044636-1 Audit Executive Summary
Description
Parma City School District Performance AuditEXECUTIVE SUMMARY Project History The State Legislature included, within the biennial budget bill (Am. Sub. H.B. 215), an urbaninitiative package which earmarked an additional budget allocation of $113.58 million for the largesttwenty-one urban school districts in the State of Ohio. The urban initiative package resulted froma series of programs/ideas proposed by the urban districts to help solve unique problems the urbandistricts face in effectively educating their students. The programs contained within the urbaninitiative package include extended and full-day kindergarten ($86.8 million); school readinessresource centers ($10.2 million); the Jobs for Ohio Graduates Program ($3.3 million); Graduation,Reality and Dual Role Skills Program ($1.8 million); professional development for urban leadershipacademies ($6 million); and teacher-peer review ($5.48 million). As a condition to receiving theseadditional dollars, the urban districts are required to comply with two conditions. The first conditionrequires the district to implement an academic performance benchmarking program. The plan mustcontain certain performance indicators including graduation rates, attendance rates and literacylevels, while also establishing a strategy for achieving enhanced performance levels on allindicators. The second condition is for the urban districts to undergo a performance audit conductedby the State Auditor’s Office. ...
Informations
| Publié par | Vuwyung |
| Nombre de lectures | 10 |
| Langue | English |
Extrait
Performance Audit
Parma City School District EXECUTIVE SUMMARY Project History The State Legislature included, within the biennial budget bill (Am. Sub. H.B. 215), an urban initiative package which earmarked an additional budget allocation of $113.58 million for the largest twenty-one urban school districts in the State of Ohio. The urban initiative package resulted from a series of programs/ideas proposed by the urban districts to help solve unique problems the urban districts face in effectively educating their students. The programs contained within the urban initiative package include extended and full-day kindergarten ($86.8 million); school readiness resource centers ($10.2 million); the Jobs for Ohio Graduates Program ($3.3 million); Graduation, Reality and Dual Role Skills Program ($1.8 million); professional development for urban leadership academies ($6 million); and teacher-peer review ($5.48 million). As a condition to receiving these additional dollars, the urban districts are required to comply with two conditions. The first condition requires the district to implement an academic performance benchmarking program. The plan must contain certain performance indicators including graduation rates, attendance rates and literacy levels, while also establishing a strategy for achieving enhanced performance levels on all indicators. The second condition is for the urban districts to undergo a performance audit conducted by the State Auditors Office. Within six months of the completion of the performance audit, the school district is required to complete aneconomy and efficiency plan with the consistent recommendations of the performance audit. The districts school board or other managing authority is required to approve the economy and efficiency plan.The economy and efficiency planthen has to be approved by the Superintendent of Public Instruction of the Ohio Department of Education (ODE) in consultation with the Office of Budget and Management. Failure to satisfy these requirements will cause the district to stop receiving their additional urban initiative revenues. To comply with the requirements of H.B. 215, the State Auditors Office performed preliminary assessments on the urban initiative districts during the summer of 1997. The districts were aggregated into specific groups according to their demographics. Meetings were held with the various school officials to explain the project, timetables, expectations, subject areas and legislation. Performance audits have been completed and reports issued for the first and second groups of schools; Lorain City School District, Elyria City School District, Springfield City School District, Hamilton City School District, Cincinnati City School District, Columbus Public Schools, Toledo City School District and Akron City School District. Parma City School District (PCSD) was selected along with Dayton City School District (DCSD), South Western Public Schools (SWPS), Canton City School District (CCSD), East Cleveland Public Schools (ECPS) and Lima City School District (LCSD) to be included within the third group of districts to undergo a performance audit under the aforementioned legislation. The final group to be audited will include five districts: Warren, Euclid, Mansfield, Middletown and University Heights-Cleveland Heights. The performance audits on the urban districts are scheduled to be completed by June 30, 1999. The
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Parma City School District Performance Audit two year timetable also includes follow-up work on the performance audits conducted by the State Auditors Office on the Cleveland City School District and on the Youngstown City School District. Economy And Efficiency Plan The State Auditors Office has worked with the Ohio Department of Education to develop a framework for the economy and efficiency plan. Generally, the economy and efficiency plan should be a formal self-assessment of internal operations to develop recommendations which, if properly implemented, will generate monetary savings, additional revenue or will improve the efficiency of the district. The district should view the economy and efficiency plan as a strategic plan which is intended to be updated periodically and should correlate to other strategic plans of the district. The district should develop a formal procedure to pursue additional recommendations in future years, should indicate who and how often the plan should be updated and should determine how the implementation of the recommendations will be monitored. Each recommendation should contain a detailed implementation plan which should include the major steps necessary to implement the recommendations including assigning a responsible person to each step and establishing an anticipated completion date. Each recommendation should also disclose the anticipated cost savings or efficiency improvement. This level of information will allow the district or another organization to assess how effectively the economy and efficiency plan is being implemented. The performance audits are designed to develop recommendations which provide cost savings, revenue enhancements and/or efficiency improvements. Therefore, the recommendations contained within the performance audit will provide one major resource to the district in developing their economy and efficiency plan. However, the districts are encouraged to assess their overall operations to develop other recommendations not contained within the performance audit. Following this procedure ensures the district performs the complete self-assessment desired by state legislators. Within six months of the completion of the performance audit, the urban districts are required to prepare the economy and efficiency plan consistent with the recommendations of the performance audit to be approved by the school board or other managing authority. The economy and efficiency plan also must be approved by the Superintendent of Public Instruction in consultation with the Office of Budget and Management. The Auditor of States Office will review the implementation of the districts economy and efficiency plan as a component of conducting the financial audit.
District Overview
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Parma City School District
Performance Audit
Parma City School District (PCSD), located in Cuyahoga County, is the second largest of 31 school districts in Cuyahoga County. The district includes the Cities of Parma, Parma Heights and Seven Hills. The City of Parma is the largest of the three communities served by the Parma City School District, with a population of approximately 87,900. Parma Heights population is approximately 21,000 and Seven Hills population is approximately 12,340.
The average daily membership (ADM) at PCSD for FY 1997-98 was 13,116 students. Parmas ADM has increased by less than one percent since FY 1995. Approximately 5.8 percent of the districts students are classified as students receiving Temporary Assistance for Needy Families (TANF) which is approximately 75 percent lower than the peer group average of 23.4 percent and 62 percent lower than the state average of 15.1 percent. The districts absentee rate in FY 1997-98 was 5.3 percent which is slightly lower than the state average of 6.1. The districts ninth grade proficiency test passage rate was 59 percent which is approximately 48 percent higher than the peer group average of 40 percent and 10.7 percent higher than the statewide average of 56 percent. According to the 1998 District Report Card, PCSD met eleven of the 18 performance standards which places the district in continuous improvement as defined by House Bill 650. PCSD met more performance standards than the peer districts.
PCSD is on the brink of fiscal watch/emergency. Although the forecast reflects an unencumbered cash balance of approximately $10 million as of FY 1998-99, this balance resulted from the recognition of one time revenues associated with the issuance of operating debt of $7 million and a $6 million advance from the county auditor of property taxes normally used to fund next year operations. In spite of these revenues being included within the forecast, PCSD is facing an unencumbered cash deficit for FY 1999-00. The latest forecast reflects an unencumbered cash deficit of approximately $45 million by FY 2003-03 which approximates almost 50 percent of the general fund budget. A further analysis of this forecast includes certain expenditure assumptions which might be difficult to achieve including zero percent salary increases for upcoming labor negotiations, proposed staff reductions which the board has not approved, lack of compliance with set-aside requirements and limited appropriations for required materials and supplies. PCSD has also ceased spending monies during the current fiscal year on items which are probably crucial to operating a school district as one possible solution to their financial situation.
Numerous reasons have caused PCSDs financial situation. A staffing analysis reflects that PCSD has more employees per 1,000 students as compared to the other large districts in the state of Ohio. A detailed analysis of staffing reflects potential overstaffing within the classified staff. Also, per the union contract, PCSD teachers are required to teach less minutes/periods as compared to other districts and are not required to perform other functions during the non-teaching periods which increases the number of monitors. District employees are also provided a costly benefit package with minimal employee contributions. The result of these reasons and other issues identified within the performance audit has led to a past practice of using most resources to fund salaries and benefits which leaves little revenues available for other required activities including capital maintenance, school bus replacement and instructional technology.
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Parma City School District
Performance Audit
Lack of formal long-term financial planning and board oversight has contributed to PCSD being on the brink of fiscal watch/emergency including the recent struggle to fund payroll. Although revenues per pupil are in excess of the state average by approximately six percent, the district has had to continually borrow against future year revenues to fund current year operations in order to avoid year-end deficits. The lack of accurate and timely forecasts has led to managements inability to oversee district finances and is contrary to board policy. A frequent turnover of treasurers could be one cause of this problem. The board must immediately prioritize dealing with the districts financial situation and make financial stewardship a high priority in future years including hiring a qualified permanent treasurer to perform required financial functions. The district is facing a significant immediate challenge. The current tax base is unstable because most of the millage is tied to emergency operating levies that limit the opportunity for future growth and are subject to voter renewal. Because of the current tax base, PCSD would have to pass a large property tax levy to realize any significant increase in property tax revenue. Also, PCSD would have to consider the financial implications that a large increase would cause to their major employer. In FY 1997-98, PCSDs expenditures per pupil were the second highest among the peer districts, only behind the Dayton City School District, and exceeded the state average by more than 12 percent. However, PCSD served a much lower percentage of economically disadvantaged students than the Dayton City School District. The high expenditures per pupil indicates that PCSD should re-evaluate spending decisions and implement spending reductions, many of which are contained within this performance audit.
PCSD employs approximately 1,759 full-time equivalents (FTEs) employees which include approximately 838 teachers. PCSDs pending financial situations will force the district to make difficult decisions in order to reduce operating costs. An analysis of PCSDs current staffing levels indicates that PCSD may be overstaffed in the areas of librarians, library aides, clerical, bus mechanics, custodians and monitors. However, PCSDs elementary traditional student/teacher ratios are higher than the peer districts and each of the districts having performance audits conducted to date by as much as 10.5 percent. PCSD has negotiated two union contracts which cover the majority of PCSDs employee population. Terms and conditions of the contracts contain several costly provisions which have had a significant financial impact to the district. For example, providing all secondary teachers with two planning periods per day in addition to an extended lunch period is a costly practice to the district. Additionally, because the Parma Education Association (PEA) contract states that teachers are not required to perform supervisory duties, the district has had to hire numerous school monitors to perform supervisory duties. Furthermore, PCSD had the
highest annual benefit cost per employee among the peer districts. PCSDs high benefit expenditures can be attributed to the minimal amount of employee contributions required for the costly traditional plan and HMO plans and no employee contribution for employees enrolled in the Super Med Plus plan.
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Parma City School District Performance Audit Analysis of average salaries for each of the employee classifications revealed that PCSDs teachers have the highest average salary of the peer districts. Additionally, PCSDs teachers have the second highest average salary at $45,429 just behind Cincinnati City School District at $46,695 when compared to the school districts having a performance audit conducted to date. However, within Cuyahoga County, PCSDs starting salary for teachers with a bachelors degree ranks 29thlowest of the 33 school districts. Also, PCSDs maximum salary for a masters degree ranks 21stlowest of the 33 school districts. Additional salary analysis illustrates a potential compensation inequity among employee classifications. PCSDs average of 8.7 sick days per teacher was the highest when compared to the peer districts during FY 1997-98. Classified employees averaged 9.0 sick days per employee which was the second highest when compared to the peer districts during FY 1997-98. PCSD currently maintains 24 buildings and one stadium with a total square footage of 2,133,319. There are 15 elementary schools, three middle schools, three high schools, one special education school, one transportation center and one administration building. The average PCSD building is 46 years old based on their original construction dates. Five of the 24 buildings were built more than 50 years ago while the remaining 19 were built between 30 and 49 years ago. PCSD has taken important steps toward the development of a comprehensive facilities master plan through its work with Acciarri-Draeger & Assoc. However, that planning lacks a thorough capacity utilization analysis and a district-wide prioritization of capital needs. Funding for PCSDs capital improvement needs has been estimated at $119 million. However, the last bond issue passed to fund capital improvements was more then 10 years ago and the district does not have a permanent improvement levy to provide a stream of funds dedicated for that purpose. The lack of a fully developed capital plan coupled with the districts financial situation has caused capital maintenance to be deferred. This situation will not be corrected in the near future because of the pending general fund deficit. Under current H.B. 264 law, the district is required to monitor the energy consumption and resulting operational and maintenance costs of the buildings in which installations, modifications or remodeling has been done. As a result, PCSD has funded approximately $7.3 million under H.B. 264. However, the district has not hired an independent architect or engineer to measure the energy savings resulting from the projects the district has funded under H.B. 264. As a result, there are no reports on file and the extent of actual savings is unknown. PCSDs overtime expenditures are the highest among the peer districts in the custodial and maintenance departments which may be attributed to the districts current policy which allows community groups to use the districts facilities without charging a rental fee. Another factor may be the lack of tools provided to management which would allow overtime to be more effectively gauged and monitored. Managing custodial time is imperative and should be kept at a minimum since PCSDs custodial staff is currently responsible for 5,749 less square feet (32 percent) than the peer district average and 5,945 less square feet (33 percent) than the AS&U average. If PCSD established staffing levels more in line with the peer district and AS&U averages, PCSD could reduce up to 22 FTE custodial positions. PCSDs transportation of regular and special needs students when compared to operating ratios of the peer districts appears to be inefficient and extremely costly to the district. PCSDs cost to
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Parma City School District Performance Audit transport a student to and from school is the second highest when compared to the peer districts. The district has obtained computerized software programs to aid with routing, parts and inventory and preventive maintenance issues; however, it appears that only the routing application is being fully utilized. A review of time cards compared to route schedules indicated some drivers and monitors are paid for time not worked. Additionally, bus monitors are paid for one-half hour of time not worked because of negotiated language requiring bus monitors to be paid the same number of hours as the driver with whom they are working. The payment for time not worked is not a payroll error, but an authorization of time error since transportation employees are at the districts transportation center but are not working because they are following the scheduled route times. PCSD appears to be overstaffed in the area of mechanics and mechanic helpers when compared to the peer districts and further supported when compared to the number of vehicles they maintain. Furthermore, the district has a relatively newer bus fleet which should require less maintenance.
In the area of technology utilization, PCSD needs to make significant improvements in the implementation and management of its technology in many aspects of their operations. For example, PCSDs procurement function appears to be inefficient as it is a highly manual and paper intensive. The highly manual and paper driven payroll process is not integrated with the human resources department. PCSD currently has two technical individuals jointly responsible for running the technology department which leaves the district vulnerable to a lack of system standards and poor systems planning. The district currently does not have a comprehensive long-term strategic technology plan to guide PCSD in managing its business operations, student information and instructional systems. The district does not have a fully functional wide area network. Additionally, departments that do have software are not utilizing it to the fullest capacity. PCSD is in the process of upgrading its wide area network. However, because the district did not perform an analysis of the network structure, it is not known whether the new wide area network will be sufficient to handle the districts current or future transmission and communication needs. Teachers and students cannot access the Internet from the classrooms which precludes students from having access to other available educational resources.
In addition to not having a full-time director of technology, PCSD does not have a dedicated grant coordinator to pursue technology grant funding. Additionally, the district does not have a central staff development program for technology or a central help desk to answer questions or assist new and inexperienced users. PCSD does not have a comprehensive database of hardware and software which hinders the districts ability to adequately assess the impact of Year 2000 on its operations or the total cost to make the systems year 2000 compliant. PCSD should have a Year 2000 disaster recovery plan developed which would detail steps the district will need to take in the event that appropriate measures cannot be effectively implemented or efforts made to address Year 2000 compliance fail.
PCSD has provided an initial response which agrees with most of the findings and recommendations contained within the performance audit. PCSD has indicated that they have implemented some of the recommendations and are actively working on the remainder.
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Parma City School District
Performance Audit
This performance audit provides a series of recommendations with possible cost reductions, revenue enhancements, redirected services, efficiency improvements and operational improvements which management should consider in addressing the efficiency and effectiveness of services provided by PCSD and its employees.
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Performance Audit
Parma City School District Summary Result The summary result of the performance audit is contained within pages1-9 through 1-27.The summary result is followed by overall performance audit information including a definition of performance audits, the objective and methodology of performance audits, a district overview and peer district comparisons of key information. The performance audit contains five major areas of PCSD operations. The financial systems area is further segregated into financial planning, budget and management reporting, procurement and payroll. A summary of background information, major findings, major commendations, major recommendations and financial implications is provided for each area. However, a thorough analysis of each of the five areas, including detailed findings and recommendations, is contained within the corresponding section of the report. All interested parties are encouraged to read the entire report. The results of this performance audit should not be construed as criticisms of PCSD management. The performance audit should be used as a management tool by PCSD and the community to improve operations within PCSD. Also, PCSD is facing a number of new issues as a result of recently passed legislation which must be implemented and could have financial implications. As PCSD is considering these issues while maintaining financial stability, the performance audit provides a series of ideas which PCSD should consider in its decision-making process. Also, the performance audit should provide PCSD with an important resource in the development of its economy and efficiency plan. Each section of the performance audit contains commendations concerning certain aspects of district operations which should not be diminished. A table representing a summary of the financial implications of the recommendations is presented on pages 1-28 through 1-31. However, the performance audit also contains a number of recommendations which may not generate estimable cost savings but will result in enhanced service delivery within district operations. If implemented, these recommendations would improve the operational efficiency of PCSD and its effectiveness in achieving its educational mission.
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Performance Audit
Parma City School District Financial Systems This section focuses on financial systems within PCSD, and is divided into four subsections: (A) Financial Planning (B) Budgeting and Management Reporting (C) Procurement and (D) Payroll. Each functional area is analyzed, including an evaluation of the internal controls, resulting in commendations of the districts effective practices and recommendations for its further consideration. Primary attention is given to the general fund, which accounts for approximately 80 percent of the revenue collected in all district funds.
A. Financial Planning Background: The board is responsible for determining the level of revenue necessary for the maintenance of an adequate educational program. The board relies on the superintendent and the treasurer in making this determination. To ensure that sufficient funding is available, the board sets policies governing the districts operations, adopts annual budgets and decides when to place a tax levy before the voters. Through the policies, the board directs the treasurer to establish and maintain long range fiscal and building plans. Despite these requirements, formal long range fiscal plans have not been created in the past. With the recent enactment of House Bill 412, the district has begun preparing long range financial forecasts. The district provided a five-year forecast that was prepared in February 1999 to facilitate this audit, however, the forecast has not yet been officially adopted by the board of education. The forecast was prepared using historical information, trend analysis, current legislative developments, recent property valuations and contractual commitments. School districts in Ohio have three tax options to raise revenue for schools, each of which requires voter approval: a property tax levy, a school district income tax or a joint city/school district income tax. PCSD receives only property tax revenues; no income taxes are collected for the district. PCSD also receives funding from the State Foundation Program. Allocations are based on a formula that guarantees each district will receive a specified amount per student which is deemed sufficient to support an educational program at the state minimum level. Federal monies are awarded primarily through grant programs directed at helping economically disadvantaged students or those with special needs.
Findings:In 1993, PCSD developed a five year strategic plan which established four goals the district feels it must attain in order to accomplish its mission. Each year, the district conducts a strategic plan review which analyzes steps taken in previous years towards the accomplishment of the mission. Although a facilities assessment conducted in July 1998 identified approximately $65 million in needed capital repairs, renovations, upgrades and other improvements, the district has not fully developed that report into a comprehensive capital needs strategic plan. While the district is utilizing the 1998 assessment as its five year capital improvement plan, the document lacks a thorough capacity utilization analysis and does not prioritize capital needs on a district-wide basis. The districts current financial distress and lack of a dedicated revenue source for capital needs has precluded funding any of the needs identified in the plan as well as performing any form of preventive maintenance. Currently, any replacement or repair of capital items is being done on an
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Parma City School District emergency basis.
Performance Audit
During the period between March 1998 and September 1998 PCSD was negotiating a contract with its classified staff. In March, the district believed that they had a valid agreement with the classified staff. However, the classified staff felt that the agreement was not fair and requested that modifications be made. In September, the district agreed to make various modifications to the contract negotiated in March. The district provided a copy of the negotiated agreement dated January 25, 1999.
House Bill 412 amends ORC § 5705.412 and now requires districts to certify funding for the life of a contract and states that any obligation that is not certified is considered void and if the treasurer, superintendent or board president issues a false certificate or makes a payment on a void obligation, they each can be held liable for the public funds up to $20,000. Although the district provided a 412" certificate dated March 1998, this certificate was not filed with the county auditor as required by law. However, the forecast the district relied on in certifying the agreement estimated the district would face cumulative cash deficits during the life of the contract. Furthermore, the forecast failed to include the spending requirements required by House Bill 412. Properly including these items would cause the deficit situation to worsen. Despite the fact that the forecast showed deficits, the district made the decision to grant guaranteed wage increases. It should be noted that the district could have developed a forecast which supported the union contract if all available revenues had been included. In addition, the district chose not to issue a 412" certificate for the amendments negotiated in September. However, upon further analysis, the amendments appear to have minor financial implications which would necessitate the issuance of another 412" certificate. This certificate would fall under the new legislation.
The district has not prepared long-term forecasts in the past. The financial forecast provided in order to facilitate this audit projects unencumbered cash deficits beginning in FY 1999-00 and cumulating in an unencumbered cash deficit of approximately $45 million in FY 2002-03. This negative financial condition is compounded by the district borrowing against future years tax revenue in FY 1998-99 to fund current obligations and avoid a year end cash deficit. In addition, the apparent minimal level of planning that went into determining the expenditures projected in the forecast only threatens to increase the financial difficulties encountered by PCSD.
PCSD receives numerous local, state and federal grants throughout the district. A consolidated local plan is prepared to streamline the application process for several federal programs, thereby enabling the district to utilize staff and resources more efficiently in the area of grant administration. Certain services provided by district personnel are reimbursed through the Medicaid program. Local businesses collaborate with the district through the Community Business Schools Council which provides various donations and program sponsorship thereby freeing district funds for re-allocation. Recommendations: The district needs to change the manner in which it is currently managing the district financially. Before negotiating wage increases that will bind the district in future years, PCSD should ensure the accuracy of the forecast they are relying on. To ensure that forecasts are
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Parma City School District Performance Audit being prepared in an accurate and timely manner, the board should expand its current policies regarding financial planning. In addition, the information provided in the financial forecast should be expanded to provide all interested parties an understanding of the districts financial condition. Revenue and expenditure projections should be supported by analyses of underlying financial and operational data including anticipated state funding, staffing levels, student enrollment, negotiated agreements, level of educational services to be provided and legislative requirements. A properly developed financial forecast is imperative to ensure sound management decisions are made regarding issues which could have significant financial implications for the district. Other recommendations include: PCSD should update and link the strategic and capital needs plans to the financial planning and budgeting process to ensure adequate resources are available for implementation. a function within the district to maximize the federal,PCSD should develop and implement state and local revenue sources available to the district. PCSD should fully utilize the Community Alternative Funding System (CAFS) to maximize the amount of Medicaid reimbursements. PCSD should continue with plans to reinstate the BAC. Financial Implications:Healthcare Billing Services, Inc., which specializes in Medicaid billing for schools, believes the district could receive an additional $258,000 annually under the CAFS program. B. Budgeting and Management Reporting Background:The Board of Education has ultimate responsibility to approve PCSDs budget and seek additional tax levies to support the operations of the district. Each year, two budgets are prepared by the district: a tax budget and an operating budget. The budgeting process identifies the adequacy of financial resources for the educational program and provides a basis for accountability in fiscal management. The tax budget also serves as the legal basis for the establishment of tax rates. PCSD currently operates on an annual budget of nearly $110 million. General fund appropriations total nearly $85 million which results in an average appropriation per pupil of $6,566, the second highest among the peer districts. Funds must be appropriated before they can be spent.
Findings:The budgetary process at PCSD is very centralized and budgeted amounts are based on adjusted historical information. There is little input from the individual operating units and community on how district resources are allocated. There are no specified goals, productivity targets or performance measures included in the budget. Schools allocations are based on decisions made by the deputy superintendent in consultation with her curriculum cabinet using past spending information and various per pupil allocations. Staffing levels are determined by the human resources department in conjunction with the superintendent. The treasurer is notified of these changes and updates the budget accordingly.
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