Report sees improvement, challenges for Orleans board

Report: Orleans board doing better; challenges remain

While the Orleans Parish School Board’s finances have dramatically improved since Hurricane Katrina, it still faces significant challenges, according to a Bureau of Governmental Research report released Thursday.

The report examines the board’s financial position as well as its performance as a financial supervisor for all public schools in Orleans Parish.

The School Board has greatly improved its accounting practices and now receives clean audits the report says, while noting a troubled history that included employees erroneously receiving more than $3 million in pay and benefits, an FBI investigation into corruption that led to 27 convictions, a bribery schemed that landed former board President Ellenese Brooks-Simms in federal prison and a “high-risk” financial status imposed by the state Department of Education.

According to the audit, 106 of the 125 schools operated by the School Board in 2005 were transferred to the Recovery School District after Katrina. At that time, the board was $100.4 million in debt. But as of June 30, 2012, the board had net assets of $157.2 million.

The report attributes the board’s financial state “largely to the infusion of extraordinary state and federal funding after Katrina.”

The most significant challenges facing the board’s financial health are “inadequate funding for facility maintenance and repair, and the potential cost of an unfavorable judgment in a class action lawsuit brought by former employees for wrongful termination after Katrina,” according to the report.

A judge ruled last year in favor of the tenured employees, who were placed on unpaid leave in August 2005 and then discharged in February 2006. The School Board appealed the judge’s ruling. An oral argument will be heard in the Fourth Circuit Court of Appeal on May 30.

In examining the board as the resource manager for all public schools in the parish, the report emphasized that common resources that exceed common expenses should be applied “in ways that benefit all public school students in Orleans Parish.”

While the OPSB only directly operates six schools, two alternative programs for troubled youth and oversees 12 charter schools, the report emphasizes that it “maintains central control over key financial functions” for the whole system.

Those functions include taxing and bonding authority and determining how certain revenue streams are spent, decisions that affect all public schools in the parish.

“For that reason it is imperative that the School Board manage the school system’s resources for the benefit of the system as a whole,” the report stated.

The BGR report said that in 2011 the board overspent $2.1 million of the general fund, money that was used for OPSB direct-run and charter schools when it should have been available for “needs of the system as a whole.”

Citing limitations in the School Board’s record keeping, the report only analyzed fiscal 2011. The report acknowledges the analysis as a “snapshot,” without providing insight into the board’s spending practices in prior years.

In terms of financial management, the report pointed to “two serious weaknesses.” The first was the board not tracking or reporting expenditures by types of schools, described as “a major transparency issue.”

The second was the lack of a policy regarding the use of the general fund and common resources, as well as those designated for the board’s own schools. Adopting formal policies for the use of that money was a key recommendation.

The report includes several recommendations to “promote good financial stewardship,” including expanding record-keeping and publishing an annual summary of revenues and expenditures by school type and making it available online.

In terms of making statewide decisions, the report found that the board does not have a “formal or informal process for consulting other school operators.”

The report recommends better communication between the board and school operators.

The report is the first in a two-part series. The report released Thursday focuses on the existing legal framework, and concluded that “many of the problems identified in this report stem from the fact that the current governance structure was not specifically designed for the type of system in place today.”

The next BGR report will tackle a much broader question: What is the most appropriate governance structure for New Orleans’ unique system of public schools?

Some of the points of the uniqueness outlined in the first report include the “highly decentralized nature,” with 48 separate entities operating public schools in Orleans Parish.

“The Orleans Parish School Board has dramatically improved its financial management since Katrina,” BGR Chairman J. Kelly Duncan said in a news release. “But it doesn’t have the systems in place to ensure a fair distribution of resources. The board can and should address these problems immediately.”

In a statement released Thursday, interim Superintendent Stan Smith called the structure of public education in Orleans Parish “the most unique in America” and said the board is “a highly capable steward for the students and parents of New Orleans as evidenced by its much improved financial posture since 2005.”

He said the board will continue to improve and refine policies to adjust to the landscape.

There were no textbooks on how to rebuild after Katrina, Smith said in the statement. “We believe these issues result from a rapidly changing landscape based on charter demonstration law. Additional work is needed to sync the current mandated reporting requirements for school districts to this new landscape,” Smith wrote.

He said that current legislation does not adequately address funding for responsibilities mandated for the School Board.