Governance Structure

FINDINGS

• The regional school district governance structure gives regional school boards much greater autonomy over the budget process than local boards of education. A regional school district budget is presented directly to the voters in towns belonging to regional school districts for adoption. Thus, voters in these towns provide the only level of scrutiny over budgetary decisions made by regional school board members.

RECOMMENDATION

1. Enabling legislation be adopted granting voters in towns belonging to regional school districts the statutory authority to establish regional finance boards by a region-wide majority vote. Members of regional finance boards would be appointed from local Boards of Finance to oversee the regional school district budget approval process.

FINDINGS

• It is unclear in statute how towns in regional school districts without adopted budgets as of July 1, should fund those districts.
• Unlike local schools boards, regional school boards have authority to deficit spend and there is no requirement for voter approval prior to the board exceeding its appropriations.
• C.G.S. Sec. 7-398 requires reports concerning public finances or the reception or disbursement of public funds made by selectmen or treasurers of towns be verified by oath. Any person who verifies any return, known to be false, or which in any material respect intentionally suppresses or conceals the truth, is subject to the penalty for false statement. There is no such requirement for regional school district treasurers.
• All school boards can transfer funds among budgetary line items. However, no detailed information on line-item transfers need be provided by school boards for the public record, only that such transfers be announced at board meetings.

RECOMMENDATIONS

2. Towns shall fund regional school districts, at a minimum, at the previous years' appropriations if regional school budgets are not adopted by the beginning of the fiscal year until the regional school budget is passed.

3. Regional boards of education shall be prohibited from deficit spending in excess of one-quarter of one percent of their total budget unless approved by a region-wide majority of voters in member towns.

4. Each regional school board shall report, as part of the public record, a detailed written statement for each transfer of funds among line items. The statement shall include:

• the reason for the transfer;
• an identification of the line item account and the dollar amount that funds are being transferred from and to;
• the intended use of the funds if the transfer is approved; and
• the fiscal impact on the line item account that funds are being transferred from.

At the end of each fiscal year, the board shall summarize the number and types of fiscal transfers made, the aggregate amount transferred to and from each account, and the impact of such transfers.

5. Regional Board of Education treasurers shall verify by oath public reports, returns, and reception or disbursement of funds. Any person who verifies any return or report, known to them to be false, in fact, or which in any material respect intentionally suppresses or conceals the truth, shall be subject to the penalty provided for false statement.

FINDING

• Current law does not allow a town that is a member of a K-12 regional school district to withdraw only some grades from the districts.

RECOMMENDATION

6. C.G.S. Sec. 10-47b shall be amended to include K-12 regional school districts.

State Oversight

FINDINGS

• The State Department of Education was slow to investigate fiscal problems in the Amity School District (Regional District Number 5).
• No quality control is being exercised over independent auditors in regional school districts, even when questionable audit work can be suspected.
• Tracking system for corrective action plans for audit findings is inadequate.
• The Office of Policy and Management has not performed an analysis of the fiscal condition of regional school districts.
• The authority of the Municipal Finance Advisory Commission to require regional school districts to appear before the commission is unclear.
• Regional school district administrative personnel, in several districts, are involved in the selection and management of independent auditors, and auditors in most districts are not changed on a regular basis.
• The credentials of independent auditors in regional school districts are not checked with State Board of Accountancy.

RECOMMENDATIONS

7. The State Board of Education shall periodically perform quality control reviews of selected audits of regional school districts made by independent auditors. This quality control review shall include but not be limited to an examination of the audit firm's system of quality control for its auditing practice to ensure it has been designed in accordance with professional standards and ensure the firm's quality control policies and procedures were complied with to provide the firm with reasonable assurance of conforming with professional standards.

8. The State Board of Education shall develop a tracking system for corrective action plans submitted by regional school districts. It shall include a classification system that indicates the seriousness of findings and establishes deadlines to correct audit findings based on their seriousness.

9. The State Board of Education shall assume the responsibilities of OPM under the Municipal Accounting Act for regional school districts regarding the review of audit reports, tracking of corrective actions, and performing a fiscal analysis of the districts. The State Board of Education, in consultation with OPM, shall develop criteria to perform an annual fiscal analysis of the regional school districts.

10. Clarify C.G.S. Sec. 7-349b related to the Municipal Finance Advisory Commission under the Municipal Auditing Act to include regional school districts and require reports generated under the statute be filed with each town's board of selectmen and board of finance, if applicable, in regional districts.

11. The State Board of Education shall regularly solicit competitive proposals from qualified and licensed auditing firms to perform Annual Audits for regional school districts and randomly assign the firms to regional districts. The audit firms shall be rotated at least every three years among the regional districts.

12. Audits performed for regional school districts under the Municipal Auditing Act shall contain a written management letter, in accordance with guidelines developed by the State Board of Education. The State Board of Education shall define the items that should be contained in the management letter and when one is necessary. It shall include at a minimum those issues identified by the auditor during the course of the audit that do not rise to the level of a reportable condition but indicate deficiencies with internal controls, inter-fund transactions, reserves, and financial documentation.

Local Share Formula

FINDINGS

• Changing the current allocation formula that determines local share of education expenses to a consolidated tax base in regional school districts would be disruptive to local government finances, could require an overall increase in the state's main education grant, and is not supported by the majority of town leaders in regional districts.

RECOMMENDATION

13. The current method of allocating the local share of education costs for regional school districts should be continued.