The Art of School District Fiscal Oversight

1. The Art of School District Fiscal Oversight CCSESA

2. Stan Mantooth, Ventura County Superintendent of SchoolsMisty Key, Merced COE Assistant SuperintendentDamon Smith, Alameda COE Associate Superintendent

3. Presentation Outline • Our Responsibilities • Our Tools • The Art

4. Our Responsibilities

5. Education Code 1240 • (a) Superintend the schools of his or her county • (b) Maintain responsibility for the fiscal oversight of each school district in his or her county pursuant to the authority granted by this code

6. District Fiscal Oversight • AB 1200 – Effective January 1st, 1992 • At least 39 subsequent bills have been passed that amend or alter our responsibilities for fiscal oversight • As economic times evolve, the process and necessary legislation continues to be refined and defined • And the art changes too…

7. We have many duties • Education Code • Government Code • Public Contract Code

8. Budget approval • We examine the budgets for compliance with the state standards and criteria (adopted by the SBE) • Determine if the budget allows the district to meet its financial obligations • We may either approve, conditionally approve, or disapprove the submitted budget

9. If we disapprove a budget • We must recommend to the district’s governing board revisions to the budget and reasons for the revisions • We may assign a fiscal adviser (at our expense) or we may appoint a committee to review our recommendations

10. Many technicalities • If the district makes budget modifications and the COE approves, all is well • If we are not satisfied with the district’s revised budget then steps continue… • Leading up to budget review committees • SPI involvement • Possible severe measures against the district including an imposed budget

11. We review Interim reports • Districts certify financial health: • Positive • Qualified • or Negative • We may change a certification • Appeal process through SPI / CDE

12. Positive • A positive certification is assigned to any district that, based upon current projections, will meet its financial obligations for the current and subsequent two fiscal years

13. Qualified • A qualified certification is assigned to any district that, based upon current projections, may not meet its financial obligations for the current fiscal year or two subsequent years • Often viewed as a budget dilemma

14. Negative • A negative certification is assigned to any district that, based upon current projections, will not meet its financial obligations for the current fiscal year or subsequent fiscal year • Often viewed as a cash dilemma

15. We also review • Unaudited Actuals (year-end financial statements) • for mathematical accuracy • Audits • for exceptions and corrective plans of actions

16. Collective BargainingAgreements • All districts must disclose the costs of an agreement with an exclusive representative at a public meeting • Districts with Qualified or Negative certifications must give us 10 days to comment on the agreement • We must notify the district within those 10 days if the agreement would endanger the fiscal well-being of the district

17. Charter Schools • All charter schools must send us the following reports: • Budget • Interims • Unaudited actuals year-end report • Annual audit • We are not required to do anything with these reports

18. Community Colleges • County Offices of Education may offer financial services to Community Colleges • Oversight authority is the responsibility of the Chancellor’s office

19. Non-voter Approved Debt • Districts with qualified or negative certifications may not issue such debt without us first determining that the repayment of the debt is probable

20. Commercial Warrants • We may audit commercial warrants issued by districts • If we determine there is evidence of fraud or misappropriation we are required to notify the governing board, the State Controller, SPI, and the local district attorney

21. More Work • Set the payroll process • Employer of record for PERS and STRS for all districts in your county • Certify attendance, deferred maintenance and other reports • Distribute apportionments

22. No Rest • Calculate revenue limits • Waive bid requirements in emergencies • Reconcile county treasurer cash to school records • Report local tax collections

23. The Tools

24. Lack of Going Concern • Lack of Going Concern = trouble • Education Code 42127.6 • If at any time during the fiscal year the CSS determines a school district may be unable to meet its financial obligations for the current or two subsequent years…. • Triggers an array of options almost identical to a qualified certification

25. Receive / Give Reports • All districts are required to give you a copy of any study, report, evaluation, or audit that contains evidence of fiscal distress • We are required to give an annual report addressing the fiscal status to the district governing board of a qualified or negative district

26. Authority to Investigate • Extraordinary audit - any time • With reason to believe fraud, misappropriation, or other illegal fiscal practices have occurred… • Any district or charter • Audit the expenditures and internal controls

27. Criteria and Standards • These standards help identify signs that a district is in danger of experiencing fiscal distress • Ensure a degree of uniformity across the state in interpretation of fiscal distress

28. Auditors • School district auditors are required to provide us information on qualified, negative or “lack of going concern” districts as requested • Will not violate auditor – client confidentiality

29. Financial Systems • Districts are not required to be on COE systems, but it sure helps! • Real-time information access • Many emergency loans are made to districts not on the COE system

30. Access to Experts • BASC • SFSS • COFS • FCMAT • Fiscal Experts / Fiscal Advisers

31. $69,920 annually • Every COE in the state receives at least $69,920 to support fiscal oversight Larger COEs receive a little more • Training • BASC has an annual training session on the technical aspects of fiscal oversight

32. The Art

33. District Relations • Most Important of All • Positive relationships are powerful • Districts are willing to disclose their mistakes, problems, and concerns to a COE they trust

34. Communication • Communicate • Often, honest, sincere • Respond to budgets, interims, collective bargaining agreements • Even when not technically required • The more often you say it, the greater chance it will be heard • Keep the Superintendent and CBO in the loop even if communicating to the Board • Many of us give CBOs a chance to comment on district letters prior to official distribution

35. Provide Trainings • Host and provide trainings for districts in your county (or regionally) • The more our district business officials know, the better job they will perform • A better job on their part makes our work easier! • Consider subsidizing the trainings if you can find a way • It’s a lot cheaper to train than to help a district recover from fiscal distress!

36. Host Meetings • Host monthly or quarterly meetings for district business officials and superintendents • Use these meetings to listen to your districts as well as share the latest information

37. The Hammer • Don’t be afraid to qualify a district • Much better to qualify a borderline district than to let a district go under • We are routinely criticized by the State when a district goes straight from positive to negative

38. The Bully Pulpit • Frank discussion • Often a discreet, but frank conversation with the CBO and Superintendent can prevent a simmering pot from boiling over • Most districts do not understand what happens to them when they are qualified or negative • Enlightenment is a powerful tool

39. Support Each Other • When in doubt • Call your colleagues • Someone in CCSESA has been down the road before • One big mistake affects us all

40. Thank You