PPT Presentation - Budgeting in a Part 32 World - Legacy ...
Transcript of PPT Presentation - Budgeting in a Part 32 World - Legacy ...
BUDGETING IN A PART 32 WORLD-LEGACY VS. ACAM
Sharon Minor
2017 TSTCI Accounting and Marketing/Customer Service ConferenceJuly 12-14, 2017
The material appearing in this presentation is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice.
This information is not intended to create, and receipt does not constitute, a legal relationship, including, but nor limited to, an accountant-client relationship. Although this information may have been prepared by professionals, it should not be used as a substitute for professional services. If legal, accounting, investment, or other professional advice is required, the services of a professional should be sought.
Assurance, tax, and consulting offered through Moss Adams LLP. Wealth management offered through Moss Adams Wealth Advisors LLC. Investment banking offered through Moss Adams Capital LLC.
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• FORECASTOFFUTUREFINANCIALRESULTS• FOCUSESONTHESHORT-TERMIMPACTOFCURRENTDECISIONS• USESSPECIFIC,MEASURABLEDATA• USESVERIFIABLEASSUMPTIONS• BECOMESAMEASUREMENTOFSUCCESS– ACTUALRESULTSCOMPAREDTOBUDGET
WHAT IS A BUDGET?
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• Notonlyisbudgetingandforecastingrequired,itisessentialforunderstandingyourbusiness
• Becausetheprocessproducescapital,operating andcashflowbudgets,personnelfromalldepartmentsanddivisionsofthecompany,accountants,consultants,engineers,etc.arenecessarytothebudgetprocess
• Thelocationandprocessareoptional– whateverbestfitsyourcompany• Itisnotaneasyprocess;Ittakestimeandpatience• Arobustbudgetingandforecastingculturemaytake2-3yearstodevelop• Oncedeveloped,itisacontinualprocess,notaone-timeevent• Budgetingisimportantforthefinancialstabilityandsurvivalofyourtelephonecompanyinthisever-changingenvironment(Part32World–ACAMvsLegacy)
BUDGETING IN SUMMARY
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• Part32Accountingruleso InvestmentsandReserves(CapitalBudget)o RevenueandExpenses(OperatingBudget)o Affiliatetransactionso RecordKeeping
• Other47CFRParts- Part64,65,36,69,54o RegulatedvsNon-regulatedo AllowedvsDisallowedo Allocationofcosts
§ Whichcostsgeneratethehighestrevenues§ Howdoesdemandchangeallocations/revenuestreams
PART 32 WORLD – (REGULATED WORLD)
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• NewOrders– USFReformo ACAM
§ Fixedamountofrevenuesfor10years§ Build-outrequirements§ Reportingrequirements
o Legacy§ Revenuesbasedoncosts§ CapitalandOperatingexpenselimitations§ BudgetControls§ Build-outrequirements§ Reportingrequirements
PART 32 WORLD – (REGULATED WORLD)
ACAM LEGACY
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• Identifytheamountofcapitaldollarstobespento Neededo Required/Plannedo Contract,Internal,orBoth
• Identifyassociatedretirements• Foreachexpenditure/project,identify
o Businessneedsuchasnewservices,growthinlines,build-outrequirements
o Expensesavingthatwillbegeneratedo Revenuestobegenerated
• CalculateDepreciationExpense• ConsiderLoanImplications
CAPITAL BUDGET – OVERALL CONSIDERATIONS
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• Purposeofadditionso Loopplanto Interexchangeplanto RegulatedorNon-regulated
• Natureofretirements• OverallNetworkchanges– collapse• Changesindemand
o Wideband/Etherneto Voice/Data– DataOnly
CAPITAL BUDGET – COST STUDY CONSIDERATIONS
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CAPITAL BUDGET – ACAM VS LEGACY CONSIDERATIONS
USF Reform Requirements ACAM LEGACY
Cost Study Still required – Special and DSL Required
Build-out 10/1 to 40% by YR 4, 50% by YR 5, 60% by YR 6…
25/3 to company specific number of locations by YR 10
10/1 to company specific numberof locations by YR 5
Reporting HUBB – all locations deployed in 2017 with 10/1 or greater by 3/1/18
All locations deployed in 2016 and earlier with 10/1 or greater by 3/1/19
HUBB – locations deployed with 10/1 or greater between 5/25/16 and 12/31/16 by 3/1/18
Limitations None Company Investment Allowance (AALPI)
Company specific construction limit per location (define project)
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• Includesexpensesandrevenueso CurrentbudgettendstobeginwithHistoricaldata/trendso Includeknown/expectedchanges
• Needtomeasure,monitor,andmaintainaccountability
OPERATING BUDGET – OVERALL CONSIDERATIONS
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• EmployeeRelatedo Salaries
§ NewHires/Retires§ ContractLabor§ Overtimerequirements
o Benefits
• TechnologyRelatedo Toolssuchascomputers,officesupplieso CircuitLeases(possiblynon-regulatedbutshouldbeconsidered)
• VendorRelated• Marketing/CommunityRelated• TaxRelated
o Increasedinvestmentscanincreasepropertytax
• InterestRelatedo Interestexpenseassociatedwithborrowedfunds
OPERATING BUDGET – OVERALL EXPENSE CONSIDERATIONS
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• LaborvsBenefitsvsOthero Growthpercentagescanbedifferentforeachelement
• RegulatedorNon-regulatedo Part64allocationscanchangefromyeartoyear
• AllowedorDisallowed
OPERATING BUDGET – EXPENSES – COST STUDY CONSIDERATIONS
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OPERATING BUDGET – EXPENSES –ACAM VS LEGACY
USF Reform Requirements ACAM LEGACY
Cost Study Still Required – Special and DSL Required
Limitations No new limitations (corporate cap still applies)
Corporate Cap still applies
Operating Expense Limitation (housing units, area in square miles, standard deviation log factor)
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• Demandchangeso Voiceo Voice/Data– DataOnlyo Widebands
• Ratechangeso SwitchedAccessRatesdecliningo Special/DSLrateimpacts
• Competitiono Impactondemando Impactonrates
OPERATING BUDGET – REVENUES –OVERALL CONSIDERATIONS
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• Changesincostsimpactsettlements• Changesindemandimpactsettlements• SwitchedAccessRevenueRequirementstillfrozenanddecliningby5%ayear(CAFICC)
OPERATING BUDGET – REVENUES –COST STUDY CONSIDERATIONS
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OPERATING BUDGET – REVENUES – ACAM VS LEGACY
USF Reform Requirements ACAM LEGACY
Cost Study Still Required – Special Access and DSL
Required – CAF BLS, Special Access, DSL
Federal USF Not Applicable – 01/01/17 Still Applicable
Model Based Support Fixed for 10 years (or transitioning based on a known schedule)
Not Applicable
Budget Control MechanismNot Applicable
CAF BLS (not applicable to broadband only)HCLS
Supported Locations Does your location count equal FCC’s count?
Competitive Overlap issues
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• StateUSF(TUSF)o SB586
§ SignedintolawonJune15,2017§ Amendsthestatue(Sec.56.032)§ ProvidesforaTUSFsupportprogramthroughSeptember1,2023
o T.A.C.§26.406§ Recoveryoffundsincertainsituations,includingreductioninfederaluniversalservicefundrevenues
• MiscellaneousRevenueso Rentrevenueo B&Crevenueo PublishedDirectoryRevenueo Other
• Non-regulatedRevenues
OPERATING BUDGET - REVENUES
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• StatementofCashflowdetailscashinflowsandoutflowsrelatedtoacompany’soperating,investing,andfinancingactivitiesoveraperiodoftime
• CashFlowismanageableo Maintainenoughcashonhandtomeetbusinessneedso Maximizereturnonsurpluscasho Managedebt
• CashFlowisdeterminedusingtheCapitalandOperatingBudgetinformation
CASH FLOW BUDGET
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CASH FLOW BUDGET – ACAM VS LEGACY
USF Reform Requirements ACAM LEGACY
Interstate Revenues Fixed for a 10 year period
No budget constraint
What happens after Year 10?
Based on your costs
Limited by budget constraints
Could be further impacted by rule changes after Year 5
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• Reviewthebudgeto AdjustCapitalandOperatingBudgetassumptionsasneededo Compareactualstothebudget– makeadjustmentsasneededo Communicatewithallpartiestoensureeveryoneisonthesamepath
CASH FLOW BUDGET