) in proper management of future events. Source: Business Dictionary
well by applying organizational skills, balancing the books or even have a high acumen for understanding Illinois school finance. But, if they are not skilled at managing risk and money – the future is cloudy at best.
Cash Management The corporate process of collecting, managing and (short-term) investing cash. A key component of ensuring a company’s financial stability and solvency. Source: Investopedia
Yet, I also reflect on the fact that so many districts do not even take the first step and commit to hiring a qualified school business expert. Are they not cognizant of the need, or are they simply underestimating the positive impact a school business official can have counterpoised with the real possibility of exposure and poor management of resources. I would suggest that any district in that category is taking one of the greatest risks possible by putting the functions of risk management and cash management into the hands of someone unprepared to do it well.
When I read these definitions and consider the opening quote from Warren Buffett, it is clear to me that every district must commit to having someone (preferably a trained Chief School Business Official) who is highly skilled in these areas. Granted, someone might be able to do many things
As you can see, I have some great concern that more than one third of the districts in Illinois do not have a school business official. When I discuss this in policy circles, I hear quite often that districts cannot afford one. I respond, “How can you not afford one? Only one wrong move and See Jacoby / Office page 10
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Many do not understand the value of sound financial management, until perhaps it is too late. Jacoby / Office from page 9 you will pay much more for not having one.” I also hear that there are not enough CSBOs to go around. I respond, “In two years you could grow your own through our School Business Management program, which is now state-wide.” The only real excuse is that many do not understand the value of sound financial management, until perhaps it is too late. One of my favorite sayings is, “Call on God, but row away from the rocks.” I can’t recall who said it, but it is quite appropriate in this case. Simply having faith that nothing will go wrong and then running headlong into trouble is just foolish. This is why we hire trained and licensed teachers to teach our children and nurses to care for them while in school. Why we have an arsenal of licensed psychologists, social
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workers, guidance counselors, physical and occupational therapists, deans, principals, special education directors, and superintendents to ensure that student needs of all types are met. We don’t want to be foolish when it comes to kids. And yet, we are willing to take chances on the stability and solvency of the whole system by not employing someone licensed and skilled to practice school business management? I’m not much of a Mike Tyson fan, but this quote is pretty on target; “Everyone has a plan ’till they get punched in the mouth.” That is how it will go for districts that do not pay close attention to managing their risk and maintaining a program of positive cash flow. These articles will help – but what will really help is a growing understanding of the need for highly trained school business professionals followed by a tangible investment to safeguard educational resources.
PERSPECTIVE / SAAC Chair
FROM-THE-FIELD Managing Banking Relationships in the Changing Financial World If asked why your school district uses a particular vendor or specific service, would your answer be, “Because that’s the vendor/service we’ve always used? ” If so, it may be time for a relationship review. The banking world is definitely different today from even a few years ago. It is now an age of bank failures and acquisitions, historically sustained low interest rates, and increased costs for banks to be able to provide products and services to their customers. And like it or not, these changes may have some affect on your district’s relationship with its bank. That being said, how are you managing those changes? When was the last time you discussed your banking relationship with your service provider? An overall review and discussion of your current relationship with your banker should occur annually. One goal of this meeting should be to help you to explore any Treasury Management services available that can reduce your costs and/or save you time.
Aimee L. Briles VICE PRESIDENT, WINTRUST GOVERNMENT FUNDS
SIMPLY SAYING
Your banker should be a partner to your district who can provide you with suggestions on ways to do more with less. Additionally, this meeting should include a discussion regarding: • Your current account structure; and • Whether it is the most cost effective set up during the current rate environment. Interest rates are predicted to stay at the current low levels for at least another year and costs to protect your funds through FDIC insurance and collateral continue to increase. It is important to talk with your banker to understand how these factors affect the yield your district is able to earn on its funds. Keep in mind that it is it is recommended that you review your district’s Investment Policy every two years. Keeping your investment options up to date and as flexible as your Board will allow may present you with investment alternatives that could help
generate additional interest income or reduce your monthly service charges. There are a wealth of knowledgeable Illinois ASBO Service Associates in the Banking and Financial Institutions Category. Use your 2012 Illinois ASBO Buyers' and Resource Guide to find those individuals that can educate you about the changes we have experienced in the banking world and how school districts can best manage the “new normal.” Remember that your banker should be a partner to your district who can provide you with suggestions on ways to do more with less. For more insight about best practices in managing your banking relationship, refer to the article on page 42.
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CONTRIBUTORS
Mohsin Dada
Michael J. McHugh
Paul D. Timm, PSP
Chief Financial Officer & Treasurer North Shore SD 112
Area Executive Vice President Arthur J. Gallagher RMS
President RETA Security, Inc.
ASBO International Distinguished Professional Eagle Award winner, Mohsin was on the 2006 -2009 Illinois ASBO Board of Directors and was the 2008-2009 President. Served on the Board of Trustees for ISDLAF+ and multiple Professional Development Committees. mdada@nssd112.org
Has been in the insurance industry since 1980. Over the past thirty-one years, Mike has been directly involved in the design, implementation, and management of Property/Casualty and Workers Compensation pool programs for public entities nationwide. michael_mchugh@ajg.com
Is a board-certified Physical Security Professional through ASIS International – among the first group ever to obtain this credential. Paul is a trained and experienced School Crisis Assistance Team (SCAT) member employing the methodology of the National Organization for Victims Assistance (NOVA). paul@retasecurity.com
Lynn Tulke
Donald E. Weber
Kimberly M. Feeney
Marketing Communication Coordinator Gallagher Bassett Services, Inc.
Senior Vice President PMA Financial Network, Inc.
Senior Vice President Bank of America
Writes and designs marketing material, safety newsletters/bulletins and online safety training programs. Contributes safety content and information to www. gbriskcontrol.com, an interactive web platform available to Gallagher Bassett clients. lynn_tulke@gbtpa.com
Joined PMA after 11 years of service as a Superintendent of Schools at Naperville Community Unit School District 203. Spent 37 years in public education in the State of Illinois serving as Superintendent of Schools for multiple districts. dweber@pmanetwork.com
Leads a team serving government entities within the states of Illinois, Indiana and Iowa. They focus on investment options for public funds, best business practices related to receivables and disbursements and capital raising options including leasing, energy financing and private placements. kimberly.feeney@baml.com
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PERSPECTIVE / Cash Management
FROM-THE-TABLE Keeping the Spotlight off Student Activity Accounts By Richard J. Hendricks ASST. SUPT./BUSINESS OAK LAWN CHSD 229
One of our many goals is to not be in the headlines of the local newspaper. The fastest way to “stardom” is to have your handling of cash questioned. Why did the Superintendent buy a couple of dozen ties with student activity funds? How much cash is missing? To aid districts in staying out of the “spotlight,” the Cash Management Professional Development Committee has presented a series of seminars on student activity accounts. The topic is addressed from various angles in an introductory presentation and then through handouts and conversation. Cash handling procedures are an important part of the discussion. The seminars start with a review of the Illinois School Code and Illinois Administrative Code mandates and the guidance of the Illinois Program Accounting Manual. The categories of Student Activity Funds vs. Convenience Accounts are highlighted with the differences noted. Options for investing the funds and allocating investment earnings are discussed. There are significant differences in operation between elementary and high school districts and between school controlled and central office controlled accounts. Designation of the treasurer and bonding is addressed.
When Best Procedures Fail The most thought provoking information is not presented, rather it is shared. The seminar presenters share the horror stories of their own experiences only to be outdone by the stories of the participants. What did you do when you got the call that thousands of dollars were missing? How do you calm a staff member after he learns that student activity funds are owned by the district, not him? Are you surprised that a student should not bring a cash box home after an event? Where was the staff sponsor?
There are significant differences in operation between elementary and high school districts and between school controlled and central office controlled accounts.
Participants walk away with statutory guidance, practical advice, and the phone number of someone to contact when the best procedures fail in the course of a regular school day.
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FROM-THE-TABLE Safeguarding a District’s Most Valuable Assets: Annual Risk Management Seminar School business officials wear a lot of hats – and unless you are at a large enough district to have someone in this specific role – one of those is that of the Risk Manager. Dean Gerdes, chair of the Risk Management Professional Development Committee, believes that risk management can be summed up as protecting the assets of the district (see more of his thoughts on this in The Final Word – page 51).
One way the Risk Management PDC addresses this tendency and prepares districts to guard their assets is through the Annual Risk Management Seminar each spring.
The Right Combination This seminar is designed to cover a fairly broad spectrum of risk management topics, with multiple speakers present to address their area of specialty. This year’s seminar focused in on topics including: • Appraisal, Insurance and Audit • Mistakes and Misconceptions in Construction Contracts • Protecting the District from Fraud • Security Trends and Technology • Workers Compensation
Charles LeMoine, Attorney at Dykema in Chicago, spoke on the topic of construction contracts. His goal was to help school districts gain a comfort level and lessen their risk in working with these contracts that are highly technical:
As a business manager, a goal is to provide security for all aspects of the district – whether it is staff, buildings, children or the district’s dollars. Nowadays, this reaches into the world of data security as well, with emergency preparedness another crucial aspect of risk management. Although managing risk may not seem glamorous or urgent, when we hear about school shootings or natural disasters in the news, it comes straight to the forefront. In the same way, when things are quiet and dailly operations are smooth, it is easy for risk to go to the back burner. 14 |
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“While there are many districts who use outside counsel, there are things that can occur in these contracts that even lawyers are not focused on. We are trying to tell school districts in a simple way that, ‘You have to have an understanding of what you are dealing with. You can’t just assume that everyone else is watching out for you.’”
considering that, “The last thing a business manager wants to do is explain to their Board that they need another $50,000 because of an insurance lapse.” As many people rely on the business manager, the business manager also has to rely on others. If that first line of defense breaks down, then the business manager is going to have to deal with the fallout. As construction contracts are often 100’s of pages in length, Charles attempted to arm business managers with the important elements that, if done right, will never become an issue.
His presentation focused on means to reduce risk of unplanned events that can affect a district’s bottom line. Especially
As a business manager, a goal is to provide “security for all aspects of the district whether it is staff, buildings, children or the district’s dollars.
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PERSPECTIVE / Risk Management
A Checklist for Safeguarding the District Harold Huang, Business Manager for New Lenox SD 122, sees the Risk Management Seminar as an opportunity to think through all of the things he is doing and see where his district's weaknesses lie: “We talked about Certificates of Insurance, and how every contractor must submit them. It’s one of those things that if you don’t follow up on, you’re not 100% sure you have it. I went back to my district and found out we were missing a few certificates and got them.”
Huang realizes that it is easy to take for granted that everyone is always doing everything they need to, while things slip through the cracks. At the same time, the seminar confirmed for him that there are a lot of things his district is doing right: for instance, keeping an up to date inventory to give the best information to the insurance company.
For Hruby, it was enlightening to hear about the structure of insurance associated with subcontractors, and that sometimes coverage depends on whether important fine print is in place. Going back and looking at past contracts, he saw that in some cases he wasn’t covered. It was also a good reminder to make sure his disaster plan was up to date; he has already gone back and implemented changes to incorporate new staff. For everyone involved, the day was a reminder of just how vital the Risk Manager “hat” is and a chance to network and share best practices. Through this seminar and others, school business managers can be more prepared to safeguard their district’s most valuable assets.
The Risk Management PDC is working to raise the awareness of critical risk management issues through the long-running Annual Risk Management Seminar and other presentations.
Brett Hruby, Business Manager at Kinnikinnick CCSD 131, makes sure to attend the seminar every year and typically comes away with a list of things to double check in his district.
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Low-Cost Ways
to Reduce Energy Consumption Energy consumption is on the minds of school business officials across the country, and rightfully so. After staff salaries, utility costs represent the largest expense in a district’s budget. For communities facing budget shortfalls, the math can be painfully simple—either cut staff or reduce money spent on building operations.
Take a Data-Driven Approach Improving energy-efficiency requires an analytical, datadriven approach. The best energy management programs consist of a three-step process: 1. Measure performance; 2. Analyze potential options; 3. Implement the most costeffective solutions. Then you start all over again. Lather. Rinse. Repeat.
However, reducing energy costs can be a difficult task. In 1999, educational facilities used an average of 75 kBtus (a measure of electricity, gas and oil consumption) per square foot.1 By 2003, this number had increased by more than 10 percent, to 83.1 kBtus a square foot. 2 Recent developments have only magnified the trend. An increase in community use of school facilities has lengthened the amount of time many buildings are in operation. Changes to codes have increased the required amount of ventilation air. In addition, the classroom has become a hotbed of technology, leading to a dramatic rise in plug loads.
The most basic way to measure energy-efficiency is through monthly utility bills. However, while the longterm goal is to reduce energy costs, merely tracking expenditures is not the most accurate method of evaluating energy-efficiency. Fluctuations in energy rates and changes in hours of operation, for example, can impact overall costs. To obtain a true understanding of your performance, you need to track energy consumption.
In this environment, how can school districts manage, and even reduce, their energy costs? Perhaps surprisingly, the most effective strategies do not always require expensive renovation projects. Instead, controlling energy and its associated costs can be achieved through four simple and financially-responsible strategies.
In early 2011, district officials at Community Consolidated School District 46 in Grayslake, IL., we're looking to do just that. The district had recently completed a major energy project involving lighting upgrades, retro-commissioning and building system improvements at several schools. However, administrators and facilities staff lacked a good way to evaluate the impact. District representatives met with Fanning Howey staff members to discuss the use of the Environmental Protection Agency’s Portfolio Manager. This online tool rates the energy performance of buildings on a scale of 1-100. The higher the rating, the more energy-efficient the building. Facilities scoring 75 or above qualify to receive the EPA’s ENERGY STAR rating. “Portfolio Manager gave us an objective way to measure our performance. We finally knew whether we were getting better or not,” said Keith Grinnell, Operations & Maintenance Coordinator for CCSD 46.
Heating, cooling, ventilation and lighting make up more than 85 percent of a school’s average energy consumption. Source: 2003, U.S. Department of Energy
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The results of the district’s energy benchmarking efforts revealed the benefits of a data-driven approach. Prior to the study, facilities staff thought that Park Campus, a PK-8 school which was only a few years old, was likely their most energy-efficient building. It turned out to be the least efficient.
CASE STUDY / Energy Cost Savings
By Ian T. Hadden PE, LEED AP BD+C ENERGY/SUSTAINABILITY SERVICES MANAGER FANNING HOWEY
“When we got the report on Park, we wondered what was going on,” said Grinnell. “We started looking at a lot of things that had been ignored during retro-commissioning. Exhaust and intake fans were out of sync. We would have never discovered the problems if we didn’t have a system that provides reliable data.” Be Proactive With Systems Management Building automation systems are meant to increase the energy-efficiency of a building. However, when these systems are not properly maintained, they can sometimes do more harm than good. Time after time, a close examination of poor energy performance identifies building automation systems as the root cause. In some cases, energy audits have revealed that air conditioning and heating units are running simultaneously, thanks to a flaw in the automation system. Altered temperature set points and inaccurate building schedules are two other common problems. Luckily, small improvements to building automation systems and controls can have a big impact. For one Midwestern school district, Fanning Howey completed a $10,000 revision to HVAC plant control sequences in an elementary school. The inexpensive project resulted in a $20,000 utility cost savings in the first year alone. At CCSD 46, upgrades to boiler burner controls have reduced gas usage by 25 percent. Learn From Peers There are many resources available to school districts wanting to learn more about measuring energy performance. The EPA’s ENERGY STAR program offers a host of excellent tools. Professional services firms can also be a good resource. While consultants do charge for some offerings, they can also connect you to peers who have implemented successful programs. While investigating the ENERGY STAR program, officials from CCSD 46 visited Des Moines Independent Community School District in Des Moines, Iowa. The Des Moines school district has been recognized as
Fanning Howey’s internal tracking shows that Midwestern schools average energy costs of $1.28 per square foot. However, some schools are experiencing costs as low as $0.75 a square foot.
an ENERGY STAR Top Performer by the EPA, and was eager to share its best practices. After speaking with representatives from Des Moines, CCSD 46 officials were able to implement several new, low-cost strategies in their own district. “One thing we learned was the importance of heating zones,” Grinnell said. “We once thought that schools should be 70 degrees, so all thermostats were set at 70. The individuals from Des Moines showed us how they use slightly lower temperatures in the hallways, when students initially enter the building. As students go further into the building, those temperatures take a step up. Then, in classrooms, temperatures are set at 70.” By implementing this strategy, CCSD 46 has been able to lower district-wide heating costs and still provide a comfortable learning environment. Before You Change Your Lights, Change Your Behavior One of the most cost-effective ways to reduce energy consumption has nothing to do with building systems or controls. Experience has shown that the actions of students and teachers can make as much of an impact as a highefficiency boiler or compact fluorescent bulbs.
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In addition to its ongoing energy projects, CCSD 46 has implemented an environmental stewardship program for students and staff. Originally developed in Des Moines, the program encourages building users to get involved in reducing energy costs. For example, students and teachers are asked to open the window blinds during cold winter days. This lets in light and heat, warming the classroom. Before leaving for the Controlling energy usage requires a constant cycle of day, students and benchmarking, analysis and implementation. teachers close the blinds. During the night, the blinds trap cold air against the window, serving as a thermal barrier of sorts. Reducing plug loads is another way that teachers can help to lower energy usage. According to the Department of Energy, the electricity used by computers, office equipment and other electronic devices represents more than nine percent of a school’s total energy consumption in fact, managing plug loads is a critical component of any energy-efficiency program. CCSD 46’s Grinnell credits the environmental stewardship program for greatly increasing energy efficiency at the district’s Frederick School. “When we benchmarked our buildings, Frederick was one of our worst schools, with an ENERGY STAR rating in the 60s. It is at 90 now,” explained Grinnell. “The retro-commissioning and improved boilers helped a lot, but Frederick also has the most aggressive classroom participation when it comes to lowering energy usage.” Conclusion In the search for lower energy costs, school districts do not have far to look. There are many examples of successful programs throughout the Midwest. 18 |
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Since beginning to work with Fanning Howey and implementing the use of Portfolio Manager, CCSD 46 has seen a dramatic improvement in building performance. Five of seven district schools are qualified to earn the ENERGY STAR; the other two have seen a significant increase in energy-efficiency. In fact, the district’s overall Portfolio Manager score has jumped from 52 to 78. “The key to our success was realizing that there is no universal answer to lowering energy usage,” said Ellen Correll, superintendent of CCSD 46. “Everything needs to be evaluated within the context of each particular building. It takes planning and constant oversight, but it can be done. We are proof of that.” Low-Hanging Fruit—High-ROI Energy Projects • Energy-efficient lighting and fixtures: • Replace traditional fluorescent bulbs with compact fluorescents • Retrofit older lighting systems to reflect modern light level requirements, which have been reduced by up to half in the last 10 years • Revisions to HVAC plant control sequences (up to 200 percent ROI) • New burner controls on boilers (25 percent savings on natural gas usage)
Additional Resources for Information on Energy Savings • ComEd Energy Insights and Energy Usage Data Tools (https://www.comed.com/business-savings/energy-tools) • Smart Energy Design Assistance Center (www.smartenergy.illinois.edu) • ENERGY STAR (www.energystar.gov) • National Energy Education Development Project (www.need.org) • Other school districts and peer groups • Administrators, teachers and students within your own district Endnotes
1 2005 Building Energy Data Report. N.p.: United State Department of Energy, n.d. 1-11. Web. 1 Mar. 2012. <http://buildingsdatabook.eren.doe.gov/docs/DataBooks/2005_BEDB.pdf >. 2 2010 Buildings Energy Data Report. N.p.: United States Department of Energy, n.d. 3-6. Web. 1 Mar. 2012. <http://buildingsdatabook.eren.doe.gov/docs/DataBooks/2010_BEDB.pdf>.
VOTE! Do your part and vote for
Terrie Simmons Illinois ASBO needs the full support of our active ASBO International members to help our own Terrie Simmons get elected as Vice President. As the largest ASBO voting affiliate, we have the power to push Terrie forward if every member exercises their right to vote. Watch your email: Voting Open: September 12 Voting Close: September 26 All voting will take place online.
PERSPECTIVE / Risk Management
SCHOOL BUSINESS 101 What is one of your district’s risk exposures and what can you do to manage it? Ann Williams
TREASURER/DIR./BUSINESS & OPERATIONS, BRADLEY-BOURBONNAIS CHSD 307
Have a question or issue that needs to be addressed by School Business 101? Submit your ideas or questions to Rebekah Weidner at rweidner@iasbo.org
A: My experience is that the slip, trip, and fall accidents are most common. During the winter months, I recommend that bags of salt are placed at each entrance and EVERYONE is responsible for ensuring that salt is distributed as needed. Additionally, I would suggest that entrance mats are deep cleaned on a weekly basis to remove salt buildup and other debris. Grant Sabo
ASST. SUPT./FACILITIES & TRANSPORTATION, BERKELEY SD 87
A: It’s difficult to train teachers not to use chairs instead of step stools to decorate their rooms and hallways. There are grants available to help schools get step stools and mats. If we make them more available it’s possible that staff will be more inclined to use them. Robert Ciserella
ASST. SUPT./FINANCE, FACILITIES & OPERATIONS, GLEN ELLYN SD 41
A: Footwear. Sounds crazy but I once had a gym teacher who wore open toed sandals, was hit with a soccer ball and broke her toe. Another was wearing sandals, went to step on a stool, caught her sandal, fell and broke her arm and shoulder. Can you really dictate what is acceptable footwear? James Jennings
PRINCIPAL, ELMWOOD PARK CUSD 401
Want to add to the discussion? Add your response in the Hot Topics Group within the peer2peer Network. Then, watch for the next School Business 101 discussion for a chance to be featured in the UPDATE Magazine.
A: Student travel— The risk can be anything from a car or bus accident to a student who is injured or assaulted on a trip due to negligence from supervision. For that reason, student travel is very restricted and controlled. It some ways it can seem like overkill, but this is all to manage that risk. Linda Mitchell
ASST. SUPT./HR, KANKAKEE SD 111
A: We try to continuously educate our staff in how to recognize sexual harassment and not be afraid to make the report. We can’t do anything about this if we are not aware of the problem. We are looking into Global Compliance doing online training which is more convenient and creates more meaningful interactions.
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ACCIDENT
INVESTIGATION:
Piecing Together the Puzzle to Reduce Risk
ARTICLE / Risk Management
By Lynn Tulke MARKETING COMMUNICATION COORDINATOR GALLAGHER BASSETT SERVICES, INC.
The primary goal of risk management is to control and mitigate loss exposures and resultant accidents. Sound loss control efforts and claim handling skills are two important actions necessary to achieving this goal. However, a third component of this equation, which is often overlooked, is accident investigation. Conducting an accident investigation of claims-related incidents provides your school district with valuable information regarding the circumstances related to the accident or incident. The end result of a thorough accident investigation ultimately identifies the root cause of the accident, allowing your school district to be proactive in preventing the same or similar events from occurring again.
Accidents—Defined Accidents are unplanned events that interrupt production and service and result in loss such as injury, property or time. Nobody plans on being in an accident, yet they occur. The occurrence of accidents can be broken down into four primary areas: 1. Unsafe acts due to poor training or the absence of a safety program. 2. Unsafe working conditions. 3. Job factors such as whether or not staff/students are provided with clearly defined safety rules and adequate equipment for work tasks. 4. Personal factors, including staff/students who are experiencing family difficulties or problems with substance abuse.
It is also important to remember that accidents rarely just happen. Significant events usually lead to an accident. Conducting an Accident Investigation In theory, all accidents should be investigated regardless of size. Your school district is encouraged to investigate all accidents. The scope of the accident investigation should be determined by your school district based on the nature of the accident or incident. It should also be determined as to who will be appointed to conduct accident investigations for the district. Training administrators and school principals on basic accident
investigation techniques is a great asset to your district’s overall loss control program. In addition, be sure to have accident investigation forms available in each school office. These decisions need to be made and outlined prior to the occurrence of any injuries so that the district can quickly determine if an accident investigation needs to be completed. Before reviewing the steps of the accident investigation process, one key word must be removed from the accident investigation: CARELESS.
The intent of the accident investigation is not to find fault or place blame on the injured person, but rather to focus on finding out the facts of the events leading up to and resulting in the accident. If the injured person or anyone involved in the accident feels threatened by the investigation, they will be reluctant to provide the truth of what really happened. When conducting an accident investigation, place emphasis on analyzing the facts and determining a sound action plan to mitigate the cost of the claim and prevent future recurrence of the incident.
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Five Important Steps in Accident Investigation Step 1: Go to the accident scene immediately • Care for the injured person; • Discuss the accident with a person of authority (teacher, principal, administrator, etc.); • Determine if there are witnesses and interview them; • Find out the facts of the accident and remember not to place blame; • Note the physical conditions surrounding the accident and gather as many facts as you can; • If photographs are taken at the scene, use good judgment. Do not take photos of injured people or graphic scenes; and • Avoid drawing hasty conclusions. When interviewing the injured person and witnesses, remember that the goal of the interview is to gather facts, not assign blame. Be sure to explain this concept to each person you interview. It is also important to interview witnesses individually. After the witness has given a statement, read it back to them for clarification and ask questions based on the witnesses’ responses. Keep in mind that injured persons’ and witnesses’ recall of events are most vivid immediately following an accident.
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Step 2: Review the facts Examine the people, tools, equipment, place and job being performed. Use other sources of information before making a decision such as: memory of previous incidents at this or other schools, information noted in previous accident investigation reports, other people involved and accident trends/statistics from this or similar job occurrences. Step 3: Take corrective action As you review the facts of the accident, ask yourself three questions: • Would a physical change have made a difference? • Would a procedural change have made a difference? • Would additional education and training have made a difference? The answers to these questions will provide you with an idea of what needs to be done to minimize the chances of a future occurrence.
Step 4: Report the accident to District Administration Use the approved accident investigation forms available at your school’s office and fill them out with accuracy. Prior to the occurrence of an accident it is a good idea to familiarize yourself with these forms. If you have never completed an accident investigation report, ask questions of your colleagues and take a look at examples of accident investigation reports that have already been completed at your school. Step 5: Follow up Once the paperwork is submitted, remember to follow up. Seek assistance by talking over your findings with administrators. Discuss preventive measures with your school’s safety committee and begin the implementation process. Monitor implementations to ensure they are being followed. Follow‐up is the key to long‐term safety success!
Piecing it all Together
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A high school wood shop class offers students the opportunity to learn a unique set of skills through creating projects cut out of wood. To create this type of art, the process necessitates the use of dangerous, high‐powered machinery. When students are properly trained and the machinery is used in accordance with safety rules, the risk of injury is very low. However, in a recent case, a student using a miter box saw suffered a severe laceration to the back side of his hand, caused by direct contact with the rotating saw blade.
Met with the wood shop teacher and took his statement. Noted that the wood shop teacher had a very thorough safety instruction program in place. Safety procedures were reviewed with students prior to the activity and followed. It was determined highly probable that the injured student was following these safety procedures at the time of the accident. The teacher was supervising students during the activity and was in close proximity to the accident.
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Assessed the miter box saw with the teacher. The board that the student was cutting was properly secured against the saw fence; all guards for the equipment were in place and in correct operating condition. The work area surrounding the saw was free from tripping hazards and there were no distractions present when operating the equipment.
The teacher took immediate action when the injury occurred—attending to the student, summoning first aid from school personnel and outside emergency medical assistance. The principal arrived on the scene and assisted with the injured student, confirmed the arrival of the paramedics and moved the remaining students to a different classroom. Once the injured student was en route to the hospital, the principal contacted the school custodian to clean and sanitize the area. The principal then immediately began the accident investigation process by taking the following actions: • Gathered oral and written statements from students and staff who witnessed the accident as well as the nurse and staff members who cared for the injured student at the scene of the accident.
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Reported the incident to district officials by email the same day and contacted the Business Manager to discuss the accident.
The accident investigation continued with discussions between school district administration, the school safety committee, and the district’s insurance pool loss control consultant. The root cause analysis and recommendation concluded that this type of saw was simply too dangerous for use by high school
students. The activities necessitating the use of this saw were removed from the wood shop curriculum along with all miter box saws from campus classrooms.
Remember that the goal of the interview is to gather facts, not assign blame.
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DEFEND
your
DISTRICT
As the School Superintendent, Chief Financial Officer, or Business Manager, you take on numerous responsibilities and duties to make certain that your district is running in an efficient and safe manner for the children and general public of your respective communities. One of your most important responsibilities is to make certain that you properly protect your district’s assets. These assets are not only your physical plant assets, but also the children you educate and the stakeholders of your community. In this article, I am going to share with you the basic components of a recommended Risk Management Program that all districts should incorporate into their insurance portfolio.
Assessing the “Battlefield” The first question you may ask yourself is “What is Risk Management?” Risk Management covers all of the processes involved in identifying, assessing, and judging risks, assigning ownership, taking actions to mitigate or anticipate them, and monitoring and reviewing progress. 26 |
Update Magazine / Winter 2011 As defined in the Public Sector Risk Management Manual, Risk Management is the planning for the negative consequences of any decision process or action by using whatever means feasible to control the chance of financial loss.
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ARTICLE / Risk Management
By Michael J. McHugh AREA EXECUTIVE VICE PRESIDENT ARTHUR J. GALLAGHER RMS
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Hazard Risk is the area of concentration that a school district needs to focus on. Failure to do so can have negative consequences on a district’s financial statement.
The Risk Management process involves the following: • Trying to stop losses from happening (through avoidance, risk control, loss control, or loss prevention). • Paying for the losses that do occur (through reduction, insurance, or risk transfer). When you think of risk, you can categorize it into six forms: • Strategic Risk – Involves political, economic, and market conditions. • Financial Risk – This deals with credit and money. • Operational Risk – This deals with risk related to systems, processes, technology, and people. • Compliance Risk – This deals with regulatory and legal. • Reputational Risk – Damage to “brand.” • Hazard Risk – Property, Liability, Workers Compensation, etc. When you examine the exposures or risks for public school districts, you find that aside from insuring your physical plant, you have the following additional exposures to deal with daily: • Athletics and Extracurricular Activities. • Transportation. • Employees and Volunteers. • Food Service/Cafeteria. • PTO/PTA/Booster Clubs. • Playgrounds and Athletic Facilities. • Educational Foundations. Your District’s Line of Defense In order to deal with these exposures, you can purchase insurance to protect the district’s financial assets. If a district elects to purchase insurance, the first thing you need to do is to make certain that the definition of the Named Insured has been broadened to include the following: • District and its employees, student and teachers. • Elected/appointed officials. • Sponsored/endorsed organizations. • Volunteers who work at your direction on behalf of the district.
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The district’s insurance portfolio should include at a minimum the following coverages: • Property and Contents. • Comprehensive General Liability. • Automobile – Physical Damage/Automobile Liability. • Crime. • Workers Compensation. • School Board Legal Liability.
Defense #1: Property Insurance Property insurance coverage provides protection for the district’s building and contents. The coverage should be written on a Replacement Cost Basis with an Agreed Amount Coverage Endorsement. It is important that you have that Agreed Amount Endorsement on the policy because it means that the insurance carrier agrees to pay your district an agreed amount (as outlined on your district’s Statement of Values) to replace your building due to a covered loss.
One major area where we see school districts are deficient in regards to building coverage is that they neglect to get a physical appraisal completed by a certified appraisal firm. A district should make certain that every five to seven years they budget for a physical appraisal to be completed at their district. It is important to remember that you need to insure your property based upon Insurance Replacement Cost Value and not Real Estate Value. In the event that you have a loss of that property, you want to replace it based upon like kind and quality. A certified appraisal determines that value. At the time of loss, if the district has a certified appraisal, you give that to the Insurance Carrier’s Adjusters and once they see that report, you should not have any issues. Extra Expense Coverage This important coverage pays for the extra expenses that a district incurs due to a covered loss. For example, if your district had a major fire and you had to move classes to other sites, it would pay for the extra expenses to rent the alternative space, from being in temporary trailers to paying for extra busing, etc. Builders Risk Coverage When a district has a building or renovation project, this important coverage provides protection to the district during the course of construction in the event a covered insurance peril (fire, flood, windstorm, etc.) destroys or damages property under construction. We recommend that before you begin a construction project, you have your district’s legal counsel review all construction documents and the AIA contract wording. Many of those AIA documents have wording in the agreements that is not favorable to school districts. Other important property coverages that you should not overlook are: • Inland Marine. • EDP Equipment. • EDP Media. • AV Equipment. • Fine Arts – these would be paintings, sculptures, and antiques. Every district has these items. They should be included on your property schedule. • Valuable Papers – These would be the district’s important records. For example, all blueprints, records of all students who ever attended the school, graduation classes, and records of major events that have occurred at the district. In the event these Valuable Papers were destroyed, if they were listed on the Statement of Values form, you would be afforded coverage, and insurance would help pay to re-create these records. • Musical Instruments. • Auto Physical Damage.
Boiler & Machinery Coverage Some carriers that do not write specific Boiler & Machinery policies call this Production Machine coverage and include this under their Property coverage form. Typically, Boiler & Machinery coverage includes the following important coverages: • Fired/Unfired Pressure Vessels – Boilers, Hot Water Tanks, etc. • Miscellaneous Electrical Apparatus – This is for your panel boards that provide electricity throughout the district. • Refrigeration Units. • Air Conditioning Units. • Extra Expense/Water Damage/Ammonia Contamination. • Joint Loss Agreement Endorsement – The Joint Loss Agreement Endorsement is needed when a district has two different carriers. One carrier provides Property coverage and the other carrier provides Boiler coverage. At the time of loss, it will be difficult to determine what caused the loss. Was it a fire that caused the loss or was it a boiler that exploded and caused the loss? If you have the Joint Loss Agreement on your policy, it basically says that the Property carrier and the Boiler carrier agree to make the district whole and not delay the claim. As you can see, without the endorsement, a district could have an extensive wait to begin the process of repairs, while the insurance carriers determine what the cause of loss was and who was at fault.
Defense #2: Transportation Coverage As we previously outlined, transportation is another risk that as a school administrator you deal with on a daily basis. If you run your own transportation program, you need to purchase an Automobile policy. The Automobile policy provides protection for your autos, trucks, and bus fleets. It also provides coverage for Auto Liability and Auto Physical Damage to your vehicles. Typically, insurance carriers will write policies with a $1,000,000 Combined Single Limit. If you contract out your transportation, you need to make certain that the firm which handles your busing also has adequate insurance. You need to get a Certificate of Insurance from that firm and the Certificate needs to name your district as an Additional Insured as your interests may appear.
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Defense #3: Crime Coverage As a school administrator, it is very important that your district carry Crime coverage. Crime coverage provides protection for the following coverages: • Employee Dishonesty. • Loss of Money/Inside/Outside of Premises. • Depositors Forgery/Credit Card Forgery. Unfortunately, over the past few years, we have seen numerous claims where school employees have stolen funds, and the district did not have adequate limits. On a minimum coverage basis, we recommend that you carry at least $100,000 of coverage for each peril. From a Casualty standpoint, it is vitally important that a school district have the proper coverages and limits. A General Liability policy affords the district that protection. Typically, carriers offer a limit of $1,000,000 per occurrence, $3,000,000 aggregate.
A Comprehensive Plan of Attack Coverages that you should make certain you have in your insurance portfolio are as follows: • Fire Damage Liability – $500,000 limit. • Employee Benefits Liability – $1,000,000 Claims-Made coverage. • Broad Form General Liability Coverage Form, which includes: • Bodily Injury/Property Damage. • Personal Injury. • Contractual Liability. • Sexual Abuse/Misconduct Coverage. • Athletic Participation Coverage. A school district should also make certain that they purchase an Umbrella Liability or Excess Liability policy. The Umbrella/Excess Liability policy should provide “Follow Form” coverage over a district’s Comprehensive General Liability, School Board Legal Liability, Automobile Liability, and Workers Compensation coverage. “Follow Form” means if it is included in the Underlying policy then it should be covered in the Excess policy. A minimum limit of coverage that a district should have is $10,000,000. Many insurance carriers can offer limits of coverage up to $50,000,000. This coverage also provides additional (follow form) coverage for Sexual Abuse and Employment Practice Liability coverage.
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School Board Legal Liability coverage provides protection for you as the school business official, your superintendent, and your board members. You should make certain that the policy provides the following minimum coverages: • Employment Practices Liability. • Discrimination. • Harassment. • Wrongful Termination. • Back Wages Coverage. • Non-Monetary Coverage. • Failure to Grant Tenure. Workers Compensation coverage provides protection for your employees in the event that they get hurt at work performing their duties. You should make certain that you have this coverage and it is written by a carrier that is rated by A.M. Best and has a rating of at least A VII. Student Accident coverage is a relatively new coverage that school districts have been purchasing over the last five years. This coverage provides coverage to all students during school-related activities. It helps a district reduce their General Liability premiums by purchasing this coverage. Other important benefits to the district are as follows: • Reduces litigation against the district. • Reduces the administrative burden. • Easy for parents to get reimbursed. The premium cost to a district is very nominal compared to the benefit it will bring to all parties. During the last few years, a number of Specialty coverages have been offered to school districts based upon the various exposures or programs that districts offer. Some of those Specialty coverages are: • Pollution Liability – for underground storage tanks. • Foreign Liability – for overseas trips by students/ teachers. • Special Events Policies. • Professional Liability. • Nurses. • Educational Foundations – Directors & Officers Liability. • Fiduciary Liability – 403(b) Exposures. A district should make certain to sit down and talk with their insurance agent and discuss if the exposure exists in the district.
There is a rather long list of insurance coverages that a school official needs to be aware of when trying to protect the assets of the district.
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As you can see, there is a rather long list of insurance coverages that a school official needs to be aware of when trying to protect the assets of the district. A very important area where districts can make certain to protect themselves is to obtain a Certificate of Insurance from any vendor who performs services at your district. The vendor should also name the district as an Additional Insured on the Certificate of Insurance as their interests may appear. Once you receive the Certificate of Insurance from the vendor, the district should send it to their insurance agent for their review and approval. By requiring Certificate of Insurance forms from the vendors and people who perform services for your district, you are reducing your district’s exposures and liability to potential litigation, by transferring the risk and exposure back to the Vendor’s Insurance carrier. In conclusion, as the district’s risk manager, you have many responsibilities. Make certain that you are working with an agent or broker who knows your world of schools. Also, you should begin your renewal process at least 150 days prior to your actual renewal date. This allows your broker or agent the proper time to negotiate favorable pricing and coverage terms, and also allows you as the buyer the proper time to review and evaluate the quotations, so that you feel comfortable and can make a timely recommendation to your Board of Education.
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NOT ENOUGH! Hazardous Recognition Inspection at the Facility Level Addressing the Enemy Within
For too long school security has been looked at as a necessary evil. After all, who really wants to think about hazards or conduct inspections to find them? Terms like these carry negative connotations. To make matters worse, the person in your district responsible for addressing school security probably did not volunteer for that duty. In many cases, security oversight was assigned in addition to existing responsibilities. So, what do we do with an assignment that nobody wants and nobody likes? Many times the answer is NOT ENOUGH. Recent school incidents, however, serve to remind us that the need for an effective security program should not, and cannot, be minimized. The time to elevate the commitment to school security is now – not after an incident! Let’s start with a new perspective on school security, move into a game plan for an effective approach, review the state requirements, and finish with resources that can help make the job easier.
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ARTICLE / Risk Management
By Paul D. Timm PRESIDENT RETA SECURITY, INC.
A New Perspective There is no price that can be placed on the importance of providing a safe learning environment. The protection of students, staff, and visitors must be a priority. Those tasked with overseeing this important responsibility should be treated with R-E-S-P-E-C-T. Administrators can set the tone for how the security program is perceived. Get on board by following security practices and supporting related initiatives. Others will follow your example and adopt your attitude! One important change that schools should consider, sooner than later, is to make security a responsibility upon which administrators are evaluated and recognized. Without this kind of accountability, school security will always run the risk of being relegated to second-tier priority, if not an outright afterthought. Improvement in performance is a natural outcome of responsibilities being measured.
One important change that schools should consider, sooner than later, is to make security a responsibility upon which administrators are evaluated and recognized.
An Effective Approach To begin on solid ground, districts must commit to addressing security with a collaborative approach. Nobody has shoulders broad enough to carry this program alone. Furthermore, decisions made in a vacuum tend to be regretted. Organize a Security Committee comprised of internal and external stakeholders, including administrators, support staff, teachers, social workers, facilities personnel, emergency responders, parents and students. Too often, students are excluded from this kind of setting because they have been wrongly cast in an adversarial role. Most students, however, are looking
for a safe learning environment. Additionally, their contribution is often most vital as they are ahead of adults in terms of technology and have a much better pulse of what is really going on in the school. Current social media threats, including cyberbullying and sexting, can best be tackled with the help of students. This committee should meet soon after the start of each semester. Meetings should follow clear agendas and last no longer than 60-90 minutes.
if I expected that the Chardon High School shooting would result in schools making quick purchases on video surveillance systems and metal detectors in the same way that the Columbine High School incident did. My response back then, like my hope today, was that schools should make prudent and careful decisions, instead of settling for “quick fix� options. The holistic approach recognizes that school assets (people, places, and things) must be prioritized.
An effective approach to school security must also be holistic. In a recent media interview, I was asked
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Since people (students, staff, and visitors) quite obviously rank first in terms of importance, we must first address the two areas that afford the most protection for people – access control and communications.
Access control begins outside the facility where vehicle barriers should prohibit access to athletic fields, playgrounds, pedestrian areas and main entries. In the same way, exterior doors should be closed and locked to restrict facility access to a monitored main entry. Since, in some of our schools, three generations of families have keys to the building, electronic access control offers the best solution. The main entry should ideally include a locked vestibule so that visitors cannot access the rest of the building unless authorized by a designated staff member. That staff member should require the visitor to present photographic identification (ID), record the visitor’s name (instead of allowing the visitor to write potentially illegible or inaccurate information), and give the visitor a badge that hangs on a brightly colored, break-away lanyard until another exchange can be made at the conclusion of the visit. In fact, all adults should be required to wear an ID on a colored lanyard – staff lanyards and visitor lanyards should be separate and distinct colors.
Communications begins inside the facility by ensuring that every area is equipped to receive announcements via Public Address (PA) or intercom systems. Conversely, every area should afford persons the capability to reach assistance via intercom call buttons or telephones. All telephones should be labeled with emergency dialing instructions (i.e. “9-911,” “0”). PA systems should also have exterior capabilities. Administrators, facilities personnel, and all staff members responsible for student movement should be required to carry a two-way radio. At minimum, schools should maintain a list of personal cellular
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phone numbers and staff members should be encouraged to program “ICE” (In Case of Emergency) information into their cellular phones. Once schools have begun to effectively address the areas of access control and communications, the physical security elements of deterrence, detection, delay, and response should be pursued. The Illinois State Board of Education (ISBE) has a fairly comprehensive, self-assessment tool that covers these elements available on the web (See Resources – pg. 35). In fact, ISBE has spent the better part of two
decades assembling resources and coordinating instruction in support of school security. For those that simply do not have the time to gather a group of stakeholders to conduct this audit, assistance can also be found with credentialed security consultants or local law enforcement officials.
Plan Now: Visit www.iasbo.org/Tornado for a timely presentation on tornado preparedness.
State Requirements For those that need motivation to improve school security, the state rewards that kind of compliance-oriented mentality with several mandates. For example, all schools are required to have a basic crisis plan and a bullying policy. Another prominent requirement for all Illinois schools, public and private, is the “School Safety Drill Act.” This act calls for schools to practice at least three fire drills each year, one of which must be monitored and signed-off on by the local fire department. Additionally, schools must conduct a lockdown drill, a shelter-in-place drill, and a bus evacuation drill. Perhaps lesser known, since 2009, the state has required school districts to “incorporate into the school curriculum a component on internet safety to be taught at least once each school year to students in grade 3 or above.” As a final example, the Illinois Compiled Statutes mandates that data involving, “attacks on school personnel, firearms in schools, and drug-related incidents in schools” be reported immediately and throughout the year.
Helpful Resources In an attempt to avoid the sense of feeling overwhelmed, this last section contains numerous assistance opportunities and resources. For those schools willing to admit that their current crisis plan is anything but “current” and comprehensive, the state supplies a template: http://www.isbe.net/safety/guide.htm. If you are reluctant or unsure of how to appropriately involve students in security, the state responds with a sample audit at: http://www.isbe.net/sos/htmls/ safe_at_school.htm. To satisfy your need for targeted instruction that addresses everything from gang prevention to taming social media risks, consider attending the free, 6th annual “School Safety Conference” this September – look
for details this summer. The Illinois Terrorism Task Force (ITTF) is also pleased to provide free, onsite training entitled “Multi-Hazard Emergency Planning for Illinois Schools.” The Illinois Attorney General’s Office sponsors, at no cost, the School Violence Tipline (800-4770024) and offers training in “Internet Safety.” There are at least three Administrators’ Academy courses (#1231, #1283, #428) that equip attendees to improve school security. Finally, organizations such as Illinois ASBO regularly offer conference workshops and professional development offerings on various school security topics. Answering the question posed earlier of what to do with an assignment that nobody wants and nobody likes can be accomplished with a few, simple reminders.
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The need to protect students, staff, and visitors is of primary importance.
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Those involved in overseeing the security program must have status and accountability.
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The path to improve security must involve an approach that is collaborative and holistic.
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The state of Illinois mandates that certain steps be taken.
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Numerous assistance tools and resources are available.
As the value of this information will be determined by the application that you make, choose to get started today. The time to elevate your commitment to school security is now – not after an incident!
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RISK RESOURCES Want to learn more about one of the Risk Management article topics? We asked our article contributors to link you to their most trusted risk-related resources. Learn the Ins and Outs of Insurance (See article, pg. 26)
Explore Accident Investigation (See article, pg. 22)
The CPCU Handbook of Insurance Policies By the American Institute for Chartered Property Casualty Underwriters
National Safety Council Web Site A good resource for not only on Accident Investigation, but a wide variety of safety topics. In the “Search NSC” box on the Home Page, type in the key words “Accident Investigation” and a number of articles related to this subject will then populate.
With so many types of insurance and policies to navigate through – understanding each contract is critical. Keep this handbook by your side to look up complex insurance terms and be sure to read the useful sections on property insurance and general liability. Find it: This book is available for sale on Amazon and other sites that sell textbooks.
Property & Casualty Principles By Kaplan Financial Build a firm foundation of the underlying principles and terminology of property-casualty insurance. This guide will give you confidence to understand and communicate the basics of risk management. Find it: On sale at barnesandnoble.com
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Find it: www.nsc.org
Recognize Hazards Early and Form Your Approach (See article, pg. 32) School Safety Resources From the National Crime Prevention Council Find information on school safety including tips for administrators, advice for students and parents, and training, publications and programs that are available to parents and schools. You’ll also find downloadable school safety resources. Find it: www.ncpc.org/topics/school-safety Spotlight on School Safety From the National Criminal Justice Reference Service This topical resource on school safety covers everything from the latest information and statistics, to Federal and State legislation, to State and local programs. You’ll also find links to Federal funding opportunities and other outside resources. Find it: www.ncjrs.gov/spotlight/school_safety/ Summary.html
PERSPECTIVE / Cash Management
SCHOOL BUSINESS 101 Should student activity accounts be centralized or decentralized and why? Raymond Costa
DIR./BUSINESS, BEACH PARK CCSD 3
Have a question or issue that needs to be addressed by School Business 101? Submit your ideas or questions to Rebekah Weidner at rweidner@iasbo.org
A: We have centralized the administration of activity accounts for years. We have five schools and approximately 17 accounts. We try to get the schools to use up the money they bring in each year and carry over only those funds needed for start-up activities. We continually have problems with schools collecting cash and turning it in to us without proper documentation, but by processing everything centrally we can keep it from getting out of hand. Ric King
ASST. SUPT./BUSINESS SERVICES, SCHAUMBURG CCSD 54
A: Decentralized. Student activities utilize the money in the buildings and when you centralize it lacks the convenience; it wastes time when you have to go through the central office. You need to set up interim controls out in the buildings so that way the convenience matches the security of the funds. Ivy Fleming
BUSINESS OFFICE COORDINATOR, LAKE ZURICH SD 95
Want to add to the discussion? Add your response in the Hot Topics Group within the peer2peer Network. Then, watch for the next School Business 101 discussion for a chance to be featured in the UPDATE Magazine.
A: Centralized, for more internal controls at the business office level. Many districts have the old checkbook system at the building levels and utilize a manual system as opposed to items being run through a financial management system for cutting purchase orders, approvals, and tracking payments. At the building level you are missing some of those components and staff may not be as well versed in the business aspect of activity accounts. Jim White
SENIOR MANAGER, BAKER TILLY VIRCHOW KRAUSE, LLP
A: Centralized, because in most school districts all your accounting staff is in the business office, which is centralized. Your accounting system is centralized. When you decentralize, unless you have skilled staff in the school or the decentralized location then the process isn’t usually as well controlled. Having it in the central office allows for better monitoring.
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A Balanced Approach: Financial Sustainability and Debt Management
In 1799 George Washington wrote in a letter to James Welch, “To contract new debts is not the way to pay old ones.” James Madison later wrote, “I go on the principle that a public debt is a public curse, and in a Republican Government a greater curse than any other.” In 1813, Thomas Jefferson wrote to John Wayles Eppes, "It is a wise rule and should be fundamental in a government disposed to cherish its credit, and at the same time to restrain the use of it within the limits of its faculties…never to borrow a dollar without laying a tax in the same instant for paying the interest annually and the principal within a given term.” Later, in 1816, Jefferson wrote, “We must not let our rulers load us with perpetual debt.”
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ARTICLE / Cash Management
By Mohsin Dada CHIEF FINANCIAL OFFICER & TREASURER NORTH SHORE SD 112
Through the years, our Founding Fathers recognized the slippery slope that can develop when a governmental entity is poised to issue debt to pay for its activities. As we have witnessed first-hand over the past several years, the subject of issuing and using debt is still difficult, and fraught with conflicting emotions. Debt can be a powerful tool for any school district but it is a tool that can also turn into a destructive weapon without clear controls and accountability. Without a specific plan that provides guidance on the use of the debt, school business officials may find themselves imprisoned by the very debt they recently issued.
While there are many ways to develop a balanced budget, most seasoned School Business Officials will tell you that there are a few important pointers:
Lay a Cornerstone of Fiscal Stability Before I address the subject of debt management, I think it is helpful to address the question of “What is a balanced budget?” For Illinois school districts, a balanced budget can hold many meanings. For our purposes in this article, I define a “balanced budget” as the situation when revenues equal or exceed expenditures. A balanced budget means that the school district will not draw down its fund balances or take on additional debt in order to conduct its operations. This is the most conservative description of a balanced budget, but it is the most accurate and allows a school district to establish a clear process for determining expenditure decisions.
The widespread belief that “having more money” is what makes a school district financially secure does not, in reality, hold true. What makes a school district financially sustainable is conservative financial management, and buy-in from all stakeholders about a need to avoid budget deficits.
• Budget for something less than 100% of the anticipated revenues and something more than 100% of the anticipated expenditures. • Exclude one-time only types of revenues from consideration; do not rely on Working Cash Fund transfers to balance the budget. • Always include line items for capital replacement in the budget and develop the budget as a component of the district’s overall financial plan and not an isolated activity.
Build on Sustainable Practices Nothing long-lasting is built without a great deal of planning. Building a financially sustainable school district requires the kind of discipline, commitment, dedication, and resilience best achieved through a thoughtful long-term planning process. This process includes not only looking at traditional financial planning activities but also capital improvement and debt planning activities.
The planned use of debt is critically important in developing a broad and sustainable long-term financial plan for a district. Make no mistake; debt is a financial drain for Illinois school districts. Debt does not create a revenue stream so it does not “pay for itself.” Debt requires school districts to allocate resources using either internal operating dollars or external taxpayer dollars. There is no such thing as “free debt.” Debt carries a cost and understanding those costs (both from an operating and political perspective) is imperative to developing a financially sustainable school district. Carefully Consider Debt Instruments For school business managers, the use of debt should always begin with an analysis of the appropriateness of the debt. In other words, do we really need to borrow money? If the answer is yes, there are a number of items to review including the management of the bond & interest tax levy in conjunction with the overall tax levy, the type and effect of the repayment cycles, i.e. serial bonds vs. capital appreciation bonds, the use of a “premium” to increase available construction proceeds, etc. Given the complexities of issuing debt, it is often appropriate to consult with legal counsel, bond counsel, auditors, and financial advisors/underwriters. Additionally, it can be helpful to discuss your thoughts regarding issuing debt with other School Business Officials and Superintendents.
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In order to preserve financial flexibility and maintain appropriate resources for a district’s present and future capital needs, it is my opinion that debt instruments should only be used to fund major capital projects. As a conservative financial planner, I would limit building and life safety bond use to new construction and/or major renovations only. Appropriate capital planning should be done to provide for regularly scheduled life safety work. By breaking life safety work up into smaller projects over a regular period of time, a district can avoid borrowing money to complete necessary life safety projects. For districts struggling under tax-caps, a regularly scheduled issuance of shorter-term life safety bonds will allow a district to complete projects without unduly burdening tax-payers. Bonds Most school districts typically issue General Obligation bonds for Building and Life Safety purposes. These bonds are issued with an approval from the community in the form of either a general voter authorized referendum process or with a non-referendum public hearing and petition process. In a “tax capped” county, there are limitations regarding the amount of the annual levy payment for nonreferendum debt. Counties which are not “tax-capped” have no such limitation regarding the amount of the annual levy to repay non-referendum general obligation bonds.
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All school districts in Illinois have a maximum amount of debt that they are authorized to issue. This legal debt margin is based on a formula contained in the Illinois School Code. The repayment obligation for these bonds is a separate tax levy and therefore issuing this type of debt increases the tax rate of the school district. For major building projects, school districts are always better off seeking voter authority and establishing a separate levy to repay the debt obligation. General Obligation Bonds are secured bonds backed by the full faith and credit of a school district and its taxing power. Typically, bonds issued by the school districts have a series of maturity dates, each maturity date being a subset of the original issue. As in any debt obligation, the longer it takes to pay something off, the more interest expense that is incurred. The duration of debt is an important component in good debt management strategies. In a relatively high interest environment, and with debt that repays over 20 years, it is highly recommended to have a “call” feature on the debt issue. This “call” feature gives an option to the school district to refund the bonds if market interest rates decline sufficiently to justify
refinancing the issue. Call features can help protect a school district if they need to repay debt over a long period of time by allowing them optional periods of time to refinance the debt without significant penalties. Alternative Revenue Source General Obligation Bonds are used by some districts for building and equipment. These obligations are payable from existing operating revenue sources and not from a separate tax levy. The bonds do have a general obligation property tax back-up. Being financially conservative, I have avoided these bonds. Using existing operating revenues to pay for large capital improvement or equipment expenditures commits operating resources away from the classroom and students. This situation can be difficult to manage if a district is forced to reduce expenditures to balance their budget. Debt Certificates Debt Certificates can be issued by districts to pay for building repairs and equipment. The obligations are payable from existing operating revenue sources and not from an additional property tax levy. No back
ADDITIONAL ARTICLE ASSISTANCE PROVIDED BY: LYNDA K. GIVEN, PARTNER, CHAPMAN AND CUTLER LLP ELIZABETH M. HENNESSY, PRINCIPAL, WILLIAM BLAIR & COMPANY, LLC LINDA M. MATKOWSKI, MANAGING DIRECTOR, RAYMOND JAMES & ASSOCIATES,INC. TAMMIE BECKWITH SCHALLMO, MANAGING DIRECTOR, PMA FINANCIAL NETWORK, INC
door referendum or public hearing is required. A debt certificate can finance real or personal property. As the repayment of Debt Certificates requires the commitment of operating revenues, these types of debt instruments should be reviewed and assessed carefully before using. Leases Leases are another common debt instrument used in school districts, especially when financing capital equipment with a short useful life. The aggressive introduction of technology such as one-on-one laptops, Smart Boards and iPad’s have created a demand for equipment leases. School districts could have a capital lease or an operating lease: • A capital lease is very similar to buying equipment on a payment plan. At the end of the capital lease the district owns the equipment. A capital lease allows the district to recognize an asset and a liability on their balance sheet.
• An operating lease is similar to renting equipment. At the end of the operating lease, the district returns the equipment to the vendor. Operating leases are often called “off balance sheet” financing because the district does not own the equipment and therefore does not have an asset or a liability to record. As with Alternate Revenue Bonds and Debt Certificates, leases will increase the district’s operating leverage. Payments for leases are made from general operating revenue. The multiyear lease commitment also limits the school district’s ability to curtail expenditures. The only operating lease I favor is for copiers. Buying equipment with a limited useful life, and using credit to pay for it, is not a good financial decision. Computers and technology should be purchased on life cycle replacement basis. School districts can stagger the purchase over multiple years to avoid buying on credit.
Stay Within Your Resources Debt levels and their related annual costs are important long-term obligations that must be managed within the district’s available resources. In addition to statutory limitations imposed by the Illinois School Code, districts should have guidelines in place to maintain a balance between debt service costs and all other expenditures. An effective debt management policy provides guidance to the school district to manage its debt program and is in line with its current and reasonable projected future resources. Conservative fiscal stewardship and budgeting practices, ample reserves and low debt should be part of every school district’s operating philosophy.
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MANAGING BANKING RELATIONSHIPS
If there is one thing the last few years have taught us, it is the importance of having a bank serve as a virtual member of your organization’s operating team. This article begins by looking at what you as a school district should expect from your bank along with some key questions to ask. Next, it examines some of the things a bank will expect from you as a client. Finally, it provides a checklist of recommendations for building a strong, ongoing relationship.
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ARTICLE / Cash Management
By Kimberly M. Feeney SENIOR VICE-PRESIDENT BANK OF AMERICA
What you should expect from your bank School District Focused Expertise Addressing the complexities of your district and the public sector requires a thoughtful, experienced approach. Whether you’re looking for faster access and greater visibility into your funds, greater control over organizational spending, more efficient financing, or safeguards against financial risks and liabilities, you should expect to have a dedicated banker/client manager who leads a team of finance specialists working together to evaluate your unique needs. “Maintaining strong banking relationships is important to the work that I do at Chicago Public Schools. We have a number of banking partners who we rely on for smooth operations of school accounts as well as vital Central Office functions,” said Melanie Shaker, Treasurer of Chicago Public Schools. A Full Range of Customized Solutions and Services Your bank should be by your side every day positioning your district for success by improving visibility, optimizing working capital, and managing risk. You should be able to count on your bank to provide guidance at every step to help automate and streamline your broad range of payments, provide your district with a variety of card-based solutions for procurement, and work with your district to minimize idle cash balances and effectively position your funds to address your organization’s financial requirements today, next week, or even years from now. You should also expect your bank to be at the forefront of lending and leasing solutions for school districts. From helping you meet your working capital requirements to financing critical infrastructure, education, and other public
initiatives, your bank must be fully equipped and committed to helping your organization address a wide range of funding needs. Finally, you should expect the bank to offer you the experience and capabilities of a world-class banking platform including broadening your access to capital to helping you manage financial risk and liabilities. Acumen, Accuracy, Approachability It goes without saying that your bank should be involved in the nitty-gritty details of your financial operations. If your banker doesn’t have an answer to your question, expect him or her to put you in touch with someone in the organization who does. You should also expect your bank to leverage a team of strategic partners to fulfill your needs if necessary. Regardless of the challenges your district faces in 2012, your bank’s banking specialists must demonstrate scrupulous accuracy in every engagement with you. One of the ways to ensure that accuracy is by choosing a banker who is dependably accessible. Whether it’s through an email message, a phone call, a one-on-one meeting, or even a video conference, you should expect your banking team to be accessible on your terms. An Annual Review of Your Banking Relationship Constant communication with your bank is vital. The more you talk to your bank about available services, the more leverage you have when financing is needed or when it comes to relationship pricing. That’s why you should expect the bank to schedule an annual review of all the services it provides. It’s an ideal opportunity to discuss your strategic plans, budget challenges and technical needs, among other things. www.iasbo.org
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What the bank will expect from you Properly Prepared Financials Up-to-date, properly prepared financial statements are always at the top of a bank’s list of client expectations. Be prepared with the information your lender needs to make a decision in your favor. An Educated Client is a Strong Client Knowing where your organization is positioned given current economic and regulatory conditions, and acting accordingly by keeping your bank informed, count for a lot. Put your best financial foot forward by having the ability to project expected results, cash flow, and growth potential. Strong Internal Controls Ensure your district has proper segregation of duties which will lead to a checks and balances system, i.e. strong internal controls. A Willingness to Communicate Most likely your banker schedules regular meetings with you. Those aren’t sales calls. They are meant to keep your banker in the loop and to assure that the relationship never slips into a generic, product-driven client-vendor model. To get the most out of these regular meetings, treat your banker as a full partner in your organization. Remember: More information makes your banker a better partner. A Plan for the Future Long-term financial planning is increasingly used by school districts to identify future financial challenges and opportunities, and to devise strategies to achieve financial sustainability. For example, long-term financial planning is an emerging tool for school districts to address fiscal challenges and provide their communities with consistent services. The Government Finance Officers Association recently interviewed officials at several local governments that have been practicing long-term financial planning for a number of years and have realized such tangible benefits as AAA bond ratings and the ability to avoid layoffs during the recent recession.2
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A checklist for building a strong, ongoing banking relationship Stay in Touch As the economic environment continues to change, placing increased financial pressure on the public sector, your district must have confidence that your bank is keeping in step with your needs. That means staying in touch. Your banker is a reliable source of critical information that can provide you with everything from important updates related to regulatory changes to ideas for streamlining your cash management operations. “I keep in contact with our banking vendors with regular meetings, maintain steady communication with representatives when there is an issue, and consistently follow through until concerns are fully resolved, along with carefully analyzing invoices of any service we use,” Shaker said. “The quality of the relationship allows me to handle problems that may arise; solutions can take time and working together as partners is critical to the success of the relationship.” Talk to Your Bank About Best Practices Your bank has relationships with numerous government entities throughout the country and should be able to share valuable information about their best practices. What are your peer organizations doing that you might consider doing? Always leverage your bank’s national relationships as much as possible. Your bank today most likely provides other government organizations and school districts with a variety of cardbased solutions for procurement and travel. Could these same solutions possibly save you administrative time and reduce process and paperwork?
Other items to discuss: Have you updated your investment policy recently to ensure it accurately reflects your district’s needs and risk position? For example, have you considered talking to your banker about an enhanced compensating balance rate to offset service fees? Make your bank an essential part of your finance team Don’t limit your discussions to cash flow and traditional banking services. Your bank should be a partner that recommends strategic solutions. That could include planning financing for capital expenditures such as equipment upgrades, facilities renovation, or technology investments. Or it could be a discussion about the best ways to automate paper-intensive payments using electronic solutions. Review the Fees Your Bank is Charging You Each quarter you should review the charges assessed by your bank. If there are changes you don’t understand, schedule a meeting with your banker to discuss them. If you think the fees are excessive, ask your banker for ideas to reduce them. Never be afraid to ask questions. Remember that all banking relationships are different No two relationships are alike; and that most certainly applies to your banking relationship as well. Make sure you are working with a bank that can meet all your needs and be sure your dedicated client manager/ banker and team of government finance specialists work closely with your district to understand every nuance of your important mission.
1 Workplace Benefits Report, Bank of America Merrill Lynch, June 2011 2 “Building a Financially Resilient Government through Long-Term Financial Planning,” Shayne Kavanagh, Government Finance Officers Association 3 “Ahead of the Curve: Automated Payments Accelerate Cost Savings at the University of Washington,” Bank of America Merrill Lynch, November 2011
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USING THE FINANCIAL PROFILE FOR GOAL SETTING The tolling of the “accountability schoolhouse bell” has taken on new meaning in the recent economic recession. It is not to say that boards of education and administrators have not been good stewards in assessing, planning and implementing expenditures in a meaningful manner consistent with community expectations, but we are living in an era where transparency, openness and controlling of expenditures have taken on a new definition. Now, the general public is demanding and expecting to see increased diligence in how school districts receive and allocate resources during these difficult economic times.
Gone is the day when new programs were being initiated on a regular basis. Consider the ramifications on any school district that engaged in a practice where yearly expenditures outdistanced the increase in revenue. The spring ritual of determining staffing allocations became very troublesome during this period knowing that reductions in force would become the practice instead of the exception. The arduous task of balancing community expectations against a declining financial forecast loomed in hovering dark clouds. With such a troubling situation, boards of education were introduced to a concept that, although not new, brought to light financial forecasting in a manner that enabled them to become actively involved in a planning process driven by goal setting to address this very dilemma – a financial planning program.
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Update Magazine Magazine // Summer Summer 2012 Update
A visionary approach to assist boards of education, superintendents of schools and business officials was unveiled in the summer of 2003 by PMA Financial Network, Inc. (PMA). Its mission was to assist a school district’s leadership team by delving into its financial foundation. The mystery of school finance was brought into the “light of the day.” With the tools made available via this newly developed software, school officials were able to analyze a school district’s Annual Financial Report, a report submitted by school district auditors for the past five years. This analysis highlighted the ongoing expenditures most common to a school district, but it also displayed the anomalies that occurred during those five years. Focusing on this exercise proved an eye-opening undertaking which illuminated how a school district traveled along the road of financial stability, or in some cases, revealed what would lead to a crash on the educational highway at the next curve in the road.
ARTICLE / Cash Management
Since the inception of the PMA financial planning program (FPP), the use of the analogy of the traffic signal as an indicator of how school district officials have responded to these troubled times - GREEN LIGHT, YELLOW LIGHT and RED LIGHT - became appropriate. With the information brought forth in the FPP, school district officials were in a position of making datadriven decisions based on factual data rather than the emotion of the hour. The process does not totally remove the emotions in having to make life-altering decisions impacting the lives of students, faculty and staff, but it does create a framework for understanding how decisions are better approached and ultimately determined.
With the tools made available via this newly developed software, school officials were able to analyze a school district’s Annual Financial Report, a report submitted by school district auditors for the past five years.
By Donald E. Weber SENIOR VICE-PRESIDENT PMA FINANCIAL NETWORK, INC
The clear road ahead, the opportunity to proceed along the educational highway consistent with community expectations, is highlighted by the GREEN LIGHT. Often this opportunity to continue to provide educational experiences that match community desires is a by-product of years of good stewardship by boards of education and the administration. This respectful financial position had often been created by time-honored, carefully measured decisions by boards of education. Analyzing historical and current financial information, discussing the merits of factual data leading decisions and balancing past budgets had become ingrained as a practice by school district officials. This year-by-year exercise positioned a school district to pass through the intersection without having to take drastic steps to realign expenditures that matched revenues. Boards of education already practicing good stewardship like “live within your means” did not have to change their practice significantly when the Balanced Budget Act became effective in 2006. In numerous cases these school districts have an Illinois State Board of Education (ISBE) Annual Profile Score of RECOGNITION.
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In light of today’s uncharted troubled economic waters, boards of education must lead with conviction and purpose and use all available resources to muster the support and assistance from an electorate who can be very suspicious as to how public tax dollars are being spent.
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The approaching YELLOW LIGHT signifies that a change in traffic conditions is about to occur. By heeding this traffic signal condition, one would approach the intersection with caution, with respect for what could occur if one ventured into the intersection where unknown factors could alter the path of the automobile (the organization). School officials who heeded this light took necessary steps to limit or begin to practice organizational behaviors squelching the appetite to overspend resources that could lead to a downgrade in its Annual Financial Profile Score. Boards of education who heeded the caution light studied the data, became well-informed of the consequences of their pending decisions, and were willing to make the difficult decisions. Hopefully, they governed by consensus which demonstrated to the community at large that they “had their act together.” Their decisions may have been unpopular in some subsets of the community, but they most assuredly attempted to respond to the majority of public opinion which expected, if not demanded, fiscal accountability of its elected officials. Their actions, if taken in time, prevented the organization from sliding into the RED LIGHT zone with brakes squealing! Those who were unwilling to heed the caution light and were unable to make the “tough decisions,” found a rocky road ahead ladened with potholes. Timely inaction could lead to an Annual Financial Profile Score of EARLY WARNING.
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Passing through a YELLOW LIGHT and proceeding to “go through” a RED LIGHT led to an Annual Financial Profile Score of FINANCIAL WATCH. This condition denoted that appropriate action was not taken in a timely manner to address the financial condition of a school district. Boards of education are generally well-intentioned individuals. Their interest in wanting to offer students a quality educational experience can often be mistaken by a public who is distrustful of past decisions or actions by school officials, whether elected or appointed. If a school district approved an unbalanced budget, it led to disfavor and distrust in the community as well as a credibility problem. Consider a board of education that knowingly adopted an unbalanced budget. On the one hand, they may have been admired by some for their sense of conviction in showing favor for students. On the other hand, the belief that all would work out in the long run ignored signs that were leading to a pending Annual Financial Profile Score of “WATCH.” Measured steps and actions in past budget cycles could have avoided financial crisis. Boards of education failing to heed a YELLOW LIGHT and speeding through a RED LIGHT may face the financial watchdog of the local media and the taxpaying public.
The Court of Public Opinion can be vicious and misguided. In light of today’s uncharted troubled economic waters, boards of education must lead with conviction and purpose and use all available resources to muster the support and assistance from an electorate who can be very suspicious as to how public tax dollars are being spent. An organization that instills transparency by its actions will capture the respect of the well-informed electorate. Their collective actions will speak volumes to community members who truly want today’s students to be educated in line with community expectations and financial resources. Failing to live within the financial means and moral support of the community will create havoc and chaos in an organization. Therefore, boards of education must be resourceful, respectful and resilient to the ever changing economic dynamics that affect them; the youth in our communities are counting on it!
PMA Financial Network, Inc. PMA Securities, Inc. and Prudent Man Advisors, Inc. are under common ownership. PMA Securities is a broker-dealer and municipal adviser registered with the Securities and Exchange Commission (SEC) and Municipal Securities Rule-making Board and is a member of Financial Industry Regulatory Authority. Prudent Man Advisors, Inc. is an investment adviser registered with the SEC. This article was prepared for informational and/or educational purposes only without regard to any particular user’s investment objectives, financial situation or means. The content of this document is not to be construed as a recommendation, solicitation or offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy in any jurisdiction in which such an offer or solicitation, or trading strategy would be illegal. Nor does it constitute any legal, tax, accounting or investment advice. Although the information contained in this article has been obtained from third-party sources believed to be reliable, PMA Financial Network, Inc. cannot guarantee the accuracy or completeness of such information. It is understood that PMA is not responsible for any errors or omissions in the content in this document and the information is being provided to you on an “as is” basis without warranties or representations of any kind.
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CASH RESOURCES Want to learn more about one of the Cash Management article topics? We asked our article contributors to link you to some additional guidance. Manage Your District’s Debt (See article, pg. 38) Government Finance Officers Association Find free resources on budgeting, debt and more within the site. In their bookstore, find books to keep nearby when assessing your district’s debt policy:
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Guide to Preparing a Debt Policy This “Document on Disk” series provides unique assistance with debt policy development. Debt Issuance and Management: A Guide for Smaller Government Introduces the essential concepts of tax-exempt debt financing, compares and contrasts options, provides practical advice and highlights potential pitfalls. Benchmarking and Measuring Debt Capacity Volume 1 provides a useful analytic approach to implementing recommended budget practices on measuring debt capacity and implementing debt policies.
Find it: www.gfoa.org and click “Publications”
Set Financial Goals and Identify Roadblocks (See Article, pg. 46) ISBE (Financial Profile) website The Illinois State Board of Education (ISBE) developed the “School District Financial Profile” to help monitor the finances of school districts and identify which are in or are moving toward financial difficulty. On the site, find:
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2012 Profile listings. How the Score is calculated for each district. School District Deficit Spending for FY 2010-2011.
Find it: http://www.isbe.net/sfms/P/profile.htm
Read Articles on Banking Best Practices (See article, pg. 42)
On the peer2peer Network Resources Page under “UPDATE,” find links to all the above resources plus these three helpful articles on banking relationships: 1. Workplace Benefits Report, Bank of America Merrill Lynch, June 2011. 2. “Building a Financially Resilient Government through Long-Term Financial Planning,” Shayne Kavanagh, Government Finance Officers Association. 3. “Ahead of the Curve: Automated Payments Accelerate Cost Savings at the University of Washington,” Bank of America Merrill Lynch, November 2011.
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ON MY LIST If you want big change, the little things matter When our society thinks about creating a large-scale change we often assume, intuitively, that social problems arise and decline in “some kind of steady progression.”
On My List The Tipping Point: How Little Things Can Make a Big Difference By Malcolm Gladwell
Overview: Have a vision of a big change you’d like to see in your district or community? It’s easy to get overwhelmed at the prospect, and not realize that small events — with the help of the right people, message, and environment — can lead to big change. Malcolm Gladwell teaches us through numerous examples that a true social epidemic has three key characteristics: it starts small, happens in a hurry, and rises and falls in one dramatic moment: The Tipping Point.
This intriguing read introduces a new concept: the social epidemic. Like the flu virus, it begins with a select few who adopt a “contagious behavior.” This begins to quickly infect people until a reaches its tipping point, the magic moment where the epidemic starts to spread like wildfire. This principle can explain the rise of crime in New York to the popularity of shoes to suicide in Micronesia. While a seemingly small event tips the spread of an “infectious agent,” epidemics are also a function of elements that Gladwell names the Law of the Few, The Stickiness Factor, and the Power of Context. How Paul Revere Factors In In social studies class, we all learn about the famous late night ride of Paul Revere to warn the communities surrounding Boston that “The British are Coming!” This word of mouth epidemic was a crucial moment in the American Revolution. What we
don’t often hear about is that Revere was not the only one who rode that night. William Dawes carried the same message from Boston to Lexington, yet his message failed to spread. What made the difference? Revere’s success had to do with his rare set of social gifts, allowing him to get to the right people who could “tip” his message. We also have people around us who possess this unique natural ability: Gladwell calls them “Connectors.” Along with Mavens (who are highly knowledgeable and eager to share), and Salesmen, these “few” specific types of people can truly give a message wings. Bringing it Home A memorable message (The Stickiness Factor), and seemingly small elements in the environment (The Power of Context) can also prove surprisingly important in the fast spread of an idea or change in behavior. From teenage smoking to bullying to suicide, understanding the nature of how these “epidemics” spread within your community gives hope that just the right push could prove key to moving the trend in reverse.
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THE FINAL WORD Great Ideas from Great Illinois ASBO Members Dean L. Gerdes Dir./Finance Summit Hill SD 161 What is your role as an educational professional with regards to risk management? As the head of business operations, I am responsible for protecting all of the assets of the school district: people, finances, property, and data. Damage to or loss of these assets can threaten the viability of the district’s operations. I draw on different resources including the Board of Education, administrative team and vendors. The complexity of the environment schools operate in today makes risk management a challenge. Most districts are not large enough to have a specialist on staff, which puts this responsibility, among many other pressing needs, on the “to do” list of the business manager or superintendent. What will impact school risk management practices most significantly in the next 5–10 years? Think back to the Columbine High School massacre. It is hard to believe that it has been a dozen years. That tragedy and other unfortunate events have changed the way schools prepare for unexpected, violent events. We used to practice tornado drills two or three times a year, but now we go through soft and hard lockdowns of our buildings. The obesity trends in the U.S., affecting one-third of all adults, cost billions of dollars in medical expenses and lost work time. Employees of our districts are our most important asset and risks to their health are an important issue. What about hacking and other cyber risks? Everyday risks such as stolen school credit card numbers exist, as well as known cases of hacking into school district bank accounts. As much as possible, we need to assess known risks and plan to meet those challenges. Even events such as 100-year floods can be anticipated in a well-designed and well-drilled school district disaster plan. There are, however, “black swan” events that we cannot anticipate, but will likely shape risk management in the next 5-10 years. What is the most important risk management topic to address immediately? In the crush of day-to-day activities, risk management often gets less attention than other priorities. The most immediate need is a review and update of the current risk management plan for each school district. That includes health and liability insurance, security procedures, emergency response and disaster recovery plans. If you could change one thing about the school risk management, what would it be? I would like to see school districts raise awareness of managing risk and the level of planning for the unexpected. I would increase the appreciation by the Board, administration and community of the need to be prepared for known and unexpected risks school districts face today. JIM WOMACK / NIU www.iasbo.org
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Google Meets TechCon Save the Date!
October 26, 2012 TechCon returns with a speaker you won’t want to miss.
JAIME CASAP Business Development Manager Google
Jaime Casap is a Business Development Manager and Education Evangelist at Google, Inc. on the Google Apps for Education Team. As such, he has been instrumental in bringing cloud based technology tools to millions of students and teachers in the K12 space. Jaime believes the technology perspective can improve education – and will share his vision with attendees at this one-day Conference exclusively dedicated to school district technology. Learn more about Jaime and preview what TechCon 2012 has to offer at: illinoistechcon.com
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Update Magazine / Summer 2012
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