Classroom Books Image

HCPSS Comprehensive Annual Financial Report (CAFR)

The CAFR is an annual report required to be published by the Howard County Public School System. It is independently audited in order to ensure integrity of financial reporting, and is designed to be consumed by the County government and tax payers, so that the public can see how tax dollars are being spent.

The 2020 CAFR was released to the public in October 2020. This report covers the 2020 Fiscal Year which ended in June of 2020. The school system budgets, plans and reports based on a fiscal year that begins and ends in the summer. When the fiscal year begins, it will be labeled as the next year's fiscal year - so for example, the 2021 fiscal year and budget went into effect in July 2020 and will end in June 2021.

Specific Items Regarding the 2020 CAFR

It is important to note that the CAFR for 2020 is accompanied by an auditors report. It is important to review the auditors report which is designed to provide context to the financial report. As may be reviewed in the report, the auditors have identified deficiencies in internal controls which they consider to be material weaknesses. Additionally in a Management Letter the auditor identifies concerns regarding staff turnover and IT management - a link to this letter may be found below.

 

We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs...that we consider to be material weaknesses.

CohnReznick LLP, Auditor
 

It is recommended that the interested reader refer to the auditor report directly regarding the concerns and make their own determinations, however for ease of review the following are what I deem key statements taken from the audit report:

Where to Find the Report

The HCPSS official financial reports website is the authoritative source for the data used on this site: HCPSS Financial Reports and Audits

In the case that the documentation is not available from the authoritative source, you may use these copies I have uploaded to this website: CAFR: cafr2020.pdf, Auditor Findings: 2020-internal-control-findings.pdf, Management Letter: 2020-management-letter.pdf

Fund Accounts

At the high level of its financial reporting the school systems has 5 governmental funds which track revenues and expenditures for the year. These funds are: General Fund, Food Services Fund, Glenelg Wastewater Treatment Plant Fund, Restricted Programs/Grants Fund and the Capital Projects Fund.

Fund $ Rev $ Spend Description
General Fund $953.5M $964.0M The General Fund is the general operating fund of the school system. It is used to account for all financial resources except those required to be accounted for in another fund. The General Fund also has a legally adopted budget.
Food Services Fund $15.7M $16.6M The Food Service Fund is used to account for the operations of cafeterias and the production facility, which provides for the preparation and sale of meals primarily to students. Food As a special revenue fund, the proceeds of specific revenue proceeds of specific revenue sources (other than major capital projects) are legally restricted to expenditures for specified purpose.
Glenelg Waste Fund $0.3M $0.2M The Glenelg Wastewater Treatment Plant Fund is used to account for the operations of the shared wastewater treatment facility at Glenelg High School, which provides wastewater treatment services to Glenelg High School and the Musgrove Farm community of 30 home sites located on the adjoining property. The proceeds of specific revenue sources (other than major capital projects) are legally restricted to expenditures for specified purposes.
Restricted Fund $35.6M $34.8M The Restricted Programs Fund is used to account for restricted grants issued primarily by county, state, and federal governmental agencies, and “S-Programs”.
Capital Fund $41.9M $42.3M The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities.

Revenues

The school system receives the vast majority of its revenues (or appropriations) from taxing authorities. These include the Federal Government, the State of Maryland and the County government. The school system has no authority to raise taxes for itself or to issue bonds to raise money, and as such is reliant on government bodies to raise money for it. HCPSS does also generate some revenue through investing the funds it has on hand. This is achieved though community activities for which it charges entrance, or other miscellaneous sources such as fees.

Let's Explore the Fund Revenues

Revenues for HCPSS come in from several sources and are appropriated to specific governmental funds. The funds were described above, but in general terms it is worth noting that appropriations to the General Fund are what can then be allocated by the Board of Education. If monies are allocated to any of the other funds, they may only be used for explicit purposes. In particular, monies allocated to the Restricted Fund are those which may have very specific legal requirements on their use.

The donut chart to the left takes each fund and shows where the money in it comes from - State vs Federal vs Local taxes, for example. When you hover over an item in the chart, you'll see the name of the item, but also a percentage - this is the percentage it represents of it's parent.

You may notice that some funds - such as the Glenelg Wastewater Plant Fund - are almost impossible to see and select in the chart to the left. This is because the amounts are insignificant in relation to the monies in other funds.

Click on sections of the chart to drill into the items, which will show the relative fund sources more clearly. Click in the center to drill out back to the original item.

Sources of Revenues

The chart on the right shows the same data as the last chart above, but it is now flipped inside out. Instead of looking at the fund and seeing where the money comes from, you can see the sources in the middle, and then the outer ring shows a break out of where that source allocates monies.

Notice how much of the Federal funding for HCPSS is restricted (click on the green inner section to see the details) - that is to say, it is earmarked for specific expenses or tied to specific required uses. Think about what this means for the school district - how local funding gives the Board of Ed and HCPSS staff much more flexibility, whereas additional federal funding comes with strings attached and often complex reporting requirements.

You might also notice that in Federal funding you will find no section for Capital Fund, while you will find an allocation for this fund in both State and County. This mirrors what you saw above.

Click on sections of the chart to drill into the items, which will show the relative fund sources more clearly. Click in the center to drill out back to the original item.

Expenses

Just like revenues, expenses are tied to specific funds. HCPSS has a variety of major expense categories. The budget for these is set annually and transfers between them may require special permission from the County. The school system is also held accountable to ensure the funds restricted to certain purposes are used in the method required - many laws and regulations as well as grant terms apply to these funds.

We are going to be looking at a lot of additional data on expenses. Lets start by re-using the same zoomable model we leveraged above for revenues in order to get a consistent view, and take a look at how each expense area spends monies out of each of the specific funds. Here we will also run into the situation that there is a subcategory in expenses called "Instruction", which has a number of additional categories under it.

 
 

With so many categories on the first level, a sunburst can begin to look very busy and it can be difficult to differentiate effectively the relative size of the expenses - our brains just are not necessarily wired well for it. Here is another view, of the same expenditure data, in a stacked bar chart. Feel free to use whichever view helps you understand the data best. Two stacked bars are provided - the second one simply removes the two largest expense elements so that smaller expense areas are more easily comparable.

GAAP vs non-GAAP Data in the Financial Reports

It is very important to note that all of the above mentrics on this site are from components of the CAFR which are aligned with Generally Accepted Accounting Principles (GAAP) Government Fund Account data, for which data is only provided to the level of detail described thus far. The subsequent comparisons and statistics are held within the additional notes in the CAFR but do not necessarily conform to GAAP.

In the prior year version of this report the distinction was not particularly important as the numbers, while varied, were largely in line betwwen GAAP and non-GAAP. However in the 2020 CAFR we find some very large variations between the data in the GAAP Government Fund accounting and the detailed statistics which are presented non-GAAP. I am providing the below graph to help depict the variation in the 2020 CAFR between GAAP and non-GAAP. Unfortunately there is no per account level comparison within the document itself.

 
 

General Fund Expenses

Because it is where unrestricted monies are allocated, the General Fund is the focus of the budget process each year and defines the space in which the Board of Education can make determinations and propose a fiscal year budget. These expenditures are split between a number of key areas, with some wide variation in relative expense.

An important item to understand is that the numbers in this chart are related only to the General Fund numbers for each category, not to all funds like in the prior graphs.

Bubble chart with General Fund expense categories

Expense Bubble Chart

The bubble chart to the left contains each of the General Fund expense areas. The purpose of this chart is to give a sense of the relative size of different detailed expenses against the whole collection of expenses.

Note that not all expenses have a specific line item name, some are just top level expense categories. In particular, the second largest bubble titled 'Other Fixed Charges' is particularly inscrutible.

The bubbles are colored by size of the expense to make it easy to differentiate orders of magnitude. The red circles are less than $1 million, light green are less than $10 million and the dark green are $10 million or more. It is important to pay attention to the category as well as the expense line. Expense lines within categories include salaries, contracted services, supplies and materials, other charges, equipment, and outgoing transfers.

General Fund Budget History

The Howard County Public School System budget as a whole has increased significantly over the past 10 years. This is reflected as well in the General Fund. Note that these numbers reflect final budgets for expense over time, which differ from the actuals for 2020 shown above - this view is important as it gives a historical sense of the board directives around spending. This historical perspective is what we will explore in this section. In order to set the stage we will start with two broad measures interlayed on top of each other - the increase in student enrollment along with the increase in General Fund budget over the past 10 years.

Growth of Budget Accounts

It can be difficult when looking at a table of expense budgets to really get a sense for how different expense lines grow over time. We will start by looking at growth (or reduction) in real dollars - note that these dollars are not adjusted for inflation in the CAFR so they won't be here either. This gives us a sense of how different expense area budgets grow over time and this type of graph is called a Stacked Area Chart. This graph is designed to do a great job of showing the magnitude of change, while the next graph really dials in on the relative change between expense areas.

Comparing Expenses as a Percentage of Total Expense

In this section we are looking at the history of expenditure budgets from the General Fund. This next chart is a view of the relative budgeted expense in each category over time - this gives us a sense of how the as expenses have risen over the past 10 years, some areas of expense rise faster or slower than others.

Individual Expense Reporting Accounts

To understand how money is spent over time, it can help to take a look at expense history over time and compare it to student enrollment. This provides a different view from the prior percent area chart. It is not as helpful in terms of seeing how expenses grow or fall in relation to student enrollment in terms of velocity, but it does give a sense of directionality. It gives additional information by providing the actual amounts and enrollment numbers for each period (mouse over the charts). Below we have one of these charts for each budget expense category.

Disclaimer

The author of this site is not an employee, board member, contractor or authorized representative of the Howard County Public School System.

This web site is independently created to provide visualizations of the data within the financial report. It is not an official source of data and should not be used solely when making determinations regarding the financials of the school system or taken as an official source of truth. You should always refer to the complete financial report. The full source of this website and all materials are available by view source and direct download as there are no server side components. Viewing this web page involves downloading the full source code and all use, whether via the online website or if hosting personally, is per the MIT License which is below.

Copyright (c) 2020 David M. Clifton

Permission is hereby granted, free of charge, to any person obtaining a copy of this software and associated documentation files (the "Software"), to deal in the Software without restriction, including without limitation the rights to use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the Software, and to permit persons to whom the Software is furnished to do so, subject to the following conditions:

The above copyright notice and this permission notice shall be included in all copies or substantial portions of the Software.

THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING FROM, OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN THE SOFTWARE.

Third party licenses are included in the site materials and available upon request.