Financial Accountability and Best Practice at the CBE

At the May 3 Regular Meeting of the Board of Trustees, CAPSC submitted two questions related to financial accountability and best practice at the CBE during Question Period. The questions were read into the record and while responses were not immediately available, the board did respond to us in writing and read them into the public record at a later board meeting (these responses are in regular text). CAPSC felt further clarification was required so they were resubmitted but not for Question Period (these responses are in bold italic text).

Question #1

Alberta Education’s Accountability Framework requires detailed reporting from school boards. For example, school boards are required to submit audited financial statements to the Minister on an annual basis. The Ministry closely reviews the statements and documentation surrounding these filings and provides feedback to the boards either in the form of incentives for good performance or penalties and disincentives for poor performance. The Auditor General also reviews the work of not only the Ministry of Education but also school boards. Reviews by the Ministry or the Auditor General are not limited to financial reporting but would also include important items like governance. From reading what is publicly available, nothing seems to indicate that the CBE is in trouble in either case. Boards who are judged to be poor performers are being dealt with publicly as is the case with the Northland School Division. There may be recommendations for improvement for some other school boards that are not specifically named but there is follow up and continued monitoring of these boards. Could the CBE share any feedback that they have received from the Ministry in regards to the Accountability Framework?

Response:

Alberta Education expects a clean audit opinion (unqualified audit) annually from school districts. The CBE has experienced a clean audit for at least the last 15 years. The CBE has never experienced a performance or operational review by either Alberta Education or the Office of the Auditor General.

The Office of the Auditor General undertook a budget process review of 13 school districts (including the CBE) approximately five years ago and the CBE was identified as having exemplary budgeting and reporting processes.

In regards to the Accountability Pillar tied to financial matters, there are no prescribed stand-alone documents stated or required from Alberta Education. However, when it comes to accountability and financial reporting to Alberta Education, the Calgary Board of Education provides an Audited Financial Statement (AFS) in the format mandated by Alberta Education and as required by the School Act (November 30th of each year). Feedback is provided to all jurisdictions on the submitted AFS. The feedback is usually received two to three months after the submission of the statements. Feedback received pertains to disclosure and confirming amounts in any of the statements or schedules.

In addition, embedded in the Calgary Board of Education’s Annual Education Results Report there are financial summary details of the most recently completed fiscal year, including revenues, expenses by program, any net use or application of operating funds and the organization’s overall financial position. As mandated by Alberta Education, the organization further provides financial information regarding School Generated Funds (SGF) and under this program how revenues are generated and how funds are spent to augment student learning.

Question #2

Alberta Education has a role in supporting school boards in their financial oversight which includes reviewing budgets, quarterly updates, and audited financial statements. In response to the 2005/2006 Auditor General’s Report, Alberta Education set up a Task Force under MLA Janice Saarich, Parliamentary Assistant to the Minister of Education. Out of this 2010 report came a set of best practices to assist trustees and superintendents to improve the efficiency and effectiveness of their financial oversight activities. This checklist, found in Appendix 6 on page 53 of the report, is described as an assessment tool for current practice in oversight activities. Could the board go through the list and comment on each of the best practices as they pertain to the Calgary Board of Education.

http://www.asboa.ab.ca/PDF/jsfinancialtaskforceeditsfinal.pdf

Response:

Alberta Education has identified the budgeting and reporting processes that are required to be followed and the CBE conducts this work in alignment with these processes and ensures best practices are followed.

It is incumbent upon the Calgary Board of Education (CBE) to utilize best practice; sound financial business processes and incorporate these within the budgeting, monitoring and reporting cycles of the organization.

Below is a commentary on how the CBE incorporates these as referenced in the checklist found on page 53 of the Appendix 6 to the 2010 report identified above.

Building Financial Capacity for School Board Trustees and Superintendents – Appendix 6 – Best Practices:
Budget Assumptions

• Considerable planning for the Operating Budget takes place – usually commencing in December of each fiscal year.
• The CBE fully considers the enrolment projections forecasted for the upcoming year (all types) and these are provided to the Board in January.
• The CBE identifies and incorporates the following budget assumptions which are shared with the Board:
o CBE Finance Department considers and collaborates with Human Resources regarding resolved and expected salary increases based on comparable organizations (ie: City of Calgary) and considers general economic conditions for all staff.
o CBE considers all grid movements anticipated for staff in those specified categories.
o CBE considers all announced statutory changes (employer’s share of CPP, EI, Pension plans).
o The CBE includes revenue change expectations (uses the Provincial Budget announcement and all associated grant rate changes).
o Other income sources (non Provincial) are fully considered (ie: interest income/Fees).
o Transportation budget is considered including inflationary increases (fuel prices, etc.) and expected service offerings.
o Identifies all other contractual obligations (changes).
o The CBE builds and develops the budget in full alignment with the CBE Three-Year Education Plan.
o The Preliminary Budget and supporting assumptions and documentations are shared with the Board of Trustees as part of the budget approval process.

Budget Updates
• The entire CBE budget is recalculated in the first quarter of every school year and reflects the confirmed student count at September 30 and all program requirements based on confirmed student need (ie: demand for Full day Kindergarten.) All revenues are recalculated and the Resource Allocation Method (Fall Schools RAM process) confirms the spending at schools and any required amended operating reserve draw(s) are placed before the Board for their consideration and approval.
• The Fall Budget Update or a full Budget report, as prescribed by Alberta education, is placed before the board of Trustees for approval before being formally submitted to Alberta Education.
• The budget is updated to reflect changes for revenues and associated expenses, staffing changes and finalization of operating reserves for the previous year.

Financial Monitoring
• The Board of Trustees receives quarterly reports with projections to year end (Variances) for both the operating and capital budgets in accordance with Executive Limitation 11: Financial Condition.
• Superintendents’ Team monitors all spending for the organization as a whole and individual Superintendent’s monitor their own operating or capital budgets at the Department and Service Unit level, significant variances are investigated and mitigated as required during the year.
• Managers, Directors and Superintendents have explicit responsibility for budgetary control as articulated in their position description for their area of accountability.
• Recommendations for budget adjustments by the Board of Trustees is communicated through these quarterly reports for consideration and approval.

Financial Health
• Is a dual responsibility of the Board of Trustees and Superintendents Team. Avoiding fiscal jeopardy is always in the forefront of the operating budget process to ensure a liquid and long term sustainable service offer to students. The Board of Trustees has prescribed Executive Limitations and especially Executive Limitation 10 – Budget Process to ensure prudent budgeting processes to ensure the long term financial health of the organization. The Board monitors compliance with EL-10 on an annual basis. The Financial Health of the organization is also considered with respect to available operating reserves to support any planned expenditures on a one time basis. The Board’s auditors also monitor the health of the organization as part of the annual audit process (going concern).
• Projections are forecast out two to three years to ensure the long term fiscal health of the organization is not jeopardized.

Audit Committee
• The Board of Trustees has a fully functioning audit committee that recommends approval of the audit plan and recommends to the Board of Trustees approval of the year end financial statements. The audit committee exercises its function through approved Terms of Reference. The Audit Committee includes Board members and external public members to review internal control adequacy. Members of the Audit Committee are able to ask questions of the appointed external auditors about any audit findings or other matters with and without administration present.

Internal Audit
• The organization has an internal controls advisor position within Corporate Financial Services whose primary function is to provide general advice and best practice concepts regarding matters of internal control. In addition, the auditors through their audit findings, report potential internal control improvements to Administration.

Capacity Training for School Board Trustees and Superintendents
• Internal training is provided to new Trustees following election, and includes financial reporting, financial literacy, financial monitoring and governance by CBE staff and through the Alberta School Boards Association.