CHAPTER 264

FORMERLY

SENATE BILL NO. 308

AS AMENDED BY

HOUSE AMENDMENT NO. 3

AN ACT AMENDING TITLE 14 OF THE DELAWARE CODE RELATING TO THE FINANCIAL ACCOUNTABILITY OF PUBLIC SCHOOL DISTRICTS AND CHARTER SCHOOLS.

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

Section 1. Amend Chapter 18, Title 14 of the Delaware Code by deleting said Chapter in its entirety and substituting in lieu thereof the following:

“Chapter 18. District and Charter School Financial Responsibility

Subchapter I. District and Charter School Financial Oversight

§1801. Definitions.

As used in this chapter the phrase “school district” means the Christina School District.

§1802. Financial Recovery Team.

Upon the recommendation of the Secretary of Education (“Secretary”) that a school district is in financial distress as provided in subsection (b) of this section, the Director of the Office of Management and Budget (“Director”), with the consent of the Controller General, may appoint a Financial Recovery Team (“Team”), and the Department of Education is hereby authorized to secure technical assistance and other resources as necessary to ensure the effective operations of the Team.

a. For the purposes of this section a local school district shall be considered in financial distress when one or more of the following criteria are met:

1. The district financial position report required to be submitted on May 1, pursuant to §1507 (a) of this Title, projects less than two months carryover; or

2. It is projected at anytime during the course of the fiscal year that local payroll expenses will exceed projected local revenues; or

3. Whenever a school district projects that it cannot fund one or more scheduled payroll disbursements.

a. During any period of time when it is determined that a school district is in financial distress, the Financial Recovery Team shall be empowered to exercise, subject to the approval of the Secretary of Education, control over the expenditure of funds appropriated to a school district as deemed necessary by the members of the Team. Control shall include, with limiting the foregoing, the right to approve the school district’s annual budget and any subsequent material amendment thereto, and the right to pre-approve any obligation or contract that would require the expenditure of funds by the school district. Notwithstanding any provision of either this Code or any applicable rule or regulation to the contrary, the authority extended under this section shall apply to the expenditure of all funds received by a school district, except that in the case of a charter school, such authority shall only extend to funds provided to the charter school either by the state or through any grant administered by the State.

b. The Financial Recovery Team shall report at least monthly to the Governor, the General Assembly, Director of the Office of Management and Budget and the Controller General regarding the district’s current and projected financial position.

c. Upon the recommendation of the Secretary of Education that a school district is no longer in financial distress as defined in this section, the Director of the Office of Management and Budget, with the consent of the Controller General, may elect to remove the members of the Financial Recovery Team.

Subchapter II. District And Charter School Board Responsibilities

§1803. Financial Responsibility Training.

With the approval of the Director of the Office of Management and Budget and the Controller General, the Department of Education, hereinafter referred to as “Department,” is directed and authorized to develop a program of financial responsibility training to instruct members of school boards, including vocational-technical school boards, and the boards of charter schools, in properly discharging their responsibility to insure that public funds, including both state and local funds, are appropriately managed and expended, and shall also include training on state and local funding of public education. The Department of Education is authorized to promulgate rules and regulations to implement such a program of training and each of the members of the aforementioned boards and any resident members of the Financial Responsibility Committees as established in §1804 of this Chapter shall be required to attend such training as may be required by the Department pursuant thereto.

§1804. Financial Responsibility Committee.

As a condition to the eligibility to receive state funds, each local school board, including vocational-technical school boards, and the boards of charter schools shall establish a permanent Committee composed of 1 or more members of the said boards and/or residents of the school district, except in the case of a charter school in which case members may either be residents of the school district in which the school is located or parents of students enrolled at the school. Said committee shall be responsible to closely monitor the financial status of the school district or charter school and provide oversight to local administrators in the conduct of the financial affairs of the school district or charter school. The member or members of said committee shall regularly require local administrators to prepare such financial reports as may be required by said committee to review the school district’s or charter school’s revenues and expenditures on a monthly basis, or by any provision of this Code, or any rule or regulation of the Department of Education, and shall examine the same and report not less than monthly to the whole board on the financial status of the said district or charter school.”

Section 2. Amend Title 14 of the Delaware Code by adding a new §1507A to read as follows:

Ҥ1507A. Christina School District financial position reports.

(a) Notwithstanding any other law to the contrary, for purposes of this section only, “public school districts”, “vocational-technical school districts”, “charter school districts” and any other reference to a public or charter school district shall mean the “Christina School District”.

(b) Beginning with the fiscal year ending June 30, 1997, all public school districts, including vocational-technical school districts, both sometimes referred to herein as “district,” and charter schools are required to submit to the Secretary of Education, 2 financial position reports, one on or before May 1 and one on or before August 31 of each year. The format of the reports shall be as prescribed by the Secretary consistent with the provisions of this section.

The financial position report due by May 1 shall project a school district's current fiscal year ending balance in its local current expense revenue accounts after 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 III 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. In the case of a charter school, the report shall identify the source and location of all funds included in the school’s financial position report. If the financial position report shows a deficit occurring prior to the close of the current fiscal year, the district or charter school 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 two month's full local payroll and other operating obligations, the district or charter school 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 August 31 of the ensuing fiscal year shall be focused exclusively on local district and charter school 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 III 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. in the case of a charter school, the report shall compare the school’s year-end current expense balances from the previous fiscal year, and identify the source and location of funds sufficient to meet the school’s payroll obligations through October 15. To the extent that this report shows a deficit, the district or charter school shall report what steps it will take to meet its payroll obligations through October 15. If the August 31 report projects an October 15 surplus that is less than the amount required to cover 1 month's full local payroll cycle, the district or charter school shall also indicate what steps it plans to take to attempt to assure that such a minimum balance will be in place in the subsequent fiscal year.

Whenever the August 31 report shows that a district will be unable to meet all or some of its payroll obligations through October 15, the district may meet those obligations by requesting from the Secretary of Education with the approval of the Secretary of Finance and the Director of the Office of Management and Budget an advance of state funds in an amount sufficient to cover the district's payroll obligations through October 15. Upon such request and approval, the Secretary of Finance shall cause to have the requested funds advanced to the district, and the district shall reimburse the State for those funds no later than November 15 of the same year.

The financial position report shall have been reviewed and approved by the school board of each reorganized school district and charter school and be made a part of the public record of that school district and charter school. Three copies of each report shall be submitted to the Secretary of Education by the dates specified above. The Secretary of Education shall provide copies of the submitted reports to the Director of the Office of Management and Budget and the Controller General within 5 working days.

(c) Notwithstanding any provision in this Code to the contrary, 25% of all projected state funding to any school district, including a vocational-technical school district, or charter school shall be withheld until the submission of the financial position report required to be filed on or before August 31st pursuant to the provisions of subsection (a) of this section, and the acceptance thereof as satisfactory in the sole discretion of the Secretary of Education, and the certification of the school district’s or charter school’s unit count in accordance with this Code and any rule or regulation promulgated in accordance therewith.

(d) If a school district or charter school materially alters its financial position after providing any report required by this section, the school district or charter school shall provide financial impact statements to the Department of Education, the Office of Management and Budget and the Office of the Controller General, specifying the nature of such change and its impact upon its previously filed financial position report.

(e) Any school district or charter school that fails to comply with this section or any provision herein shall be subject to review, including all of its books and financial records, by the Department of Education, the Office of Management and Budget and the Office of the Controller General in order to determine whether the school district or charter school is financially stable. In the case of a charter school, nothing contained in this section herein shall be deemed to in any way limit the authority of the school’s approving authority to act pursuant to the provisions of Chapter 5 of Title 14 of this Code.”

Section 3. The provisions of this Act shall be effective upon enactment.

Section 4. If any provision of this Act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or applications, and to that end the provisions of this Act are declared to be severable.

Section 5. State intervention authority is designed to allow the State of Delaware to intervene in the Christina School District’s current situation of financial distress. It is expected that subsequent legislation will be proposed prior to June 23, 2006, setting in place permanent rules, conditions, and procedures designed to allow the State to intervene into local school district financial and budgetary management, as well as other rules, conditions, and procedures designed to allow for the proper financial and budgetary management of school districts and charter schools. The Director of the Office of Management and Budget shall make timely and at least weekly specific recommendations for financial oversight of the Christina School district.

Approved May 11, 2006