Audit: EBR school system in black, but fiscal problems loom _lowres

Annual audits -- Advocate graphic

After years of bad financial news, the East Baton Rouge Parish school system is in the black for the second year in a row, raising more in revenue than it’s spending and increasing its reserves as a result.

On the downside, though, spending is currently growing at a faster pace than revenue, largely due to the added expenses from greater enrollment in charter schools and increases in state-mandated contributions for teacher retirement.

This is the picture painted by the school system’s most recent annual audit, covering the fiscal year that ended June 30.

The School Board is set to approve the annual audit, done by the firm Postlethwaite & Netterville, at a board meeting at 5 p.m. Thursday at the School Board Office, 1050 S. Foster Drive.

As of June 30, the school system had almost $45 million in unassigned reserves, nearly three times what it had in the bank just two years earlier.

For the past few years, the school system has had to cut ten of millions of dollars in spending annually to stay out of debt. In the process, it has closed schools, eliminated a variety of instructional positions, increased some class sizes and has shifted more and more to less expensive online instruction.

Candidates running for School Board this fall have regularly called for further cuts, particularly at the Central Office, and an outside group has called for an independent audit to find more savings.

The cost-cutting on South Foster Drive, however, is well underway.

In September, Superintendent Bernard Taylor showed that between the 2011-12 fiscal year and 2012-13, Central Office spending declined from $41.7 to $34.9 million. That’s a decline of 16.2 percent.

It’s unclear if that downward trend in Central Office spending continued in the 2013-14 fiscal year because the audit isn’t organized the same way as Taylor’s presentation in September.

But auditor Mike Schexnayder, a partner in Postlethwaite & Netterville, told the School Board on Nov. 6 that East Baton Rouge is similar to its peers in administrative spending.

“You’re not out of line at all when you look at what you spend on Central Office in this system,” he said.

Last spring, the school system handed principals the scissors. In a limited version of school-based budgeting, school principals were directed to trim their own budgets by between 4 and 9 percent. Those cuts were part of a continuing trend. School level funding had already declined by 3.3 percent between 2011-12 and 2012-13.

The cutting is expected to continue.

Superintendent Taylor has projected that the school system will have to make more cuts every year through at least 2016-17 to maintain healthy financial reserves.

“This is not going to get better,” he said. “It’s going to get worse.”

Taylor blamed payout to charter schools, saying that absent that, overall spending would increase only slightly.

“What’s driving our deficit is not anything we’re doing,” Taylor said. “We’re containing our costs, but we’re being eaten alive by this.”

School officials and auditors have long reported that traditional public schools reap little to no savings when charter schools open and take students with them. The students tend to leave in small clumps, not enough for traditional schools to cut teachers and staff or eliminate bus routes. That makes it difficult to offset the outflow of money via budget cuts.

During the 2013-14 school year, the school system took in $573.2 million and spent $566.8 million. Overall, per-pupil spending was $13,668 per student in 2013-14, which is almost 6 percent higher than the previous fiscal year.

Much of that is spending on school construction, transportation and facility maintenance, things that are not associated directly with the classroom. Direct instructional spending, according to the auditors, came in at $6,808, or 7.6 percent more than the year before.

Schexnayder said his team found no material weaknesses in the school system’s financial controls.

“I think you’ve received a very good audit,” he said. “You’re in compliance with all accounting and government controls standards.”