Northern Michigan SBO March 16, 2011 Jeff Kolb Michigan Department of Education Jeff Kolb Michigan Department of Education

Deficit roles and responsibilities Deficit procedures Transparency reporting guidelines Transparency reporting statistics Questions Topics

Deficit Roles & Responsibilities

MCL A district or intermediate district receiving money under this act shall not adopt or operate under a deficit budget, and shall not incur an operating deficit in a fund during a school fiscal year. A district having an existing deficit or which incurs a deficit shall not be allotted or paid a further sum under this act until the district submits to the department for approval a budget for the current fiscal year and a plan to eliminate the deficit not later than the end of the second fiscal year after the deficit was incurred. State School Aid Act Section 102

MCL Except as otherwise permitted in MCL the local school board shall not adopt a general appropriations act (Budget) or an amendment to that act which causes estimated total expenditures including an accrued deficit to exceed total estimated revenues. Uniform Budgeting and Accounting Act

MCL The administration of a school district shall not incur expenditures against an appropriation (Budget) account in excess of the amount appropriated (Budgeted) by the local school board. Uniform Budgeting and Accounting Act

MCL A member of the legislative body, the chief administrative officer, or an employee of a school district shall not authorize or participate in the expenditure of funds except as authorized by the general appropriations act (budget). Uniform Budgeting and Accounting Act

Local School Boards, elected by the constituents of local school districts are charged with the responsibility for allocating scarce financial (revenues) and human (staff) resources to accomplish the various educational objectives of the district. District School Board and Administration Responsibility

Establishing Deficit Elimination Plan procedures and forms used to monitor districts that encounter a deficit fund balance Determining which districts are in a deficit condition Collecting, analyzing and determining if a Deficit Elimination Plan is reasonable MDE Responsibility

Monitoring a district’s adherence to a Deficit Elimination Plan by reviewing monthly budgetary control reports Enforcing penalties on districts that fail to comply with laws related to its fiduciary responsibility Reporting to the Legislature the status of districts with deficit fund balances MDE Responsibility

MDE does not make decisions related to the actual expenditures or programs that a district experiencing a deficit will cut to achieve the positive fund balance. Those decisions remain the responsibility of the local school board and administration. MDE Responsibility

Used as a last resort Lists triggers that can result in the determination of serious financial problem The State Superintendent notifies the Governor and the State Board The Governor appoints a Review Team The Review Team has 30 days to report Local Government Fiscal Responsibility Act

Following the Review Team’s report the State Superintendent makes final determination Can result in the appointment of a Financial Manager at the district’s expense Local Government Fiscal Responsibility Act

Deficit Procedures

District is determined to be in a deficit position by: District notifies MDE of deficit MDE “discovers” deficit budget through monitoring of districts’ websites Constituents notify MDE of district’s deficit Media articles Deficit Procedures

Once deficit position is determined, the district is notified by MDE via written correspondence that a Deficit Elimination Plan (DEP) needs to be submitted. Correspondence notifies district of Section 102 provisions URL to DEP forms are included Deficit Procedures

Year end deficit position is confirmed by audit and FID data by November 15. District is required to submit their DEP within 30 days of November 15 There may be extenuating circumstances that prohibit a district to comply with the 30 day due date. Such circumstances will be considered by the MDE and an extension may be granted Deficit Procedures

DEP is reviewed by MDE staff District is allowed two years from the first deficit year to emerge from deficit There may be extenuating circumstances that prohibit a district from emerging within two years. These circumstances will be considered by the MDE and an extension of time to eliminate the deficit may be granted. Deficit Procedures

DEP is reviewed by MDE staff All tabs of DEP worksheet must be filled in completely If MDE determines that additional work needs to be done, the district will be notified and given time to rectify the plan (usually two weeks) Deficit Procedures

DEP is reviewed by MDE staff Once DEP is determined to be satisfactory, MDE sends formal correspondence confirming approved status Correspondence includes contingencies that must be complied with, including monthly reporting requirements Such monthly reports monitor district’s adherence to approved DEP Non-compliance with contingencies may cause MDE to withhold State Aid payments Deficit Procedures

DEP process is repeated annually (if not more often) until district emerges from deficit Each year presents new assumptions/changes Deficit Procedures

?? Deficit districts at June 30, Deficit districts at June 30, 2010 Deficit Districts 33 Remained in deficit 8 Emerged from deficit 10 Went into deficit 41 Deficit districts At June 30, 2009

Transparency Reporting Guidelines Summary

MCL (2) : MDE Guidelines for Budget and Salary/Compensation Transparency Reporting Published on February 4th, 2010 (revised July 2010) _6526_ ,00.html Guidelines Summary

MCL (2) : Information was to be available on the website within 30 days of the date the Fiscal Year Budget was adopted by the local school board. Guidelines Summary

MCL (2) : Standard Icon Must be no smaller than 150 x 150 pixels Must be visible when Main Home Page loads

Guidelines Summary MCL (2) : Budget within 30 days of adoption (ISDs must provide this data) URL to CEPI’s website with the pie charts Personnel Expenditures (ISDs must provide this data) Current Operating Expenditures

Guidelines Summary MCL (2) : Current Bargaining Agreements (pdf) Employer Sponsored Health Care Plans Audited Financial Statements (ISDs must provide the 3 data elements above) Employee Compensation Information District Paid Association Dues District Paid Lobbying Costs

Transparency Reporting Compliance Statistics

 Three Criteria Icon usage – Is there an icon? If so, is it properly sized and placed? Data inclusion – Are all of the required data included? Heading formatting – Do the headings follow the guidelines? Analyses done in September and October Transparency Compliance

Icon Usage Proper size, placement52% placement52% No icon 29% 29% Proper size, placement61% placement61% No icon 17% 17% September 2010 October 2010

Data Inclusion All required data 39% 39% No icon 29% 29% September 2010 October 2010 Data missing 32% All required data 45% 45% Data missing 38% No icon 17% 17%

Heading Formatting Properly formatted 44% 44% No icon 29% 29% 17% 17% September 2010 October 2010 Close8%Close8% Not properly formatted19% Properly formatted 54% 54% Not properly formatted20% Close9%Close9%

Overall Transparency Compliance Compliant28%Compliant28% No icon Non-compliant17% Non-compliant17% 1 or more issues Non-compliant55%

“Good” icon All data Proper formatting 23% Compliance Progression No icon 29% September % Compliance ?????? No icon 17% 28% October 2010

On November 10, 2010 non-compliance memos were ed to those districts that did not comply with all of the requirements I received several s and phone calls Many districts revised their websites What followed

Another analysis will be done in the next couple of months. Districts not in compliance will be notified as such and will be given a deadline to comply. If any district is not in compliance at the deadline, direct contact will be made. What’s Next?

Questions?

Jeff Kolb Office of State Aid and School Finance Phone: (517) MDE Contact Information