The Art of School District Fiscal Oversight CCSESA

Stan Mantooth, Ventura County Superintendent of Schools Misty Key, Merced COE Assistant Superintendent Damon Smith, Alameda COE Associate Superintendent 2

Presentation Outline  Our Responsibilities  Our Tools  The Art  Our Responsibilities  Our Tools  The Art 3

Our Responsibilities

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 (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 5

District Fiscal Oversight AB 1200 – Effective January 1 st, 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… AB 1200 – Effective January 1 st, 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… 6

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

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 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 8

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 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 9

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 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 10

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

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 12

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 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 13

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 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 14

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

Collective Bargaining Agreements 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 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 16

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 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 17

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

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 19

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 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 20

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 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 21

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

The Tools

Lack of Going Concern Lack of Going Concern = trouble Education Code 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 Lack of Going Concern = trouble Education Code 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 24

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 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 25

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 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 26

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 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 27

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 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 28

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 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 29

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

$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 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 31

The Art

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

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 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 34

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! 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! 35

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 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 36

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 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 37

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 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 38

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

Thank You