District counters annexation scheme
Posted on Tuesday, June 24, 2008
URL: http://www.nwanews.com/nwat/News/66501/
The Arkansas Department of Education originally listed seven reasons for placing the Greenland School District on the state’s fiscal distress list.
The most serious of those reasons, cited in a Feb. 29 letter from the department Administrator Bobbie Davis to Superintendent Ron Brawner, is a projected budget shortfall of nearly $ 300, 000.
The Feb. 29 memo was the formal announcement of the department’s plan to place the district on fiscal distress. At a meeting April 21, the Arkansas State Board of Education approved placing the district on the list.
The district began taking steps to address the financial shortcomings through budget cuts, and it scheduled a millage election designed to restore financial stability with a 2. 6-mill property tax increase and bond debt restructuring.
The millage election passed on June 10, but state Education Department Commissioner Ken James announced on June 13 that he would recommend the Greenland district be annexed by a neighboring district due to the projected shortfall. The state Board of Education is scheduled to consider the recommendation at a meeting July 14 in Little Rock.
In a June 13 memo by James to state Board of Education members, he mentioned the shortfall and his prediction the district will have another shortfall next year as the reasons for his recommendation. He did not mention any of the other reasons the district was placed on fiscal distress.
On the shortfall, Brawner predicted last week that the district should finish the fiscal year with a balance of about $ 4, 000. He is out of town this week because he is getting married.
Last week he argued that even if some bills come in that have to be paid, the shortfall won’t be anything close to $ 300, 000. He also claimed to have planned for about $ 1 million in cuts for the upcoming year to prevent any shortfall for 2008-09.
“ We feel given the twoyear cycle most people get (before consolidation ), we’ve made enough cuts, ” said Bill Groom, Greenland school board president.
Districts normally get two years to work themselves off the fiscal distress list before the state approves them for annexation or consolidation.
“ The cuts we’ve made are going to affect the bottom line, ” Greenland board member Dennis Caudle said. “ Anybody can see in two years we’re going to be in the black.... We just want a fair shot. ”
The other reasons the department cited on Feb. 29 for placing the district on fiscal distress were:
• Obtaining cash flow loans of $ 300, 000 in 2007 and $ 500, 000 in 2008
• Acquiring a $ 110, 966 loan in 2006
• Refunding federal funds
• A declining annual fund balance
• Audit findings in 2006 and 2007
The district did obtain a $ 300, 000 cash flow loan last year to help cover operating expenses while waiting on state aid checks, but it was paid back by December, Groom said.
It also obtained the $ 500, 000 loan for this year, but Brawner has accounted for it and it will be paid back in full next year, Groom said.
While it may not be a preferred regular practice, obtaining short-term loans to cover expenses is not unprecedented, and several districts have obtained such loans at one time or another without going into fiscal distress.
The Elkins School District, for example, obtained a $ 200, 000 short-term loan in the 2004-05 school year. At the time, Elkins Superintendent Robert Allen asked for the loan primarily to help cover rising expenses stemming from the opening of the new Elkins Primary School.
Greenland officials say the district obtained the $ 110, 966 loan to buy a stone house next door to the middle school. The house was converted into the district’s administration building.
The administration offices were previously in the middle school, and the change both added classrooms to the middle school and gave the district a new office, Groom said. Also, the land was contiguous to district property on all sides except for frontage along U. S. 71.
“ That was really a loan to purchase property, ” Groom said.
The refunding of federal funds and the audit findings were citable violations, but minor in nature, he said.
The federal funds violation stemmed from having to give back $ 147 of unused money to the federal government.
The audit findings mentioned three errors:
• A child nutrition application was filled out improperly
• An inventory recording error
• Incorrectly recording the $ 300, 000 loan
The error on the nutrition application concerned one form, Groom said, and the mistake was self-reported.
Brawner claims the error in the inventory record was an inherited problem stemming from the annexation of the Winslow School District in 2004. A safe stored at the Winslow campus had been stolen before the annexation, and it wasn’t recorded as lost property.
“ It was a missing safe that Winslow lost years ago, ” Caudle said.
The error on the $ 300, 000 loan stemmed from improperly recording the date the money was deposited in the district’s account.
School officials and the bank had planned to deposit the money by July 1, 2007, but the bank deposit was delayed by a few days. The banker in charge of making the transfer wrote a letter to the state explaining that his pregnant wife went into labor that day and he left work and forgot to deposit the money.
The delay in the deposit never affected the district’s ability to pay any bills.
“ In the scheme of things, why should those trump the community’s efforts to keep the school open ? ” Groom said.
The declining balance has been an issue. When this year’s budget was originally planned, it called for an ending balance of $ 23, 100. The declines have been attributed to fallout from Winslow students who left the district after their high school was closed.
Caudle admitted the district probably made a mistake by not planning for the enrollment losses.