CHAPTER 329

FORMERLY

HOUSE BILL NO. 391

AN ACT TO AMEND TITLE 14, DELAWARE CODE, REGARDING THE FINANCIAL REPORTING REQUIREMENTS OF REORGANIZED SCHOOL DISTRICTS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

WHEREAS, there is a clear need to assure citizens of this state that their local school districts arc operating in a financially solvent manner; and

WHEREAS, the State provides, -through its Division III Equalization program, a substantial amount of flexible resources that districts utilize in combination with property tax and capitation tax revenues in order to meet their local obligations; and

WHEREAS, the amount of Division III Equalization a district earns directly impacts the amount of local current expense revenue a district needs to maintain as an unencumbered balance in order to meet their contractual and operating obligations either through the end of a fiscal year or until the district receives the hulk of its local tax revenues each fall; and

WHEREAS, the current provisions of Chapter 1509, Title 14, Delaware Code, fail to recognize the inter-relationship between Division III Equalization income and local current expense revenue; and

WHEREAS, the quarterly reporting requirements of Chapter 1509, Title 14. Delaware Code were intended to provide the general public, the local school hoards and the State with an early warning should a district enter into a precarious financial position; and

WI IEREAS, the provisions of Chapter 1509. Title 14. Delaware Code, which requires a district that ends a fiscal year with an unubligated cash balance in excess of 20 percent of its estimated current operating expense revenue or $100,000, whichever is more, to submit a report detailing how the district proposes to dispose of such balance, suggests that such balances are inappropriate, when in fact this balance may be required in order to meet obligations prior to the receipt of the ensuing year's tax revenues or is indicative of a recently enacted referendum.

WHEREAS, the General Assembly agrees that if financial reporting requirements are to he imposed on local school districts such requirements should focus on meaningful public information without imposing administrative burdens on the districts.

NOW, TI 1EREFORE:

13E IF ENACTED BY 'HIE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Amend Chapter 1509, Title 14, Delaware Code, by deleting said section in its entirety and substituting in lieu thereof the fllowing:

"; 1509 School District Financial Position Reports

Beginning with the Fiscal Year ending June 30, 1997, all reorganized school districts are required to submit to the State Board of Education. two Financial Position Reports, one on or befine May I and one on or before July 31 of each year. The format of the reports shall be as prescribed by the State Board consistent with the provisions of this Section,

The Financial Position Report due by May I shall project a district's current fiscal year ending balance in its local current expense revenue accounts alter taking into consideration all remaining local contractual. salary. and regular operating obligations that can be reasonably estimated. To the extent that a district has General Fund balances in their Division Ill Equalization Accounts, Division II - All Other Costs and Energy Accounts, or in a State Board approved cash option account, such balances may be identified as offsets to any local obligation. If the financial position report shows a deficit occurring prior to the close of the current fiscal year, the district shall indicate what steps it will take to assure that its obligations are satisfied in the current fiscal year. If the financial position report shows a current expense deficit, or a surplus that is less than the amount required to satisfy one month's full local payroll and other operating obligations, the district shall also indicate what steps it plans to take in the ensuing fiscal year to assure that its future year-end balance will be sufficient to cover at least this amount.

The Financial Position Report due on or before July 31st of the ensuing fiscal year shall be focused exclusively on local payroll obligations through and including the October 15 payroll cycle. This report shall compare the district's year-end current expense balances from the previous fiscal year, and its preliminary Division 111 Equalization appropriation for the current year (which amount shall be based on 90% of the Division III amount earned in the previous fiscal year), with the district's projected local salary obligations through October 15. To the extent that this report shows a deficit, the district shall report what steps it will take to meet its payroll obligations through October 15. If the July 31 report projects an October 15 surplus that is less than the amount required to cover one month's full local payroll cycle, the District shall also indicate what steps it plans to take to assure that such a minimum balance will be in place in the subsequent fiscal year.

The Financial Position Report shall have been reviewed and approved by the school board of each reorganized school district and be made a part of the public record of that school district. Three copies of each report shall be submitted to the State Board of Education by the dates specified above. The State Superintendent of Public Instruction shall provide copies of the submitted reports to the Budget Director and Controller General within 5 working days."

Approved May 8, 1996