County Superintendent s Role for Fiscal Oversight

Transcription

1 County Superintendent s Role for Fiscal Oversight AB 1200 Fall Conference Ventura and Yolo COE October 2017 Michael Fine, CEO FCMAT Adapted from CCSESA 2 Prior to AB 1200 Counties reviewed and approved budgets Every county approached this process differently The State intervened and directly dealt with districts in fiscal crisis Initiated and monitored the repayment of emergency loans for fiscally insolvent districts Established budget review committees for districts that received state loans A reactionary process 1

2 3 California State Loans to School Districts During the 1980s State loans were provided to 27 school districts, totaling $19,726,000 Amounts ranged from the smallest of $5,300 (Sunol Glen Elem) to the largest of $4,700,000 (Stockton Unified) Richmond Unified (West Contra Costa) Three State Loans in Fiscal Year / $ 2,000,000 01/ $ 7,525,000 07/ $19,000,000 A total of $28,525,000 in one year for one school district 4 AB 1200 (Eastin) Effective January 1, 1992 Expanded authority for the county superintendent to intervene in financially troubled school districts Revised and standardized the budget development and interim reporting processes for all LEAs Addressed other issues related to fiscal accountability such as emergency apportionments, actuarial studies of health benefits, debt issuance approval, and more Created the Fiscal Crisis and Management Assistance Team (FCMAT) And at least 39 subsequent bills have also been passed that amend or alter the county superintendent responsibilities for fiscal oversight 2

3 5 Major Post- AB 1200 Legislation AB 3141 Additional public disclosure requirements: Non-voter approved debt Collective bargaining agreements Health and welfare benefits (including retiree benefits) AB 139 Fraud / Misappropriation of funds AB 2756 Financial Accountability Expands criteria and standards areas Emergency loan provisions Reports of fiscal distress Going concern monitoring 6 Budget Adoption On or before July 1 st, the governing board of a school district shall adopt a budget Adopted budget is submitted to the county superintendent by July 1st or no later than five days after adoption, whichever comes first 3

4 7 Budget Approval County superintendent / COE staff examines the budget Criteria and standards compliance Ability to meet financial commitments in the current and subsequent two fiscal years County superintendent shall either approve, conditionally approve, or disapprove the adopted budget by September 15 th 8 If COE Disapproves a Budget LEA responds to county superintendent s recommendations by October 8 County superintendent must recommend to the district s governing board revisions to the budget and reasons for the revisions County superintendent may assign a fiscal advisor or may appoint a committee to review the county superintendent s recommendations 4

5 9 Failure to Submit a Budget If a school district does not submit a budget County superintendent / COE staff develops a budget on their behalf School district will reimburse COE for their work County superintendent submits budget to governing board Budget is deemed adopted 10 Interim Reports School districts must file two Interim Reports annually 1 st Interim, for the period ending October 31 st 2 nd Interim, for the period ending January 31 st Governing Board must certify financial health of district Positive Qualified Negative County superintendent may change a certification (a positive to a qualified, a qualified to a negative, a positive to a negative or a qualified to a positive) 5

6 11 Interim Report Certification Positive will meet their financial obligations for the current and two subsequent fiscal years Qualified may not meet their obligations for the current or next two fiscal years Negative will be unable to meet their obligations for the current or next fiscal year 12 Consequences for Qualified / Negative Certifications 3 rd Interim updated budget for period ending April 30; file with the county superintendent, SPI and SCO by June 1 st Limitations on debt issuance Possible downgrade by rating agencies Prior review of collective bargaining agreements by county superintendent is required Qualified status: the Board retains authority but may have compensation withheld for failure to provide information Negative status: County Supt., or an appointed fiscal advisor has stay and rescind authority over Board actions 6

7 13 COEs Also Review Unaudited actuals (year-end financial statements) Standardized Account Code Structure (SACS) compliance Mathematical accuracy Audit reports For exceptions and corrective plans of actions 14 Non-voter Approved Debt All districts issuing Certificates of Participation (COPs) or revenue bonds must provide county superintendent with evidence of their ability to repay Districts with qualified or negative certifications may not issue these debt instruments without the county superintendent first determining that the repayment of that debt is probable 7

8 15 Collective Bargaining All districts must disclose the costs of an agreement with an exclusive representative at a public meeting and file a disclosure form with their county superintendent Districts with qualified or negative certifications must give the county superintendent 10 days to comment on the agreement County superintendent must notify the district within those 10 days if they believe the agreement would endanger the fiscal well-being of the district 16 Going Concern Monitoring Accounting standards work under the assumption that the organization will remain viable If there are doubts an organization can financially sustain itself, a going concern issue exists Education Code If at any time during the fiscal year the county superintendent determines that a school district may be unable to meet its financial obligations for the current or two subsequent years Triggers an array of options that may include Conducting a study of financial and budgetary conditions Review of internal controls Directing the district to submit additional financial, budgetary, and cash flow projections Assign FCMAT to review hiring practices 8

9 17 Auditors At the county superintendent s request, school district s independent auditors are required to provide information on qualified or going concern districts 18 Audit Authority AB 139 If the county superintendent has any reason to believe that fraud, misappropriation, or other illegal fiscal practices have occurred, the county superintendent can audit expenditures and investigate internal controls Any district Any charter school Any time during a fiscal year Exclusive authority of the county superintendent FCMAT conducts these audits without cost to the COE 9

10 19 Charter Schools Financial oversight of charter schools is the responsibility of the authorizing LEA Charter schools must send their financial reports to their authorizing authority For district authorized charters, the county superintendent/ COE Staff will check the mathematical accuracy of the unaudited actuals year-end report, prior to submitting to the CDE The county superintendent is the local agent for CalSTRS and CalPERS, and can be held liable for the collection of pension contributions by charter schools in their county 20 Reports of Fiscal Distress Districts are required to provide the county superintendent with a copy of any study, report, evaluation, or audit that contains evidence of fiscal distress Real life examples FCMAT study on escalating transportation costs (growing encroachment) Federal audit of child nutrition program claims resulting in the repayment of federal funds Impact of CalSTRS compliance audit resulting in additional funds owed to CalSTRS 10

11 21 Criteria and Standards These standards help identify signs that an LEA is in danger of experiencing fiscal distress Required with adopted budget and interim reports Provides a degree of uniformity across the state in the interpretation of fiscal distress The assessment of risks is unique to each district - the art of AB FCMAT s Common List of 15 Predictors Governance crisis Absence of communication to educational community Lack of inter-agency cooperation Failure to recognize year-to-year trends Flawed average daily attendance (ADA) projections Failure to maintain reserves Insufficient consideration of long-term bargaining agreement effects Flawed multi-year projections Inaccurate revenue and expenditure estimates Poor cash flow analysis and reconciliation Bargaining agreements beyond state cost-of-living adjustment (COLA) No integration of position control with payroll Limited access to timely personnel, payroll, and budget control data and reports Escalating General Fund encroachment Lack of regular monitoring of categorical programs 11

12 23 The Process Works In the 25 years subsequent to AB 1200, there have been a total of nine state loans to school districts $260M authorized ($232M used) FY Second Interim / FY Second Interim Qualified: 41/14 Negative: 2/2 FY Budget Adoptions (not all COEs reporting) Conditionally Approved: 32 Not Approved: 2 24 AB 1200 Continues To Be Relevant In Today s Landscape Source: School Services of California, 2017; Data: elementary district, 60% unduplicated 12

13 Thank You! 13