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OUSD and the case of the mysterious bottom line

By Katy Murphy
Tuesday, March 10th, 2009 at 6:23 pm in finances, OUSD central office, School board news.

Last August, I wrote about the fact that no one knew how much money the Oakland school district really had – five years after the 2003 state takeover.

State auditors found all kinds of discrepancies and missing records dating back to 2003, and OUSD hired an outside firm to “disentangle” its finances from those early years – to see if they could uncover the district’s true fund balance.

Now, as that outside firm wraps up OUSD’s cash flow case, the school district’s new CFO has some news for us: “District does not report the same cash balances as the Alameda County Treasury and Alameda County Office of Education (ACOE),” a bullet point on Page 31 of his presentation reads.

Further, CFO Vernon Hal reports: “Staff believes there will be significant adjustments to cash and the ending fund balance in the General Fund upon completion of analysis by an outside audit firm.” (The word “significant” is used twice, and underlined for emphasis each time. I still don’t know how much “significant” is.)

Board President Alice Spearman downplayed the potential impact of this fiscal bombshell, saying she just wanted the mystery solved. “It’s just something that you need to know,” she said. “Wherever we are, we’ll be able to start fresh and work from there.”

To complicate the matter, Oakland’s CFO predicts a nearly $30 million cash flow deficit in June — an alarmingly high figure, printed in red. District spokesman Troy Flint says it’s a one-month snag, because of $40 million in delayed payments from the state (expected to come in July, the start of the new fiscal year).

But how does the district plan to make payroll?

On Page 35, it tells us. “In order to ensure there is sufficient cash to meet financial obligations, resolution may be brought to (the board) for approval of temporary interfund borrowing.”

I asked Flint to clarify. It’s the facilities fund they’re talking about, he said. The local bond money to repair and modernize schools.

But wait: Is the state letting districts borrow from their facilities bond fund to make payroll? I thought that wasn’t allowed.

You can find the full interim financial report here. It includes more fiscal details, based on the new state budget, but few specifics on what local programs and departments will be cut, and by how much.

You can find tomorrow’s meeting agenda here.

image from Carla216′s photostream at flickr.com/creativecommons

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  • Michael Siegel

    Interestingly enough, I believe that the original state bailout of the Oakland schools, circa 2003, was precipitated by a similar cash flow crunch that could have been solved by “interfund borrowing.” From what I remember, various powers-that-be, such as Sheila Jordan of the ACOE, prevented such borrowing then.

  • Nancy

    And what happened to public oversight these past +/- 6 years demanding to view audit reports?

  • John

    Back off Nancy! As part of California Oakland and its schools enjoy all privileges, powers, and rights of deception pertaining thereto.

  • http://perimeterprimate.blogspot.com/ Sharon

    I don’t understand this at all. I’ve been unconscious for the past six years and just woke up.

    The last I heard, the wonderful and wise Jack O’Connell was sending in his experts from the Broad Foundation who were going to fix OUSD, and transform our “K-12 urban public education through better governance, management, labor relations and competition?”

    When the Broad Superintendents Academy says it wants “The nation’s most talented executives to run the business of urban education,” did alumni Randy Ward, Kimberly Statham, and Vincent Matthews skip school? If not, what happened to all their training and business acumen?

    Didn’t the millions of dollars spent on Expect Success! “…significantly improve student achievement in urban areas [Oakland] by creating and supporting strong leadership, school district efficiency, competition, best practices and teacher quality.”

    I just cannot believe that every single thing is not in order after all these years that have gone by. Please say it’s not true!

    Billionaire Broad, who certainly knows everything there is to know, says on his website that:
    – Every person and every dollar in school district central offices and schools must be focused—efficiently and effectively—on students, not adults, and must be held accountable for results.
    – All students do better when they are supported by a good teacher.
    – Competition among American schools is healthy.
    – Best practices should be shared.

    Is what happened to OUSD for the last six years one of Broad’s best practices that should be shared?

  • Katy Murphy

    Troy Flint just sent me this provision of the California Education Code titled “Temporary Borrowing Between Funds.”

    42603. The governing board of any school district may direct that moneys held in any fund or account may be temporarily transferred to another fund or account of the district for payment of obligations. The transfer shall be accounted for as temporary borrowing between
    funds or accounts and shall not be available for appropriation or be considered income to the borrowing fund or account. Amounts transferred shall be repaid either in the same fiscal year, or in the following fiscal year if the transfer takes place within the final 120 calendar days of a fiscal year. Borrowing shall occur only when the fund or account receiving the money will earn sufficient income, during the current fiscal year, to repay the amount transferred. No more than 75 percent of the maximum of moneys held in any fund or account during a current fiscal year may be transferred.

  • Former OUSD parent

    So Troy is now running the legal department too?

    Please for the love of God hire someone COMPETENT to run the distict.

    Sadly, I think Jack O’s final gift to the OUSD will be its dismemberment. OUSD will not be “unified” within three years.

  • ex-OUSD staff

    Former OUSD Parent -
    Just because someone cites Ed. Code doesn’t mean that they are running the legal department, nor that they presume to do so. Ed. Code is full of easily understandable regulations that apply to all participants in the public schools. The code is available on line to everyone, in a searchable form (along with all the other codes) @ http://www.leginfo.ca.gov/calaw.html

  • Former OUSD parent

    Dear Ex-OUSD Staff,

    The REGULATIONS are not part of the ED Code. If you have ever tried to figure out how to staff an SSC, you might not think the Ed Code is full of “easily understandable regulations” because, they are not regulations (they are statutes) and not written in plain languages.

    Moreover (a big word meaning “and”) The Education Regulations are here: http://www.calregs.com/linkedslice/default.asp?SP=CCR-1000&Action=Welcome.

    Finally, here is great link on how in the eyes of the CDE the OUSD has been failing over the last three or four years under the AYP standards. I wonder if the district really sent the letters to all the parents letting the parents know the LEA PI status. I doubt it.. Please see: http://www.cde.ca.gov/ta/ac/ti/piyr3c1t3yr4.asp

  • cranky teacher

    Love the Nancy Drew image — is that you, Katy?
    ;-)

  • Katy Murphy

    Shhhh… I don’t want everyone to know about the double life I lead. I haven’t even told Ned.

  • Pingback: The Case of the Mysterious Bottom Line: Solved - The Education Report - Reporter Katy Murphy’s blog on Oakland schools

  • Diane Ravitch

    Katy,
    I am trying to understand the Oakland story. Just read Joe Williams’ report, then your article about the tangle re finances. What is the current bottom line? Does the district have a deficit now? Did the state bail out the district and clean up the deficit?
    What can I read to explain how Oakland schools are doing as a result of the state takeover?
    Thanks,
    Diane

  • Katy Murphy

    The district does have a deficit now, though in large part it’s because of $40 million in deferred payments from the state (payments owed in 2008-09, but delayed until after the start of the next fiscal year).

    Oakland school district’s chief financial officer says the deficit will be close to $40 million as a result ($30 million from the deferred state payments, plus the newly uncovered negative cash balance).

    So in answer to your question about whether 1) the state bailed out the district and whether it 2) cleaned up the deficit, I suppose the answer would be “yes” to the first part and “no” to the second.

    Some board members said last week that this fiscal situation sounds remarkably similar to that which the district faced in 2002-2003, before the state takeover — a comparison I plan to research further.

  • Jim Mordecai

    Katy:

    The issue at the time of the Chaconas administration was whether or not it could borrow from its construction bond accounts to cover its deficit. The Alameda County Superintendent Sheila Jordan ruled that it could not.

    Faced with the deficit that will be addressed when the Governor releases money it is obligated to pay the District, the present State Administration can borrow using “Temporary Borrowing Between Funds”, statue 42603, according to Troy Flint of the District.

    Without knowing if 42603 existed in 2003, the ruling of Superintendent Jordan lacks context. However, if the law did exist then, I am sure that the Chaconas Administration would not have been silent and therefore doubt it was in existence at that time. Since other districts practiced using borrowing from other funds, including construction funding, it would not be surprising that districts successfully lobbied to get the right to borrow short term. And, my guess is that after Oakland was forced into receivership for lacking the power to borrow, that is what happened.

    The down side of a district having the flexibility to borrow is that structural problem could go years not addressed while a hidden deficit continues to grow.

    Jim Mordecai