DAVE YOST Ohio Auditor of State 1 BethelTate

DAVE YOST Ohio Auditor of State { 1 Bethel-Tate Local School District Performance Audit Updated Presentation to BTLSD Board of Education

Overview of Presentation • • 2 Project History Performance Auditing Project Scope Methodology Noteworthy Accomplishments Key Recommendations Next Steps Questions and Answers

Project History • • • Early 2015 ODE Requested Audit May 2015 Initial Contact with District June 2015 Notice of Engagement Sent • • Aug 2015 New Treasurer Sep 2015 Status Update Oct 2015 Initial Draft Prepared; New Five-Year Forecast released Nov 2015 Requested Updated FY 2015 -16 Staffing Data Feb 2016 Staffing Update & Final Requested Information Complete Mar 2016 Final Draft Apr 2016 Report to be Released 3 • Entrance Conference with Board and Initial Administrative Interviews

Performance Auditing The performance audit was conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS). These standards require that AOS plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for findings and conclusions based on the audit objectives. 4

Performance Auditing • An audit engagement provides conclusions based on evaluation of sufficient, appropriate evidence against stated criteria, such as specific requirements (ORC / OAC), measures (peer averages), or defined business practices (industry standards). • • Efficiency: productive without waste Economy: thrifty and conservative use of resources Effective: producing desired result This performance audit is primarily an efficiency and economy audit. 5

Performance Auditing • Provides objective analysis so that management and those charged with governance and oversight can use the information to improve program performance and operations. • • • 6 Not a financial audit Not a compliance audit A tool for management and the public

Scope • • • Financial Systems Human Resources Facilities Transportation Food Service 7

Methodology • • • Gather and review client and peer data • • • Compare client to criteria Conduct interviews as needed Test reliability of the information Collect audit documentation Collect and identify criteria – peer information, industry benchmarks, contracts, Ohio code, best practices Hold periodic status meetings to share information Report on findings and, where applicable, recommendations 8

Noteworthy Accomplishment: Facilities Expenditure and Staffing Levels • • • BTLSD spends less for facility expenditures and staff before above benchmarked levels In-house and contracts out for major maintenance Industry benchmark indicate BTLSD needs 15. 9 FTEs • • BTLSD exceeds benchmark by employing 13. 0 FTEs Peers spend $4. 87 per square foot • 9 BTLSD spends less than peers at $4. 67 per square foot

Noteworthy Accomplishment: Transportation Preventive Maintenance (PM) Expenditure Levels: • Reduced maintenance and repairs costs by 27 percent between FY 2013 -14 and FY 2014 -15 • Reduced overall transportation costs by 7 percent • Routine transportation PM activities follow industry benchmarks • Detailed set of cost records used in maintenance 10

Recommendations R. 1 Update the strategic plan and link the budget to goals • • • 11 Strategic Plan created in 2013 No longer updated No link between plan goals and budget

Key Recommendations R. 2 Improve the accuracy and oversight of internal and external data reporting • Staff and Payroll Records • Position codes • Full-time equivalent (FTE) calculations • Payroll calculations (24 - and 26 - pay periods) • Transportation T-1 Reports • Bus student ridership counts • Mileage counts • Improve reconciliation and detail accountability and controls 12

Key Recommendations R. 3 Renegotiate costly provisions within CBAs • Sick leave accumulation • BTLSD has no limit on maximum for classified or • • certificated ORC allows 120 days (or more based on contract) Eight peers have accumulating maximums of 220 -340 days • • • Payout maximum is 25%, up to 50 days paid ORC allows 30 days Additional 20 days of payout compared to minimums • Sick leave payout 13

Key Recommendations R. 3 Renegotiate costly provisions within CBAs • Sunday / holiday pay (classified schedule) • BTLSD pays 2 x regular rate for Sundays or holidays • Holidays • Five peers pay 1 ½ x regular rate for holidays • Sundays • Only four address Sunday pay: • Two pay 2 x regular rate for Sundays • Two pay 1 ½ x regular rate for Sundays 14

Key Recommendations R. 3 Renegotiate costly provisions within CBAs • Supplemental salary schedule tied to regular salary schedule (certificated schedule) • BTLSD language states supplemental will change in • 15 correlation with negotiated changes to regular schedule Only two peer districts have this provision

Key Recommendations R. 4 Renegotiate sick leave policies and practices • FY 2014 -15 • • • 24. 4% absent 9 or more days 11. 6% absent 15 or more 40 absent before or after a holiday (6 repeatedly) • Certificated and classified required to furnish affidavit to • justify use of sick leave Physician statements only required for certificated after using 30 consecutive days and requesting more 16

Key Recommendations R. 5 Develop a comprehensive preventive facilities maintenance plan • • No formal plan No transparency on whether PM conducted Lack of PM activities can potentially create short-term savings Risk of expensive, long-term damage to facilities and equipment 17

Key Recommendations R. 6 Increase transportation fleet efficiency • • • 14 active buses (11 regular, 3 special needs) Efficiency rating lower than peer average (0. 9 vs 1. 2) Riders per bus (66. 7 vs 65. 4) Miles per bus (approx. 12, 000 vs 13, 200) Percent of capacity used for regular riders: 67. 6% Targeted benchmark based on industry standards: 80% • Adjustment needed: 1. 7 fewer buses • Eliminate 1. 0 bus • Potential Annual Savings: $19, 500 18

Key Recommendations R. 6 Increase transportation fleet efficiency 19

Key Recommendations R. 7 Implement a formal bus replacement program • BTLSD initiated a plan in 2013 • Original plan used 16, 200 per year in estimated mileage • (3 -tier) Not updated • Tiers reduced (estimated new mileage only 14, 000 per year) • Not current with odometer readings 20

Key Recommendations R. 8 Improve food service management practices • Audit initiated prior to outsourced management • Worsening financial history • Declining revenue; increasing expenditures • Reserve balance decreasing rapidly 21

Key Recommendations R. 8 Improve food service management practices • Focus on increasing participation without regard to financial and cost management • Federal food regulations blamed for lower participation 22

Key Recommendations R. 8 Improve food service management practices • Purchasing costs remaining consistent despite declining receipts 23

Key Recommendations R. 8 Improve food service management practices • Peers net $0. 04 per meal • BTLSD overspent $0. 55 per meal 24

Key Recommendations R. 8 Improve food service management practices 25

Key Recommendations R. 8 Improve food service management practices 26

Key Recommendations R. 8 Improve food service management practices 27

Key Recommendations R. 8 Improve food service management practices • Manage to cost drivers not to participation • Salaries & Wages • Served more efficiently than benchmark by 8. 9 more per labor hour • or (0. 6) FTE under expected staffing level Consistently paid more hourly than peers • Benefits • Supplies & Materials • Purchasing unchanged despite drop in actual meals served • Inventory control issues • • • 28 Little purchasing change across past three years Excessive inventory in storage Reported no spot-checks or reconciliations

Financial Solvency • • • May 2015 Forecast: FY 18 -19 Ending Balance = ($155, 714) Oct 2015 Forecast: FY 19 -20 Ending Balance = ($2. 67 M) Additional research to identify financial solvency recommendations 29

Financial Solvency Recommendations R. 9 Implement a two-year salary freeze • Teachers (Certificated) average 1. 8 -3. 2 % above regional peers in annual salaries • Classified mostly lower than peers in hourly rates • Salary freeze can save $95, 000 in FY 2016 -17 and can reduce staffing cut from 13. 0 FTEs to 10. 0 FTEs • Without implementation of staffing cut, a two-year freeze is not sufficient to eliminate projected deficit 30

Financial Solvency Recommendations R. 10 Eliminate 10. 0 FTE general education teaching positions • BTLSD is consistent with peers (20% above State minimums) • 13 FTEs higher than State minimums (at a cost of $660, 400) • Based on most conservative option for savings, can eliminate 10. 0 FTE (to 10% above State min for savings of $501, 300) • Should also consider ESP positions (9. 0 FTEs, no required State minimums) 31

Issues for Further Study: Health Care Consortium • • • Southwestern Ohio Educational Purchasing Council (EPC) has had lower rates than BTLSD’s provider, Clermont County Insurance Consortium (CCIC) Initial rates would be higher due to high historical claims Consider changing consortiums for potential future savings or if claims lower 32

Issues for Further Study Future Building Closure • Steadily decreasing enrollment indicates potential for closing a building within the decade • District should continue to monitor enrollment and develop updated projections • Use capacity analysis for any future building changes 33

Issues for Further Study Future Building Closure Building Utilization Analysis Enrollment Capacity Utilization Bick Primary Elementary 402 450 89. 3% Hill Intermediate 392 500 78. 4% Bethel-Tate Middle School 406 550 73. 8% Bethel-Tate High School 412 675 61. 0% 1, 612 2, 175 74. 1% TOTAL 34

Issues for Further Study Future Building Closure Remaining Capacity Utilization FY 2014 -15 Utilization FY 2019 -20 Close Primary School 1, 725 93. 4% 81. 8% Close Intermediate School 1, 675 96. 2% 84. 3% Close Middle School 1, 625 99. 2% 86. 9% Close High School 1, 050 153. 5% 134. 4% 35

Issues for Further Study Fuel Purchasing Options: • Fuel purchasing not bid out and prices not compared to contracted rates available through the Ohio Department of Administrative Services (DAS) • ORC § 125. 04(C) requires price comparison • Analysis showed slight savings for the District using DAS, but delivery fees would likely offset savings • Consider working with other local governments in the region for potential joint fuel deliveries 36

Issues for Further Study Administrative Salaries: • BTLSD should analyze administrator salaries, similar to the methodology used in R. 9, to ensure appropriate alignment with the salary peers. Further, given the District’s financial condition, any change negotiated in certificated or classified bargaining agreements should also be considered and applied equitably in the salary levels associate with administrative contracts. 37

Recap 10 Recommendations (3 with Cost Savings) Ø R. 6 Increase transportation fleet efficiency $19, 500 R. 9 Implement a two-year salary freeze $270, 100 R. 10 Eliminate 10. 0 FTE general education teaching positions $501, 300 Cost Savings Adjustment for both R. 9 and R. 10 ($39, 200) Ø Total Cost Savings $751, 700 Ø Ø Ø 38

Recap Revised Forecast with Audit Recommendations FY 201516 Original Ending Balance Cumulative Balance of Performance Audit Recommendations Revised Ending Fund Balance 39 FY 201617 FY 2017 -18 FY 2018 -19 FY 2019 -20 $831, 769 $331, 399 ($260, 510) ($1, 206, 850) ($2, 666, 767) N/A $598, 500 $1, 350, 600 $2, 102, 300 $2, 954, 000 $831, 769 $930, 299 $1, 090 $895, 450 $187, 233

Next Steps • Draft Review and Comments • Official Response Letter • Report Release • Follow-ups 40

Ohio Performance Team 88 East Broad Street Columbus, Ohio 43215 Kathy Frato, Project Manager Presenter Phone: (800) 282 -0370 Presenter Fax: (614) 466 -4490 Email: contactus@ohioauditor. gov 41

Ohio Auditor of State Dave Yost 88 E. Broad St. Columbus, Ohio 43215 Phone: (800) 282 -0370 Fax: (614) 466 -4490 Email: Contact. Us@Ohio. Auditor. gov www. Ohio. Auditor. gov 4 2