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FCPS shares details on cashflow issue

Franklin City Public Schools administrators shared details at a Nov. 4 division school board meeting about the school system’s recent cashflow issue that answered some key questions posed by the city.

Amanda C. Jarratt

At an Oct. 25 City Council meeting, Franklin City Manager Amanda C. Jarratt briefed the council on an issue leading to the school division having a negative allocated cash balance.

Jarratt said that a gap between the time that federal grant funds had been spent by the school system and the time the school system was reimbursed had led to that negative allocated cash balance. She said that what had contributed to this funding gap had been delays in the school system filing claims for reimbursement, sometimes filing in excess of 30 days after the money was spent.

“Why is there this lengthy delay from the time the money is being sent and the reimbursement is being asked for?” Jarratt said when outlining the questions city staff had for the school system. “That’s a question that we can’t answer.”

She noted that the situation had required the city to front cash to the school system to help sustain its cash balance while the system awaits reimbursement from the federal government.

Tamara Sterling

During the Nov. 4 school board meeting, FCPS Superintendent Dr. Tamara Sterling asked Jeff Ryder, assistant superintendent of finance, nutrition, operations and special programs, to explain the school system’s process for filing claims for reimbursement.

“I think that needs to be explained a little bit more for clarification purposes,” she said. “(The city is) thinking that we’re filing the claims late, which actually we’re not.”

Ryder pointed to some of the complexity of the process when he noted that most federal grants have three funds that the school system has to keep track of, parsing each one out, tallying it up and sending in a claim for reimbursement.

“Sometimes we will actually spend the money, but we don’t claim it right away because that particular grant is in the process of being amended,” he said.

He explained that making an amendment is a long, two-step process.

“And why is the grant amended?” he said. “Well, because we sometimes have to change what a particular line is (in) the grant. We might spend more in supplies in a month than that supplies line has, so we have to take it from another line. There’s a position we’re not filling or a technology expense we’re not making, and we need it down in supplies. 

“And so we have to send in a written request to the Virginia Department of Education,” he continued. “All this is taking time. They evaluate the amendment, then they decide.”

Jeff Ryder

Ryder said FCPS actually has to wait for two approvals from the VDOE during the process.

“All that time, we already spent the money,” he said. “So there are sometimes delays between when we actually spend the money and when we submit (the claims).”

He said this usually has not been a problem before in reference to the school system’s allocated cash balance.

Earlier in his presentation, he noted that the cashflow issue that came about in October had really been building through August and September.

“There were a couple missteps, and the essence of the problem was that too many federal dollars that are reimbursable went out in too short of a time period, and that served to deplete the school division’s allocated cash balance,” he said.

Up to September, FCPS had not needed to project cashflow, he stated in his presentation, because the monthly cycle of cash receipts had always outpaced the level of cash expenditures and because the cash balance allocated to the school division was always adequate to cover the funding gap that exists between grant money expenditure and grant money reimbursement.

Explaining the link between the city and the school system’s finances, Ryder said, “We’re part of the city’s checking account, but part of their checking account is allocated to us for our operations.

“And so this balance, now that it’s been really pointed out in a variety of ways, if we’re going to be projecting cashflow every month, we can really keep very good track of that,” he continued. “I’ve spent the last three weeks of my life creating a cashflow projection model, and I’ve sent it over to the city, and they’ve come back with some constructive criticism, and we’re honing that thing into just the right format and content. And it’s forward-looking — that’s the whole point.”

He later added, “We, meaning ourselves and the city, will be able to very quickly identify where cash balances will be too low and something has to happen long before that happens.”

Ryder said that as of Monday, Nov. 1, the allocated cash balance for FCPS was positive again by more than $208,000.

During the Monday, Nov. 8, City Council meeting, Jarratt gave a positive update on the joint efforts taking place with the city and the school system to ensure the cashflow issue does not happen again.

“We did have a meeting with the superintendent and Mr. Ryder — (Franklin Director of Finance) Ms. (Tracy) Spence and myself did — on Friday, and we’re planning to meet again tomorrow,” she said, later noting the Friday meeting was productive. “I think I feel a lot better about the actions that they’ve taken and implemented from their staff’s perspective to prevent the issue from happening in the future, and we’re continuing to notify them on a daily basis of what their cashflow is.”