Public Schools of the City of Ann Arbor
FY17 Financial Audit Presented by Laura Claeys November 15, 2017
Audit Summary
• All school districts in Michigan are required by state law to have an audit
• As a result of our audit, we rendered an unmodified or ‘clean’ opinion
• Our audit of your federal programs had no findings or quesJoned costs
2
Highlights and Challenges
Highlights:
• Enrollment conJnues to grow significantly year-over-year
• The District conJnued its investment in the classroom and achieved the goal of reducing class sizes and reducing the number of combined grade classes
• $4.6 million in current year capital investments from the Technology Bond and 2015 Bond funds
• Sinking Fund millage renewal supported by taxpayers, with $8.2 million in current year capital investments from this fund
3
Highlights and Challenges
Challenges:
• ConJnual balancing between offering addiJonal programming and gauging the demand for new programs
• ConsideraJon of investments in addiJonal staff and services with ongoing funding challenges
• Despite sizeable capital investment this year, infrastructure investment needs conJnue – which creates decisions to be made between those that can be provided currently uJlizing available bond funds and those that need to be deferred
4
General Fund – Budget to Actual
5
$215.0 $214.8
$235.3 $235.1 $233.0
$235.2
$200
$205
$210
$215
$220
$225
$230
$235
$240
Revenues Expenditures
Mill
ions
Approved Budget (May 2016) Amended Budget (May 2017) Actual (Audited 6/30/17)
$218.7 $220.9
$14.3* $14.3*
$14.3
$14.3
*Both revenue and expenditures include $14.3 million in Michigan Public Schools Employee ReQrement System (MPSERS) reQrement contribuQons passed-through from State of Michigan
$14.3
$220.8
$200.5
$221.0
$200.7
$14.3
General Fund Budget to Actual Year Ended June 30, 2017
AmendedBudget Actual Variance %FundBalance-June30,2016 21,508,022$ 21,508,022$ -$
Revenue 235,343,070 233,001,238 (2,341,832) -1.00%
Expenditures 235,062,128 235,158,896 96,768 0.04%
ExcessofRevenueOverExpenditures 280,942 (2,157,658) (2,438,600)
Plus:OtherFinancingSources/(Uses) - 530,388 530,388
ChangeinFundBalance 280,942 (1,627,270) (1,908,212)
FundBalance-June30,2017 21,788,964$ 19,880,752$
FundBalanceas%ofExpenditures 8.5%
FundBalanceas%ofRevenue 8.5%
Daysofoperation(365dayyear) 31
6
ComparaQve General Fund Fund Balance History Year Ended June 30
7
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$31,920,876
$27,914,369
$20,500,576
$17,331,456 $16,634,969
$9,426,763 $8,818,884
$16,762,959
$21,508,022
$19,880,752
15% Fund Balance Target ** (15% of 2017 expenditures)*
EsFmated Early Warning
Line (5% of 2017
revenue)*
Percentage of Expenditures 16.3% 13.9% 8.2% 10.5% 8.5% 4.7% 4.6% 8.3% 10.2% 8.5%
*Es$mated Early Warning Line and Fund Balance target percentages based on 2017 general fund revenues and expenditures. Board policy is range of 6-15% of expenditures
** Michigan School Business Officials (MSBO) recommended target
Net Change in Fund Balance – General Fund Year Ended June 30
8
-$10,000,000
-$8,000,000
-$6,000,000
-$4,000,000
-$2,000,000
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
2013 2014 2015 2016 2017
$7,944,075 (A)
($1,627,270) (C)
($7,208,206)
($607,879)
(A) Includes one-Qme funds for Special EducaQon from WISD ($4.6 million) and Medicaid funds ($400,000) (B) Includes one-Qme funds related to sale of Roberto Clemente ($1 million) and Ann Arbor District Library interest ($3 million) (C) Includes certain one-Qme direct expenses related to the Allen Elementary flood during the 2016/2017 school year ($1.3 million)
$4,745,063 (B)
$159.7m69%
$26.1m11%
$14.3m6%
$33.4m14%
Founda'onAllowance
CountySpecialEduca'onMillage
Re'rementFundingPass-through(Requiredtobesentdirectlytopensionsystem)
Other(StateCategoricals,FederalGrants,SpecialEdStateFunding,Local)
General Fund Revenue Year Ended June 30, 2017
Total Revenue = $233,531,626
9
FoundaQon Allowance historical lookback at funding
$9,001
$9,434 $9,490
$9,336 $9,320
$9,020 $9,020 $9,050
$9,100 $9,170 $9,180
$233
$233 $233
$8,600
$8,800
$9,000
$9,200
$9,400
$9,600
$9,800
02/03 07/08 08/09 09/10 * 10/11 ** 11/12 ***
12/13 13/14 14/15 15/16 16/17
Fu
nd
ing
Pe
r P
up
il
Base FoundaQon 20j Hold Harmless
10
* 09/10 reflects SecQon 11d funding reducQon of $154 per pupil ** 10/11 reflects SecQon 11d funding reducQon of $170 per pupil *** 11/12 $170 reducQon noted for 10/11 was statutory enacted in 11/12, along with an addiQonal $300 per pupil rollback of foundaQon allowance
$9,234
$9,667 $9,723
12,000
14,000
16,000
18,000
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018*
16,47116,597 16,669 16,700 16,493 16,844
17,15417,500
17,730*
Num
bero
fstude
nts
Student Enrollment Comparison Fall Count and Percentage Change from the Previous Years Ended June 30
.17% .76% .44% .18% (1.24%) 2.13%
*Es$mated Fall 2017 count (FTE)
1.31%
1.84%
2.02%
11
General Fund Expenditures Year Ended June 30, 2017
12
$177.0m75.3%
$14.3m[VALUE]
$33.4m14.2%
$7.6m3.2%
$2.8m1.2%
SalariesandBenefitsRe'rementFundingPass-ThroughPurchasedServices(Custodial/Maintenance,Transporta'on,Technology)SuppliesandMaterialsOther(EquipmentandOthercosts)
6.1%
Total Expenditures = $235,158,896
General Fund Salaries and Benefits Year Ended June 30, 2017
13
$116.0m61%
$42.9m22%
$22.2m12%
$8.4m4%
$1.8m1%
Salaries&WagesRe'rementContribu'onsHealthInsuranceFICAOther(SpecialLeavePayments,Worker'sCompensa'on,CashInLieuofInsurance)
Total Salaries and Benefits = $191,326,753
$14.3m
ReFrement Funding Pass-Through
General Fund Breakdown of Salaries and Benefits Year Ended June 30, 2017
14
$167.6m88%
$13.6m7%
$2.9m1%
$1.4m1%
$5.8m3%
Instruc'onandInstruc'onalSupportSchoolBuildingAdministra'onCentralAdministra'onOpera'ons:Facili'esOther(ex:HumanResourceServices,Athle'cs,CommunitySvcs)
Categories according to State
repor$ng requirements
Total Salaries and Benefits = $191,326,753 (95% = School-based Salaries & Benefits)
ReQrement Funding – Total Michigan Public Schools Employee ReQrement System (MPSERS) Expense Year Ended June 30
MPSERS Unfunded Actuarial Accrued Liability (UAAL) expense from State Aid. This is a direct pass-through from State:
- 2013 includes $2.2 million - 2016 includes $12.2 million - 2014 includes $5.8 million - 2017 includes $14.3 million - 2015 includes $9.4 million
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
$22.4
$27.5 $28.1
$32.7
$35.3
$40.4$43.8
Dollars(inMillions)
$5.8
$9.4
$12.2
15
$14.3
$2.2
Total Health Related Insurance Costs Year Ended June 30
$-
$5.0
$10.0
$15.0
$20.0
$25.0
2011 2012 2013 2014 2015 2016 2017
$17.7 $18.0$19.4
$19.5 $19.7 $20.2
[VALUE]*
Dollars(inMillions)
$22.5*
16
*Increase in FY2017 was primarily the result of increasing the hard cap. The District currently pays a maximum of $12,960 per employee for insurance (an increase of $378 per person from FY 2016)
ComparaQve General Fund Fund Balance History Year Ended June 30
17
EsFmated Early Warning Line (5% of 2017
revenue)*
15% Fund Balance Target ** (15% of 2017 expenditures)*
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$31,920,876
$27,914,369
$20,500,576
$17,331,456 $16,634,969
$9,426,763 $8,818,884
$16,762,959
$21,508,022
$19,880,752
*Es$mated Early Warning Line and Fund Balance target percentages based on 2017 general fund revenues and expenditures. Board policy is range of 6-15% of expenditures
** Michigan School Business Officials (MSBO) recommended target
Percentage of Expenditures 16.3% 13.9% 8.2% 10.5% 8.5% 4.7% 4.6% 8.3% 10.2% 8.5%
Ann Arbor Public Schools Year Ended June 30, 2017 Key Takeaways
18
• Your conJnued success is a community and district collaboraJon
• For the 4th year in a row, enrollment has increased by the largest percentage in the last decade, resulJng in a current year increase to revenue of approximately $3.2 million
• Students are entering and returning to the district from the Ann Arbor footprint due to your robust program offerings (STEAM, world languages, Young Fives, Project Lead the Way, InternaJonal Baccalaureate)
• Cost containment and improved efficiencies will need to conJnue to be a focal point for the organizaJon in order to yield posiJve financial results
Future Developments in the School Environment
• Cash Flow Needs • Fund Balance Levels • Delayed State Aid Payments • Health Care Costs • Capital Repairs • Cost of UJliJes • State economy and poliJcs • Charter and Private School opJons
19
• Employee Group NegoJaJons • Federal Funding Changes • Future ReJrement ContribuJon
Rates • Future changes in foundaJon
allowance funding
Areas to monitor as it relates to school operaQons:
Keep an eye on local opQons that are within your control to provide funding for the student populaQon (examples include: Special educaQon millage; countywide enhancement millage;
sinking fund millage; and bond issues)
Next Steps in our AAPS School Environment ConJnue to: • Advocate at the state level
• Build fund equity to ensure sustainability of the organizaJon
• Monitor monthly budget reports
• Control expenditures and understand market rates for compensaJon across the district
• Balance long-term investments with funding volaJlity • Recognize a large porJon of the current fund balance was created
by one-Jme transacJons – use cauJon when spending it
20
Thank you! We appreciate: AAPS employees
- the hard work to extend our district quality and ensure we conJnue to deliver the ‘Ann Arbor Public Schools’ difference Board of EducaJon
- support, advocacy, & courageous decision-making Community
- ongoing support of the Ann Arbor Public Schools
21
Thank you.
Public Schools of the City of Ann Arbor FY17 Financial Audit Presented by Laura Claeys
23