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Budget & Finance

Budget & Finance Dollars & Sense with CFO Brad Grundy

Dollars & Sense with CFO Brad Grundy

​Chief Financial Officer Brad Grundy responds to some of the comments received via email and our budget feedback form. Please note, comments received from the public are not edited for spelling or clarity. All personal information is removed. 

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​ 


Weighted Moving Average (WMA) funding framework for school boards

Apr. 9, 2021

ResponseWhen the provincial budget gets announced, you will commonly see the top-line budget figure reported in the news. For Alberta Education, that means the total amount allocated to all school jurisdictions in the province. What follows is often referred to as an individual funding profile. That profile provides each school board with their detailed funding. 

Many people are curious to know the basis on which individual school jurisdictions, such as the Calgary Board of Education, are funded. Hopefully, the following will bring a little clarity to a somewhat complex process.

To determine how much funding each school jurisdiction gets, Alberta Education uses a funding framework that depends on myriad factors to determine who gets how much. It is also important to note that the funding provided by Alberta Education represents more than 90 per cent of a school division’s total funding.

Typically, government funding frameworks are based on the number of students in the respective school jurisdiction. This makes sense as we try to match the number of students with the number of teachers, support staff and other resources necessary to support student success.

Accordingly, most provincial governments provide a dollar amount per actual enrolled student. Historically, this is how Alberta has done it. 

In early 2020, Alberta Education implemented a different funding framework that took effect for the 2020-21 school year. 

Alberta Education calls this framework the “Weighted Moving Average” or WMA model.

Alberta Education now funds based on an enrolment calculation of three school years rather than actual number of enrolled students.

Alberta Education has stated three objectives for the new framework:

  • Give boards ​more predictability in planning and budgeting processes. 
  • Reduce mid-year adjustments to budgets and staffing.
  • Better align the school year and the government’s fiscal year.

The WMA calculation is based on past, present and future school year enrolment. 

  • ​First, Alberta Education needs the school jurisdiction’s actual enrolment (let’s call it students in seats) for the prior school year. 
  • Second, the ministry needs the estimated enrolment for the school year in which the budget is delivered.  
  • And, finally, government officials need the projected number of students in seats for the upcoming school year.

With that information in hand, Alberta Education applies some weightings (expressed as a percentage)​

​School yea​r
​Weighted factor
​Enrolment count
​Previous
​20%​
​Actual
​Current
​30%
​Estimates
​Next
​50%
​​Projection


Once the calculated n
umber of funded students is determined, Alberta Education applies a number of funding rates to arrive at a school jurisdiction’s total funding. 

As half of the funding formula is based on a projection, the projected enrolment count will be compared against the actual count at the end of September. Any differences will be will be accounted for in the calculation of WMA for the subsequent school year.

While the model provides stable, predictable funding based on three-years, it still has impacts on jurisdictions particularly those experiencing a significant decline or growth in enrolment. Under the WMA model, school jurisdictions that are seeing declining enrolment will have a calculated number of funded students that is higher than the projected number of students.  

By way of example:

​​School Year
​Enrollment
​Weighting Factor
​Weighted Enrolment
​Prior year (actual)
​120 ​0.20 ​24
​In-Year (estimated)
​110
​0.30
​33
​Next school year (projected)
​100
​0.50
​50
​Students funded through WMA




​107


In this example you can see that school jurisdictions seeing declining enrolment will receive proportionally more funding than under the previous model.

Now let’s look at a school jurisdiction with growing enrolment. Total funding will be greater year-over-year, but the students funded through the WMA will be lower than the projected number of students. 

For example:​

​​School Year
​Enrollment
​Weighting Factor
​Weighted Enrollment
​Prior year (actual)
​100
​0.20
​20
​In-year (esimated)
​110
​0.30
​33
​Next school year (projected)
​120
​0.50
​60
​Students funded through WMA




​113


​​Current trends see the CBE growing year over year. As shown, this means that our total funding will continue to increase but, based on the WMA calculation, the number of funded students will be less than the actual number of students in the system. And with enrolment estimated to exceed 129,000 students, the size of the lag in funded students can mean millions of dollars.

The CBE submits a balanced budget every year to Alberta Education by the end of May. As always, budget decisions are guided by the values of: Students come first; Learning is our central purpose; and Public education serves the common good. 

As a school board, we develop a budget that maximizes dollars to support teaching and learning in the classroom and while delivering educational programs, services, and supports. We direct our funding where they will have the greatest impact for student success.​​

Brad


Explaining the CBE's reserve balances

Nov. 26, 2019

ResponseIn the recently released Calgary Board of Education 2019-20 audited financial statements, the CBE is showing gross operating reserves of approximately $23 million and capital reserves of $16 million. With the CBE facing a $32 million reduction in Alberta Education revenue, many have asked me why the CBE doesn’t use its $39 million in reserves to cover off the budget gap and save jobs.

As is often the case in a large organization, the answer is complicated.

Operating Reserves: $23 million

Of the CBE’s $23 million of gross operating reserves, $2 million is the reserves of Education Matters, the CBE’s fundraising entity. Education Matters is a separate entity that the CBE is required to consolidate into its financial reporting. These $2 million in reserves are Education Matters to use and deploy and are not available to the CBE. That then takes us to $21 million.

Of the $21 million, approximately $7 million relates to currently in progress projects that just happen to straddle the year end. As a result, the CBE “carries forward” the amount of money necessary to complete the related project.

At the school level, that may relate to the purchase of a photocopier or another project necessary for the continued operation of the school.

As the CBE level, some examples would be the required upgrade of the PowerSchool student information system or the required upgrade of our PeopleSoft payroll system. These upgrades are necessary to ensure our major systems continue to function appropriately. $21 million less $7 million in carry forward amounts leaves the CBE with approximately $14 million in operating reserves available as at Aug. 31, 2019.

However, we really don’t have $14 million available. This spring the CBE submitted a budget as required, assuming provincial funding would be maintained at 2018-19 levels. In order to balance the spring budget we planned on using at least $5 million of operating reserves. So $5 million in reserves is already allocated to help fund operations in 2019-20.

The spring budget plan also included another $5 million in savings to be found over the course of the school year. If we couldn’t find it all, we would go back to reserves for the remaining funds needed to balance our budget by year end.

Assuming we were successful in finding the $5 million over the course of 2019-20, we would have actual unencumbered operating reserves of $9 million. In percentage terms that is about .7 per cent of expenditures. Said another way, $9 million is about two days worth of CBE operations. The point is that $9 million is a very modest amount for an organization of our size.

By direction from Alberta Education, we are not permitted to have an outright deficit. If we are off in our planning even a little bit, we will need the remaining operating reserves to balance our budget. Also, there is significant uncertainty as we look into 2020-21 and beyond. Keeping a very modest amount of money in our operating reserves is simply sound business practice.

Finally, deploying reserves does not solve a problem. It simply provides time. Any positions saved by the use of reserves would simply have to be cut in the following year when the reserves are all gone and the funding shortfall remains.

Capital Reserves: $16 million

Our capital reserves of $16 million (or .3 per cent) are set aside for capital projects. For reference, an unexpected roof replacement on a high school can cost $2 - $3 million.

These capital reserves must be maintained as new schools are built in our communities. Three new schools were recently announced, and readying the schools for learning are costs that fall back to the CBE. For example, the province only pays for landscaping for the first five meters from the wall of the school building. Everything beyond five meters is the CBE’s responsibility to fund. The CBE needs capital reserves to ensure that buildings become schools ready to accept students.

Finally, under direction from Alberta Education, capital reserves are not to be used to support operations. While there are certain exceptions to that rule, the fact that we have approximately $162 million in deferred maintenance on our current facilities suggests that using capital reserves to fund operations for one year would be imprudent.

I hope that this information provides a little perspective to the ongoing conversation around school jurisdiction reserves.​

Brad​


Responding to Budget Chatter

Nov. 17, 2019

ResponseThe CBE released information about our 2019-20 budget gap earlier this week. In my six years as Chief Financial Officer, I have seen some hard budgets and big budget gaps. But this one - $48 million – is the hardest we have ever faced.

In these times, it's important to know that we are working hard to minimize effects on students. We are digging deep to find efficiencies and keep our staff supporting students.

In the meantime, staff and community members have questioned me after hearing chatter about a few controversial things. I’d like to take this time to do some myth busting.

Education Centre lease

​It’s easy for people to pick on. It’s a big building and the solution is to just walk away, right?

​In reality, it isn’t that simple. The current Board of Trustees and administration is doing everything we can to keep the costs associated with the lease as low as possible.

​Unfortunately there just isn’t much wiggle room. The CBE is obligated to make the specified lease payments out to 2031. It is a legally binding contract. If we break that contract we will be sued. If we are sued, we will lose. And when we lose we still have to pay.

We have been and will continue to work with the Province and others on alternatives; however, none have presented themselves.

​This decision was made a decade ago, by a Board of Trustees and administration that is no longer at the CBE. It was supported by the Education Minister at the time. No one responsible for the 2009 lease decision predicted the low occupancy rates and inexpensive office space we would see in 2019.

​All that said, we will continue to work to manage all costs, including the lease costs, to ensure we maximize the dollars available to our schools.

​CBE’s administrative costs

​Our administrative cost (Board and System Administration, or BSA) is below the 3.6 per cent cap imposed by Alberta Education. And keep in mind, our BSA costs include the entire cost of the Education Centre lease. If you remove the lease cost from our BSA total you would see that our actual administrative costs are around 2.8%. That is very low, even by private company standards.

I know it can be easy to see administration as some unnecessary spending for unneeded purposes. That, however, isn’t an accurate perspective. Administration costs are vital to the continued operation of any organization, big or small.

By definition administration includes things like payroll services (paying staff), procurement (buying necessary goods and services), financial services (accounting, financial reporting, budgeting, fees management, etc.), human resources (hiring, supporting and managing our 14,000 staff), providing legal services and supports, and building, supporting and maintaining an extensive technology infrastructure necessary to support a modern education system while protecting the petabytes of data from unwarranted and unwanted intrusion. These are just a few examples. There are a plethora of supports and services that are necessary to run a $1.4 billion organization with over 14,000 staff across 250 facilities.

Our administrative costs also go toward supporting our publically elected board of trustees.

For the 2018-19 school year, total BSA is approximately $48 million. I know that sounds like a big number but it is, as mentioned, less than the 3.6% cap imposed by Alberta Education.

Even if we stopped providing all of these essential administrative functions, we would barely close the 2019-20 funding gap with which we are currently grappling.

It is also important to know that the budget submitted to Alberta Education in the spring (as required by law) already included a $3 million cut to administration. That was on top of further cuts to administration over the last few years.

The focus is always, and rightly, on impacts to students and schools. We work diligently each and every year to keep our administrative costs as low as possible.

We are a very lean organization, despite the lease costs. With a workforce of over 14,000, the number of non-unionized employees (exempt) is small at 205. About 93 per cent of all CBE staff work directly in schools or are regularly deployed to schools.

There are eight senior executives called superintendents. Using averages, there are approximately 1,750 staff for each senior executive. That is a very, very low ratio by any measure. The CBE does not have any bonus program, and the wages of executive and exempt staff have been frozen for several years.

Accounting Error

All organizations are full of good people doing good work. From time to time errors are identified and corrected. That is what happens in a healthy, positive work environment. It would certainly be my expectation that when errors are made they are identified and corrected.

With regard to the accounting error referenced, it was solely about two different approaches to how financial information ought to be presented. Rather than an error, it was a difference of opinion.

That said, whether you call it an “accounting error” or a difference of opinion, the reality is the change had absolutely no impact on the dollars actually available to support students in the classroom.

These are challenging times. Please know we are doing all we can to minimize the impacts of this budget on our students and staff. As always, we are happy to take your feedback through our budget feedback form.

Brad​

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