Board warned of budget mess two months before FY 2008 budget release
STATEMENT TO THE CHICAGO BOARD OF EDUCATION JUNE 27, 2007
Members of the Board may be aware in a few days the Illinois State Board of Education (ISBE) is submitting to the US Department of Education’s Inspector General extensive additional auditing of Chicago Public School’s Federal Title 1 expenditures and related instructional positions. At stake is $16.8 million or possibly more if ISBE’s additional reviews indicate additional problems with comparability of services requirements related to Title 1 funding.
Rodney Estvan (Access Living, Chicago) asked the Board on June 27 to re-establish a regular audit committee to avoid future financial mistakes like the paperwork trickery resulting in a $16 million claim for a refund by the federal government. Substance photo by George N. Schmidt.
The root of the problem CPS is faced with is that schools have not been able to fill teaching positions in low income Title 1 schools, but CPS has taken in federal funds for these unfilled positions. There is much in the Office of the Inspector General’s (DOE) report issued on June 7th relating to CPS that is disturbing, but I must say that it is not unanticipated.
You all may recall that on June 26, 2006 the Civic Federation in its review of CPS FY 07 budget called for a rejection of that budget. One reason for that rejection was a lack of “transparency.” Part of this lack of transparency was in relation to your budget’s lack of breakdown by function for the district’s 44,000 teaching and support services personnel. The Federation even objected to the fact that they could not tell exactly where staffing cuts were being made even though they endorsed these cuts in principal. Access Living reviewed your FY07 budget for special education in detail and found numerous problems with that budget portrayal of both State and Federal funding for special education services in CPS. In light of the OIG’s June 7th report we have significant concerns over the continuation of State of Illinois educational services block grant to CPS for special education personnel reimbursement. In 1996 CPS was granted the extensive flexibility that allows CPS not to file applications and other claims all other school districts in the state must submit for State special education funds (see 105 ILCS 5/1D‑1). Because ISBE has been cited for its failure to effectively monitor CPS’s staffing in relation to Title 1, we have real concerns in relation to special education staffing levels. This is particularly the situation because CPS has historically had its highest area of unfilled positions in special education.
Lastly, I would note that the OIG report made some very concerning comments about CPS’s fiscal oversight of charter schools, which are highlighted in the copy of the report we have included in each of your packets. This is a concern to us at Access Living because we carried out an extensive Freedom of Information Act Request reviewing numerous charter schools and contract schools budgets. We have real concerns about Educational Management Fees being charged by some charter and contract school operators. We have seen fees as high as 14% of revenues. Part of the problem with these EMO fees in relation to special education and other categorical funds is that in most cases there are very specific percentages that CPS can use from these funds for administrative purposes. If CPS has already taken the full administrative percentage of these funds as they pass through the school district to the charters, how can the EMOs tag on fees to these funds? We have real concerns about the accounting process for these schools in light of the OIG report. We have also reviewed audits of charters and some contract schools in the process of carrying out the FOIA. We did not see this issue of potential double dipping of programmatic administrative costs specifically addressed in the few audits we had access to. This Board does not have any functioning standing committees and this is unlike any of the Boards of Education in recent history prior to the Illinois General Assembly granting increased power to the Office of the Mayor of Chicago in relation to CPS. All of you as a requirement of the State School Code were required to have undergone specific training “budget and revenue review” (105 ILCS 5/34‑3.2). On July 26th 1995 the Board suspended its own rule requiring a standing budget committee. This Board needs to have a standing finance oversight or audit committee, just like publicly held corporations do. The issue of finance oversight for corporations was put in the spotlight by the Enron Bankruptcy. Several of you appear based on your resumes to have served on audit committees of either publicly held or not for profit entities. The CPS is the largest employer in our State and its fiscal issues are extremely complex. This school district like almost all others in out state needs to have such a standing committee. This standing committee needs to have regularly scheduled meetings subject to the Open Meetings act. It is not appropriate for this Board to delegate its oversight responsibilities to CPS employees including the CEO, those in the Office of Management and Budget, Grants Management and Administration, and other sub-units. For Board members to sit in isolation reading audit reports does not serve the tax payers of Chicago appropriately or provide the level of transparency necessary to the citizens of Chicago, regardless of the skills many of you have in finance. It is in the best interest of Chicago and of the CPS to have a standing committee of the Board reestablished to serve these important functions.
