Fairfax County, Virginia LINES OF BUSINESS March 2016 FINANCE

FINANCE
Fairfax County, Virginia
LINES OF BUSINESS
March 2016
FINANCE
County Lines of Business (LOBs)
Presentation to the Board of Supervisors
www.fairfaxcounty.gov/budget/2016-lines-of-business.htm
FINANCE
OUTLINE OF TODAY’S PRESENTATION
1. Department Overview
2. Mandates, Regulations, and Standards
3. High level view of our Lines of Business (LOBS)
•
Summary
•
Benefits
•
Metrics
4. How our LOBs relate to the County Vision Elements
5. Trends and Challenges
6. Looking Forward
7. Discussion
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
DEPARTMENT OVERVIEW
The MISSION of the Department of Finance (Finance) is to
protect and maintain the fiscal integrity and financial solvency
of the Fairfax County government.
The department has five LOBs:
• Investments and Treasury Management
• Payment of Countywide Obligations
• Accounting and Financial Reporting
• Financial Control and Governance
• Risk Management*
* The Risk Management LOB information is reported separately
in Fund 60000, the County Insurance Fund and will be covered
in the LOBs presentation immediately following this one.
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
DEPARTMENT OVERVIEW
The department’s core functions include oversight of:
• Financial transactions
• Financial reporting
• Cash management
• Banking services
• Accounts payable
• Financial policies and procedures
• Debt service obligations
• Grants management compliance
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
MANDATES, REGULATIONS & STANDARDS
As Treasurer, the Director of Finance has a number of financial
responsibilities mandated or administratively required by the Code of
Virginia and/or federal regulations and guidelines. In addition, the
department adheres to established accounting standards. The core
functions within DOF work to ensure compliance in critical financial
areas which include:
Investments & Treasury Management
• Code of Virginia 2.2-4500 – 2.2-4518 Investment of Public Funds
Act
• Code of Virginia 2.2-4400 – 2.2-4411 Virginia Security for Public
Deposits Act
• Code of Virginia 15.2-829 Powers of the County Treasurer; deposit
of moneys
• Credit card acceptance rules set by credit card industry, and debit
cards by the Durbin Amendment, passed as part of the DoddFrank financial reform legislation in 2010
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
MANDATES, REGULATIONS & STANDARDS
Payment of Countywide Obligations
• Code of Virginia 15.2-826 – Department of Finance, Director, General Duties; 15.2827 Expenditures and Accounts; require that the Director of Finance will have
charge of the disbursement of County funds
• Internal Revenue Service 1099 reporting for payments to non-employees for
services performed on behalf of Fairfax County
• Virginia Public Procurement Act 2.2-4352 requires every agency of local
government to promptly pay for the completed delivery of goods or services by the
required payment date
Accounting & Financial Reporting
• Code of Virginia 15.2-2510 Comparative report of local government revenues and
expenditures
• Code of Virginia 15.2-2511 Audit of local government records, etc.; Auditor of
Public Accounts
• Code of Virginia 2.2-615 to 619 Implementation of Federal Mandates Act
• PL 104-156 Single Audit Act Amendments of 1996
• Code of Federal Regulation, Title 2, Part 200 – Uniform Administrative
Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform
Guidance), Subparts A-F
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
MANDATES, REGULATIONS & STANDARDS
Financial Control & Governance
Code of Virginia Sections
• 15.2-826 through 830 Department of finance; director; general duties;
expenditures and accounts; powers of county treasurer; deposit of moneys; claims
against counties; accounts
• 55-210.9 When intangible property held for owner by public agency presumed
abandoned
• 55-210.12 Report and remittance to be made by holder of funds or property
presumed abandoned; holder to exercise due diligence to locate owner
• 58.1-3127 Treasurer to keep account of receipts and disbursements; books open
for inspection
Federal Mandates
• 23 USC-Internal Revenue Code Subpart B Requirements Applicable to All State and
Local Bonds, Sec 148-149
• PL 104-156 Single Audit Act Amendments of 1996
• 17CFR Part 240 Subpart A, Release No. 34-34961, File No. A7-5-94 Municipal
Securities Disclosure
• 26CFR Part 1 TC9085 Arbitrage and Private Activity Restrictions Applicable to Taxexempt Bonds
• Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance),
Subparts A-F
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
DEPARTMENT RESOURCES
Category
FY 2014 Actual
FY 2015 Actual
FY 2016 Adopted
FUNDING
Expenditures:
Compensation
Operating Expenses
Work Performed for Others
Capital Equipment
Total Expenditures
General Fund Revenue
Net Cost/(Savings) to General Fund
$3,804,195
4,313,359
(489,732)
12,490
$7,640,312
$3,543,831
4,587,830
(724,480)
0
$7,407,181
$3,832,284
5,188,399
(751,697)
0
$8,268,986
$335,712
$332,522
$330,426
$7,304,600
$7,074,659
$7,938,560
55 / 55
55 / 55
55 / 55
55 / 55
POSITIONS
Authorized Positions/Full-Time Equivalents (FTEs)
Positions:
Regular
Total Positions
County of Fairfax, VA – 2016 Lines of Business Presentation
54 / 54
54 / 54
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FINANCE
LOBS SUMMARY TABLE
FY 2016 Adopted
LOB #
14
15
16
17
Total
LOB Title
Investments and Treasury Management
Payment of Countywide Obligations
Accounting and Financial Reporting
Financial Control and Governance
County of Fairfax, VA – 2016 Lines of Business Presentation
Disbursements
$383,013
1,606,151
3,694,942
2,584,880
$8,268,986
Positions
4
22
11
18
55
9
FINANCE
LOBS AT A GLANCE
#14
Invest ments and
Treasury Management
#15
Pay ment of
Count ywide
Obligations
#16
Account ing and
Financial Reporting
#17
Financial Control and
Gov ernance
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
LOB #14 - INVESTMENTS AND TREASURY MANAGEMENT is
responsible for the:
• Administration of bank and cash management services
• Oversight of the County’s daily cash position
• Investment of County funds (average daily portfolio balance
$2.8 billion)
Banking services include County’s main banking relationship,
credit card acceptance program, electronic funds receipts &
payments, fraud prevention services, armored courier services,
etc.
Investment objectives include preservation of capital, timely
availability of cash to meet obligations; and a return on
investments that meets or exceeds industry standard
benchmarks.
 Safety  Liquidity  Yield
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
INVESTMENTS AND TREASURY MANAGEMENT
The County’s Investment program operates under the following
parameters:
• Investments are made in strict adherence to a formalized*
investment policy
• Only those investments permitted by the Code of Virginia are
used
• Oversight is done by a senior Investment Committee
*For the 18th consecutive year, the
County has received the Association
of Public Treasurers Investment
Policy Certificate of Excellence Award
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
INVESTMENTS AND TREASURY MANAGEMENT - BENEFITS
• Enhanced banking services and better rates
• Cash flow analysis capabilities
• Staff is an important resource for Investment Committee,
Bond Committee for Land Development Services, FCPA
Resident Curator program, debt issuance
• Amount invested in local community banks as of February
2016 is approximately $460 million
• Generated $14.6 million in investment revenue in FY 2015
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS: INVESTMENT EARNINGS VS. BENCHMARK
Liquidity Portfolio vs LGIP
Yield %
0.8
0.7
0.6
Liquidity
LGIP
0.5
0.4
0.3
0.2
0.22%
0.1
0.13%
0
2011
2012
2013
2014
2015
Liquidity – Weighted Average Maturity 90 days
LGIP – Local Government Investment Pool
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS: INVESTMENT EARNINGS VS. BENCHMARK
Yield %
1.4
Core Portfolio vs. 6 Month LIBOR
1.2
_____Core Portfolio
1
_____6 Month LIBOR
0.8
0.6
0.56%
0.44%
0.4
0.2
2010
2011
2012
2013
2014
2015
Core – Maximum Maturity 1 Year
LIBOR – London InterBank Offered Rate
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS: INVESTMENT EARNINGS VS. BENCHMARK
Yield %
1.2
Core Extended Portfolio vs.
Merrill Lynch 1 Year Treasury Index
1
Core Ext.
M.L. 1Yr Tsy.
0.8
0.66%
0.6
0.4
0.37%
0.2
0
2010
2011
2012
2013
2014
2015
Core Extended – Laddered Portfolio (Max. Maturity 2 Years) – Weighted Average Maturity 1 year
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
LOB #15 – PAYMENT OF COUNTYWIDE OBLIGATIONS is
responsible for handling all payments for services and materials
for the operations of County and Schools.
This centralized payment processing oversight function has
three distinct programs:
• Vendor Maintenance
 Validates vendor information and taxpayer identification
numbers
 1099 reporting
 Continues efforts to convert vendors to electronic
disbursements, a more cost efficient method of vendor payment
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
PAYMENT OF COUNTYWIDE OBLIGATIONS
• Accounts Payable




Provides centralized scanning of all invoices
Ensures only valid invoices are processed
Issues timely vendor payments
Utilize efficient decentralized processes for initiation of payment
requests and goods receipts
• Payment Disbursement
 Responsible for payments of all County and Schools obligations
 More than 220,000 payments are disbursed annually
 Payments issued include bond payments, employee
reimbursements, payroll check issuances, retirement
disbursements, tax refunds, and vendor invoices for goods and
services
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
PAYMENT OF COUNTYWIDE OBLIGATIONS - Benefits
• Timely payment for goods and services
• Interest earnings are maximized
• Centralized disbursement oversight and controls
• Provides IRS 1099 compliance
• Delivers high level of customer service
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS

The median cost per invoice of all companies surveyed for the past
three years is an average of $5.87. Data source: Accounts Payable &
Procure-to-Pay Network, the Institute of Finance and Management
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS
Average # of Invoices by Staff per Month
Fiscal Years 2013, 2014, 2015
1,200
1,122
989
1,000
Number of Invoices
898
800
598
600
400
200
0
FY13
FY14
Fiscal Years
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS
Payment Disbursements* - Electronic versus
Checks
100,000
90,000
98,838
96,615
95,111
80,000
70,000
60,000
53,901
48,781
49,724
50,000
40,000
44,937
47,834
45,387
30,000
20,000
FY13
FY14
FY15
Total number of disbursements
Electronic payments (ACH & Wires)
Checks
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
LOB #16 - ACCOUNTING AND FINANCIAL REPORTING is
responsible for:
• Overseeing Countywide accounting processes and producing
consistent and reliable financial information
• Interpreting and implementing new accounting
pronouncements from the Governmental Accounting
Standards Board (GASB)
• Adhering to Generally Accepted Accounting Principles
(GAAP), Auditor of Public Accounts (APA) requirements, and
federal agency mandates (e.g., Single Audit)
• Assisting County agencies with required financial reporting
and providing technical guidance on governmental
accounting standards and financial training
• Overseeing coordination of the annual independent audit
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
ACCOUNTING AND FINANCIAL REPORTING
Staff accountants support and monitor over 165 funds and
agency accounts as well as account for $4 billion in capital
assets.
They prepare and produce the:
 Comprehensive Annual Financial Report (CAFR)
 Auditor of Public Accounts (APA) required Audit Procedures
and Transmittal Form
 Integrated Sewer System (ISS) CAFR
 Financial statements for the Economic Development
Authority (EDA)
In addition, Financial Reporting staff work with Housing, Parks,
and Schools staff during the preparation of their CAFRs and
Single Audit program reviews
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
ACCOUNTING AND FINANCIAL REPORTING – Benefits
• Financial reports provide substantive information for County
leadership, residents, other government agencies and
financial/investor institutions
• County’s financial reports continue to receive wide
acceptance from rating agencies
• Annual audits of the County’s financial reports have an
unblemished record of receiving unmodified “clean” opinions
from its independent auditors
• Earned for the 38th consecutive year, a
Certificate of Achievement for
Excellence in Financial Reporting from
the Government Finance Officers
Association of the US and Canada (GFOA)
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
LINES OF BUSINESS SUMMARY
LOB #17 - FINANCIAL CONTROL AND GOVERNANCE is
responsible for two main program areas:
1. Centralized Financial Operations and Governance
•
•
•
•
•
•
Reconciliations of bank accounts and investment transactions
Grants management
Treasurer obligations under the Code of Virginia
Oversight and processing of positive pay and unclaimed property
Developing Countywide financial policies and procedures
Providing oversight, outreach, and training
2. Debt Issuance and Compliance
•
•
•
•
Debt service payments
Annual continuing disclosure requirements for debt obligations
Debt post issuance compliance requirements
Calculation of arbitrage rebate/yield amounts
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FINANCE
LINES OF BUSINESS SUMMARY
FINANCIAL CONTROL AND GOVERNANCE - Benefits
• Reconciliations can prevent/detect fraudulent activity
• Accounting oversight of investment transactions
• Policy/procedures development, training, and control oversight
• Financial activities are carried out in accordance with the Code of
Virginia (Treasurer function) and federal regulatory requirements
• Assurance that debt management services are handled in
accordance with bond documents and regulations
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS
Bank Reconciliation Transactions by Fiscal Year
800,000
$20,000,000,000
$16,067,054,245
$17,473,232,448
$15,678,997,741
700,000
$18,000,000,000
$16,000,000,000
600,000
$14,000,000,000
500,000
$12,000,000,000
602,271
598,000
595,021
400,000
$10,000,000,000
$8,000,000,000
300,000
$8,989,493,237
$8,562,956,104
$6,000,000,000
$7,847,962,317
200,000
$4,000,000,000
100,000
$2,000,000,000
91,280
94,786
88,708
FY2013
FY2014
FY2015
-
$0
Number of Deposits
Number of Disbursements
Total Non-investment Transactions ($)
Total Investment Transactions ($)
100% of bank accounts fully reconciled timely (within 30 days)
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
METRICS
Debt Payments by Fiscal Year
200
$450,000,000
175
$400,000,000
$ 367,478,496
150
$ 394,715,444
$ 377,524,686
$350,000,000
$300,000,000
125
$250,000,000
100
$200,000,000
75
126
125
128
50
$150,000,000
$100,000,000
25
$50,000,000
0
$0
FY2013
FY2014
Number of Payments
FY2015
Amount ($)
100% of debt payments made ON TIME
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
COUNTY VISION ELEMENTS
•
The purpose of the LOBs process and the validation process performed by
staff and management is to array the relevance of all LOBs according to the
County’s Vision Elements. Our LOBs support:
Maintaining
Safe and
Caring
Communities
Exercising
Corporate
Stewardship
County
Vision
Elements
Creating a
Culture of
Engagement
Signifies support of Vision Element
Building
Livable Spaces
Practicing
Environmental
Stewardship
Connecting
People and
Places
Maintaining
Healthy
Economies
Does not contribute to support of Vision Element
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
TEN PRINCIPLES OF SOUND FINANCIAL
MANAGEMENT (REV. 4/21/15)
5. Cash Management. The County’s cash management policies shall
reflect a primary focus of ensuring the safety of public assets while
maintaining needed liquidity and achieving a favorable return on
investment. These policies have been certified by external professional
review as fully conforming to the recognized best practices in the
industry. As an essential element of a sound and professional financial
management process, the policies and practices of this system shall
receive the continued support of all County agencies and component
units.
6. Internal Controls. A comprehensive system of financial internal
controls shall be maintained in order to protect the County’s assets
and sustain the integrity of the County’s financial systems. Managers
at all levels shall be responsible for implementing sound controls and
for regularly monitoring and measuring their effectiveness.
County of Fairfax, VA - Lines of Business Presentation - Winter 2016
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FINANCE
COUNTYWIDE BENEFITS
The personnel and processes in place with the Department of Finance
provide:
•
•
•
•
•
•
Skillful management of County’s cash
Prudent investing with award-recognized investment policy
Countywide financial oversight
Award-recognized financial reporting
Consistently clean audit reports
Debt service post issuance compliance and continuing disclosure
 All key factors in helping the County maintain its Triple-A rating
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
TRENDS CHALLENGES & LOOKING FORWARD
•
Investment Returns
 Rates at historical lows not seen for 50 years
 Investment earnings heavily dependent on strength of economy
 Maximizing investment returns while maintaining Safety First
• Banking Services
 Required use of credit cards with embedded security chips
 Same day ACH deposits
•
Accounts Payable Processes
 Increase digital disbursements/decrease issuance of paper checks
 Explore other payment trends – e.g., single account procurement cards;
electronic data interchange (EDI)
 Timely goods receipt by external agencies
• Policy Development and Outreach
 Update Financial Policy Statements and provide training and outreach to
County departments
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
TRENDS CHALLENGES & LOOKING FORWARD
•
Financial Reporting Requirements
 Increased demand for disclosure & ease of interpretation of financial
records
 Implementing new Governmental Accounting Standards Board (GASB)
accounting and financial standards
 Increased complexity of debt financing arrangements (e.g.,
public/private partnerships)
• Federal Grant Reporting Requirements
 Incorporating compliance with sweeping grant regulatory changes not
seen since the mid 90s
 Continuous outreach and compliance oversight is necessary to educate
and monitor the programs’ adherence to these requirements
• Debt Management Requirements
 Annual Continuing Disclosure Reporting
 Annual Post Issuance Compliance Reporting
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
OUR LOGO & MOTTO
County of Fairfax, VA – 2016 Lines of Business Presentation
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FINANCE
DISCUSSION
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