What is the fiscal oversight relationship between the State, County, and School Districts?
The State Education Code gives fiscal oversight responsibilities of school districts to the local County Office of Education (COE): County superintendents are required to do the following: Maintain responsibility for the fiscal oversight of each school district in his or her county.
How is fiscal oversight of local school districts conducted?
School districts are required to file two reports during a fiscal year (interim reports) on the status of the district's financial health.
The first interim report is annually due by December 15 for the period ending October 31. The second interim report is annually due by March 15 for the period ending January 31. The reports are designed to explicitly display real revenues and expenditures to-date. They also provide a snapshot of the projected revenues and expenditures for the current year and two subsequent years.
The interim reports must include a certification of whether or not the district is able to meet its financial obligations. The school district first submits a self-certification, followed by the COE conducting a review and either concurring or overturning the district’s self-certification.
The certifications are classified as positive, qualified, or negative:
Both Qualified and Negative certifications are part of the State’s established warning system so that districts can implement necessary measures to balance their budget. These warnings trigger support and interventions designed to correct the fiscal trajectory.
What does a Qualified Certification mean?
A Qualified certification is assigned when the district may be unable to meet its financial obligations for the current or upcoming two subsequent years. A Qualified certification is concerning and points to some actions being necessary for the current or upcoming year to establish a balanced budget.
Some support and interventions may be implemented to assist the district, such as:
What does a Negative Certification mean?
A Negative certification is assigned when the district will not be unable to meet its financial obligations for the remainder of the current year or for the subsequent fiscal year. The circumstances that lead to Negative certification can be outside of the control of district leadership, like the loss of one-time funds and/or a decline in student enrollment.
Ultimately, a Negative Certification means there are significant risks of the district not meeting its monthly payroll obligations in the foreseeable future. Therefore, it indicates a need for significant budget adjustments to balance the budget and immediate actions are needed to meet its financial obligations and maintain local control.
A Negative certification provides the most support and interventions, given the severity of the district’s finances (like the risk of not meeting its payroll obligations) and the ultimate responsibility to ensure students are receiving the instruction and services they need.
What happens next?
The good news is that a Negative certification comes with the most support, such as:
Negative certification may also result in the stopping and reversal (“stay and rescind”) of any Board of Education action that is determined to be inconsistent with the ability of the school district to meet its financial obligations for the current or subsequent fiscal year.