Financial and Performance Review of the Burke County School System

EXECUTIVE SUMMARY

April 12, 2010

EXECUTIVE SUMMARY
In January 2010, the Burke County Board of County Commissioners contracted with Evergreen Solutions, LLC to conduct a Financial and Performance Review of the Burke County School System. This review included a detailed analysis of all of the school systems financial management functions, including accounts payable, payroll, internal allocation of resources, internal controls, impact of federal and state reporting requirements, use of grant funds, and procurement. The study also included a review of other operations in Burke County Public Schools, including organization and management, human resources, transportation, food service, facilities, and safety and security.

SCOPE OF STUDY
To fulfill the requirements of the contract with Burke County for the financial and performance review, Evergreen Solutions:

developed a detailed set of information about the status of each BCPS fund source; developed a summary report of the status of district financial resources by fund source (federal, state, and local dollars); analyzed Burke County funding of Burke County Public Schools and the processes involved; and utilized findings to recommend strategies for improvements in the use of funds in Burke County Public Schools.

METHODOLOGY
Evergreens approach and methodology for conducting this review included the following components:

reviewing existing reports and data sources, including independent financial audits, annual budget and expenditure reports, budget guidelines and procedures, accounting procedures, salary schedules, organizational charts, staffing ratios, school board policies, strategic plan, and annual performance reports; conducting a diagnostic review and interviews with Board of Education members, County Commissioners, Burke County Manager and staff, BCPS Superintendent, and other BCPS administrators and staff; collecting additional reports and data from sources inside and outside the school system; conducting a formal on-site review with a team of four consultants; and preparing draft and final reports.

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OVERVIEW OF THE REPORT

The final report for this study consists of the following five chapters:

Chapter 1: Chapter 2: Chapter 3: Chapter 4: Chapter 5:

Introduction Fiscal Resources in Burke County Public Schools Review of Financial Operations and Management Review of Non-Financial Management and Operations Fiscal Impact of Recommendations

Chapters 3 and 4 contain findings, commendations, and recommendations for specific operational areas, and are provided in the following sequence:

a description of the operation in Burke County Public Schools; a summary of our study findings; a commendation or recommendation for each finding; and estimated costs or cost savings over a five-year period, which are stated in 2010 dollars.

OVERVIEW OF FISCAL RESOURCES IN BURKE COUNTY PUBLIC SCHOOLS

Evergreen consultants documented and analyzed the revenue and expenditure activities of the school system by fund source (state, federal, and local) and function. This information is valuable as a foundation for discussing primary financial issues currently facing Burke County Public Schools. An analysis of this recent financial information on the school system can serve as the basis for assessing operations and practices, and for developing future program and operational decisions. There are three major revenue sources that comprise the BCPS budget state, federal, and local (county) funds. According to the most recent data from the state, the State of North Carolina provided 68.9 percent of the funding for Burke County Public Schools in 2007-08. Federal funding accounted for 11.7 percent of the total, and Burke County contributed about 19.4 percent of the school systems operating budget. Salaries accounted for 67.9 percent of all funds expended by the district in 2007-08. Additionally, the following percentages represent total expenditures for each category:

Benefits: 17.3 percent Purchased Services: 6.8 percent Supplies and Materials: 7.4 percent Instructional Equipment: 0.6 percent

Within the context of local funding, highlights include:

Local funding accounts for $16.3 million of the revenue in 2009-10. Burke County appropriations increased $164,127 or 1.2 percent from 2008-09 to 2009-10. Local revenues recorded by BCPS slightly decreased overall from 2008-09 to 2009-10 (0.3 percent).

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Local funds accounted for 12.5 percent and 5.7 percent of administrator and teacher funding, respectively, during 2008-09. In total, local funding accounted for 15.2 percent of staff funding. Local funds expended on salaries were $773.82 per pupil in 2007-08. This is $214.79 more than the $559.03 per pupil that was spent in 2006-07. Local funds expended on benefits were $208.80 per pupil in 2007-08. This accounts for approximately 15 percent of the total funds spent on benefits.

Within the context of state funding, highlights include:

BCPS had approximately 1,453 positions funded by the state in 2008-09. Of these employees, 56 were administrators and 1,003 were teachers. BCPS increased the number of state-funded positions by approximately 10 percent from 2007-08 to 2008-09. This was largely due to the addition of 165 state-funded teaching positions. State salary expenditures were $4,282.82 per pupil in 2007-08. Compared to 2006-07, this is an increase of $163.73. State salary expenditures account for 76.4 percent of total salary expenditures. State benefit expenditures were $1,069.64 per pupil in 2007-08. State benefit expenditures account for 74.9 percent of total benefit expenditures.

Within the context of federal funding, highlights include:

BCPS receives about 7.8 percent of its staffing funding from federal sources. Federal funding for personnel remained relatively stable from 2006-07 through 2008-09; ranging from 7.0 percent to 8.0 percent. For the most current school year in which data was available, federal funds accounted for 7.8 percent of funding for personnel. Per pupil federal salary expenditures were $548.98 in 2007-08. This represents an increase of $29.61 from the previous year.

MAJOR FINDINGS, COMMENDATIONS, AND RECOMMENDATIONS

This executive summary highlights commendations and recommendations. Additional findings, commendations and recommendations, and the details supporting the major recommendations included in this executive summary, are contained in Chapters 3 and 4 of the full report. Major Commendations Burke County Public Schools is commended for:

improving cost efficiency and effectiveness for both employees and the district by mandating direct deposit of employee checks;

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addressing excessive workers compensation costs and reducing claims through training and safety inspections; efforts to control and reduce accidents, injuries, and claims leading to lower insurance premiums; recognizing and aggressively addressing inequities in instructional technology opportunities for its students; examining areas in which the school system can capitalize on economies of scale for purchases; establishing high goals for strategic planning, outreach to the community, and the transparency of planning processes; recognizing the merits of creating a Foundation for BCPS and for the community as a whole; creating an effective enterprise program with before-school, after-school, and summer school programs to generate revenues despite economic challenges; enacting effective measures that should continue to reduce its costs for substitute teachers; achieving a complete and consistent high level of efficiency in the Transportation Department; sustaining a diligent preventive maintenance and bus inspection program; contributing positively to its Child Nutrition Incentive Program; staffing its Maintenance Department at a level that is within the recommended best practice range; effectively staffing custodial services as well as maintaining exceptional cleanliness of its facilities; implementing an Energy Education Program to assist with achieving a major reduction in energy use and cost as well as maintaining its energy consumption profile that has been largely in line with nationally-recognized benchmarks; maintaining a substantive, timely and useful array of policies and procedures in the area of security and safety; and installing surveillance cameras on its entire fleet of school buses.

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Major Recommendations The major findings and recommendations related to improvements in the efficiency and overall management of Burke County Public Schools are presented in this section. Review of Financial Operations and Management

Burke County Public Schools should consolidate and reorganize all financial functions under a Chief Financial Officer and advertise for the position. The consolidation of all financial-related functions will provide better coordination of these functions and provide better oversight of financial processes and procedures. The relocation of financial functions from departments with program responsibilities will provide managers of those programs to have more time for their core functions. Transferring the purchasing operation from the Child Nutrition/ Purchasing Department and separating these two functions will allow Child Nutrition managers to concentrate on actions needed to improve the programs financial position (Recommendation 3-1). The district should determine the total cost for its Child Nutrition Program and take actions to increase fees or reduce operating costs to enable the fund to reimburse the Local Current Expense Fund for all support and indirect costs. Calculating the total cost of operating the BCPS Child Nutrition Program, and the costs incurred by the Local Current Expense Fund that are not reimbursed, will provide BCPS managers and the School Board with financial data that will enable better management of district funds. When total costs are known, decisions can be made either to increase fees to fund the total costs (whereby the Local Current Expense Fund can be reimbursed) or the operating costs of the program can be reduced to achieve the same goal (Recommendation 3-7). Burke County Public Schools should develop a Board Policy for day care funds, centralize accounts, allocate total costs, and transfer fund balances at the end of each year that exceeds target operational amounts to the Local Current Expense Fund (i.e., the funding source for general operations of the district). Centralizing day care funds will provide better oversight to the monies in this account and help ensure these funds are expended only for day care costs. A Board policy should standardize how and what funds can be expended for and provide a source of revenue for the Local Current Expense Fund (Recommendation 3-16).

Non-Financial Management and Operations

The Superintendents span of control should be reduced to enable him to focus on broader districtwide responsibilities. Burke County Public Schools should adopt Evergreens proposed executive organizational structure. The proposed positions of Executive Director of Accountability and Planning, Chief Financial Officer, Executive Director of Human Resources, and School Community Engagement Officer should be advertised (Recommendation 4-1).

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Burke County Public Schools should eliminate the Instructional Coaches and add Content Coordinators to work under the Assistant Superintendent for Curriculum and Instruction. Creating Content Coordinators to work closely with other instructional leaders in the district will achieve the goal to provide a cohesive, seamless system for teaching and learning throughout the K-12 sequence. Specific content areas which should have coordinators include Mathematics, Reading, Language Arts, Science, Social Studies, Arts, Physical Education/Athletics, and Career Technical Education/Workforce Development (Recommendation 4-2). The Superintendent should reorganize the Department of Curriculum and Instruction to better align staff with similar roles and responsibilities, and consolidate grant-funded positions. Implementing these changes will enable the Executive Director of Student Services to better focus on the support nature of that role. Consolidating all health and safety-related responsibilities under one coordinator should better assure that all activities and decisions are cohesive (Recommendation 4-3). Burke County Public Schools should create an Office of Accountability and Planning. Currently, there is a lack of clarity regarding the data functions in the Offices of Technology and Student Accountability. With the addition of the position of Executive Director for Accountability and Planning, the Assistant Director should be eliminated. The part-time Administrative Assistant for Textbooks should be converted into a fulltime position serving as the Administrative Assistant to the Executive Director as well as having responsibility for textbooks (Recommendation 4-5). Burke County Public Schools should immediately increase day care rates for beforeschool, after-school, and summer school programs, monitor comparative costs annually, and continue to raise rates incrementally toward state reimbursement rates. BCPS is not competitive with other regional programs or local private child care providers. Costs have increased considerably in the past nine years, but revenues have not. Reimbursement by the state is capped by the rates that BCPS charges for its programs. By not increasing rates, BCPS is limiting its income for the program and its reimbursement rate from the State of North Carolina (Recommendation 4-8). The district should combine its two alternative schools to maintain a teacher/student ratio of no more than 1:15. By combining the two schools and reducing teaching staff by five, class sizes for 180-220 students with the combined enrollment would range from 1:12 to 1:15. This action would reduce transportation and operating costs for an entire facility and program, and eliminate the staff costs of operating two separate programs (Recommendation 4-11). The Board of Education should continue to review and revise Board policies, eliminating those that reiterate state laws and regulations, eliminate hard copies, and post polices on the BCPS Web site. A revision of the Board Policy Manual is long overdue. Once it is completed, annual reviews and updates should be conducted. Containing redundant state requirements unnecessarily adds length to the Policy Manual. Once policies are reviewed and streamlined, the Manual will be more user friendly and likely accessed more

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frequently by staff and the public. The Policy Manual should be accessible online (Recommendation 4-12).

Burke County Public Schools should continue to reduce the number of assistant principal months in BCPS to the number of months funded by the North Carolina Department of Public Instruction (DPI). Reducing school administrators to equal DPI allocations will allow BCPS to redirect those additional funds toward classroom instruction (Recommendation 4-14). The Board of Education should implement a process that ensures a cost-benefit analysis of legal costs originating with the district before undertaking legal actions. BCPS should discuss and determine how much money it is willing to support in legal expenses with the Burke County over increased funding as well as future lawsuits. The implementation of this recommendation should result in an organized, ongoing process designed to control legal expenses. Once legal action has begun, the Board should monitor expenditures and regularly discuss the merits of its continuation versus costs to the district in terms of dollars, public good will, and distraction from its core educational mission (Recommendation 4-15). Job descriptions are an essential management tool for specifying minimum qualifications, knowledge, skills and ability requirements, and essential job functions. The BCPS Human Resources Department should develop job descriptions for each position, and tie them directly to performance evaluations. The Executive Director of Human Resources should work with district staff to update BCPS job descriptions. (Recommendation 419). Burke County Public Schools should create an employee attendance incentive program to award employees at six-week, semester, or at the end of the year with bonuses for perfect attendance. Such action has helped other school districts reduce substitute teacher costs. In so doing, these districts have kept teachers in classrooms and helped focus more concertedly on improving student achievement. BCPS should create a committee of administrators and teachers to examine programs in other districts and develop one tailored to BCPS needs and resources (Recommendation 4-23). Burke County Public Schools should develop and implement a labor productivity improvement program for its Child Nutrition Department. Although many campuses meet or exceed meals per labor hour (MPLH) guidelines, there is room for improvement in labor productivity in the Child Nutrition Department. Initially, the Child Nutrition Department should set quarterly productivity improvement goals for the seven schools most in need of improvement, based on the MPLH productivity guidelines (Recommendation 4-27). Burke County Public Schools should obtain severe need lunch reimbursement eligibility, and maintain severe need breakfast reimbursement eligibility for BCPS students. Severe need lunch reimbursement eligibility may require a few years to accomplish, since the second preceding school year is the qualifying measure. Because reimbursement at severe need levels is higher than regular reimbursements, it is highly desirable to have

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BCPS qualify for the maximum possible reimbursement from federal funds (Recommendation 4-28).

Burke County Public Schools should set a meal price policy indexed to the USDA reimbursement rates. The school system should arrive at a benchmark price for its meals for 2010-11, and then set an index against which future price increases will be set. BCPS should consider the new benchmark paid price profile for 2010-11 displayed in Chapter 4. The meal price structure should be tested for profitability, as it will be the benchmark from which future price increases should be put into effect. By indexing this benchmark price structure to changes in the reimbursement rate for free or reduced meals from USDA, a logical and fair pricing process can be implemented by the school system (Recommendation 4-29). Burke County Public Schools should prepare a Five-Year Facilities Master Plan 20112015, update it annually, use it as the official planning guide, and measure progress against the plan. The Five-Year Facilities Master Plan for 2011-2015 should be established as a living document that guides all facilities planning, design, and construction activities of the district (Recommendation 4-34). The BCPS central office is currently housed in several separate facilities. BCPS should consolidate all central office functions into one building in a geographically central location (Recommendation 4-35). Burke County Public Schools should consolidate at least two pairs of elementary schools, combine the alternative schools, and remove portables, due to low utilization. This consolidation should be addressed in detail in the recommended Five-Year Facilities Master Plan, and specific consolidation and related proposals should be part of the planning process. The closing of schools is frequently an emotionally-charged issue, and should therefore follow the public participation aspects of facilities master planning delineated under Recommendation 4-34. Only when the general public understands that school closings and other consolidation efforts have been considered carefully and deliberately, can BCPS achieve broader acceptance and support (Recommendation 436). The BCPS School Board should review its facilities use policy once a year in order to make any changes reflecting charges, facilities available for use, procedures, or any other aspects of the policy. While it is not expected or necessary that changes to the policy are made every year, an annual examination of the policys provisions will ensure that the policy reflects the most current situation in the school system. BCPS should take advantage of SchoolDudes availability for analyzing optimum income strategies for facilities use, and for making strategic recommendations. Above all, the policy must be consistently and uniformly implemented at all BCPS facilities (Recommendation 4-37).

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FISCAL IMPACT OF RECOMMENDATIONS

Some of these recommendations can be implemented immediately, while others may take months or years to implement. Exhibit 1 provides the summary for Evergreens recommendations that have a fiscal impact. A detailed fiscal summary chart is provided in Exhibit 5-2 of the full report. Exhibit 1 Fiscal Impact Summary
Years Cost Savings 2010-11 TOTAL SAVINGS TOTAL COSTS TOTAL NET SAVINGS $2,394,575 ($304,359) $2,090,216 2011-12 $3,151,655 ($274,359) $2,877,296 2012-13 $5,247,275 ($274,359) $4,972,916 2013-14 $6,297,575 ($274,359) $6,023,216 2014-15 $6,297,575 ($274,359) $6,023,216 Total 5-Year (Costs) or Savings $23,388,655 ($1,401,795) $21,986,860 One-Time (Costs) or Savings $0 ($127,500) ($127,500) $21,859,360

TOTAL FIVE-YEAR NET SAVINGS MINUS ONE-TIME SAVINGS

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