Ann Arbor school board gets clean financial audit, discusses school finances
The Ann Arbor Public Schools Educational Foundation has received about $7,500 in private donations since voters turned down a countywide schools enhancement millage, executive director Wendy Correll told the school board Wednesday night.
In addition, a private donor has offered matching funds up to $10,000 for donations gathered from new donors between Nov. 4 and Dec. 31, Correll said.
Wendy Correll
File photo
The hope is those who voted for the unsuccessful millage will donate the money they were willing to pay in taxes to the foundation, which supports the school district.
Correll’s announcement was one of several financial items on the agenda for the school board tonight.
The biggest item was the district’s audit of its spending for the 2008-09 school year.
The district has a clean audit, Eric Formberg of Plante Moran told the board. That means the auditors found no problems in the handling of the district’s finances.
According to the audit, the district received slightly more than $182 million in revenue for the 2008-09 school year, while it spent about $186.5 million. The difference, about $4.1 million, was spent out of the district’s fund balance. That lowered the total fund balance to $27.9 million.
The numbers reported were for the district’s general fund.
Several board members had questions about the fund balance. Formberg said only about 10 percent of that fund balance was undesignated. The majority of the fund balance, 62 percent, is set aside to help with cash flow during the months when the district doesn’t get state aid checks.
The auditors said 89 percent of the district’s general fund spending is on salaries and benefits. They also said for every $1 spent on salaries, 86 cents went to instruction.
Trustee Randy Friedman asked Superintendent Todd Roberts to make sure the auditors’ presentation was put up on the Web site for district residents to view.
Earlier in the evening, a couple parents who were heavily involved in the failed millage campaign told the board they want to make sure the community understands the district's finances.
“I urge the board to redouble efforts to make the districts’ finances not only open, but understandable to those who don’t understand education,” Steve Norton said.
Christine Stead said the district needs to educate its residents about what programs are mandated by the state, what changes they can make, what costs the districts controls and what costs the district does not control.
Roberts told the school board district administrators plan to hold a series of meetings with the public in the coming months over budget cuts. He said the district hopes to have a draft budget for the 2010-11 school year complete by February.
David Jesse covers K-12 education for AnnArbor.com. He can be reached at davidjesse@annarbor.com or at 734-623-2534.
Comments
Stephen Lange Ranzini
Thu, Nov 19, 2009 : 11:16 p.m.
Thanks "Alexpa" for the link to the financials and financial report, which I found very useful. The AAPS had unrestricted net assets of about $20 million and cash and investments of $37.6 million at fiscal year end. Net assets dropped $9.3 million (in other words they had a loss of $9.3 million for the year). Revenue was $234.4 million of which $134.6 million was spent on instruction and $84.0 million was spent on support services out of the $243.7 million in total expenditures. The fund balance or "net worth" of the AAPS was $121.6 million at fiscal year end. Property taxes raised $101.7 million of the total revenue of $234.4 million or 43.4% of the revenue raised. Unfortunately property taxes dropped $3.9 million year over year and that trend will continue. Also, the second largest revenue source was the $75.0 million State Foundation Allowance down $0.6 million from the prior year, but we know that will be hit hard in 2010 due to the recent cutback in the state's budget that targeted Ann Arbor and a few other communities statewide. Some observations: the Michigan Municipal League indicates that the rainy day fund of a municipal unit of government ideally should be about 20% of revenues, which in this case would be $46.9 million. Of course now it is not just rainy, but a hurricane came through and washed Michigan out to sea, so a draw down of the rainy day fund is not only prudent but timely as this is what it's for. The "rainy day" fund is now either just under $20 million or $37.6 million by whichever metric you choose to use. The amount spent on instruction was $134.6 million of the $234.4 million in revenue, or 57.4%. Roughly $100 million was spent on $84 million of support services, interest on the debt of $9.3 million and various miscellaneous categories, including athletics, the expenditures for which grew from $2.7 million to $3.2 million year over year (all other miscellaneous categories were flat or up or down $100,000 or less). We know the revenue side isn't going to help for at least a year so cuts must be made to balance the budget. Aren't there any cuts possible in $84.0 million of expenditures? Lastly, I'd like to see a plan as to what it would cost and how the district could send elementary school children to school year-round (for a start) to eliminate the traditional Summer break, which is harming the children as noted by President Obama, the Secretary of Education and many other commentators (see http://www.msnbc.msn.com/id/33044676/) as this would in the future raise property values and turn the revenue equation around more rapidly if our primary schools had the best MEAP scores in the state, as a result, since this would bring in jobs and home buyers to the city if we did that.
a2st
Thu, Nov 19, 2009 : 3:24 p.m.
Oops! I meant "glass half empty."
Steve Norton, MIPFS
Thu, Nov 19, 2009 : 10:59 a.m.
AAPS does not have a "surplus." They call it "fund equity," which doesn't help either. Sometimes people call it a reserve fund, but that's not quite right. Basically, the district has some cash in their "checking account" (if you will) that they hope to still have at the end of the year. It can serve as a "rainy day fund," in case of surprises like mid-year state cuts. But most of it is earmarked for special purposes. The largest share is designated for cash flow; that is, to make sure the district can pay its bills without having to borrow between state aid payments. There is also a two-month gap between state payments from August through late October, which this money helps bridge without having to borrow money (and pay interest). As the team from Plante Moran said last night, once you spend this, it is gone forever. There is almost no chance that the district would be able to carve out money to replenish it anytime in the next few years. If we spend it all now (and it would be gone in a couple years if we use it to replace all state cuts), then we are basically betting that nothing else bad will happen over the next five to ten years. That's just dreaming. As they said last night, having the "fund equity" lets our schools respond strategically to surprise bad news, rather than be forced to react instantly and with less thought. (Schools by law are not allowed to run deficit budgets, even if conditions change mid-year.) So do we use it? Yes, very modestly. There is nothing holy about it. But, we need to be careful, and preserve some to help us handle the disasters we haven't even thought about yet. It's also true that many districts across Michigan, and a number here in Washtenaw county, have little or no fund equity left. This means that the state cuts will force them to cut the full amount out of their budgets immediately, since they have no cushion left. AAPS is lucky to have this option, but we are all on the same downward escalator - just at different points along it.
Lisa Starrfield
Thu, Nov 19, 2009 : 10:36 a.m.
1Block, We do not have a 'surplus'. We have a fund which we use primarily for cash flow that can be tapped in an emergency. However, if we deplete it, we will have significant issues paying bills in between state payments. Ann Arbor Schools are facing a significant budget crisis this year. School district budgets are due at the end of June and we base our budget on what the state tells us we will be getting per pupil. The stat is cutting that amount MID-YEAR bye over $600. That represents a cut of 1 dollar out of every 16, more than 6% of our budget. This isn't something that we could have planned for since the state made a promise and is not keeping it.
Dr. I. Emsayin
Thu, Nov 19, 2009 : 10:09 a.m.
My understanding is regarding the difference between the amount paid for instruction and the amount paid for teachers is that the state mandates that certain special education student have an aid either to deliver individual help with instruction or help groups of special education students. Some teachers, like at Skyline, have released time to work on developing curriculum for the new programs or to imporve student achievement. Some teachers are counselors (who are part of the teaching cohort). Athletic directors are also assistant principals who have more responsibility than coordinating 21 varsity teams, plus junior varsity and freshman teams; hiring coaches, dealing with parents, etc. They also evaluate teachers, are in charge of departments, have responsibility for the physical building, etc. Many districts only have one high school with under 1500 students, Ann Arbor has 3 Large high schools and top sports teams in the state. I hope the cuts are deep enough to hurt the community so they can see that it is at their child's expense that the millage was voted down.
Jim Mulchay
Thu, Nov 19, 2009 : 10:01 a.m.
As "Basic Bob" indicates the heading of "Instruction" seems to cover a number of sub-categories (that is probably true of other headings too). Perhaps the AAPS would like to add a description (glossary or list of sub-accounts?) of the various categories (budget accounts?) so the general reader can better understand the reports - or perhaps this already exists and and can be highlighted? Ideally we could all learn to read the existing reports, but I suspect that is unrealistic. It would also be helpful to clearly identify items what are federally or state mandated - sort of "fixed" revenues and costs. I'm sure all this is in the existing reports, but finding (and understanding what one finds) seems to be a major complaint and perhaps one that can quickly resolved and perhaps lead to a more focused discussion of school finances.
Basic Bob
Thu, Nov 19, 2009 : 9:27 a.m.
The auditors say 86% of salaries are spent on instruction, but the AAPS 2009/10 approved budget indicates only 71.8% of the total salaries are spent on teachers. This looks some creative accounting to me. I think the ROOSTER is minding the hen house.
Commoncents
Thu, Nov 19, 2009 : 7:32 a.m.
So Ann Arbor CITY schools has a surplus of $29million dollars? One thing I still haven't seen anywhere is the detail of the CITY of ann arbor vs. all of the surrounding areas. Is that information available somewhere? My current understanding is the CITY schools (where I live) are fine and have plenty of money... is that true? What about salary cuts across the board? The more you make, the slightly more you have to be cut. I don't want to go into details of what I do, but I took a GIANT pay cut this year. Everyone that I know did, except those that are paid by taxpayers. Ironic? To say the least. Next, can we get a comparison of administration costs at ann arbor vs. all other cities across the nation of our same size? That benchmark will put it in perspective for many citizens. My current understanding is there is a lot of extra positions that are VERY highly paid that many other schools don't have (3 athletic directors for example!) Provide the data so the people can decide. No data, no meaning. About the private donations, I can't help but laugh a little that the total amount is only $7,500. If everyone that voted yes on the millage would give their amount the total would be 3.5million dollars. It's hard to prove, but I'm inclined to believe people know about the donation effort, but since they don't HAVE to give, they won't. Interesting to say the least....