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Fiscal Health Analysis of Colorado School Districts

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This report analyzes the fiscal health of Colorado school districts, focusing on financial policies and procedures. It assesses trends over three years (2009-2011), evaluating key ratios that indicate financial stability. Warning indicators highlight districts at risk, enabling early intervention. The Office of the State Auditor and Colorado Department of Education play vital roles in monitoring compliance and transparency. With 178 districts in Colorado, financial challenges may arise from dwindling reserves and reduced state funding, impacting educational programs and services.

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Fiscal Health Analysis of Colorado School Districts

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  1. Fiscal Health Analysis of Colorado School Districts Financial Policies & Procedures Committee October 12, 2012 Crystal Dorsey Office of the State Auditor

  2. Fiscal Health Analysis • Roles of the OSA and CDE • Trends and evaluation of ratios • Factors that impacted 6 school districts for Fiscal Year 2011

  3. Fiscal Health Analysis Auditor: District’s reserves dwindling By Steve Block, Staff writer, TTi June15, 2012

  4. Background • 178 school districts in Colorado • Funding sources • Local - property taxes • State share - $3.2 billion • Charter School Institute

  5. Roles of OSA & CDE • Colorado Department of Education (CDE) • Oversight & monitoring of accreditation • Public School Financial Transparency Act • Office of the State Auditor • Compliance with Local Government Audit Law • Authority to hold property taxes • Review of audit report

  6. Development • Development of Fiscal Health Analysis • Three year period to review • Trends that provide warning indicators

  7. Focus on highest risk • General Fund • Debt • Changes in fund balance • Excludes Proprietary Funds

  8. Ratio 1: Asset Sufficiency Ratio • Are assets larger than liabilities? • Formula: General fund total assets General fund total liabilities • Warning trend: A consistent deficit in assets’ adequacy to meet obligations over the 3-year period.

  9. Ratio 2: Debt Burden Ratio • Do annual revenues cover debt service payments? • Formula: Total governmental revenue of fund(s) paying debt Total governmental debt payments • Warning trend: Annual revenues consistently below the annual debt payment for each of the three years.

  10. Ratio 3: Operating Reserve Ratio • How long will reserves last for future expenditures? • Formula: Fund balance of the general fund Total general fund expenditures (net transfers) • Warning trend: A reserve that covers less than 1 week of future expenditures, which is the equivalent of .0192, or 1/52, for each of the 3 years.

  11. Ratio 4: Operating Margin Ratio • How much is added to reserves for every dollar generated in revenues? • Formula: General fund total revenue – (general fund total expenditures (net) General fund total revenues • Warning trend: A loss in reserves for each of the 3 years.

  12. Ratio 5: Change in Fund Balance Ratio • Are reserves increasing or decreasing? • Formula: Current year fund balance of the general fund – prior year fund balance Prior year fund balance of the general fund Warning trend: Consistent decreases in reserves.

  13. Trend analysis • Purpose • Warning trends over three year period • 2009, 2010, 2011 • Limitations • Warning indicator in one year • Current budgetary actions

  14. Warning Indicators - 2012 • 19 school districts with one or more warning indicators • 13 districts with one • 6 districts with two

  15. Warning Indicators • Warning indicators do not always mean there is a problem • Planned capital expenditures • Deliberate spending of reserves • However: the more warning indicators, the greater the risk • Identify potential problems early

  16. Appendices • Appendix A • Ratio descriptions, calculations, benchmarks, warning indicators • Appendix B • Districts with two or more warning indicators • Comparison with prior year • District responses • Appendix C • Map • Appendix D • Data for all school districts

  17. Districts with Two Warning Indicators • North Park R-1 (Jackson County) • Mountain Valley(Saguache County) • Trinidad 1 (Las Animas County) • Jefferson County R1 (Jefferson/Broomfield) • La Veta RE-2 (Huerfano County) • Hoehne(Las Animas County)

  18. Two Warning Indicators • Not necessarily a problem • Reasons centered around two themes • Various planned expenditures • Reductions in state school finance funding

  19. Two Warning Indicators • Plans to correct the situation • Budget cuts – eliminate jobs • Cuts to education programs • Further spend down of fund balance • CDE Actions

  20. Prior Year • 6 districts identified with two in 2011 analysis • Fiscal Year 2010 • 4 districts showed improvement • 3 districts had two last year – none this year • 1 district had three last year – two this year • 2 districts no change

  21. Prior Year • Four districts with warning indicators in last three Fiscal Health Analysis reports • Hoehne • Jefferson County • La Veta • Pritchett RE-3

  22. Prior Year • Overall number of districts with warning indicators has declined • 2012 – 6 districts • 2011 – 6 districts • 2010 – 19 districts

  23. School District Fiscal Health • Important analytical tool • Early warning system • Allows school districts to take prompt action

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