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HomeMy WebLinkAboutFiscal and Budgetary Policies TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS MUNICIPAL OPERATIONS I. STATEMENT OF PURPOSE The overall intent of the following Fiscal and Budgetary Policy Statements is to enable the Town to achieve a long-term stable and positive financial condition. The watchwords of the Town’s financial management include integrity, prudence, stewardship, planning, accountability, and full disclosure. The more specific purpose is to provide guidelines to the Town Manager and Finance Director in planning and directing the Town’s day-to-day financial affairs and in developing recommendations to the Town Manger and Town Council. The scope of these policies generally span, among other issues, accounting, purchasing, auditing, financial reporting, internal controls, operating and capital budgeting, revenue management, cash and investment management, expenditure control, asset management, debt management, and planning concepts, in order to: A. Present fairly and with full disclosure the financial position and results of the financial operations of the Town in conformity with generally accepted accounting principles (GAAP), and B. Determine and demonstrate compliance with finance related legal and contractual issues in accordance with provisions of the Texas Local Government Code and other pertinent legal documents and mandates. The Town Council will annually review and approve the Fiscal and Budgetary Policy Statements as part of the budget process. II. SUMMARY OF POLICY INTENDED OUTCOMES This policy framework mandates pursuit of the following fiscal objectives: A. Operating Budget: Prepare, conservatively estimate revenues, present, and adopt the Town’s annual operating plan. B. Revenues Management: Design, maintain, and administer a revenue system that will assure a reliable, equitable, diversified, and sufficient revenue stream to support desired Town services. C. Expenditure Control: Identify priority services, establish appropriate service levels, and administer the expenditure of available resources to assure fiscal stability and the effective and efficient delivery of services. D. Fund Balance/Retained Earnings: Maintain the fund balance and retained earnings of the various operating funds at levels sufficient to protect the Town’s creditworthiness as well as its financial position from emergencies. E. Debt Management: Establish guidelines for debt financing that will provide needed capital equipment and infrastructure improvements while minimizing the impact of debt payments on current revenues. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS F. Intergovernmental Relationships: Where feasible, coordinate efforts with other governmental agencies to achieve common policy objectives, share the cost of providing governmental services on an equitable basis and support favorable legislation at the State and Federal level. G. Grants: Seek, apply for and effectively administer within this policy’s guidelines, Federal, State, and foundation grants-in-aid which address the Town’s current priorities and policy objectives. H. Economic Development: Initiate where feasible, encourage, and participate in economic development efforts to create job opportunities and strengthen the local tax base and economy I. Fiscal Monitoring: Prepare and present regular reports that analyze, evaluate, and forecast the Town’s financial performance and economic condition. J. Financial Consultants: With available resources, seek out and employ the assistance of qualified financial advisors and consultants in the management and administration of the Town’s financial functions. K. Accounting, Auditing, and Financial Reporting: Comply with prevailing Federal, State and local statues and regulations. Conform to generally accepted accounting principles as promulgated by the Government Accounting Standards Board (GASB), the American Institute of Certified Public Accountants (AICPA), and the Government Finance Officers Association (GFOA). L. Capital Improvement Plan/Budget and Program: Multi-year planning, forecasting, preparation, and control of the Town’s capital improvement plan/budget. M. Capital Maintenance and Replacement: Annually review and monitor the state of the Town’s capital equipment and infrastructure, setting priorities for its replacement and renovation based on needs, finding alternatives, and availability of resources. N. Internal Controls: To establish and maintain an internal control structure designed to provide reasonable assurances that the Town’s assets are safeguarded and that the possibilities for material errors in the Town’s financial records are minimized. III. OPERATING BUDGET A. Preparation - Budgeting is an essential element of the financial planning, control and evaluation process of municipal government. The “operating budget” is the Town’s annual financial operating plan. The budget includes all of the operating departments of the Town, the debt service fund, all capital projects funds, and the internal service funds of the Town. The proposed budget will be prepared with the cooperation of all Town departments, and is submitted to the Town Manager who makes any necessary changes and transmits the document to the Town Council. A budget preparation calendar and timetable will be established and followed in accordance with State law. B. Revenue Estimates for Budgeting - In order to maintain a stable level of services, the Town shall use a conservative, objective, and analytical approach when preparing revenue estimates. The process shall include analysis of probable economic changes TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS and their impacts on revenues, historical collection rates, and trends in revenues. This approach should reduce the likelihood of actual revenues falling short of budget estimates during the year and should avoid mid-year service reductions. C. Balanced Budget - As per State Law, current operating revenues, including Property Tax Reduction Sales Tax transfers (which can be used for operations), will be sufficient to support current operating expenditures. Annually recurring revenue will not be less than annually recurring operating budget expenditures (operating budget minus capital outlay). Debt or bond financing will not be used to finance current expenditures. D. Proposed Budget Process - a proposed budget shall be prepared by the Town Manager with the participation of all of the Town’s department directors. • The proposed budget shall include four basic segments for review and evaluation: (1) personnel costs, (2) base budget for operations and maintenance costs, (3) service level adjustments for increases of existing service levels or additional services, and (4) revenues. • The proposed budget review process shall include Council participation in the review of each of the four segments of the proposed budget and a public hearing to allow for citizen participation in the budget preparation. • The proposed budget process shall allow sufficient time to provide review, as well as address policy and fiscal issues, by the Town Council. • A copy of the proposed budget shall be filed with the Town Secretary when it is submitted to the Town Council as well as placed on the Town’s website. E. Budget Adoption - Upon the determination and presentation of the final iteration of the proposed budget as established by the Council, a public hearing date and time will be set and publicized. The Council will subsequently consider a resolution which, if adopted, such budget becomes the Town’s Approved Annual Budget. The adopted budget will be effective for the fiscal year beginning October 1. The approved budget will be placed on the Town’s web site. F. Budget Award - Each year the Council approved operating budget will be submitted annually to the Government Finance Officers Association (GFOA) for evaluation and consideration for the Award for Distinguished Budget Presentation. G. Budget Amendments - Department Directors are responsible for monitoring their respective department budgets. The Finance Department will monitor all financial operations. The budget team will decide whether to proceed with a budget amendment and, if so, will then present the request to the Town Council. If the Council decides a budget amendment is necessary, the amendment is adopted in resolution format and the necessary budgetary changes are then made. H. Central Control - Modifications within the operating categories (salaries, supplies, maintenance, services, capital, etc.) can be made with the approval of the Town Manager. Modifications to reserve categories and interdepartmental budget totals will be made only by Town Council consent with formal briefing and Council action. I. Planning - The budget process will be coordinated so as to identify major policy issues for Town Council by integrating it into the Council’s overall strategic planning process for the Town. Each department shall have a multi-year business plan that integrates with the Town’s overall strategic plan. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS J. Reporting - Monthly financial reports will be prepared by the Finance Department and distributed to and reviewed by each Director. Information obtained from financial reports and other operating reports is to be used by Directors to monitor and control departmental budget. Summary financial reports will be presented to the Town Council quarterly. K. Performance Measures & Productivity Indicators - Where appropriate, performance measures and productivity indicators will be used as guidelines to measure efficiency, effectiveness, and outcomes of Town services. This information will be included in the annual budget process as needed. L. Contingent Appropriation - During the budget process, staff will attempt to establish an adequate contingent appropriation in each of the operating funds. The expenditure for this appropriation shall be made only in cases of emergency, and a detailed account shall be recorded and reported. The proceeds shall be disbursed only by transfer to departmental appropriation. All transfers from the contingent appropriation will be evaluated using the following criteria: • Is the request of such an emergency nature that it must be made immediately? • Why was the item not budgeted in the normal budget process? • Why can’t the transfer be made within the department? IV. REVENUES MANAGEMENT A. REVENUE DESIGN PARAMETER. The Town will pursue the following optimum characteristics in its revenue system: • Simplicity - The Town, where possible and without sacrificing accuracy, will strive to keep the revenue system simple in order to reduce costs, achieve transparency, and increase citizen understanding of Town revenue sources. • Certainty - A knowledge and understanding of revenue sources reliability increases the viability of the revenue system. The Town will understand, to the best of its ability, all aspects of its revenue sources and their performance, as well as enact consistent collection policies to provide assurances that the revenue base will materialize according to budgets, forecasts, and plans. • Equity - The Town shall make every effort to maintain equity in its revenue system: i.e. the Town shall seek to minimize or eliminate all forms of subsidization between entities, funds, services utilities, and customer classes within a utility. • Administration - The benefits of a revenue source will not exceed the cost of collecting that revenue. Every effort will be made for the cost of collection to be reviewed annually for cost effectiveness as a part of the Town’s indirect cost and cost of service analysis. • Adequacy, Diversification and Stability - The Town shall attempt, in as much as is practical, to achieve a balance in its revenue system. The Town shall also strive to maintain a balanced and diversified revenue system to protect the Town from fluctuations in any one source due to changes in local economic conditions which adversely impact that revenue source. B. OTHER CONSIDERATIONS. The following considerations and issues will guide the Town in its revenue policies concerning specific sources of funds: TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS • Cost/Benefit of Incentives for Economic Development - The Town will use due caution in the analysis of any tax or fee incentives that are being considered to encourage economic development. A cost/benefit (fiscal impact) analysis will be performed as a part of the evaluation for each proposed economic development project. • Non-Recurring Revenues - One-time or non-recurring revenues will not be used to finance on-going operational costs. Non-recurring revenues will be used only for one- time expenditures such as long-lived capital needs or one-time major maintenance projects that occur infrequently. Non-recurring revenues will not be used for budget balancing purposes except to cover the one-time expenditures described above. • Investment Income - Earnings from investment of available monies, whether pooled or not, will be distributed to the funds in accordance with the equity balance of the fund from which monies were provided to be invested. • Property Tax Revenues - The Town shall endeavor to avoid a property tax by revenue diversification, implementation of user fees, and economic development. C. USER-BASED (DEMAND DRIVEN) FEES AND SERVICE CHARGES. For services that are demand driven and can be associated with a user fee or charge, the direct and indirect costs of that service will be offset by a fee where possible. The Town staff will endeavor to prepare a review of all fees and charges annually, but not less than once every three years, in order to ensure that these fees provide for, at minimum, full cost recovery of service. D. ENTERPRISE FUND RATES. Utility rates and rate structures for water and sewer services will be constructed to target full cost of service recovery. Annually the Town will review and adopt water and sewer utility rates and a rate structure that generates revenue sufficient to fully cover operating expenses, meet the legal restrictions of all applicable bond covenants, provide for an adequate level of working capital, and recover applicable general/administrative costs. The Solid Waste function will have rates that fully recover all costs and maintain an adequate balance. The Cemetery Fund will be structured to operate on lot sales and endowments. • General and Administrative (G&A) Charges – Where feasible, G&A costs will be charged to all funds for services of indirect general overhead costs, which may include general administration, finance, customer billing, facility use, personnel, technology, engineering, legal counsel, and other costs as deemed appropriate. These charges will be determined through an indirect cost allocation study following accepted practices and procedures. E. INTERGOVERNMENTAL REVENUES. As a general rule, intergovernmental revenues (grants) will not be utilized for on-going operating costs. Any potential grant opportunity will be examined to identify all costs related to matching and continuation of program requirements. Staff will focus on one-time grants to avoid long-term implications. If it is determined that accepting a grant with on-going cost conditions is in the interests of the Town, all the operating and maintenance costs must be included in the financial forecast and their ultimate effect on operations and revenue requirements be known. F. REVENUE MONITORING. Revenues as they are received will be regularly compared to budgeted revenues and variances will be investigated. This process will be summarized in the appropriate budget report. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS G. SPECIAL REVENUE / EDUCATIONAL FUNDS. Where feasible and practical, General and Administrative Charges (G&A) for special revenue and educational funds of the Town of Westlake will be determined on an annual basis and transfers will be made where sufficient revenue exists to cover the associated expenditures. V. EXPENDITURE CONTROL A. Appropriations – The point of budgetary control is at the department level in the General Fund and at the fund level in all other funds. When budget adjustments among Departments and/or funds are necessary, they must be approved by the Town Council. B. Current Funding Basis - The Town shall operate on a current funding basis. Expenditures shall be budgeted and controlled so as not to exceed current revenues plus the planned use of fund balance accumulated through prior year savings. (The use of fund balance shall be guided by the Fund Balance/Retained Earnings Policy Statements.) C. Avoidance of Operating Deficits - The Town shall take immediate corrective actions if at any time during the fiscal year expenditure and revenue re-estimates are such that an operating deficit (i.e., projected expenditures in excess of projected revenues) is projected at year-end. Corrective actions can include a hiring freeze, expenditure reductions, fee increases, or use of fund balance within the Fund. D. Balance/Retained Earnings Policy- Expenditure deferrals into the following fiscal year, short- term loans, or use of one-time revenue sources shall be avoided to balance the budget. E. Maintenance of Capital Assets - Within the resources available each fiscal year, the Town shall maintain capital assets and infrastructure at a sufficient level to protect the Town's investment, to minimize future replacement and maintenance costs, and to continue service levels. F. Periodic Program Reviews - The Town Manager shall undertake periodic staff and third- party reviews of Town programs for both efficiency and effectiveness. Privatization and contracting with other governmental agencies will be evaluated as alternative approaches to service delivery. Programs which are determined to be inefficient and/or ineffective shall be reduced in scope or eliminated. G. Salary - The Town shall strive to maintain competitive salary levels for municipal employees. A salary survey will be conducted through a sampling of surrounding and comparable municipal organizations to create a comparison. The Town will strive to maintain salary levels within three percent (3%) of the median of surveyed benchmark municipalities. H. Purchasing - The Town shall make every effort to maximize any discounts offered by creditors/vendors. Staff shall also use competitive bidding in accordance to State law, as well as intergovernmental partnerships and purchasing cooperatives to attain the best possible price on goods and services. I. Prompt Payment - All invoices will be paid within 30 days of receipt in accordance with the prompt payment requirements of State law. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS VI. FUND BALANCE/RETAINED EARNINGS A. General Fund Undesignated Fund Balance - The Town shall strive to maintain the General Fund undesignated fund balance at, or in excess of, 90 days of operation. B. Retained Earnings of Other Operating Funds - In the Utility Fund, the Town shall strive to maintain positive retained earnings positions to provide sufficient reserves for emergencies and revenue shortfalls. C Use of Fund Balance - Fund Balance will be targeted to only be used with Council approval and can be only be used for the following: emergencies, non-recurring expenditures, such as technology/FF&E (furniture, fixtures and equipment), or major capital purchases that cannot be accommodated through current year savings. Should such use reduce the balance below the appropriate level set as the objective for that fund, recommendations will be made on how to restore it. The Council shall approve all commitments by formal action. The action to commit funds must occur prior to fiscal year- end, to report such commitments in the balance sheet of the respective period, even though the amount may be determined subsequent to fiscal year-end. A commitment can only be modified or removed by the same formal action. The Council delegates the responsibility to assign funds to the Town Manager or his/her designee. The Council shall have the authority to assign any amount of funds. Assignments may occur subsequent to fiscal year-end. The Council will utilize funds in the following spending order: Restricted, Committed, Assigned, Unassigned VII. DEBT MANAGEMENT A. Debt Issuance Analysis - All consideration of debt issuance for major capital assets will be prepared within the framework of a Council approved multi-year capital improvement plan and forecast for all Town facilities and infrastructure. B. Analysis of Debt Issuance and Debt Issuance Alternatives - Staff will explore alternatives to the issuance of debt for capital acquisitions and construction projects. These alternatives will include, but not be limited to, (1) grants- in- aid, (2) use of reserves, (3) use of either current on-going general revenues or one-time revenues, (4) contributions from developers and others, (5) leases, (6) user fees, and (7) impact fees. C. Use of Debt Financing - The useful life of the asset or project shall, at a minimum, exceed the payout schedule of any debt the Town assumes. Debt financing instruments to be considered by the Town may include: • General obligation bonds - These must be authorized by a vote of the citizens of Westlake. • Revenue bonds - These bonds generate capital requirements necessary for continuation or expansion of a service which produces revenue and for which the asset may reasonable be expected to provide for a revenue stream to fund the debt service requirement. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS • Certificates of obligation - These can be authorized by Council approval with debt service by either general revenues or backed by a specific revenue stream or a combination of both. • Lease/purchase agreements - These shall only be used to purchase capital assets that cannot be financed from either current revenues or fund balance/retained earnings and to fund infrastructure improvements and additions. D. Assumption of Additional Debt - The Town shall not assume more tax-supported general purpose debt than it retires each year without first conducting an objective analysis as to the community's ability to assume and support additional debt service payments. E. Affordability Targets - The Town shall use an objective multi-year analytical approach to determine whether it can afford to assume new general purpose debt beyond what it retires each year. This process shall compare generally accepted standards of affordability to the current values for the Town. The process shall also examine the direct costs and benefits of the proposed expenditures. The decision on whether or not to assume new debt shall be based on these costs and benefits and on the Town's ability to "afford” new debt as determined by the aforementioned standards. The Town shall strive to achieve and/or maintain these standards at a low to moderate classification. F. Debt Structure - The Town shall structure its debt payment schedules for general purpose debt to ensure level principal repayment schedules. The Town shall not assume any debt with "balloon' repayment schedules which consist of low annual payments and one large payment of the balance due at the end of the term. While balloon payment structures minimize the size of debt payments during the period, they force a large funding requirement on the budget of the final year. Given the uncertainties of the future, level payment schedules improve budget planning and financial management. G. Sale Process - The Town shall use a competitive bidding process in the sale of debt unless the nature of the issue warrants a negotiated bid. The Town shall award bonds based on a true interest cost (TIC) basis as long as the financial advisor agrees that the TIC basis can satisfactorily determine the lowest and best bid. H. Bond Rating Agencies Presentations - Full disclosure of operations and open lines of communication shall be made to the bond rating agencies. Town staff, with assistance of financial advisors, shall prepare the necessary materials and presentation to the bond rating agencies. I. Continuing Disclosure - The Town is committed to continuing disclosure of financial and pertinent credit information relevant to the Town's outstanding securities. J. Debt Refunding - Town staff and the financial advisor shall monitor the municipal bond market for opportunities to obtain interest savings by refunding outstanding debt. As a general rule, the present value savings of a particular refunding should exceed 3.5% of the refunded maturities. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS VIII. INTERGOVERNMENTAL RELATIONSHIPS The Town will pursue coordinated efforts with other governmental agencies to achieve common policy objectives, share the cost of providing government services on an equitable basis, and support favorable legislation at the State and Federal levels. A. Inter-local Cooperation in Delivering Services - In order to promote the effective and efficient delivery of services, the Town shall actively seek to work with other local jurisdictions in joint purchasing consortia, sharing facilities, sharing equitably the costs of service delivery, and developing joint programs to improve service to its citizens. B. Legislative Program - The Town shall cooperate with other jurisdictions to actively oppose any State or Federal regulation or proposal that mandates additional Town programs or services and does not provide the funding to implement them. Conversely, as appropriate, the Town shall support legislative initiatives that provide more funds for priority local programs. IX. GRANTS A. Grant Guidelines - The Town shall apply, and facilitate the application by others, for only those grants that are consistent with the objectives and high priority needs previously identified above in these policies. The potential for incurring on-going costs, to include the assumption of support for grant funded positions from local revenues, will be considered prior to applying for a grant. B. Grant Review - All grant submittals shall be reviewed for their cash match requirements, their potential impact on the operating budget, and the extent to which they meet the Town's policy objectives. If there are cash match requirements, the source of funding shall be identified prior to application. Staff will focus on one-time grants to avoid long-term implications related to additional expenditures in future years. C. Grant Program Termination - The Town shall terminate grant funded programs and associated positions when grant funds are no longer available unless alternate funding is identified. X. ECONOMIC DEVELOPMENT A. Positive Business Environment - The Town shall endeavor, through its regulatory and administrative functions, to provide a positive business environment in which local businesses can grow, flourish and create jobs. The Town Council and Town staff will be sensitive to the needs, concerns and issues facing local businesses. B. Commitment to Business Expansion, Diversification, and Job Creation - The Town shall encourage and participate in economic development efforts to expand Westlake's economy to increase local employment. These efforts shall not only focus on newly developing areas but also on other established sections of Westlake where development can generate additional jobs and other economic benefits. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS C. Coordinate Efforts with Other Jurisdictions - The Town's economic development program shall encourage close cooperation with other local jurisdictions, chambers of commerce, and groups Interested in promoting the economic well-being of this area. D. Cost/Benefit of Incentives for Economic Development - The Town will use due caution in the analysis of any tax or fee incentives that are used to encourage economic development. A cost/benefit (fiscal impact) analysis will be performed as part of such evaluation for each prospect. Economic development agreements will contain performance language as to the business’s proposed economic impact to Westlake in exchange for Town incentives with adequate “claw-back” provisions for the Town. XI. FISCAL MONITORING A. Financial Status and Performance Reports - Quarterly reports comparing expenditures and revenues to current budget, projecting expenditures and revenues through the end of the year, noting the status of fund balances to include dollar amounts and percentages, and outlining any remedial actions necessary to maintain the Town's financial position shall be prepared for review by the Town Manager and the Council. B. Compliance with Council Policy Statements - The Fiscal and Budgetary Policies will be reviewed annually by the Council and updated, revised or refined as deemed necessary. Policy statements adopted by the Council are guidelines, and occasionally, exceptions may be appropriate and required. However, exceptions to stated policies will be specifically identified, and the need for the exception will be documented and fully explained. XII. FINANCIAL CONSULTANTS To employ the assistance of qualified financial advisors and consultants as needed in the management and administration of the Town's financial functions. These areas include but are not limited to investments, debt administration, financial accounting systems, program evaluation, and financial impact modeling. Advisors shall be selected on a competitive basis using objective questionnaires and requests for proposals based on the scope of the work to be performed. XIII. ACCOUNTING, AUDITING, AND FINANCIAL REPORTING To comply with prevailing local, state, and federal regulations relative to accounting, auditing, and financial reporting. Accounting practices and financial reporting shall conform to generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants, (AICPA), and the Government Finance Officers Association (GFOA). The Board shall select an independent firm of certified public accountants to perform an annual audit of all operations A. Accounting – The Town is solely responsible for the recording and reporting of its financial affairs, both internally and externally. The Town’s Finance Director is responsible for establishing the structure for the Town’s chart of accounts and for assuring that procedures are in place to properly record financial transactions and report the Town’s financial position. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS B. External Auditing - Town will be audited annually by outside independent accountants (auditors). The auditors must be a CPA firm and must demonstrate significant experience in the field of local government auditing. They must conduct the town’s audit in accordance with generally accepted auditing standards and be knowledgeable in the Government Finance Officers Association Certificate of Achievement program. The auditors’ report on Town’s financial statements will be completed within a timely period of the Town’s fiscal year-end. The auditor will jointly review the management letter with the Town Council, if necessary. In conjunction with this review, the Finance Director shall respond in writing to the Town Council regarding the auditor’s Management Letter, addressing the issued contained therein. The Town will not require auditor rotation, but will circulate request for proposal for audit services on a periodic basis as deemed appropriate. C. External Financial Reporting - Town will prepare and publish a comprehensive annual financial report (CAFR). The CAFR will be prepared in accordance with generally accepted accounting principles and will be presented annually to the Government Finance Officers Association (GFOA) for evaluation and awarding of the Certificate of Achievement for Excellence in Financial Reporting. D. Responsibility of Auditor to Town Council – The auditor is retained by and it accountable directly to the Town Council and will have access to direct communication with the Town Council if the Town Staff is unresponsive to auditor recommendations or if the auditor considers such communication necessary to fulfill its legal and professional responsibilities. E. Internal Financial Reporting - The Finance Department will prepare internal financial reports sufficient for management to plan, monitor, and control Town’s financial affairs. XIV. CAPITAL BUDGET AND PROGRAM A. Preparation - The Town’s capital budget will include all capital projects funds and all capital resources. While the capital budget will be prepared annually on a project basis, it will be based on an on-going, multi-year capital improvement plan (CIP) that shows all funded and unfunded projects as identified by staff for all Town facilities and infrastructure. The multi-year CIP will be reviewed annually, updated by staff and presented to the Council for its review and approval. The annual capital budget will be prepared by the Finance Department with the involvement of responsible departments based on the multi- year CIP. B. Control - All capital project expenditures must be appropriated in the capital budget. The Finance Director must certify the availability of resources before any capital project contract is presented to the Town Council for approval. C. Program Planning - The capital budget will be taken from the capital improvements project plan for future years. The planning time frame for the capital improvements project plan should normally be five years, with a minimum of at least three years. The replacement and maintenance for capital items should also be projected for the next five years. Future maintenance and operational costs will be considered so that these costs can be included as appropriate in the annual budget. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS D. Financing Programs - Where applicable and with Council approval, impact fees, pro-rata charges, assessments, or other fees should be used to fund capital projects which have a primary benefit to specific, identifiable property owners. • Recognizing that long-term debt is usually a more expensive financing method, alternative financing sources will be explored before debt is issued. When debt is issued, it will be used to acquire major assets with expected lives which equal or exceed the average life of the debt issue. E. Reporting - Periodic financial reports will be prepared to enable the department directors to manage their capital budgets. Summary capital project status reports will be presented to the Town Council quarterly. XV. CAPITAL MAINTENANCE AND REPLACEMENT The Town recognizes that deferred maintenance and not anticipating capital replacement needs increases future capital costs. Annually, available funds will be evaluated during the budget process and a percentage of each operating fund’s budget will be recommended to the Council for transfer. Upon approval by the Council, the recommended amount will be transferred to the appropriate funds (General or Utility Maintenance Replacement Fund) for major maintenance/ replacement of street, building roof, flooring, air conditioning, equipment, etc. XVI. INTERNAL CONTROLS A. Written Procedures - Whenever possible, written procedures will be established and maintained by the Finance Director for all functions involving purchasing, cash handling and/or accounting throughout the Town. These procedures will embrace the general concepts of fiscal responsibility set for in this policy statement. B. Department Directors’ Responsibilities - Each department director is responsible for ensuring that good internal controls are followed throughout his/her department, that all directives or internal controls are implemented, and that all independent auditor internal control recommendations are addressed. Departments will develop and periodically update written internal control procedures. XVII. ASSET MANAGEMENT A. Investments – The Finance Director shall promptly invest all Town funds with the depository bank in accordance with the provisions of the current Bank Depository Agreement or in any negotiable instrument authorized by the Town Council. Further, investments shall be made in accordance with the Investment Policy approved by the Town Council for the Town of Westlake that meets the requirements of the Public Funds Investment Act (PFIA), Section 2256 of the Texas Local Government Code. The Finance Director will issue quarterly reports on investment activity to the Town Council. B. Cash Management - Town’s cash flow will be managed to maximize the cash available to invest. Such cash management will entail the centralization of cash collections, where feasibility, including utility bills, building and related permits and license, fines, fees, and other collection offices as appropriate. Periodic review of cash flow position will be performed to determine performance of cash management and conformance to TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS investment policies. The underlying theme will be that idle cash will be invested with the intent to (1) safeguard assets, (2) maintain liquidity, and (3) maximize return. C. Fixed Assets and Inventory - Such assets will be reasonably safeguarded and properly accounted for and prudently insured. The fixed asset inventory will be updated regularly. D. Capitalization Criteria – For purposes of budgeting and accounting classification, the following criteria must be capitalized: • The asset is owned by the Town of Westlake • The expected useful life of the asset must be longer than one year, or extend the life on an identifiable existing asset by more than one year • The original cost of the asset must be at least $5,000 • The asset must be tangible • On-going repairs and general maintenance are not capitalized • New Purchases – All costs associated with bringing the asset into working order will be capitalized as part of the asset cost. This includes start up costs, engineering or consultant type fees as part of the asset cost once the decision or commitment to purchase the asset is made. The cost of land acquired should include all related costs associated with its purchase • Improvements and Replacement – Improvement will be capitalized when they extend the original life of an asset or when they make the asset more valuable than it was originally. The replacement of assets components will normally be expenses unless they are a significant nature and meet all the capitalization criteria. E. Computer System/Data Security – The Town shall provide security of its computer/network system and data files through physical and logical security systems that will include, but are not limited to: network user authentications, firewalls, content filtering, spam/virus protection, and redundant data backup. ACADEMIC OPERATIONS I. STATEMENT OF PURPOSE The broader intent of the following Fiscal and Budgetary Policy Statements is to enable the Academy to achieve a long-term stable and positive financial condition. The watchwords of the Academy’s financial management include integrity, prudent, stewardship, planning, accountability, and full disclosure. The more specific purpose is to provide guidelines to the Finance Director in planning and directing the Academy’s day-to-day financial affairs and in developing recommendations to the Academy Superintendent or his designate and Academy Board of Trustees. The scope of these policies generally span, among other issues, accounting, purchasing, auditing, financial reporting, internal controls, operating budgeting, revenue management, cash and investment management, expenditure control, asset management, debt management, and planning concepts, in order to: • Present fairly and with full disclosure the financial position and results of the financial operations of the Academy in conformity with generally accepted accounting principles (GAAP), and TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS • Determine and demonstrate compliance with finance related legal and contractual issues in accordance with provisions of the Texas Local Government Code and other pertinent legal documents and mandates. The Academy Board of Trustees will annually review and approve the Fiscal and Budgetary Policy Statements as part of the budget process. II. SUMMARY OF POLICY INTENDED OUTCOMES This policy framework mandates pursuit of the following fiscal objectives: Operating Budget: Prepare conservatively, estimate revenues, present and adopt the Academy’s annual operating plan. Revenues Management: Design, maintain and administer a revenue system that will assure a reliable, equitable, diversified and sufficient revenue stream to support desired Academy services. Expenditure Control: Identify priority services, establish appropriate service levels and administer the expenditure of available resources necessary to assure fiscal stability and the effective and efficient delivery of services. Fund Balance: Maintain the fund balance of the various operating funds at levels sufficient to protect the Academy’s creditworthiness as well as its financial position from emergencies. Intergovernmental Relationships: Coordinate efforts with other agencies to achieve common policy objectives, share the cost of providing governmental services on an equitable basis and support favorable legislation at the State and Federal level. Grants: Seek, apply for and effectively administer Federal, State, and foundation grants-in-aid which address the Academy’s current priorities and policy objectives. Fiscal Monitoring: Prepare and present regular reports that analyze, evaluate, and forecast the Academy’s financial performance and economic condition. Financial Consultants: With available resources, seek out and employ the assistance of qualified financial advisors and consultants in the management and administration of the Academy’s financial functions. Accounting, Auditing, and Financial Reporting: Comply with prevailing Federal, State and local statues and regulations. Conform to generally accepted accounting principles as promulgated by the Government Accounting Standards Board (GASB), the American Institute of Certified Public Accountants (AICPA), and the Government Finance Officers Association (GFOA). Internal Controls: To establish and maintain an internal control structure designed to provide reasonable assurances that the Academy’s assets are safeguarded and that the possibilities for material errors in the Academy’s financial records are minimized. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS III. OPERATING BUDGET PREPARATION – BUDGETING IS AN ESSENTIAL ELEMENT OF THE FINANCIAL PLANNING, CONTROL, AND EVALUATION PROCESS. THE “OPERATING BUDGET” IS THE ACADEMY’S ANNUAL FINANCIAL OPERATING PLAN RELATED TO EDUCATIONAL SERVICE INSTRUCTIONAL COSTS. The Academy operating budget is legally required to include the Academy’s General, Debt Service, and Food Service Funds. Currently, Westlake Academy only has one fund, the General Fund, which must be legally adopted annually. The Academy budgets the Special Revenue Funds for informational purposes only. Information to be prepared includes documentation related to Service Level Adjustments (SLAs) for increases to existing service levels or additional services, position control schedules, general and administrative cost implications, etc. will be submitted and reviewed during the budget process. SLA’s related to new position requests will include an assessment of their impact on additional internal services necessary to support these positions as it relates to General & Administrative (G&A) charges in the Academy budget ( subject to funding availability) to fund these costs. A budget preparation calendar and timetable will be established and followed in accordance with State law. Revenue Estimates for Budgeting - In order to maintain a stable level of services, the Academy shall use a conservative, objective, and analytical approach when preparing revenue estimates. The process shall include analysis of probable economic changes and their impacts on revenues, number of students, and trends in revenues. It will also include an assessment of the State legislative environment related to public charter school funding levels. This approach should reduce the likelihood of actual revenues falling short of budget estimates during the year and should avoid mid- year service reductions. Balanced Budget – A balanced budget is a budget with total expenditures not exceeding total revenues and monies available in the fund balance within an individual fund. Proposed Budget Content and Process – A proposed budget shall be prepared by the Superintendent or his designate with the participation of the Academy’s Leadership Team, Finance Director and Academy staff, and then submitted to the Superintendent for review. Following the Superintendent’s review, the proposed budget will be presented to the Board for its consideration. The proposed budget shall include five basic segments for review and evaluation: (1) personnel costs, (2) base budget for operations and maintenance costs, (3) service level adjustments for increases of existing service levels or additional services, (4) revenues, and (5) General Administrative (G&A) costs. The proposed budget review process shall include Board of Trustees review of each of the four segments of the proposed budget and a public hearing to allow for citizen participation in the budget preparation process. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS Concurrent with the Academy budget preparation, Town staff will identify and provide to the Board all direct Academy expenses contained in the Town’s municipal budget. The proposed budget process shall allow sufficient time to provide review as well as address policy and fiscal issues by the Board of Trustees. A copy of the proposed budget shall be filed with the Town Secretary when it is submitted to the Board of Trustees as well as placed on the Academy’s website. Budget Adoption - Upon the determination and presentation of the final iteration of the proposed budget document as established by the Board of Trustees, a public hearing will be set and publicized. The Board will subsequently consider a resolution which, if adopted, such budget becomes the Academy’s Annual Budget. The adopted budget will be effective for the fiscal year beginning September 1. Budget Amendments – The Superintendent or his designate and Finance Department will monitor all financial operations. A school district must amend the official budget before exceeding a functional expenditure category, i.e., instruction, administration, etc. in the total budget. The budget team will decide whether to proceed with the budget amendment and, if so, will then present the request to the Board of Trustees. If the Board decides a budget amendment is necessary, the amendment is adopted in resolution format and the necessary budgetary changes are then made. Planning – The budget process will be coordinated so as to identify major policy issues for the Board of Trustees by integrating it into the Board’s overall strategic planning process for the Academy. Reporting - Monthly financial reports will be prepared by the Finance Department and distributed to the Superintendent or his designate. Information obtained from financial reports and other operating reports is to be used by personnel to monitor and control the budget. Summary financial reports will be presented to the Board quarterly. IV. REVENUES MANAGEMENT A. REVENUE DESIGN PARAMETERS. The Academy will strive for the following optimum characteristics in its revenue system: • Simplicity - The Academy, where possible and without sacrificing accuracy, will strive to keep the revenue system simple in order to reduce costs, achieve transparency, and increase parent and citizen understanding of Academy revenue sources. • Certainty - A thorough knowledge and understanding of revenue sources increases the reliability of the revenue system. • Administration - The benefits of a revenue source will exceed the cost of administering that revenue. Every effort will be made for the cost of administration to be reviewed annually for cost effectiveness as a part of the indirect cost and cost of service analysis. • Equity - The Academy shall make every effort to maintain equity in its revenue system: i.e. the Academy shall seek to minimize or eliminate all forms of subsidization between entities. • Adequacy, Diversification and Stability – To the extent practical, the Academy shall attempt to achieve a balance in its revenue system. The Academy shall also strive to maintain a balanced and diversified revenue system to protect the Academy from fluctuations in any one source due to changes in local economic conditions which adversely impact that source. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS B. REVENUE CLASSIFICANTION AND SOURCES. The revenues received by Westlake Academy are classified into one of three broad categories: Federal, State or Local and come from the following sources : • State Education funding • State and Federal Grants • General Donations – The Academy recognizes that private donations comprise a significant part of the Westlake Academy budget. All funds received will become part of the budget and be subject to appropriation for Academy general operations. o Westlake Academy Foundation o House of Commons o Westlake Academy Athletic Club o Local Merchants • Specific Purpose Donations – Funds donated for a specific purpose C. REVENUE MONITORING. Revenues as they are received will be regularly compared to budgeted revenues and variances will be investigated. This process will be summarized in the appropriate budget report. V. EXPENDITURE CONTROL • Appropriations – The point of budgetary control is at the function level in the General Fund and Special Revenue Funds. When budget adjustments among functions are necessary, they must be approved by the Board of Trustees. • Current Funding Basis - The Academy shall operate on a current funding basis. Expenditures shall be budgeted and controlled so as not to exceed current revenues plus the planned use of fund balance accumulated through prior year savings. (The use of fund balance shall be guided by the Fund Balance/Retained Earnings Policy Statements.) • Avoidance of Operating Deficits - The Academy shall take immediate corrective actions if at any time during the fiscal year expenditure and revenue re-estimates are such that an operating deficit (i.e., projected expenditures in excess of projected revenues) is projected at year-end. Corrective actions can include a hiring freeze, expenditure reductions, or use of fund balance within the Fund. Use of fund balance must be recommended by the Superintendent and approved by the Board of Trustees.  Expenditure deferrals into the following fiscal year, short-term loans, or use of one- time revenue sources shall be avoided to balance the budget. • Periodic Program Reviews - The Superintendent or his designate shall undertake periodic staff and third-party reviews of Academy programs for both efficiency and effectiveness. Where appropriate, privatization and contracting with other governmental agencies will be evaluated as alternative approaches to service delivery. Service delivery which is determined to be inefficient and/or ineffective shall be reduced in scope or eliminated. • General and Administrative (G&A) Charges – To the extent practical, an annual analysis of G&A charges will be performed and funding allocated, if available. The purpose of determining the associated costs for G&A charges is to identify the full operational costs of the entity in question. The analysis shall involve an objective consideration of the service demands currently being met by municipal staff to support Academy operations and a determination of factors that will continue to affect and increase the time needed for the performance of these services. For example, new Academy staff requires additional support staff time to perform tasks related to insurance, payroll, etc. TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS Where feasible, G&A costs will be charged to all funds for services of indirect general overhead costs, which may include general administration, finance, facility use, personnel, technology, engineering, legal counsel, and other costs as deemed appropriate. If funding is not available, these costs will be shown below the line of the financial statement in the five-year financial forecast in order to promote transparency and provide the Board with a full cost accounting of services. The charges will be determined through an indirect cost allocation study following accepted practices and procedures. • Purchasing - The Academy shall make every effort to maximize any discounts offered by creditors/vendors. Staff shall also use purchasing cooperatives as well as competitive bidding in accordance with State law to attain the best possible price on goods and services. • Prompt Payment - All invoices will be paid within 30 days of receipt in accordance with the prompt payment requirements of State law. • Salary - The Academy shall strive to maintain competitive salary levels for faculty and staff. A salary survey will be conducted annually, sampling surrounding Independent School Districts and Charter Schools, to create a comparison. The Academy will strive to maintain salary levels within three percent (3%) of the median of surveyed schools. (Existing language) VI. FUND BALANCE • Fund Balance Reporting - The District shall report governmental fund balances per GASB 54 definitions in the balance sheet as follows: Nonspendable, Restricted, Committed, Assigned, and Unassigned. • General Fund Unassigned Fund Balance - The Academy shall strive to maintain the General Fund unassigned fund balance at 45 days of operation. • Use of Fund Balance - Fund Balance will be targeted to only be used with Board approval and can be only be used for the following: emergencies, non-recurring expenditures, such as technology/FF&E (furniture, fixtures and equipment), or major capital purchases that cannot be accommodated through current year savings. Should such use reduce the balance below the appropriate level set as the objective for that fund, recommendations will be made on how to restore it. The Board of Trustees shall approve all commitments by formal action. The action to commit funds must occur prior to fiscal year-end, to report such commitments in the balance sheet of the respective period, even though the amount may be determined subsequent to fiscal year-end. A commitment can only be modified or removed by the same formal action. The Board of Trustees delegates the responsibility to assign funds to the Superintendent or his/her designee. The Board of Trustees shall have the authority to assign any amount of funds. Assignments may occur subsequent to fiscal year-end. The Board of Trustees will utilize funds in the following spending order: Restricted, Committed, Assigned, Unassigned VII. INTERGOVERNMENTAL RELATIONSHIPS • Inter-local Cooperation in Delivering Services - In order to promote the effective and efficient delivery of services, the Academy shall actively seek to work with other local entities in joint purchasing consortium, sharing facilities, sharing equitably the costs of service delivery, and developing joint programs to improve service to its students. • Legislative Program - The Academy shall cooperate with other entities to actively oppose any state or federal regulation or proposal that mandates additional Academy programs or TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS services and does not provide the funding to implement them. Conversely, as appropriate, the Academy shall support legislative initiatives that provide additional funding. VIII. GRANTS • Grant Guidelines - The Academy shall apply, and facilitate the application by others, for only those grants that are consistent with the objectives and high priority needs previously identified by Academy Board of Trustees. The potential for incurring ongoing costs, to include the assumption of support for grant funded positions from local revenues, will be considered prior to applying for a grant. • Grant Review - All grant submittals shall be reviewed for their cash match requirements, their potential impact on the operating budget, and the extent to which they meet the Academy's policy objectives. If there are cash match requirements, the source of funding shall be identified prior to application. Staff will focus on one-time grants to avoid long-term implications related to additional expenditures in future years. • Grant Program Termination - The Academy shall terminate grant funded programs and associated positions when grant funds are no longer available unless alternate funding is identified and obtained. IX. FISCAL MONITORING • Financial Status and Performance Reports - Quarterly reports comparing expenditures and revenues to current budget, noting the status of fund balances to include dollar amounts and percentages, and outlining any remedial actions necessary to maintain the Academy's financial position shall be prepared for review by the Superintendent and the Board of Trustees. Student roster information will also be included in the quarter reports submitted to the Board of Trustees. • Compliance with Board Policy Statements - The Fiscal and Budgetary Policies will be reviewed annually by the Board of Trustees and updated, revised or refined as deemed necessary. Policy statements adopted by the Board of Trustees are guidelines, and occasionally, exceptions may be appropriate and required. However, exceptions to stated policies will be specifically identified, and the need for the exception will be documented and fully explained. X. FINANCIAL CONSULTANTS The Academy employs the assistance of qualified financial advisors and consultants as needed in the management and administration of the Academy's financial functions. These areas include but are not limited to investments, debt administration, financial accounting systems, program evaluation, and financial impact modeling. Advisors shall be selected on a competitive basis using objective questionnaires and requests for proposals based on the scope of the work to be performed. XI. ACCOUNTING, AUDITING, AND FINANCIAL REPORTING The Academy strives to comply with prevailing local, state, and federal regulations relative to accounting, auditing, and financial reporting. Accounting practices and financial reporting shall conform to generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS Accountants, (AICPA), and the Government Finance Officers Association (GFOA). The Board shall select an independent firm of certified public accountants to perform an annual audit of all operations. Required Texas Education Agency (TEA) account coding will be used for all revenue and expenditure reporting. • Accounting - Currently, the Education Service Center (Region XI) books all revenues and expenditures, and prepares bank reconciliations. Academy staff is responsible for all coding and approval of expenditures and revenues. Documentation and coding of deposits are forwarded to the Town’s Finance Department for review and preparation of deposit slips. Town’s Finance Director and staff are responsible for review and transfer of invoices and other documentation to the Service Center for processing as well as the physical deposit of funds. It is the responsibility of the Superintendent or his designate and Academy staff to review the monthly reports for any discrepancies and report to the Town’s Finance Director for analysis and re-class of questioned bookings, if appropriate. • External Auditing - Academy will be audited annually by outside independent accountants (auditors). The auditors must be a CPA firm and must demonstrate significant experience in the field of local government auditing. They must conduct the Academy’s audit in accordance with generally accepted auditing standards. The auditors’ report on Academy’s financial statements will be completed within a timely period of the Academy’s fiscal year-end. The auditor will jointly review the management letter with the Academy Board of Trustees, if necessary. In conjunction with this review, the Finance Director shall respond in writing to the Academy Board of Trustees regarding the auditor’s Management Letter, addressing the issued contained therein. The Academy will not require auditor rotation, but will circulate request for proposal for audit services on a periodic basis as deemed appropriate. • Responsibility of Auditor to Academy Board of Trustees - The auditor is retained by and is accountable directly to the Academy Board of Trustees and will have access to direct communication with the Academy Board of Trustees if the Academy Staff is unresponsive to auditor recommendations or if the auditor considers such communication necessary to fulfill its legal and professional responsibilities. • Internal Financial Reporting - The Finance Department will prepare internal financial reports sufficient for management to plan, monitor, and control Academy’s financial affairs. XII. INTERNAL CONTROLS • Written Procedures - Whenever possible, written procedures will be established and maintained by the Finance Director and utilized by all Academy personnel for all functions involving purchasing, cash handling and/or accounting throughout the Academy. These procedures will embrace the general concepts of fiscal responsibility set forth in this policy statement. • Academy Staff Responsibilities - The Superintendent or his designate, in consultation with the Finance Director, will be responsible for ensuring that appropriate internal controls are followed throughout the Academy, that all directives or internal controls are implemented, and that all independent auditor internal control recommendations are addressed. Staff will develop and periodically update written internal control procedures. XIII. ASSET MANAGEMENT • Investments – The Finance Director shall promptly invest all Academy funds with the depository bank in accordance with the provisions of the current Bank Depository Agreement or in any negotiable instrument authorized by the Academy Board of Trustees. The Academy Board of Trustees has formally approved a separate Investment Policy for the Academy of Westlake that meets the requirements of the Public Funds Investment Act TTOOWWNN OOFF WWEESSTTLLAAKKEE // WWEESSTTLLAAKKEE AACCAADDEEMMYY FFIISSCCAALL AANNDD BBUUDDGGEETTAARRYY PPOOLLIICCIIEESS (PFIA), Section 2256 of the Texas Local Government Code. The Academy’s investment practices will be conducted in accordance with this policy. The Finance Director will issue quarterly reports on investment activity to the Academy Board of Trustees. • Cash Management - Academy’s cash flow will be managed to maximize the cash available to invest. Such cash management will entail the centralization of cash collections, where feasible, including field trips, and other collection offices as appropriate. Periodic review of cash flow position will be performed to determine performance of cash management and conformance to investment policies. The underlying theme will be that idle cash will be invested with the intent to (1) safeguard assets, (2) maintain liquidity, and (3) maximize return. • Fixed Assets and Inventory - Such assets will be reasonably safeguarded and properly accounted for and prudently insured. The fixed asset inventory will be updated regularly. • Capital Assets – Currently all capital assets of Westlake Academy are owned and purchased by the Town of Westlake. In subsequent years, additional asset purchases may be paid with Westlake Academy funds. • Capitalization Criteria – For purposes of budgeting and accounting classification, the following criteria must be capitalized: o The asset is owned by the Westlake Academy o The expected useful life of the asset must be longer than one year, or extend the life on an identifiable existing asset by more than one year o The original cost of the asset must be at least $5,000 o The asset must be tangible o On-going repairs and general maintenance are not capitalized o New Purchases – All costs associated with bringing the asset into working order will be capitalized as a part of the asset cost. This includes startup costs, engineering or consultant type fees as part of the asset cost once the decision or commitment to purchase the asset is made. The cost of land acquired should include all related costs associated with its purchase o Improvements and Replacement – Improvement will be capitalized when they extend the original life of an asset or when they make the asset more valuable than it was originally. The replacement of assets components will normally be expenses unless they are a significant nature and meet all the capitalization criteria. • Computer System/Data Security – The Academy shall provide security of its computer/network system and data files through physical and logical security systems that will include, but are not limited to: network user authentications, firewalls, content filtering, spam/virus protection, and redundant data backup.