Reforms sought after audit confirms IPS budget surplus

INDIANAPOLIS (WISH) A pair of new financial audits released Tuesday confirm Indianapolis Public Schools ended 2013 with an $8.4 million surplus. It’s a far cry from the $30.2 million deficit the district projected, and it’s left administrators facing some tough questions.

Some of the answers lie within the two audits, conducted independently by the Indiana State Board of Accounts (SBOA) and the Council for Great City Schools (CGCS) over the last two months. IPS is a member of CGCS, a coalition of the nation’s 65 largest urban school districts.

IPS Superintendent Dr. Lewis Ferebee presented the results of the audits to school board members Tuesday evening. Both audits were performed at no additional cost to IPS, Ferebee said.

PROJECTIONS VS. ACTUAL

Among the audits’ findings are that IPS projected $244 million in revenues, but $274 million in expenses in 2013—creating a projected $30 million budget general fund deficit. The audits also found IPS projected a $39 million operational general fund deficit in 2012.

The two audits only examined the general fund budget, used to pay for daily operational expenses. The district’s transportation and capital purchasing budgets, which are kept separate from the general fund, were not examined.

The audits confirmed what Ferebee first reported in March: that actual general fund expenses were far below forecast levels, creating surplus funding.

Both the SBOA and CGCS confirmed the 2013 general fund was recorded properly, and all 2013 receipts and disbursements were accurate.

The board—and the public—simply were not shown accurate figures showing projected deficits versus actual ones, Ferebee told selected members of the media during a briefing prior to his board presentation Tuesday.

It’s not the first time.

Both audits found over-inflated budget deficit projections were “longstanding practices” within IPS, dating back to at least 2002.

Data contained within the audits shows actual budget deficits regularly ran above projections from 2002-2005, and again from 2007-2009. But, since 2009, IPS has operated well above its projected deficits, including the recording of surplus funding in 2010, 2012 and 2013.

The audits also show the district has not actually seen expenditures outpace revenues—in other words, spent more than it’s taken in–during any of the last 12 years.

IPS currently has around $60 million in reserve funding, Ferebee said. Those reserves are maintained in a low-interest bearing account, and have not been invested so that they can be utilized without early withdrawal penalties, Ferebee said.

LACK OF TRANSPARENCY

“These reports provide confirmation of my findings,” Ferebee told I-Team 8 Tuesday. “But, they also provide an opportunity to be more transparent and to earn greater trust. Some of this is a challenge in communication, both with the board and the public. Some of what may have been good intentions here has been lost in translation.”

The school board voted to fire IPS’ Chief Financial Officer Debbie Hineline in March, the week after Ferebee announced he would seek the financial audits.

Critics complained that IPS had cut its staff by 100 last summer, including some teachers, while maintaining a surplus. Ferebee countered that criticism in March, clarifying that the cuts were made due to reduced enrollment, not lack of funding.

“Whether we had a deficit or not, those were sound business decisions to reduce positions that we not necessary to get the best outcome for our students,” Ferebee said at the time.

Still, criticism or not, Ferebee said additional reforms are already underway to better protect the district’s finances in the future.

CHANGES AHEAD

Administrators will now be required to report actual spending and revenue every month–not just projected amounts. School board members will also receive quarterly budget updates at regularly scheduled meetings, and a new budget development committee will be developed, Ferebee said.

The audits also make additional recommendations for change, including:

-That IPS reorganize its Business and Finance Department

-That IPS establish an audit committee to strengthen internal financial auditing practices

-That IPS develop new strategies for monitoring budget transfers

-That IPS establish new reporting, reserves, and auditing policies to guide budgeting practices in the future

-That IPS move to a fiscal year that starts on July 1st, rather than the current calendar year system

Ferebee said he plans to recommend the board adopt a new fiscal year policy within the next three months to better align the district with the State of Indiana’s fiscal year. That could help the district better predict how much money it will get from the state each year as it crafts its budget.

Ferebee was also quick to point out Tuesday that the audits found no allegations of fraud or intentional mismanagement.

But, he said the district must do better.

“We still need a close eye on finances, and a small surplus doesn’t change that,” he said. “If changes aren’t made, we know we’ll be in a tough position if additional revenue cuts do come.”

Watch 24-Hour News 8 at 11 for the latest updates from the board members.

Below is the full IPS Budget Audit:

 

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