Leftover School “FUN”d Money – The Data Doesn’t Lie

My usual detractors are in a tizzy over my most recent column and a discussion had during a council meeting (reported on here) regarding the school’s practice of stockpiling cash while claiming poverty.

I also stated, “in spite of being one of the most heavily funded systems in the state, much of your money is not making it into the classroom where it belongs.” The schools are top heavy in administrators, who, according to Dr. Borchers have average salaries of $94,770 and there’s this: From http://www.myschoolspending.org/, “2014: Of $54.8M, Only 55.16% is spent on instructional costs; 27% increase in administrative costs over the past decade.”

They didn’t give that first fact, or any of the other concerning stats I shared, much attention. Instead,  the airflate dancers  are hyper-focused on this one: “the schools…are sitting on nearly $6 million that they can, per their own audit, ‘spend at their own discretion’ (see page 17 here).”

I cited their most recent audit verbatim. The counter claim (that the fund balance is currently $4M) cannot be proven until the next audit is complete, but it is irrelevant. There is a clear pattern of, let’s call it “excessive savings” found in the school’s audit history. At one time, they were “saving” roughly 4% of their annual budget. In recent years, however they have averaged 11%. This is money they could have budgeted prior to requesting increases of council, but instead chose to sit on until after council’s final budget approval. They then return to council periodically for approval to dip into this fund for expenses they’d been aware of prior to budget finalization.

What’s more, according to a state official (see email below), The department does NOT require a 3% fund balance, or any fund balance for that matter, except as required under TCA 49-3-352. That states that ‘Any accumulated fund balance in excess of three percent (3%) of the budgeted annual operating expenses for the current fiscal year may be budgeted and expended for any education purposes, but must be recommended by the board of education.’”

The following red statements were pulled from the Financial Highlights section of each ORS audit found here. The budget totals were extracted from the audit column of the posted school budgets. The post-budget approval expenses were gleaned from council agenda minutes. The school finance director claims that they have or will use $2M of the $6M referenced in the 2015 audit. If history repeats itself, they’ll still have much of that $2M leftover come this time next year (note that even though they tapped $2.25M in 2014, 2015’s end balance was actually higher.)

2015 Audit –   11% retained of a $54M total budget  At year end, the Schools’ governmental funds reported combined ending fund balances of $6.1 million, of which $5.8 million is available for spending at the Schools’ discretion.

Post-budget approval by council: Jan 2015 FY2015 budget amendment: Fund balance draw of $500,000 for transportation services reinstatement

 

2014 Audit:   10% retained of a $54.9M budget  At year end, the Schools’ governmental funds reported combined ending fund balances of $5.9 million, of which $5.3 million is available for spending at the Schools’ discretion.

April 2014: An ordinance amending the FY2014 budget to allow the schools to use $454,940 of their reserves for the purchase of replacement bleachers at Blankenship Field;  March 2014: An ordinance amending the FY2014 to allow the Oak Ridge Schools to appropriate $1.75 million from their reserves towards technology spending

 

2013 Audit    11% retained of $54.4M total budget   At year-end, the Schools’ governmental funds reported combined ending fund balances of $6,289,435, of which $5,800,554 is available for spending at the Schools’ discretion.”

 

2012 Audit    10% retained of $55.7M total budget At year-end, the Schools’ governmental funds reported combined ending fund balances of $5,981,008, of which $5,676,413 is available for spending at the Schools’ discretion.”

February 2012:  Schools requested to use but were denied by council $937,091 of fund balance. They used it anyway which resulted in a negative audit finding.

 

2011 Audit      11% retained of $54M total budget At year-end, the Schools’ governmental funds reported combined ending fund balances of $5,688,681, of which $5,503,321 is available for spending at the Schools’ discretion.

2010 Audit         7% retained of a $53.3M budget At year-end, the Schools’ governmental funds reported combined ending fund balances of $3,875,139, of which $3,593,522 is available for spending at the Schools’ discretion.”

2009 Audit      4% retained of a $51.5M budget At year-end, the Schools’ governmental funds reported combined ending fund balances of $2,732,508, of which $2,176,621 is available for spending at the Schools’ discretion.”

 

Finally, for years we were told by the schools that they were required by law to maintain a 3% fund balance. Then they changed their tune to claim that they needed to maintain larger fund balances to align with so-called “best practices.”  This email debunks the 3% claim:

From: Maryanne Durski <Maryanne.Durski@tn.gov

Date: August 29, 2013, 10:13:26 AM CDT

The 3% fund balance has been a source of confusion for a while in some LEAs.  The department does NOT require a 3% fund balance, or any fund balance for that matter, except as required under TCA 49-3-352 c.  That states that “Any accumulated fund balance in excess of three percent (3%) of the budgeted annual operating expenses for the current fiscal year may be budgeted and expended for any education purposes, but must be recommended by the board of education.”

In effect, if an LEAs revenues are greater than its budgeted expenditures, no fund balance is required, because the current year revenue will cover all of the proposed expenditures.  However, if an LEA choses to budget a part of its fund balance, that is when the 3% requirement becomes applicable per TCA.  An LEA may only budget that portion of its fund balance in excess of the 3% amount.  This is something that we review annually at our spring fiscal workshops with LEA finance personnel.  I have an upcoming meeting with our CORE office fiscal consultants, and will review this with them as well (the majority of them are new to education finance).

If there is anything else that I need or can do to clarify this issue, please let me know.

Thank you,

Maryanne

Maryanne Durski

Interim Chief Financial Officer

Maryanne.Durski@tn.gov<mailto:Maryanne.Durski@tn.gov>

Office (615) 532-9510

Cell (615) 419-1605

 

 

 

 

 

 

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