D100 Accounting Miracle

[Ted]

  Last Thursday, the Chicago Tribune had an article about the fact that the ISBE had just released its financial scorecard for school districts around the state and how a lot of school districts were having financial difficulty.

  Last year, District 100 was one of only a handful of districts in Cook County (others being Maywood, Bellwood, Ford Heights, Prairie Hills, Sandridge and Cook 130, I believe) that were on the state's financial warning list or the state's financial watch list for districts in Cook County.

  I went out to the ISBE site to see this year's new financial scorecard. I found that District 100 was off the financial warning list.  That puzzled me because I thought the district had less than $10 million in its reserve funds and was running a deficit this year of $2.8 million and next year expected a $4.2 million dollar deficit.

So, I looked at the district's Statement of Financial Affairs.  And, lo and behold,  a miracle occurred.  For Fiscal Year 2012/2013, the beginning balance in the reserve funds was $9 million dollars and the ending balance in the reserve funds was $17.2 million - an INCREASE OF $8 million dollars in a year when the district was running a deficit.

Then I looked more closely at the ISBE report.  The ISBE is reporting that District 100 took property tax revenue from July and August of 2013 and applied it to fiscal year 2012/2013 rather than 2013/2014.  A school district's fiscal year goes from July 1 through June 30 of the next year.

  In other words, the district is applying 18 months of property taxes to a 12 month period in order to boost the reserve funds from an accouting perspective!  This accounting trick will keep the district off of the state's fnancial warning list and the district will not have to provide the state a Deficit Reduction Plan next year if it runs the expected $4.2 million dollar deficit.

  I believe that what District 100 did was unethical from an accounting perspective.  From a General Accepted Accounting Principles (GAAP) perspective, I think it is unethical to put 18 months of property tax revenue into a 12 month period just to boost the fund balances on paper.

[mustang54]

  Ted I would think its a lot worse than unethical. To me it would seem like fraud and I think that is against the law. How can you use 18 months in a 12 month fiscal year? Doesn't anyone check up on these frickin people who are given taxpayer money to operate?

[buzz]

  In other words, the district is applying 18 months of property taxes to a 12 month period in order to boost the reserve funds from an accouting perspective!  This accounting trick will keep the district off of the state's fnancial warning list and the district will not have to provide the state a Deficit Reduction Plan next year if it runs the expected $4.2 million dollar deficit.

Would the Board have authorized this (voted) or is the Financial Manager/Officer responsible ?
And what happens when that referendum to increase the taxing rate fails ?

So many questions.

[Ted]

Would the Board have authorized this (voted) or is the Financial Manager/Officer responsible ?

Buzz, last year, the Business Manager, Cheryl Wadsworth, resigned last June amid a lot of rumors that she disagreed with something being done.  She had one more year on her contract and her resignation seemed mysterious.  She had no new job to go to, as far as I know. There were rumors that she and Fields had bumped heads on some issue.

  Now, I think I know the reason she resigned.

[Ted]

Here was the statement in the ISBE financial scorecard:

"Our (District 100) audit is accrual based. If the district receives property tax revenue within 60 days of year end, it is recorded as a property tax receivable. The county accelerated payments thus resulting in a significant increase in property tax receivables for fy 2013."

[Ted]

  Ted I would think its a lot worse than unethical. To me it would seem like fraud and I think that is against the law. How can you use 18 months in a 12 month fiscal year? Doesn't anyone check up on these frickin people who are given taxpayer money to operate?

  Mustang54, it looks like the ISBE knows about it, based on the statement in the financial scorecard.

[fatladysings]

Can someone please tell me what this means? It is on the AGENDA for tonites board meeting?


Adopt resolution to waive the limitation on administrative costs for the school year
2013-2014. This is an annual requirement by ISBE for school districts who rank
in the lowest 25% of per pupil administrative expenditures.

[buzz]

Can someone please tell me what this means? It is on the AGENDA for tonites board meeting?
Adopt resolution to waive the limitation on administrative costs for the school year
2013-2014. This is an annual requirement by ISBE for school districts who rank
in the lowest 25% of per pupil administrative expenditures.

Wait'll Mustang sees this one !

[Ted]

Can someone please tell me what this means? It is on the AGENDA for tonites board meeting?


Adopt resolution to waive the limitation on administrative costs for the school year
2013-2014. This is an annual requirement by ISBE for school districts who rank
in the lowest 25% of per pupil administrative expenditures.

That is something ALL school districts do every year.  This is not anything special.  Every district does it (or, at least, D100, D98 and D201) does it every year.

[Ted]

 It looks like the Chicago Public School system is going to borrow a page from what D100 did last year to make their books look good by pushing 18 months of property tax revenue into a 12 month year.

  Glad to see the Trib is calling this a gimmick.  I wonder if any other school systems are going to do the same thing.

In my opinion, this "stunt" is contrary to GAPP accounting and contrary to the principles of accrual accounting.

Here is the editorial in the Trib:

http://www.chicagotribune.com/news/opinion/editorials/ct-chicago-school-budget-gimmick-edit-20140419,0,7112090.story

  CPS uses another gimmick to balance budget
  Stealing from the future

April 19, 2014

Last year, Chicago Public Schools officials tapped out reserves and turned their pockets inside out to fill a projected $1 billion shortfall. They closed schools, laid off teachers, slashed classroom and central office spending. District officials warned that they had run out of budgetary rabbits to yank from hats.

So what's in store for next year's budget? Looks like ... another rabbit.

CPS officials recently released preliminary details of the district's fiscal 2015 budget. It is expected to include a roughly $250 increase in per-pupil spending to schools, officials said. That would be good news — more money for classrooms — except CPS officials admit that this spending depends on a one-time accounting gimmick. Voila! The rabbit.

How will this work? CPS will grab several hundred million dollars in property tax revenue that would have flowed into its 2016 budget and count it for the 2015 budget.

That is, of course, a bad idea. It provides a fix on paper for 2015 but creates a greater hole in 2016 and beyond. "It's like using a home equity line to pay for your groceries," says Laurence Msall, president of the Civic Federation. "You're borrowing from the future to pay for this year's expenses."

If future tax collections are delayed or do not reach projected levels, CPS will face an even bigger hole.

School officials acknowledged in a release that the tax shift doesn't address the school system's structural deficit but said it will help to stave off "draconian budget cuts" this year. CPS budget officer Ginger Ostro told us she hopes this year's budget is a "bridge" to "help us get to structural reforms."

We understand what's driving the gimmickry. CPS faces a massive $697 million pension payment in the 2015 budget. That amounts to a crushing $1,700 per pupil. The Illinois legislature has approved several pension reform packages for various government workers, but there's no sign that it's ready to tackle the pension fund for Chicago school employees.

The budget plan will keep the classroom doors open, but it will also take pressure off of Springfield to do teacher pension reform this year.

The reform models are there, in recent legislation. Everyone knows what has to be done to help CPS and the 400,000 children in its classrooms. Curbing the rise of pension obligations will protect schools, protect students, protect teachers who are counting on a pension.

Instead, we pull more rabbits from hats. You know the most aggravating thing about rabbits. They dig holes.