In The News › Orleans Parish School Board fails to properly track money shared with RSD, report finds

Orleans Parish School Board fails to properly track money shared with RSD, report finds

By Danielle Dreilinger, / The Times-Picayune
April 25, 2013

The Orleans Parish School Board is not properly accounting for the money it shares with the Recovery School District, resulting in $2.1 million misspent in fiscal year 2011, according to a report released Thursday (April 25) by the Bureau of Governmental Research. The report recommends that the board change its bookkeeping procedures to clearly track shared revenues and costs.

Though OPSB controls only about one quarter of New Orleans’ 80-plus public schools — the rest were taken over by the state Recovery School District after Hurricane Katrina — it continues to levy taxes for all the schools, receive some funds for both districts and cover some costs for city schools as a whole.

Common expenses include debt service for pre-Katrina bonds, certain central administrative tasks such as collecting and distributing taxes and some pre-Katrina human resources costs such as retiree health benefits and litigation fees.

Common resources include post-Katrina community disaster loans, fees for debt service, some federal funds for non-public schools and proceeds from the sale of surplus school property. BGR, an independent watchdog and policy group, counted $755.3 million in common revenue from July 2005 to June 2012.

“We strongly believe the common resources should be used to meet the common expenses,” said Janet Howard, BGR’s president and CEO.

But the board has no policies requiring that, the report says. And because its bookkeeping practices don’t break out common revenues and costs, it’s difficult to trace the trail of money, Howard said. That means the school board’s regular annual audit didn’t pick up the alleged misspending. OPSB staff cooperated with BGR to provide financials.

The board also doesn’t systematically notify the Recovery School District ahead of the general public when it’s planning to address an issue of shared concern, such as the annual decision on property tax rates.

The researchers reconstructed records for shared funds in 2011, the most recent year available when the study started. That analysis showed that OPSB ran up $2.1 million in deficits for its own schools that year — $1.2 million for direct-run schools and $845,000 for charters — and dipped into the shared funds to cover the gap.

“This was not appropriate,” the report states.

All OPSB’s direct-run schools were in the red in 2011 except McDonogh 35. The biggest deficits were at McMain high school and Mahalia Jackson elementary. The cost per pupil at Mahalia Jackson was about twice that of the other schools largely because of issues in managing the school’s campus, which included a health clinic and other community services.

The biggest problem for the charter balance was the cost of property insurance. At the time, OPSB covered that cost. Policy has since changed so that charters now pay for their own insurance.

OPSB interim Superintendent and past Chief Financial Officer Stan Smith said in a statement that the district had followed followed all legislation and regulations governing the distribution of funds to the Recovery School District, and spent money “in accordance with specific directives” from the Department of Education.

“The Orleans Parish School Board always spends its funds in compliance with state and federal laws. The funds were raised for the education of public school students in Orleans Parish and have been spent judiciously for that purpose,” he said. “In addition, we follow current established practices for financial reporting as mandated by the Department of Education.”

The BGR report acknowledges that the financial situation of OPSB has strengthened greatly since before Katrina, when the district was in the red and considered “high-risk” financially by the state, a status it shed last year. Since the storm, the school board’s general fund balance has ended each year with a surplus.

Researchers were unable to analyze about one-third of the common revenues, or $65 million, that were received and spent within a single fiscal year and thus did not show up in the general fund’s year-end balance.

However, authors are concerned that OPSB misspending may be helping drain that fund. There has been a steady decline in the year-end closing balance since fiscal year 2008, from $138.9 million to $44.6 million.

Worse, about half the money in the fund came from one-time post-storm sources. For one, there was a $65.3 million operating surplus for the 2005-06 school year because the district continued to receive state per-pupil funds based on pre-Katrina enrollment even as most schools were closed.

“There should be policies on using the general fund balance so it doesn’t go up in smoke,” Howard said. That $2.1 million from 2011 “would have increased the fund balance (and) been available for system-wide needs as they should occur.” And a major expense could be coming down the pike if United Teachers of New Orleans prevails in its class action lawsuit over post-Katrina layoffs.

As a city with two school districts, New Orleans — and the Orleans Parish School Board — is in a unique situation nationwide. “There aren’t models out there,” Howard said.

But she said the school board needs to get on top of its new role as a funds manager in a decentralized district. “This is a system that’s been moving along solving its problems as it arises, but here’s a financial issue we think really needs to be addressed through policies and proceeds,” she said.

Smith said the district would continue to refine its procedures but that laws needed to be changed at the state level to catch up with the changing schools landscape. “The current legislation does not adequately address the funding for responsibilities mandated for OPSB as the local education agency in Orleans Parish,” he said.

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