PERFORMANCE AUDIT REPORT
Kansas City School District
A Report to the Legislative Post Audit Committee By the Legislative Division of Post Audit State of Kansas February 1983
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PERFORMANCE AUDIT REPORT
U.S.D.1I500 Kansas City
February 3, 1983
Legislative Division of Post Audit State of Kansas Topeka
FOREWORD
State aid to school districts has risen dramatically in recent years, rising 342 percent since fiscal year 1973 to an estimated $601 million in fiscal year 1983. To evaluate the State's approach to aid for school districts, the 1981 Legislature created a Task Force on School Finance to study various aspects of school district funding, especially State aid. In conjunction with this study, the Legislature directed the Legislative Division of Post Audit to conduct performance audits of school districts each year. Eight such audits of districts were conducted in 1981 at the direction of the Legislative Post Audit Committee. Reports on those audits as well as a summary of all eight audits were presented to the 1982 Legislature.
In March 1982, the Legislative Post Audit Committee directed the Division to conduct four more school district audits in fiscal year 1983. As with last year's audits, these audits are to provide as clear a picture as possible of how each district is spending its money and managing its resources and programs. In addition, the Committee directed that the auditors place emphasis on special education and transportation programs.
This report covers the Kansas City school district, which is located in Wyandotte County on the northwest corner of the metropolitan Kansas City area. The district has 22,803 full-time equivalent students and covers 59 square miles. In fiscal year 1982, the district had $86.2 million in available funds and $60.8 million in expenditures. State aid received in fiscal year 1982 accounted for about 42 percent of the district's available funds, up from 38 percent in fiscal year 1978. Most of the State funding was in the form of equalization aid.
The distr ict'sfinancial condition appears to be sound. Property tax support has decreased as the result of a lower assessed property valuation in the district. The district has been able to maintain a slow overall growth in its mill levy during the past five years because of increasing State aid and interest moneys, and because it has kept its expenditure increases relatively low. Also, enrollment declines have aided the effort to keep costs down. Per-pupil costs in the Kansas City school distr ict were 13.5 percent lower than the averages in distr icts with enrollments of 1,600 and above and about 16.3 percent lower than the average for the four largest districts. Total available funds have consistently exceeded expenditures, so that the district has been able to maintain and increase its carryover balances. The district appears to have a healthy cash position that should enable it to absorb State aid reductions in the current year without any cutbacks in services. The audit makes a number of recommendations that could improve the efficiency of the district's operations and could save the district money. The audit recommends that the district develop a long-range plan , for closing enough elementary schools so that remaining buildings are fully used. While the district plans to recommend the closing of four schools, the auditors estimated that as many as 10 schools could be closed. For each school closed, the district can save about $100,000; by closing 10 schools, it could save as much as $1.0 million a year in maintenance, utilities, and staffing costs. The audit also recommends that the district reduce its maintenance costs to a level more comparable to other large districts, and consider reducing the number of licensed craftsmen. The auditors found that almost half of the district's maintenance workers were licensed craftsmen earning an average salary of $32,601--10 percent higher than the average salary paid to district administrators. The auditors estimated that if the craftsmen in the Kansas City school district were paid at rates similar to those in the nearby districts, the savings would amount to about $400,000 a year.
The audit also makes recommendations that would allow the district to earn more than $100,000 in interest income a year. The additional income would come from investing cash balances designated for federal programs, earning a higher interest rate on some of its certificates of deposit, and converting its checking accounts to interest-bearing accounts. Other cost-saving recommendations include several directed to the Legis lature that it consider amending purchasing statutes to specifically require competitive bids for leases and purchases of services over $5,000, and to allow districts to purchase items from regular vendors instead of special industries if distr icts can decrease their costs by doing so.
Recommendations are also made in the area of special education, including one that the Legislature more clearly specify what categories of employees can be counted as special teachers for the purpose of distri buting State categorical aid. In reviewing the distribution of this State aid to the Wyandotte County Cooperative (of which Kansas City is the sponsoring school distr ict), the auditors noted that the Cooperative includ ed special education administrators in its count of special education teachers, a practice that is not specifically allowed in law. Other recommendations in the special education area address the questionable use of State special education funds for pregnant students. The auditors found that the entire cost of the Wyandotte Cooperative's pregnant student program in fiscal year 1982 ($139,024) was paid from the Special Education Fund, when amounts from the Fund should have been used only for students either confined to the home or hospital, or for students who have been individually evaluated and determined to have social, emotional, or learn ing problems that would prohibit them from staying in the regular classroom. Other recommendations are made to help ensure that the district is in compliance with State laws and to help ensure that only eligible students are receiving free or reduced-price lunch benefits. The report's recom mendations, together with a brief description of the audit's major findings, are presented in the summary that follows this foreword. The report itself contains more detailed information about the district's financing and opera tions.
A copy of the draft report was sent to the district's Board of Education for review and comment. The district's response indicated agreement with some recommendations. However, it disagreed with the general thrust of many recommendations, especially those relating to prohibiting the Kansas City Public Library from using school district moneys and to considering the closing of more elementary schools. Further, the district did not respond to a number of recommendations, stating that responses were limited to areas of legislative concern.
These audits are intended to give the Legislature a close look at the operations of certain school districts. Taken only one by one; however, they may not present a complete picture of some of the themes and issues that run through these audits. At the conclusion of this series of school district audits, these broader themes and issues will be drawn together into a summary report. This report will also follow up on the recommendations made in last year's school distr ict audits.
The cooperation of officials of the district during this audit is appreciated. Mark Levy was the audit supervisor for this project. He was assisted by Mike Erbschloe, Robin Hunn and Tom Vittitow. Assistance was also provided by other staff members during the course of the audit.
Summary of Matters for Legislative Attention
The Kansas City School District: A Brief Description
The Kansas City school distr ict (Unified School District No. 500) is located in Wyandotte County on the northwest corner of the metropolitan Kansas City area. It covers 59 square miles and encompasses most of the City of Kansas City, which has a population of 161,000.
The district operates 51 schools--37 elementary schools, eight middle schools, five high schools, and a vocational school. During the 1981-1982 school year, the district had a full-time equivalent enrollment of 22,911. Enrollment decreased 14 percent from 1978, and preliminary figures for the 1982-1983 school year showed a drop of only .5 percent from the previous year. Thus, the decline in enrollment in Kansas City appears to have slowed, and elementary school enrollments are now projected to increase nearly 11 percent by 1986. The district had 2,545.8 full-time equivalent positions during the 1981-1982 school year, including 1,094.5 classroom teachers. The number of teaching positions has declined 14 percent since 1978.
Between· fiscal years 1978 and 1982, the funds available to finance the district's operations rose from $60.2 million to $86.2 million, an increase of 43.2 percent. This increase was slightly less than the inflation rate of 45.3 percent during the same period. State aid, local taxes, and balances carried over from the previous year constituted most of the funds available. Local and county taxes and federal aid have decreased as a percent of the total funds available, while State support and beginning balances and other sources such as interest and reimbursements for school lunches have increased.
The district's expenditures rose at a slower rate during the same period. Expenditures increased 31.1 percent from fiscal year 1978 to fiscal year 1982 from about $46.4 million to $60.8 million.
Financial Management
The district's financial picture appears sound. Property tax support has decreased as the result of lower assessed property valuation in the
S-1 district. The district has been able to maintain a slow overall growth in its mill levy during the past five years because of increasing State aid and interest moneys, and because it has kept its expenditure increases relative- • ly low. Also, enrollment declines have aided the effort to keep costs down. Total State support over the five-year period rose 57.7 percent, primarily because of increases in State equalization aid and in categorical aid for specific programs such as special education and vocational education. Per- pupil costs in the Kansas City school district were 13.5 percent lower than the averages in districts with enrollments of 1,600 and above, and about 16.3 percent lower than the average for the four largest districts.
The district adopts the maximum allowable General Fund budget. A General Fund budget establishes the maximum amount that can be spent for many aspects of school district operations. It also establishes the level at which the district's property holders will be taxed to finance those operations. From fiscal years 1978 through 1982, the district has adopted the maximum allowable General Fund budget. Expenditures over the five year period averaged 89.4 percent of each year's General Fund budget. But because the district takes in more revenues that it budgets, it also had a large amount of money left over each year. On the average, the district spends only 79.7 percent of the General Fund moneys available each year.
General Fund Cash balances are larger than necessary for operations, but reductions in State aid could lower balances. In all the district's funds, total balances carried over from previous years have increased 60.2 percent in five years, from $12.9 million at the start of fiscal year 1978 to $20.6 million at the start of fiscal year 1982. The increase in the district's balances is larger than both the increase in all sources of funds (43.2 percent), and the increase in total expenditures (31.1 percent) ov~r the same per iod. Because of these increases, the auditors examined monthly balances to determine if they were excessive. After making a number of adjustments and allowing a cushion for unforeseen expenditures, the auditors still conservatively estimated that the lowest rnonth-end balance in the General Fund was $1.6 million more than the needed cushion. Although balances were high, that extra money could help the district through the four percent reduction in State aid made necessary because of shortfalls in State revenue. The auditors estimated the fiscal year 1983 reduction in State aid for the Kansas City district will total about $850,000. Assuming that the district's excess balance in 1983 is $1.6 million, as it was in 1982, the district could, if it wished, absorb the one time cut without any reduction in services.
Transfers from the General Fund, although necessary to support special revenue funds, should be reduced in one of the special funds. Several aspects of the district's operations are paid for out of special revenue funds that are separate from the General Fund. These funds receive support from a variety of sources, including federal programs, such as the school lunch program, and State categorical aid. Most special funds cannot
S-2 receive moneys directly from local tax levies. Local funds can be obtained indirectly, however, by transferring moneys from the General Fund. In fiscal year 1982, $2.7 million was transferred from the General Fund. Between fiscal years 1978 and 1982, the district transferred $14.4 million from its General Fund into four of its special revenue funds--Transporta tion, Special Education, Food Service, and Vocational Education.
The auditors examined transfers to these funds to determine if they were excessive and found that transfers in the Vocational Education Fund should be reduced. In reviewing the month-end balances for that Fund, the auditors found that the balance was $153,102 more than a one-month minimum reserve. District officials told the auditors that the transfer to the Vocational Education Fund is intended to approximate the amount of funds that would have been raised with a two-mill levy, although in fact the transfers were not equal to an amount two mills would have raised. (The two-mill levy for vocational education was allowed by State law until fiscal year 1979.) Nonetheless, the auditors determined that the balances in the Fund are larger than necessary.
A long-range capital outlay plan is needed to avoid unnecessarily large balance increases. The district has placed most of its interest earnings in recent years in the Capital Outlay Fund. As a result, large balances have built up in that Fund from $3.3 million in fiscal year 1978 to $10.5 million at the beginning of fiscal year 1983. These balances have increased without a written plan for using those moneys.
The district indirectly subsidized the Public Library Fund. Kansas City is the only school district in the State that can legally use school district funds to support a public library. Although the district has not directly used school district funds on the Library, it has done so indirectly by placing interest moneys earned on school district funds in the Capital Outlay Fund. A $3.5 million branch library is planned to be built from that Fund. Had these interest moneys been placed in special funds that receive transfers from the General Fund, the General Fund budget, and conse quently State aid, would have been reduced. The statute allowing the Kansas City Library to use school district moneys became law in 1957. Since then, the State's role in financing education has changed consider ably. The Legislature may want to reconsider whether it wants to continue to allow the Kansas City district to use district moneys to subsidize the Public Library.
The district failed to ensure deposits were proper1y secured as required by law. The auditors found 17 instances at four of the banks used by the district in which pledged securities were less than 70 percent of the uninsured deposits at the end of a month. By allowing such unsecured deposits, the district is violating the law.
5-3 The district could have earned more on its investments. Although the amount of interest earned from moneys invested by the Kansas City district rose from $837,568 in fiscal year 1978 to $3.6 million in fiscal year " 1982, the. auditors found three ways in which the distr ict could further improve its investment earnings. First, the district could have earned as much as $107,184 in added interest revenue if it had invested its cash balances designated for federal programs. Second, the auditors found that the district could have invested some certificates of deposit to earn a higher rate of interest. Finally, the auditors found that the district did not convert its checking accounts to interest-bearing accounts.
Some of the district's purchasing practices appear to circumvent competitive bid requirements. The auditors noted several instances in which the district bought items costing more than $5,000 without using the competitive bid process, as required by law. Instead, the district used several vouchers totaling less than $5,000 each. By using mUltiple purchase orders for supplies from the same vendor--often on the same day--the distr ict circumvented the statutory requirement to obtain competitive bids. Therefore, the district avoided the bidding process, which might have resulted in lower prices on these items. The auditors also found that the district could improve its purchasing procedures by consolidating purchases for similar items into single purchase orders.
Amending purchasing laws could offer a potential for cost savings. In reviewing the district's purchasing practices, the auditors noted three areas that offer a potential for cost savings to the district if State purchasing laws are amended--requiring school distr icts to obtain competitive bids for leased equipment and services over $5,000, allowing districts to purchase items from regular vendors instead of special industries, and allowing them to purchase items on State contracts.
State guidelines on activity funds should be improved to prevent potential abuse. Although school activity funds were found to be managed in accordance with State guidelines, several purchases were made with student funds that are questionable in that they appear to be purchases that would normally be made through the district's General Fund. Because the potential for abuse in this area is high, State guidelines should be improved.
Management of District Personnel and Educational Resources
The district has more students per teacher than other large distr icts, but more administrators for the size of its teaching staff. The district's pupil-teacher ratio of 20.2:1 is 6.9 percent higher than the average for the four largest districts, and 25.5 percent higher than the Statewide average.
S-4 While the district has fewer teachers for the size of its student population than other districts, it has more administrators for the size of its teaching staff in comparison to other districts. However, per-pupil costs for administration in Kansas City were $4-2, compared with an average per pupil cost of $52 for the four largest districts.
Teacher and principal salaries are lower than in other large districts. For fiscal year 1982, the average teacher's salary in the district was $16,74-4-, 6.8 percent less than the average of $17,964- for the four largest districts and .2 percent higher than the Statewide average of $16,712. Principals' salaries averaged $27,257, 11 percent less than the average for the four largest distr icts. The Super intendent's salary, however, was higher than both averages.
Classes are larger than in other large districts, and teaching loads are heavier. During the 1982-1983 school year, the Kansas City school district employed a total of 1,015 regular teachers on a full-time equivalent basis, 329.4- of whom teach at the high schools. The auditors determined that Kansas City high school teachers teach an average of 128.7 students each day--which is more than the averages for teachers from Wichita and Topeka. The class size at the high schools averaged 25.8 students. On a distr ict-w ide basis, only 126 (7.7 percent) of the 1,64-2 classes had 15 or fewer students enrolled. The majority of classes had between 21 and 30 students enrolled.
Management of Facilities and Support Services
School district facilities can be better utilized. The district's 37 elementary schools are now considerably underutilized because the sixth grade was shifted into middle schools. The district plans to recommend the closing of four schools, but the auditors estimated as many as 10 schools could be closed. For each school closed, the district can save about $100,000; by closing 10 schools, it could save as much as $1.0 million a year in maintenance, utilities, and staffing costs.
Maintenance costs are higher than in comparable districts. The auditors determined that a major reason that the district's maintenance costs were higher than the averages for similar-sized districts was the high salaries paid to maintenance personnel. The district has a staff of 63 maintenance workers, 31 of whom are licensed craftsmen--such as carpen ters, painters, and electr icians--earning an average salary of $32,601. This amount is 10 percent higher than the average salary paid to district administrators. The other 32 maintenance employees in the district are laborers, truck drivers, mechanics, and repairmen who are paid between $15,000 and $18,000 a year. The average salaries paid to skilled mainte nance workers in Shawnee Mission and the Kansas City, Missouri school
S-5 distr icts--who are comparable to the licensed craftsmen in Kansas City, Kansas--are $18,720 and $19,911, respectively. The auditors calculated the amount that could be saved if the Kansas City school district paid its .. craftsmen at rates similar to those in the nearby districts and found that the savings would amount to about $400,000 a year. Because maintenance costs are paid out of the General Fund, and because about 59 percent of General Fund revenues in Kansas City is State aid, about $240,000 of this amount represents State aid.
The district's transportation costs appear low in comparison with other districts. In fiscal year 1982, the Kansas City school district transported 11,490 regular students and 483 special education students, or 50.4 percent of the students in the district. This percentage is significantly higher than in Topeka or Wichita. The auditors found that more students are bused in Kansas City because the district must comply with a court-ordered desegregation program, and because it has chosen to provide transportation for many more students living closer than 2.5 miles from school. Total transportation costs for the district have risen from $940,764 in fiscal year 1978 to $2.1 million in fiscal year 1982, an increase of about 125 percent. State aid increased by 230 percent. These increases are due largely to the increase in the number of regular students transported and to the increased cost of transporting special education students. State aid also increased because of a change in the formula in 1978. On a per-student basis, the district's regular transportation costs (not including special education, vocational education, or field trips) increased from $101 in 1978 to $125 in 1982, still considerably lower than the per-student cost of $169 for transporting students in the Shawnee Mission school district, the only other district with a population and density similar to the Kansas City district.
Conversion to propane has saved transportation costs. Dur ing the past two years, the district has changed the primary fuel for 85 of its buses assigned to regular distr ict routes from gasoline to propane. The conver sion costs, which totaled $145,200, have been recovered through reduced operating costs. Savings appear to be continuing at a rate of about $22,000 a month. If savings continue at this rate, the district will save up to $200,000 a year in fuel costs as a result of these conversions.
The district absorbed federal cuts in the school lunch program by reducing staff. The district received $2.6 million in federal lunch aid in fiscal year 1981, but budget cuts reduced its aid for fiscal year 1982 to $2.0 million, or a decrease of $627,166. To make up this loss, the district cut its food service staff from 346 positions in 1981 to 196 positions in 1982. Elimination of the 150 positions resulted in an annual savings of $776,303.
Free and reduced-price meal applications require more scrutiny. The auditors noted that the district's process for approving applications for free or reduced-price lunches does not call for any documentation of the
S-6 incomes reported. Despite the lack of federal approval for a method of verifying information on applications for free or reduced-price meals, school districts do have the authority to request that applications provide c€>pies of wage stubs or other documentation of income. Requesting documentation of at least a sample of applicants would likely discourage applicants from understating their income.
Administration of the Special Education Program
The Kansas City school district is the sponsoring district for the Wyandotte County Special Education Cooperative, which serves students from the Kansas City, Bonner Springs, Piper, and Turner districts. The Cooperative's total enrollment during fiscal year 1982 was 3,595. Most of these students were in the learning disability (1,343), speech impaired (949), educable mentally retarded (568), and gifted (415) categories. Together, these categories accounted for 91 percent of the Cooperative's total headcount enrollment. Overall, the portion of Cooperative students receiving special education services is comparable to that for all districts Statewide. The Cooperative had 5.6 students for each special education teacher in fiscal year 1982. This ratio is significantly lower than for regular students (20 students per teacher).
Most of the Cooperative's funding comes from State sources. Most of the $8.8 million available to spend in fiscal year 1982 (61.8 percent) came from the State government through one of three sources--State categorical aid for special education ($2.8 million), State aid for special education transportation ($574,792), and transfers from participating districts' Gener al Funds to their Special Education Fund ($2.0 million). Another large source of funds in fiscal year 1982 came from that portion of General Fund transfers which is primarily local revenues such as property taxes ($1.3 million, or 14.8 percent). The remaining funds were federal aid ($978,481, or 11.1 percent), beginning balances ($870,483, or 10 percent), and miscel laneous sources ($198,586, or 2.3 percent).
Most of the Cooperative's expenditures are for teacher salaries. Nearly 78 percent of the Cooperative's fiscal year 1982 expenditures were for personnel ($6.1 million out of $7.9 million). Of the Cooperative's 437 employees during this year, most (359) were teachers or teacher aides.
The Cooperative counts special education administrators in the distribution of categorical aid for excess costs. State law specifies that the State appropriation for the excess costs of special education (excluding transportation aid) shall be distributed based on the number of full-time equivalent "special teachers" employed by a district. The law also defines a special teacher as either a "teacher qualified to instruct exceptional children" or a "paraprofessional qualified to assist certificated teachers in
S-7 the instruction of exceptional children." The State Plan for Special Education expands the definition of special teacher to include support personnel such as psychologists, physical therapists, and nurses. Nowhere • in State law or in the State Plan are special education administrators included in the definition of special teachers. Yet, the Department of Education allows cooperatives to claim administrators as teachers. In the Wyandotte Cooperative, seven administrators were counted in fiscal year 1982 as "special teachers," increasing the Cooperative's share of State aid by $56,000.
A Department of Education official told the auditors it is generally understood that "special teachers" include all certified support personnel, including administrators. However, Legislative Post Audit concluded legislative intent is not clear in this area and a review of this Department practice by the Legislature is warranted. The reason for concern is that a cooperative can increase its share of State aid by having more administra tors. Since the Legislature has expressed special concern about the number of administrators in school districts, it is not clear whether administrators should be included for State aid without restriction.
The program for pregnant students may be a questionable use of State special education funds. The Wyandotte Cooperative's program for preg nant students is entirely paid through the Special Education Fund and adds to the Statewide excess costs, yet only part of the program's costs legitimately can be considered special education. The Cooperative classi fies the students in the program as "physically impaired." But the State Plan for Special Education requires an evaluation of student needs before being placed in the physically impaired category. The auditors' review of 69 students' files did not show that the required evaluations were conduct ed by professionals to identify social, emotional, or learning problems. To comply with the State Plan's requirements, professional evaluations should have been obtained for all pregnant students being taught in special education programs.
Audit Recommendations and Organization Responses
The draft audit report was sent to the· President of the Board of Education of the Kansas City school district for review and comment. The Department of Education and Division of Accounts and Reports received specific sections that pertained to them. This procedure is followed in the preparation of all audit reports. It gives audited organizations an oppor tunity to point out any errors of fact, to provide additional relevant information, and to respond to the recommendations. A copy of the report also was sent to the Super intendent of the distr ict.
S-8 The President of the Board responded on behalf of the district, and the Department of Education and Division of Accounts and Reports also submitted responses to the sections they received. Those responses are Appendix C of this report. While the agencies indicated agreement with the recommendations submitted for their consideration, the district's response included a number of comments and some disagreements with recommendations. Listed below are all the recommendations made in the audit report, together with summaries of the organizations' responses to them and Legislative Post Audit's replies.
Reducing Transfers to the Vocational Education Fund
The Kansas City school district should transfer to the Vocational Education Fund and to all other funds only the amount needed to maintain reasonable balances.
District response. The district said its transfers are based on its estimated annual need. Legislative Post Audit points out, however, that the fiscal year 1982 transfer to the Vocational Education Fund was about $150,000 more than needed to maintain a one-month minimum reserve in that fund.
Developing a Long-Term Capital Improvements Plan
To prevent the unnecessary buildup of capital outlay funds and to ensure they are not spent on projects that may not be the best use of those funds, the Kansas City school district should develop a long-term capital improvements plan. That plan should include a plan for school closings, a list of proposed capital projects, the need for each project, and the financing needs of each project.
District response. The district, which said it was largely limiting its responses to areas of legislative concern, did not respond specifically to this recommendation.
Prohibiting the Kansas City Public Library From Using School District Moneys
Because of the inequitable situation created by K.S.A. 72- 1623, which allows only Kansas City to pay its library costs out of school district funds, the Legislature should consider amend ing that law to no longer allow the Kansas City Public Library
5-9 to use school district moneys. If the Legislature removes the ability of the library to directly or indirectly use school district funds, it may be necessary to increase Kansas City's authority to levy taxes for capital improvements in a way similar to other cities.
District response. The district opposed this recommendation, stating that amending K.S.A. 72-1623 would leave the Public Library without any authority for capital expenditures. It also said that no State funds are involved in any aspect of library operation, capital expenditures, or debt service. Legislative Post Audit maintains that the school district indirect ly subsidizes the Public Library with State school district equalization aid. The audit points out that the district must transfer money from the General Fund to several special funds to operate programs. Had the school distr ict placed interest earnings in those special funds rather than in the Capital Outlay Fund, which is expected to finance a $3.5 million branch library, transfers out of the General Fund budget itself could have been reduced. Reductions in the General Fund budget, in turn, would have decreased State equalization aid. Legislative Post Audit did not intend to imply that the district should be left without any authority for capital expenditures, and the audit recommendation has been changed to clarify this point.
Improving Investment Management
1. To help ensure compliance with K.S.A. 1981 Supp. 9-1402, which requires that deposits be secured by banks pledging secur ities equal to 70 percent of all uninsured deposits, the Kansas City school district should ensure that banks pledge sufficient securities to cover its deposits.
2. To increase earnings in its investments, the Kansas City school district should seek at least the 91-day U.S. Treasury Bill rate on all certificates of deposit. If the interest rate offered at a given bank is below the average yield before taxes on the 91-day rate, the district should invest moneys elsewhere as the law allows.
3. To increase its investment earnings, the Kansas City school district should begin investing all idle funds from special federal programs.
4. The Kansas City school distr ict should convert all of its checking accounts that generally have balances large enough to avoid service charges to interest-bearing checking accounts.
5-10 District response. The distr ict said it has reviewed all these recommendations and has implemented them. It did not elaborate further.
Complying With Bidding Requirements
The Kansas City school district should adhere to State law by obtaining competitive bids for all goods or materials that cost more than $5,000, and should ensure that multiple purchase orders are not used to circumvent this requirement.
District response. The district responded that this and the other recommendations in the area of purchasing have been reviewed and, "where appropriate, modifications in procedure have been made." It did not respond specifically to this particular recommendation.
Improving Efficiency of Purchasing Procedures
To ensure greater efficiency in purchasing procedures:
1. The Kansas City school district should coordinate pur chases of supplies with its schools and departments and combine purchase orders as much as possible.
2. The Legislature should consider amending K.S.A. 72-8208 to allow large school districts to operate petty cash funds in departments apart from the central office. Until the law is changed, the Kansas City school district should discontinue the use of separate maintenance and transpor tation petty cash funds.
District response. The district responded specifically to the second recommendation, stating that amending the statute would be advantageous for large distr icts.
Changing State Purchasing Laws
Because of the potential for cost savings to the district, the Legislature should consider the following:
1. Expanding the requirements for receiving competitive bids on purchases over $5,000 to specifically include leases and purchases of services.
5-11 2. Amending State law to allow school districts to purchase items from regular vendors instead of special industries when doing so can decrease their costs by a specified percentage. Prior to such a change in State law, the Kansas City school distr ict should purchase all available items from the Kansas Industries for the Blind or the Division of Vocational Rehabilitation.
District response. Responding specifically to the first recommenda tion, the district said that amending the statute to require bids for leases and services would be "extremely complex." It expressed several concerns, including the complexity of considering certain elements such as compe tence and experience when contracting professional services. Legislative Post Audit does not agree that the proposal to require bids for leases and services is unreasonably complex. Service contracts for equipment and professional services can be effectively bid by ensuring that bid specifica tions clearly delineate the capabilities required of the successful bidder.
Clarifying Proper Uses of School Activity Funds
To clarify the proper uses of student funds that are not associated with a particular activity or club, the Division of Accounts and Reports should revise its activity fund guidelines.
Agency response. The Division of Accounts and Reports, in agree ment with the recommendation, said it has consulted with the Department of Education to revise the guidelines. It said that the revised guidelines would be published in the "Municipal Accountants' Bulletin" and in the next "Minimum Standard Audit Program" update.
Improving Investment of School Activity Funds
To improve management of school activity funds, the Kansas City school district should ensure that all its schools reduce their checking account balances and move their remain ing checking account funds into interest-bearing accounts.
District response. The district indicated that it has reviewed this recommendation and said that, if appropriate, it would implement it.
S-12 Verifying Travel Stipends
To ensure the size of administrative staff mileage sti pends reflects actual travel, the Kansas City school district should require all administrators receIvmg such stipends to report their actual mileage for at least one month out of the year.
District response. The district indicated that this recommendation is being given consideration. It did not elaborate further.
Closing More Schools
Because substantial savings can be realized by dosing underutilized schools, the Kansas City school district should develop a long-range plan for closing enough elementary schools so that the remaining buildings are fully used. The district's short-term plan is to close only four elementary schools over the next two years, while the auditors' review showed as many as 10 schools could potentially be closed.
District response. The district indicated that although closing and consolidating more schools warrant consideration, it disputed the auditors' methods of arriving at their conclusions relative to available space and potential school closings. It said that the auditors did not account for required space needed for Title I remedial reading and math labs, special art and physical education programs, geographical distribution of pupils and buildings, and other elements. Legislative Post Audit notes that although problems unique to closing individual schools were not within the scope of the audit, the audit's conclusion is based on sound analysis and conservative assumptions. Enrollment projections were based on the assumption that future enrollment will grow at the same rate as recent birth rates in Wyandotte County. Building capacity was based on 25 students per regular classroom, conservatively setting aside one classroom for every six special educa tion students.
Reducing Maintenance Costs
To reduce its maintenance costs to a level more compar able to other large districts, the Kansas City school district should review its maintenance staff and consider reducing the number of licensed craftsmen.
5-13 District response. The district said that it would consider reducing the number of licensed craftsmen used. It added that if the auditors are proposing legislation in this area, the various labor organizations affected • would be considerably interested. Legislative Post Audit notes that the audit does not recommend legislation in this area. Rather, it recommends that the district take steps to modify its hiring policies.
Requesting Documentation of Income for Free and Reduced-Price Meal Applications
The Kansas City school district should request documen tation of income from at least a sample of applicants for free and reduced-price meals to discourage applicants from under stating their income.
District response. The district indicated that it agreed with the recommendation, but said that the Legislature may wish to provide funding for the added time involved in processing applications. Legislative Post Audit does not envision that requesting documentation from a small sample of applicants would increase administrative costs to the extent that additional State funding would be necessary.
Clarifying the Intent of Distributing State Categorical Aid for Special Education
To clarify its intent regarding the distribution of State categorical aid for special education, the Legislature should more clearly specify what categories of employees can be counted as special teachers for the purpose of distributing that aid. If the Legislature decides it did not intend for specia~ education administrators to be counted as special teachers, the Wyandotte County Cooperative should discontinue this practice and the Department of Education should revise the State Plan to exclude administrators. If the Legislature decides adminis trators should be included in the count of special teachers, the Department should revise its definition of special teachers in the State Plan to reflect this intent.
Organization responses. The district disagreed with the audit report's statement that the State law and the State Plan do not include special education administrators in the definition of special teachers. The district quoted from the State Plan a statement that the reimbursement schedule for administrators and supervisors of special education follows the same schedule as for all approved special education teachers. The district
S-14 further stated that legislation is not needed for including administrative personnel in the reimbursement authorization. It also implied that the audit's recommendation calls for the Legislature to withdraw support from special education programs. Legislative Post Audit points out that administrators are a legitimate part of special education costs and that those costs should be included in the excess cost formula that determines Statewide aid. Further, the audit mentions that the State Plan says that administrators and supervisors shall be reimbursed with State aid the same as teachers. However, that is not the same as defining "special teachers" to include administrators. State law specifies that only "special teachers" be counted to determine each cooperative's share of State aid. The law also specifically includes psychologists, social workers, and therapists under the definition of "special teachers." However, it is not clear whether administrators are included in the definition. Therefore, the recommenda tion suggests legislative involvement in this matter because a State law appears to be violated by the inclusion of administrators in the distribution formula.
The Department of Education responded that the practice of reim bursing State aid for administrators has been reviewed by legislative committees. The Department said that the special education rules and regulations under consideration would include administrators under the "special teacher" definition. Legislative Post Audit points out that legislative review of this matter seems warranted. A concern still exists, however, that a cooperative can increase its share of State aid by having more administrators. Because the Legislature has expressed special concern about the number of administrators in school districts, it is not clear whether administrators should be included for State aid without restriction.
Ensuring Appropriate Use of Pregnant Student Programs
1. Because most of the costs of the Wyandotte County Cooperative's pregnant student program appear to be inappro priately charged to the Special Education Fund, the following actions should be taken:
a. The Cooperative should immediately obtain professional evaluations of all pregnant students who are currently being taught in separate special education facilities by special education teachers to determine which ones have social, emotional, or learning problems that justify their continuation in a program funded through the Special Educa tion Fund.
b. In the future, all students referred to the Cooperative's pregnant student program should be appropriately evalu-
S-15 ated before their acceptance into or rejection from this program.
2. Because the question of whether separate maternity pro grams for students who are not hospitalized or homebound should be fully funded from special education moneys applies to other districts and cooperatives as well, the Department of Education should take the following actions:
a. Review all such maternity programs to determine which program costs are appropriate special education costs and which are not. This rev iew would have to include an assessment of whether students in those programs have been properly evaluated as called for in the State Plan.
b. Specify clearly the accepted criteria for placement in these programs and clarify the State Plan accordingly.
c. Remove all inappropriate costs now being charged to special education from its future computation of total Statewide special education costs.
Organization responses. The district did not specifically respond to this recommendation~ The Department of Education, in response to the first recommendation, said that the Wyandotte County Cooperative has provided to the Department written assurances and documentation that eligibility and placement will be determined on the basis of individual student comprehensive evaluations and staffings. The Department also noted that the Cooperative has amended sections of its local compre hensive plan to reflect these changes. The Department said it would conduct a follow-up visit to ensure that the written procedures are being followed.
In response to the second recommendation, the Department of Education said that all districts and cooperatives in the State that have students receiving homebound services because of pregnancy have been contacted to stress the need for appropriate eligibility and determination of services. The Department added that according to its records, all districts and cooperatives now have orderly and appropriate evaluation procedures. Legislative Post Audit notes that it may be necessary for the Department to give special attention to programs for pregnant students during future on-site reviews to ensure all cooperatives are using appropri ate procedures.
S-16 Matters Remaining for Legislative Attention
The Department of Education and the Division of Accounts and Reports agreed to implement all the recommendations directed to them. The Kansas City school district indicated that it would at least consider implementing some recommendations, although it did not specifically respond to all recommendations. It disagreed with the auditors' conclusions relative to the recommendation to close more elementary schools. How ever, the district did indicate that closing and consolidating more schools would warrant consideration. Other recommendations with which the district disagreed called for legislative rather than district action. These and several other recommendations remain for consideration by the Legis lative Post Audit Committee and the Legislature. They can be summarized as follows:
Improving Financial Management
Prohibiting the Kansas City Public Library from using school district moneys. The Legislature should consider amending K.S.A. 72-1623 to no longer allow the Kansas City Public Library to use school district moneys.
Illl>roving efficiency in purchasing procedures. The Legislature should consider amending K.S.A. 72-8208 to allow large school districts to operate petty cash funds in departments apart from the central office.
Expanding requirements on competitive bidding. The Legislature should consider expanding requirements for receiving competitive bids on purchases over $5,000 to specifically include leases and purchases of services.
Allowing exceptions to a purchasing law. The Legislature should consider amending the law to allow school districts to purchase items from regular vendors instead of special industries when doing so can decrease their costs by a specified percentage.
Administering Special Education Programs
Clarifying the intent of distributing State categorical aid for special education. The Legislature should more clearly specify what categories of employees can be counted as special teachers for the purpose of distri buting State categorical aid.
5-17
TABLE OF CONTENTS
Page
I Introduction ...... 1
Audit Objectives and Methods 1 Organization of the Report. . . 3 State Funding for School Districts. 3 Department of Education's Role in Administering State Education Programs . . • . . . 5 Unified School Distr icts in Kansas. • . 5 U.S.D. #500 Kansas City School District ...... • • • . 6
II Trends in District Financing 9
Sources of Funds ...... 9 Local Property Tax Support Has Declined, Although County Taxes Have Risen . • . • • . . . 10 State Support Has Increased Moderately . . . . 11 Beginning Balances Have Increased Moderately . 12 Federal Funds Have Increased Slightly. . . . 12 Other Sources of Funds Have Increased at Varying Rates ...... 12 Uses of Funds ...... • • . 13 Expenditures From Some Funds Have Increased More Rapidly Than Others. . . • ...... • 14 Per-Pupil Costs Were At or Below Averages for Similar Distr icts • . . . • ...... • . 14
III Improving the District's Financial Management . 17
Budgeting Practices: General Fund . • . . . 18 The District Budgets the Maximum Allowed Each Year ...... 19 General Fund Cash Balances Are Larger Than Necessary for Operations ...... 20 The Fund's Lowest Monthly Balance Was $1.6 Million More Than Needed . . . . • ...... 21 Reductions in State Aid Will Lower Balances . 22 Budgeting Practices: Special Revenue Funds . 23 Most Transfers Are Needed, But Transfers to the Vocational Education Fund Should Be Reduced 24 Recommendation • • ...... 25 Transfers Increase General Fund Budgets and State Aid to Special Funds. . . • ...... • • • . • • 25
S-19 A Long-Range Capital Outlay Plan is Needed. 26 Recommendation . . • • • • • • • • • 27 The District Indirectly Subsidizes the Public Library Fund...... 27 Recommendation. • • • • • . • . 28 Invest ment Management. • • • • . • • . • • • 28 The District Failed To Ensure Deposits Were Properly Secured .. .••••••• • 29 Recommendation . • . • • • • • • • • • 29 The District Could Have Invested Some Funds To Receive a Higher Interest Rate. • • • • • • 30 Recommendation • • • . . • • . • • • • • • 30 The District Failed To Invest Federal Program Moneys • • • • • • • • • 30 Recommendation • • • . • • • • • • • • 31 The District Also Failed To Obtain Interest on Checking Accounts .. ••••••• 31 Recommendation. . . • • • • • • • 31 Purchasing Practices . . • . • • • • • • • 31 Multiple Purchase Orders Appear To Circumvent Competitive Bid Requirements • • • 32 Recommendation • • • • . • . . • . • • • 32 The District's Purchasing Procedures Could Be More Efficient • • . • • • • • . • • • • 32 Reco m menda tions. • • • • . • • . . • • • 34 Changes in State Purchasing Laws Could Save the Distr ict Money . . . . • 34 Recom mendations. . . . • . • • • • . • . • . • 36 Management of School Activity Funds...... • . . • • 36 State Guidelines Need To Be Clarified To Prevent Potential Abuse of Activity Funds. . • . • • • 37 Recommendation . . • . • • . . • • . • • 38
Investment of Activity Funds Can Be Improved 38 Recommendation. . • • . • . • • • 38
IV Managing District Personnel and Educational Resources 39
S-20 School District Enrollments Are Stabilizing After Declines...... 39 Overall Staff Level Has Declined • ...... • 40 Large Increases Occurred in Staffing For Special Education and Transportation. . . • • • • • · . 41 The District Has More Students Per Teacher Than Other Large Distr icts, But More Administrators For the Size of Its Teaching Staff...... • . • . . • 42 Administrative Staff Costs Are Lower Than In Other Large Distr icts...... • . . . 42 Salar ies and Employee Benefits...... 43 Teacher and Principal Salaries Are Lower Than in Other Larger Distr icts. . . . . • . . • . . 4-3 Employee Benefits Do Not Seem Excessive, But Travel Stipends Need to Be Verified Periodically 4-4 Recommendation . • • ...... • 45 Course Offer ings and Teaching Loads ...... • • 45 The District's Requirements for Graduation Are Below Sta te Standards. • . . • • ...... • . . . . • • 45 Classes Are Larger Than In Other Large Districts, And Teaching Loads are Heavier • . . . 46 v Managing Facilities And Support Services • 4-9 School District Facilities Can Be Better Utilized 49 Many Schools Have Been Closed Since 1965, But More Apparently Could Be Closed. • • 49 Recommendation ...... • . • . . 52 Maintenance Costs Are Higher Than In Comparable Distr icts. . . . . • • • • ...... • 52 Other Districts Pay Lower Salaries for Similar Work. · 53 Highly Paid Craftsmen Are Not Always Needed • • 55 Recommendation . . , ...... 56 Transportation Services ...... 56 The District Transports More Students Than Other Large Distr icts...... 57 Transportation Costs Appear Low in Comparison With Other Distr icts...... 58 The District's Buses Appear to be Well Utilized. 59 Food Service Program...... 59 The District Absorbed Federal Cuts by Reducing Staff ...... 60 Free and Reduced-Price Lunches Require More Scrutiny...... 61 Recommendation . • ...... • • 62
S-21 VI Administering Special Educ&tion Programs . . . . . 63
The Development of Special Education in Kansas • 63 Funding for Special Education • • • • • • • • 64 Special Education Progra ms Offered in Kansas • · 65 Introduction to the Wyandotte County Special Education Cooperative. • . • • • • • . . • • • 66 Most of the Cooperative's Funding Comes From Sta te Sources...... • ..• • • • • . • • · • 67 Most of the Cooperative's Expenditures Are For Teacher Salar ies • • • • • • • • • • . • • • • • • • • 68 The Majority of Students Are in Learning Disabled or Speech Impaired Programs. • • • . • • • •• • • 68 Pupil/Teacher Ratios Are Much Smaller for Special Education ...... · • 69 Cooperative Students Are Taught in Both Regular Classrooms And Special Education Facilities • • • • • • · 70 Examining Selected Aspects of the Cooperative's Special Education Program. • • • • • • • • . • • • • 70 Determining the Excess Costs of Special Education 70 The Cooperative Counts Special Education Administrators In the Distribution of Categorical Aid for Excess Costs • • • • • • • . 71 Recommendation . • • . • • • 73 Expenditures for Special Education • . 73 Recommendations. • . . • • • . • • • 74 Placement of Special Education Students in the Wyandotte Cooperative • . . • • • • • • • . • • . • 76
APPENDIX A: Kansas City School District Sources of Funds Fiscal Years 1978-1982 .••.••.••.••.• 81
APPENDIX B: High School Course Information, Kansas City School District, Fiscal Year 1983 • • 85
APPENDIX C: District and Agency Responses • • • • • • • • • • • • 87
S-22 CHAPTER I
INTRODUCTION
State aid to school districts has risen dramatically in recent years. To evaluate the State's approach to aid for school districts, the 1981 Legislature created a Task Force on School Finance to study various aspects of school district funding, especially State aid. In conjunction with this study, the Legislature directed the Legislative Division of Post Audit to conduct performance audits of at least six school districts each year. Eight audits of districts in all enrollment categories were conducted in 1981 at the direction of the Legislative Post Audit Committee. Reports on those audits as well as a summary of all eight audits were presented to the 1982 Legislature.
In March 1982, the Legislative Post Audit Committee directed the Division to conduct four more school district audits for the 1983 legislative session. The Committee considered geographic location and enrollment sizes, and chose the following districts for audit: Kansas City, (large enrollment category), Wamego (medium enrollment category), Phillipsburg (medium enrollment category), and Utica (small enrollment category). At its May 1982 meeting, the Committee further directed that these audits should provide the same level of review as the first round of audits, but should also place special emphasis on special education and transportation programs. This report contains the auditors' findings and recommendations resulting from a performance audit of the Kansas City school district.
Audit Objectives and Methods
Performance audits generally address questions of whether programs are operated as intended by the Legislature, and whether they are run as efficiently and effectively as possible. By contrast, financial audits concentrate on whether financial records are presented fairly and accu rately. By law, each school district is required to have an annual financial audit conducted by a licensed municipal accountant or certified public accountant. Rather than duplicate this financial audit work, Legislative Post Audit reviewed the fiscal year 1981 financial audit report of the Kansas City school district to determine whether it was in compliance with financial auditing requirements.
This performance audit of the Kansas City school district addresses four questions:
1. 1. Is the distr ict effective in managing its budget and other financial resources to ensure that resources are managed effi ciently and its operating costs are minimized? 2. Is the district managing its personnel, facilities, and other resources in an efficient and economical manner? 3. Is the district operating programs or providing services that are unnecessary or that could be operated in a more cost effective manner? 4. How is State aid for special education in the district deter mined, and is this aid used only to benefit special education students? Are special education students placed in the proper program, and are special education programs adequately evalu ated? To answer these questions, the auditors conducted a number of different kinds of research and analysis. The question dealing with the effective management of the district's budgets and other financial re sources was answered through an analysis of the district's budgets. The auditors determined such factors as the mix of funding over the years, expenditure trends, and the degree to which budgets reflect financing needs. Auditors also reviewed the district's special use and activity funds to determine how those funds were used and whether unnecessary transfers were made into them. They examined the district's cash management and investment activities to determine whether the district is complying with the law and whether the maximum amount of interest is being earned on funds available for investment. They reviewed the district's purchasing policies and practices to determine whether they are reasonable and comply with State laws. And they reviewed the most recent financial audit report of the school district to make sure the district is in compliance with requirements for such audits.
To answer the question dealing with efficient management of district personnel, facilities, and other resources, the auditors reviewed staffing levels to determine if the district appeared to be overstaffed in any areas. They reviewed the number of schools, capital outlay costs, maintenance costs, and use of space to determine if all facilities are needed and whether space is used efficiently. To determine whether the district is operating programs or providing services that may be unnecessary, over- or underutilized, or too expensive, the auditors reviewed areas in which costs have increased rapidly or appear excessive in comparison with other districts, analyzed the courses offered by the district, and analyzed transportation and food service programs provided by the district.
Finally, to answer the questions concerning special education, the auditors reviewed the budgets of the special education cooperative that includes the Kansas City school district, examined the method of calcu lating State aid for the cooperative, and examined a sample of purchases
2. made by the cooperative to determine if the funds were used only for special education purposes. They also reviewed a sample of student files to determine if student placement appeared proper, and interviewed a sample of parents to determine what concerns they had about the special educa tion program.
Organization of the Report
The remainder of this chapter summarizes the State's role in local education and introduces the Kansas City school district. Chapter II describes the trends in the district's finances over the past five years. Chapter III addresses the auditors' findings concerning the district's finan cial management practices. Chapter IV covers the district's use of resources for education, while Chapter V evaluates the efficiency of certain support services, such as maintenance and transportation. Chapter VI describes the development of the State's involvement in special educa tion and evaluates certain aspects of both the State's and district's administration of those programs.
State Funding for School Districts
Article 6 of the Kansas Constitution requires the Legislature to establish and maintain public schools and educational institutions in Kansas and to make suitable provisions for financing those schools and institutions. The Constitution mandates that no tuition, except for fees and charges specifically authorized by law, can be charged any students required to attend public schools. Over the past 50 years, several legislative decisions have been made to substantially increase State financial support for public elementary and secondary schools. The accompanying figure summarizes the key changes in State funding. Currently, most State aid to school districts is paid under the provisions of the School District Equalization Act of 1973. The original impetus behind this Act was a California Supreme Court ruling that California's school finance system--which depended on local property taxes--discriminated against the poor ''because it makes the quality of a child's education a function of the wealth of his parents and neighbors." As a result of this ruling, the Kansas Legislature appointed an interim committee to consider alternatives to the property tax method of funding public schools in Kansas. Before the interim committee reached a decision, a suit was filed in Kansas (Caldwell v. Kansas) challenging the State's school funding system. A Kansas district court ruled that the system must be restructured so that the amount of money spent to educate a child was not d~endent on a district's wealth. The Equalization Act passed by the 1973 Legislature satisfies this mandate, providing relatively more State funding for poorer districts and less funding for wealthier districts that are better able to support education through local funding sources.
3. PROGRESS OF STATE FUNDING The Equalization Act pro FOR SCHOOL DISTRICTS vides for the distribution of State general aid, transportation Before 1937 - Public schools received only small . distributions from the State annual school aid, and an income tax rebate of fund for general purposes and for vocational 20 percent. The Act bases gen education. eral State aid on each school 1937 - Retail sales, consumers' use, and cereal district's budget per pupil, and malt beverage taxes provided State aid for adjusts the amount of State aid elementary schools. received to . reflect district wealth, local tax effort, the 1945 and 1947 - Further State aid for elementary schools provided additional across-the-board amount received by the district property tax relief. from an income tax rebate, and the amounts received from cer 1949 - Equalization aid program' established for elementary schools. School district wealth, tain federal funds. Unless the or ability to fund public school operations, Legislature specifies differently, was based solely on assessed property valua school districts can annually in tion or adjusted valuation, and by a two-mill deduction in computing State aid. Transpor crease their General Fund bud tation allowance was also paid. gets per pupil by between five percent and 15 percent, depend 1955 - Equalization aid established for high schools, but without a transportation allow ing on the size of the district's ance. budget in the prev ious year. Districts that budgeted low in 1959 - Separate emergency aid was distributed for all grades one through 12 at a rate of $6 per the previous year are allowed pupil to help support increasing enrollments higher increases. The districts and rising costs. then cannot spend more than the 1959-1965 - Emergency aid increased four times, General Fund budget they adopt reaching a high of $30 per pupi I. without losing future State aid.
1965 - School Foundation Finance Program re placed emergency aid. County economic In addition to the aid provid index was used to measure local ability, and included an allowance for transportation. ed under the School District Earlier tax levies were replaced with a Equalization Act, the State also single county-wide levy of 10 mills on ad provides several types of cate justed property valuation. The law also repealed all statutory rate limits on proper gorical aid. During fiscal year ty tax levies for operating purposes, estab 1982, that aid was as follows: lishing in their place new restrictions on Special Education Aid of $46.6 increases in school budgets. million, Aid for Dr iver Education 1969 - Supplemental State Aid to Schools enacted, of $1.3 million, Aid for Voca based on the number of students and the tional Education of $752,000, number of certified employees, and adjusted Food Assistance of $2.6 million, to reflect each district's adjusted valuation per pupil. Aid for Adult Basic Education of $52,000, Aid for Bilingual Educa 1973 - School District Equalization Act passed, tion of $4-66,000, and Aid to the which provides for the distribution of State general aid, transportation aid, and an in Kansas Employees Retirement come tax rebate of 20 percent. General System of $35.5 million to cover State aid is based on each school district's employer contributions for em budget per pupil, and is adjusted depending on certain other State, local, and federal ployees of unified school dis moneys received. tricts.
4. The Equalization Act and categorical aid have increased State aid to school districts by over $450 million since adoption of the 1973 Act. In fiscal year 1973, the year before the Act took effect, State aid to school districts was $136 million. For fiscal year 1983, it is estimated to be $601 million, an increase of 342 percent. The increase in total State aid has averaged 17 percent per year since the Act was adopted; State aid is expected to increase 13 percent between fiscal years 1982 and 1983.
Dep'artment of Education's Role in Administering State Education Programs
The State Board of Education has overall responsibility for the State's role in elementary and secondary education, but the Board appoints a Commissioner of Education to carry out the day-to-day administration. The Commissioner directs the Department of Education, which has three major divisions: Financial Services, Education Services, and Agency Services. The Division of Financial Services administers the distribution of State and federal aid to unified school distr icts, community colleges, area vocational-technical schools and Washburn University. The Division of Education Services provides curriculum support to local education agen cies, administers the State's special education program, accredits schools, approves college programs for teacher training, and provides support for State planning. The Division of Agency Services provides technical services for the Department and administers State and federal food assistance programs as well as teacher certification. The Department's operating budget for fiscal year 1982 was $6,215,871, about $3.3 million of which was from the State General Fund. Most of the remaining funds came from the federal government.
Unified School Districts in Kansas
The number of school districts has declined dramatically since 1900, when there were a total of 9,284 districts. A series of reorganizations over the years reduced that number to its current level of 305 distr icts. Each district is governed by a locally elected school board. These boards must appoint a superintendent, clerk, and treasurer to administer the public schools in their districts. They may also appoint one or more assistant super intendents, super v isors, and pr incipals.
During the 1981-1982 school year, a total of 391,052 full-time equivalent students were enrolled in the State's 1,532 elementary, junior high, and high schools. On a full-time equivalent basis, the school districts employed 26,178 classroom teachers, 2,070 administrators (including super intendents and principals), and 2,486 other certified personnel like curricu lum specialists, librarians, audio-visual technicians, guidance counselors, and nurses. In addition, the districts employed 17,274 support personnel, including cooks, janitors, bus drivers, and clerical personnel.
5. In fiscal year 1981, State aid contributed 35 percent of the school districts' available funds, and local'sources of funding (primarily property taxes) contributed 32 percent. Beginning balances accounted for 21 percent of total revenues, federal funds contributed five percent, and other sources accounted for seven percent. As the figure below shows, enrollment levels and the number of schools operated by the 305 districts have declined somewhat since the 1977 -1978 school year. A t the same time, the number of certified employees rose slightly, while both total funding and the General Fund budget per pupil increased considerably. As the figure at the top of the next page shows, the largest sources of funding for the school distr icts are local funds (primarily property taxes) and State aid. Between fiscal years 1978 and 1981 (the most current data available) the largest increases in available funds were in State aid (up 47 percent), beginning balances (up 52 percent), and other sources such as interest on idle funds and user charges (up 60 percent).
Percent Chooges in Enrollment, Schools, Staffing, and Funding for All School Districts Fiscal Years 1978 and 1982 Gen. Fund Budget Per Pupil Rose $783 Total funding to $2,223 (through fiscal year 1981) rose $.3 billion to $1.4 billion Certified employees increased by 51 positions to 30,734 .2%
Certified Total Budget Employees Funding Per Pupil
U.S.D.8500 Kansas City School District
The Kansas City school district (Unified School District No. 500) is located in Wyandotte County on the northwest corner of the metropolitan Kansas City area. The district covers 59 square miles and encompasses
6. Increases in Financing of Public Schools in Kansas Fiscal Year 1978 Through Fiscal Year 1981 (in millions) $50 CZl 1978 1981
Local State Federal Beginning Other Sources Aid Aid Balar1Ces Sources most of the City of Kansas City, which has a population of 161,000. The following map shows the Kansas City school district and the area immediately surrounding it.
The Kansas City school di strict (Unified School District No. 500) is in Wy andotte County on the northwest corner of the metropolitan Kansas City area. The district covers 59 square miles and encompasses most of the Ci ty of Kansas City, which has a population of 161,000.
7. The district owns and operates 51 schools, including 37 elementary schools, eight middle schools, five high schools, and one vocational school. One unusual aspect of the district is that it is under order of the U.S. District Court to desegregate five schools which the Court found had been deliberately created and maintained as schools segregated on the basis of race. The desegregation order affects the district's operations in several ways that are referred to later in the report.
During the 1981-1982 school year, 11,120.5 full-time equivalent students were enrolled in the district's elementary schools, 1,464 students were in middle schools, 3,911 in the junior high schools, and 5,633.5 students in high schools. In addition, 782 special education students were enrolled in the district. In all, then, 22,911 full-time equivalent students were enrolled in the Kansas City school district. During that same school year, the district employed 2,545.8 persons on a full-time equivalent basis, including 61 full-time equivalent principals and assistant principals, 1,094.5 classroom teachers, and 249 special education teachers.
Like many other schools throughout the State, the Kansas City school district has experienced declines in enrollment and staffing and increases in funding since the 1977-1978 school year. The accompanying graph presents these figures for the distr ict.
Percent Changes in Enrollment, Staffing, and Funding for the Kansas City School District Fiscal Year 1978 Throu h 1982 General Fund budget per pupil % change rose $718 Total funding to $1,952 increased $26 million to $86.2 million
Staffing dropped by 241.7 FTE positions 2,545.8
Total Budget Enrollment Staffing Funding Per Pupil
8. CHAPTERll
TRENDS IN DISTRICT FINANCING
This chapter reviews changes in the Kansas City school district's financing between fiscal years 1978 and 1982. In both years, State aid was the largest single source of funds for the district, followed by local taxes and beginning balances. Asa percent of total funds, State aid and beginning balances increased over the five-year period, while local funding support declined. A more detailed review of the district's sources and uses of funds follows.
Sources of Funds
The Kansas City school district obtains funds for its operation from eight sources--balances carried over from the previous year, local taxes, county taxes, State funds, federal funds, reimbursements, interest, and miscellaneous sources such as payments for services from other districts. The following table shows the changes in the district's sources of funds over a five-year period. Since fiscal year 1978, total funds available for the district's use have increased lJ.3.2 percent. The increases have averaged 9.lJ. percent a year.
Sources of Funds Available for Use Kansas City School District
Fiscal Year % Change Sources of Funds 1978 1982 1978-1982
Beginning Balances $12,857,675 $20,603,31lJ. 60.2 Local Taxes 15,701,7lJ.8 1lJ.,357,038 (8.6) County Taxes 768,732 2,2lJ.6,710 192 .3 State Funds 22, 87lJ.,71lJ. 36,06lJ.,663 57.7 Federal Funds lJ.,855,973 5,8lJ.l,795 20.3 Reimbursements 1,199,816 1,519,382 26.6 Interest 837,568 3,615,528 331. 7 Miscellaneous 1,099,782 1,9lJ.lJ.,lJ.25 76.8 Total $60,196,008 $86 , 192 , 855 lJ.3.2
This 43.2 percent increase is slightly less than the inflation rate based on the Consumer Price Index of 45.3 percent during the same period. The most significant changes in the funding picture are the drop in local property tax support and the increases in State funds, beginning balances, and interest moneys.
9. Local Property Tax Support Has Declined, Although County Taxes Have Risen
Local property tax support for the district decreased 8.6 percent during the five-year period, dropping from $15.7 million to $14-.4- million. As a percent of total funds, local taxes dropped from 27 percent to 19 percent. Property tax support was at its highest in fiscal year 1978 at $15.7 million, and reached its lowest point in 1981 when it dropped to $13.6 million. This decrease was the result of a lower tax levy and lower assessed property valuation in the district that year. The district has been able to maintain a slow overall growth in its mill levy during the past five years because of increasing State aid and interest moneys, and because it has kept its expenditure increases relatively low (31.1 percent). Also, enrollment declines (14-.2 percent) have aided the effort to keep costs down. As the accompanying table shows, the total mill levy for the district was 51. 77 in fiscal year 1982. This was a slight increase of about .6 mills from 1978, although the levy had been lower in every other year in between. Assessed valuation in the district was about $301 million in 1982, a decrease of 4-.8 percent from the 1978 level of $316 million. In 1982, a Kansas City taxpayer's home would be assessed at about nine percent of market value. Thus, a home with a market value of $25,000 would be assessed at about $2,250, and at the 1982 mill levy rate its owner would pay about $116 in property taxes to finance public schools. Someone owning a $50,000 home would pay about $232.
Tax Rates for the Kansas City School District Fiscal Years 1978 to 1982 School Year
--1978 1979 1980 1981 1982 General Fund 26.59 31. 79 30.90 29.14 34.55 Capital Outlay 2.90 2.95 2.88 3.4-6 2.96 Transportation .95 .94- .91 1.02 .99 School Retirement 1. 31 1.30 1.26 1.15 1.27 Bond and Interest 8.15 8.15 6.95 8.78 8.94 Social Security (a) 6.21 Special Education(a) 1.27 Vocational Education(a) 1.65 Public Library Board 2.12 --2.4-6 2.4-4- --2.4-7 --3.06 TOTAL 51.15 4-7.59 45.34- 4-6.02 51.77 -- -- (a) After fiscal year 1978, special levies were no longer assessed for Social Security, vocational education, or special education. They were incorporated into the General Fund mill levy.
10. Comparing Sources of Funds as a Percent of Total Funds Available for the Kansas City School District
%pf total revenues 45 c:=J 1978 42
~·O 35 30 25 20 15 10 5
Local/Coun- State Federal Beginning Other ty Taxes Support Support Balances Sources
The funding base for the Kansas City school district has shifted slightly over the past five years. Local and county taxes and federal aid have decreased as a percent of the total funds available, while State support and beginning balances and other sources such as interest and reimbursements for school lunches have increased.
Kansas City's mill levy for the General Fund (34-.55 in fiscal year 1982) was the 70th lowest out of 305 districts in the State, placing it in the 23rd percentile. To compare property taxes in Kansas City more accurate ly with those of other districts, it is necessary to use its adjusted tax rate. The adjusted tax rate is determined by lowering the mill levy rate to the rate needed to produce current revenues if property were assessed at 30 percent of fair market value instead of at a lower percentage. Using this method, Kansas City's General Fund tax rate would have been 13.38 for fiscal year 1982, making it the 11 Oth lowest in the State, placing it in the 36th percentile. The average for all distr icts was 14-.10. Taxes from the county increased 192.3 percent during the five-year period, from $768,732 to more than $2.2 million. The county foundation tax, the main source of county tax support in 1978, was eliminated in fiscal year 1979. In that year, the district received no county funds. But by fiscal year 1982, revenues from the county nearly doubled their earlier levels when motor vehicle taxes became part of the county taxes.
State Support Has Increased Moderately Total State support over the five-year period rose 57.7 percent, primarily because of increases in State equalization aid and in categorical
11. aid for specific programs such as special education and vocational educa tion. As a percent of total funding, State support rose from 38 percent to 42 percent.
State aid increased fastest in the Transportation Fund (230 percent) and Special Education Fund (166 percent). The transportation increase oc curred because more students are being bused, while State aid for special education increased as the number of teachers and costs of special education rose. State aid in the General Fund increased $9.8 million (49 percent), and constituted 75 percent of the total increase in State aid. Increases in the General Fund are limited by budget controls.
In addition to the State aid included in the district's budget, the State also provided approximately $1.7 million for the employer's share of the Retirement System's contribution in fiscal year 1982.
Beginning Balances Have Increased Moderately
Like many school districts in Kansas, Kansas City has experienced increases in its beginning fund balances--those unspent funds carried over from the previous year. The district's beginning balance increased 60.2 percent in five years, rising from about $12.9 million to over $20.6 million. In fiscal year 1978, beginning balances accounted for about 21 percent of the funds available for use. By fiscal year 1982, that portion had risen to 24 percent. Most of the money in beginning balances is unspent State and local funding, and the effect of the balances is that less new local money needs to be obtained to finance the district's operations.
Federal Funds Have Increased Slightly
Federal funds coming into the district have fluctuated over the five year period, but overall they increased 20.3 percent from about $lj..9 million to $5.8 million. As a percent of total funds, however, they decreased by just over one percent. In fiscal year 1982, about $3.8 million of these funds were for educational programs, such as Title I reading programs, vocational education, and special education. The remaining federal funds, about $2 million, were for the school lunch program. The district's General Fund also received small amounts of federal aid for school districts that have students who are the children of certain types of federal employees, such as military personnel.
Other Sources of Funds Have Increased at Varying Rates
Interest moneys, which are the return on the district's investment of its idle funds, increased 332 percent during the period to more than $3.6 million. This large increase was caused by larger balances available for investment and higher interest rates. Reimbursements are the proceeds from school lunch fees charged to students and teachers. These funds
12. increased about 27 percent since fiscal year 1978. Miscellaneous sources of funds amounted to approximately $1.9 million in fiscal year 1982, an increase of 77 percent. These include such items as funds received from other school districts in the special education cooperative.
Uses of Funds
The auditors also examined the district's uses of funds for fiscal years 1978 through 1982. The following table summarizes district expenditures for these years, which have risen an average of 7.0 percent a year, or a total of about 31 percent, from $46.4 million to $60.8 million.
Uses of Funds Kansas City School District
Fiscal Year % Increase 1978 1982 1978-1982 General Fund Regular (a) $28,425,516(b) $37,293,332 31.2% Federal Programs (c) 1,963,940 2,494,681 27.0% Total $30,389,456 $39,788,013 30.9%
Special Revenue Funds Vocational Education 2,256,498 2,972,130 31.7% Adult Education (a) 447 0 -- Special Education Coop 3,770,440 7,945,306 110.7% Drivers Training 59,714 35,605 (40.4%) Food Service 3,639,176 3,685,485 1.3% Capital Outlay (a) 2,023,881 758,906 (62.5%) Transportation 699,985 1,435,814 105.1% School Retirement 400,000 400,000 0.0% Bilingual Education -- 92,731 -- Bond & Interest 2,366,038 2,595,231 9.7% Public Library 791,299 1,106 1058 39.8% TOTAL $46,396,934 $60,815,279 31.1%
(a) These expenditures do not include transfers made into school district special revenue funds. Under the law, transfers from the General Fund qre considered as operating expenses. However, if transfers are included, they would overstate actual operating expenditures for the district. In addition to transfers from the General Fund, transfers were also made from the Capital Outlay Fund to the Transportation Fund to buy buses, from the Special Education Fund to the Special Education Coop Fund, and in one year from the Adult Education Fund to the Capital Outlay Fund. The Special Education Fund is not shown because transfers were its only expenditures.
(b) The 1978 General Fund expenditures include expenditures originally recorded in the Social Security Fund. After 1978, these expenditures were made directly from the General Fund.
(c) These federal revenues are shown separately because they are not included in expenditures controlled by General Fund budget limitations.
13. Expenditures From Some Funds Have Increased More Rapidly Than Others
Expenditures from the different funds rose at varying rates in the district over the five-year period. General Fund expenditures increased 30.9 percent, and, on the average, expenditures from the special revenue funds increased by 31.4 percent. But special revenue expenditures did not increase uniformly. For example, expenditures for special education increased 110.7 percent and for transportation increased 105.1 percent, but capital outlay expenditures decreased 62.5 percent. The large increases in special education and transportation funds were caused primarily by increases in the number of students receiving those services.
The 30.9 percent General Fund increase and the 31.1 percent overall increase in expenditures were significantly less than the rate of inflation, which was 45.3 percent during this time. Part of the reason the district has been able to keep total costs down is that there were 14.2 percent fewer students in fiscal year 1982 than there were in fiscal year 1978. On a per-pupil basis, however, the district's General Fund budget increased from )1,234 to $1,952, or a 58 percent increase. This increase is 13 percent higher than the inflation rate.
Per-Pupil Costs Were At or Below Averages For Similar Districts
To determine how the district's General Fund expenditures compared with those of other districts, the auditors compared the per-pupil costs for Kansas City with the average per-pupil costs for all districts with enrollments of over 1,600 and with the average for the four largest school districts in Kansas (Wichita, Shawnee Mission, Topeka, and Kansas City). As the accompanying table shows, per-pupil costs in the Kansas City school district during fiscal year 1981 were generally at or below the averages for the other two district categories. They were about 13.5 percent lower than the average per-pupil costs in districts with enrollments of 1,600 and above and about 16.3 percent lower than the average for the four largest distr icts.
In only one expenditure category--maintenance of facilities--was Kansas City's per-pupil cost significantly above similar districts. On a per pupil basis, the district's maintenance costs were about 38 percent higher than the average for districts with enrollments of more than 1,600, and 21 percent higher than the average for the four largest districts. The auditors determined that a major reason for the district's high maintenance costs was the high salaries paid to maintenance personnel. An analysis of this area is included in Chapter V.
14. Per-Pupil Costs, General Fund Expenditures Kansas City and Similar Districts Fiscal Year 1981
Districts Four Expenditure with More Than Largest Categories Kansas City ,1,600 Enrollment Districts Administration (for example superintendents' salaries, contractual services) $ 42 $ 60 $ 52 Instruction (for example teache r, principal, and cler ical salaries, text books and teaching supplies) 948 1,144 1,161 Attendance & Health 21 15 20 Operation of Facilities 186 196 217 Maintenance of Facilities 91 66 75 Fixed Charges 131 160 180 Student Body Activities & Community Services 5 10 2 Capital Outlay 27 25 26 Total Average $1,451 $1,676 $1 ,733
Administration and instruction costs per pupil were significantly lower for Kansas City than for the average of the four largest districts. Administration costs apparently are lower because the district's adminis trative staff is concentrated in lower-paid instructional specialists rather than central administrators. The lower instruction costs appear to be the result of lower salaries and larger teaching loads for teachers.
15.
CHAPTERllI
IMPROVING THE DISTRICT'S FINANCIAL MANAGEMENT
To determine if the district is effectively managing its financial resources, the auditors assessed such areas as budgeting procedures, purchasing procedures, and cash management policies and procedures. They determined whether the district's financial management practices were in compliance with State laws and regulations, whether the practices were effective, and whether there was a need for improvement in any of these areas. Their review showed that improvement was needed in the management of district budgets, investments, purchases, and school activi ty funds. Briefly, the auditors' findings in these areas were as follows:
--General Fund cash balances are larger than necessary for operations. The district always budgets the maximum allowed by law in the General Fund and spends an average of 89 percent of its budget. But because it takes in more revenues than it budgets, the district actually spends only 80 percent of its available funds. These revenues have resulted in increasing fund balances and higher bal ances than needed to maintain the Fund.
--Although most transfers out of the General Fund are necessary, transfers to vocational education should be reduced. In fiscal years 1978 through 1982, the district transferred $14-.4- million from its General Fund to special funds, $8.3 million of which represented State aid. Most transfers were necessary and did not unduly increase balances in the special funds; however, transfers to the Vocational Education Fund did appear to be excessive.
--Long-range plans for capital outlays are needed to avoid unnecessar ily large balance increases. The district has placed most of its interest earnings in recent years in the Capital Outlay Fund. As a result, large balances have built up in that Fund without any formal plan to use the money.
--The school district indirectly subsidizes the Public Library Fund. Kansas City is the only school district in the State that can legally use school district funds to support a public library. Although the district has not directly used school district funds on the Library, it has done so indirectly by placing interest moneys earned on school district funds in the Capital Outlay Fund. A planned $3.5 million branch library will be built from that Fund.
17. --The district has failed to ensure its deposits were properly secured as required by law. The auditors found 17 instances at four of the banks used by the district in which pledged securities were less than the statutorily required 70 percent of the uninsured deposits.
--The district failed to invest federal program moneys. Overall, the district effectively manages its funds to maximize interest earnings. However, it failed to invest over $800,000 of federal moneys each month in fiscal year 1982 because district officials thought the interest earned would have to be returned to the federal government. The district has also failed to pursue interest-bearing checking accounts. --Purchasing procedures should be improved. The district could improve its purchasing procedures by consolidating purchases for similar items into single purchase orders. Changes in State law should be consid ered to ensure all purchases over $5,000 are competitively bid and to authorize petty cash funds in district departments.
--State guidelines on activity funds should be improved to prevent potential abuse. Although school activity funds are managed in accordance with State guidelines, several purchases were made with student funds that are questionable in that they appear to be purchases that would normally be purchased through the distr ict's General Fund. Because the potential for abuse in this area is high, State guidelines should be improved.
Each of these findings is discussed in greater detail in the following sections. Where appropriate, recommendations are made for improvements or for bringing district policies and procedures into compliance with State laws and regulations.
Budgeting Practices: General Fund
Budgets in school districts are built through a General Fund and a series of funds for special programs such as vocational education, special education, and transportation. The Legislature limits the amount a district can budget for its General Fund. This limit allows districts to increase their General Fund budgets between five and 15 percent annually unless greater or lesser limits are mandated by the Legislature. These budget limits also are expenditure limitations because a district cannot spend more than the maximum allowable budget out of the General Fund without losing State aid.
Most of the Kansas City school district's revenues are paid into and spent out of the General Fund. As the accompanying figure shows, in fiscal year 1982 the General Fund contained $50.1 million (58.2 percent) of the district's $86.2 million in available funds.
18. Available Moneys By Fund Kansas City School District
Total A vai lable %of Fund Fiscal Year 1982 Total
General Fund $50, 137, 133 58.2% Special Revenue Funds Vocational Education 3,830,866 4.4 Special Education Coop. 8,784,357 10.2 Drivers Training 137,356 0.2 Food Service 4,709,508 5.5 Capital Outlay 11,249,836 13.0 Transportation 2,173,958 2.5 School Retirement 480,481 0.6 Bilingual Education 104,185 O. I Bond and Interest 3,219,373 3.7 Public Library Board 1,365,802 1.6 TOTAL $86,192,855 100.0%
In all, 82.5 percent of the district's total State aid was deposited in the General Fund. This State aid accounted for 56.3 percent of all moneys in the General Fund. Local and county taxes contributed 21 percent of the Fund's total, balances carried forward from the previous year accounted for 18.2 percent of the Fund's total, and federal funds contributed 4.5 percent. Of the approximately $60.8 million spent by the district in fiscal year 1982, $39.8 million (65.4 percent) was spent out of the General Fund for such purposes as administration, instruction, operation and maintenance of schools and other facilities, and other charges. An additional $2.7 million was transferred into the Special Education Coop, Food Service, and Vocational Education Funds.
The District Budgets the Maximum Allowed Each Year
The district has budgeted the maximum amount allowed under the law in each of the past five years. It's adopted General Fund budget rose from $33 million in fiscal year 1978 to $44.7 million in fiscal year 1982, an increase of 35.7 percent, or an average increase of 8 percent per year.
Over the five-year period, the district spent an average of 89.4 percent of its General Fund budget. But because the district takes in more revenues than it budgets, 'it also had a large amount of money left over each year. On the average, the district spends only 79.7 percent of the General Fund moneys available each year. For example, the district spent $40 million from the General Fund in fiscal year 1982, $4.7 million less
19. than the adopted budget. However, the district had $50.5 million in available funds for its General Fund that year, $10.5 million more than it spent. These leftover funds are used, in part, to maintain the district during the first part of the next fiscal year when revenues come in slowly.
General Fund Maximum and Adopted Budgets, Revenues, and Expenditures Kansas City School District Fiscal Years 1978-1982
Maximum Fiscal Budget Adopted Available Amount Year Allowed Budget Funds Spent
1978 $32,969,890(a) $32,969,890(a) $37,486,780(a) $30,124,843(0) 1979 36,957,349 36,957,349 41,082,622 33,327,191 1980 38,829,314 38,829,314 43,682,906 34,173,686 1981 42,323,989 42,323,989 46,856,002 37,343,574 1982 44,727,563 44,727,563 50,488,533 40,003,013 1983 NA 49,653,012 NA NA %Increase 1978-1982 35.7% 35.7% 34.7% 32.8%
(a) These figures include amounts budgeted and spent for Social Security, Worker's Compensation, and unemployment insurance. Prior to 1979, these were separate funds from the General Fund. From 1979 on, these were included in the General Fund budgets and expenditures. The changes were made to keep those figures comparable to later years. The actual adopted budget was $31,498,081 in fiscal year 1978.
General Fund Cash Balances Are Larger Than Necessary for Operations In all the district's funds, total balances carried over from previous years have increased 60.2 percent in five years, from $12.9 million at the start of fiscal year 1978 to $20.6 million at the start of fiscal year 1982. The increase in the district's balances is larger than both the increase in all sources of funds (4-3.2 percent) and the increase in total expenditures (31.1 percent) over the same period. Moreover, balances as a percent of expenditures rose from 28 percent to 34- percent. Because of these increases, the auditors examined monthly balances to determine if they were excessive. They made several assumptions and adjustments:
--School districts must have fairly large fund balances at the beginning of the fiscal year because revenues from State and local sources come in slowly during the first months of the fiscal year. The districts are required by statute to budget for between 4-0 and 50 percent more revenues than they need in the General Fund during the ! fiscal year so that they will have an adequate balance for the first part of the next fiscal year. (This is often called the 18-month budget process.)
20. --Despite the requirement for large beginning balances, there is no requirement that the lowest fund balance dur ing the fiscal year be more than a minimum "cushionll against unforeseen expenditures. The auditors used one month of annual expenditures as the balance needed for a reasonable cushion.
--Capital Outlay and Bond and Interest Funds were removed from the analysis because balances in those funds are purposely built up to meet future construction and bond retirement needs. Thus, the one month criterion for balances cannot be fairly applied to these Funds. The School Retirement Fund was removed because the balances required in that Fund are dictated by the need to make payments to teachers who were in the school district prior to the Kansas Public Employees Retirement System. Finally, the Public Library Fund was removed because it is a separate entity from the school distr ict.
--Unencumbered (uncommitted) balances were used in the analysis.
The Fund's Lowest Monthly Balance Was $1.6 Million More Than Needed
The auditors found that the lowest combined month-end balance in fiscal year 1982 for funds used in this analysis was $11.7 million, or 22 percent (about 2.5 months) of total 1982 expenditures from these funds. This low balance occurred in December. The balance in the General Fund that month, $9.4 million, accounted for 80 percent of the total balances in these funds.
State law requires that each fund remain solvent independently. To ensure the analysis fully considered this requirement, the auditors adjusted the General Fund balances to show what those balances would have been if transfers were made out of the General Fund each time a balance in anoJher fund fell below the one-month cushion. For example, the balance in the Transportation Fund in December was $41,408 less than a one-month cushion. The auditors removed $41,408 from the General Fund balances as if that money had been transferred to the Transportation Fund. The chart a t the top of the next page shows the General Fund month-end balances (after these adjustments) compared to the balance required for a one month cushion.
The adjusted General Fund balance in the lowest month (December) was $8.5 million, which was $5.2 million more than the one-month cushion of $3.3 million. A final concern about the completeness of this analysis was that these balances are month-end balances and do not reflect the lowest balance during the month. Daily fund balances were not available. Therefore, the auditors removed all revenues received in the General Fund during December and found the lowest the balance could have been during the month was $4.9 million, which is still a conservatively estimated $1.6
21. Adjusted General Fund Month-End Balances Kansas City School District Fiscal Year 1982
(in millions) $15.0 ~ 12.5 ":" ~ ",,' ,~ ~ 10.0 (:\# C'"' r:-: ~ . } , \~ ;ii~ ~ ~ :";', ~ ~~ ~ " , 7.5 . j'. " ~~ . ..; one-month :;: ~ cushion " , ~ . $3,320,250 ~ c'f " ~ 2.5
Jul. Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June million above the one-month cushion. In other words, the lowest General Fund balance in fiscal year 1982 needed for unforseeen expenditures, after adjusting to ensure all funds remained above a one~month cushion, was approximately $1.5 million. Legislative Post Audit recognizes it would be difficult for the district to plan so carefully that its lowest balance would equal the one-month cushion. The General Fund ending balance is partly dependent on the district's decision at the beginning of that year to budget between 40 or 50 percent more revenues than needed during the year to comply with legal requirements for 18-month budgeting. This procedure ensures sufficient funds are available in ending balances to keep the district solvent in the first part of the next fiscal year, when revenues come in slower than in the latter part of the year. Thus, if a district's balances are too high at the lowest point in the year, future balances can be reduced by budgeting closer to 40 percent. The Kansas City district budgeted 48 percent above needed revenues in the past three years, and 45 percent in the two years preceeding that. A district official told the auditors the percentage bUdgeted was increased from 45 percent to 48 percent because of concerns about inflation and the increasing uncertainty of school district financing.
Reductions in State Aid Will Lower Balances
Fund balances that were not needed in the past will help the district face the impending reductions in State aid. Although balances in the General Fund were $1.6 million above a minimum cushion in fiscal year
22. 1982, that extra money will help the district through the four percent reduction in State aid made necessary because of shortfalls in State revenue. The auditors estimated the fiscal year 1983 reduction in State aid for the Kansas City district will total about $850,000. Assuming that the district's excess balance in 1983 is $1.6 million, as it was in 1982, the district will be able to absorb the one-time four percent cut without any reduction in services. The only effect of the cut in State aid, then, will be to reduce the size of balances not needed for operations.
This effect raises the question of whether those balances were in fact excessive or merely prudent. The fund balances in the Kansas City school district were built primarily through local property taxes. In essence, local taxpayers paid more than necessary in previous years in case the district would need that money later.
It is up to local taxpayers to decide, through the election of school board members, whether it is reasonable to be taxed for more money than is needed now so that extra money will be available to meet revenue needs later. Perhaps the electorate would prefer to increase taxes or cut programs at the time revenues are reduced, rather than allow the district to save money for lean times. As it stands now, the district appears to have a healthy cash position that should enable it to absorb aid reductions in the coming year without any cutbacks in services.
Budgeting Practices: Special Revenue Funds
The district maintains 12 special revenue funds: Food Service, Transportation, Capital Outlay, Special Education, Vocational Education, Driver Training, Special Education Coop, School Retirement, Bilingual Education, two Bond and Interest Funds, and the Public Library Fund.
Special revenue funds receive support from a variety of source". State and federal funds support various programs, as do such charges to users as lunch fees and fees for vocational education classes. Most special funds cannot receive moneys directly from local tax levies. Local funds can be obtained indirectly, however, in one of two ways: depositing interest earnings into them, which by law cannot go into the General Fund, and transferring moneys from the General Fund. In fiscal year 1982, $3.6 million in interest was deposited in these funds, and $2.7 million was transferred from the General Fund.
During fiscal year 1982, the district's special revenue funds had a total of $36.1 million in available funds. Expenditures that year totaled $21 million, or 58.3 percent of the moneys available. Remaining balances were carried over to the next fiscal year. Four of the district's spe cial revenue funds--Transportation, Special Education Coop, Food Serv ice, and Vocational Education--received General Fund transfers totaling $14.4 million between fiscal years 1978 and 1982.
23. The auditors examined transfers to these funds to determine if they were excessive. They also examined each fund to determine if there were any problems in the management of those funds. They found that transfers from the General Fund were generally not excessive, although transfers do increase State aid to special funds. Concerning the operation of specific funds, they found that large balances had been built up in the Capital Outlay Fund without a long-range plan for spending those funds, and that the district indirectly uses school district funds to subsidize the Public Library. These findings are discussed in more detail below.
Most Transfers Are Needed, But Transfers to the Vocational Education Fund Should Be Reduced
Looking at both the overall result of the transfers for fiscal years 1978 through 1982 and the transfers on a year-to-year basis, the auditors determined most of the money transferred to the Special Education Coop Fund was needed to support that Fund's operations. In the three other funds, only about half the moneys transferred--or $2.2 million out of $4.3 million--was needed to keep those funds solvent. In all, nearly $3.0 million of the $14.4 million transferred, or 20.5 percent of the total, appeared to be unnecessary to keep the funds solvent at the end of the fiscal years.
To assess the reasonableness of the district's transfers from its General Fund, the auditors compared its transfers with those of compar ably sized districts. Kansas City's transfers in fiscal year 1982 were 6.8 percent of total General Fund expenditures, compared to 7.4, 10.4, and 10.7 percent in the Shawnee Mission, Topeka, and Wichita districts, respectively. Thus they were lower in comparison.
The auditors also compared month-end balances for each fund to the balance required for a one-month cushion. The lowest balances in fiscal year 1982 in the Food Service and Special Education Coop Funds were well below the one-month expenditures limit. Thus, although transfers to these funds were larger than needed to keep the funds solvent, they did not result . , in the build-up of unreasonably high fund balances. 1 ~,
However, the balances in the Vocational Education Fund still ap l peared higher than necessary. In fiscal year 1982, the low balance in that f Fund was $372,817, or $153,102 more than the one-month minimum , reserve. District officials told the auditors that the transfer to the I Vocational Education Fund is intended to approximate the amount of funds tha t would have been raised with a two-mill tax levy, although in fact the /' transfers were not equal to an amount two mills would have raised. (The i two-mill levy for vocational education was allowed by State law until fiscal year 1979.) Nonetheless, the auditors determined that the fiscal year 1982 transfer was still more than needed to maintain a one-month minimum reserve in that fund.
24. Recommendation
The Kansas City school district should transfer to the Vocational Education Fund and to all other funds only the amount needed to maintain reasonable balances.
Transfers Increase General Fund Budgets and State Aid to Special Funds
When transfers are made from the General Fund, whether they are necessary to support special programs or not, they increase the amount of local property taxes and State equalization aid needed to finance the next year's General Fund expenditures. They also increase the amount of money available to the district to spend out of its special revenue funds. Unlike the General Fund, there are no expenditure limits on these funds.
Because General Fund moneys include State equalization aid paid to the district, transfers to special revenue funds also contain a portion of that State aid. As a result, the State ends up contributing a portion of its equalization aid to support special programs that already receive State categorical aid. The State paid an additional $8.3 million from 1978 through 1982 to support Kansas City's special program funds. In fiscal year 1982, $1.6 million of the $2.7 million transferred to special funds, or 59 percent of the total, was State aid.
State Equalization Aid Paid to Special Revenue Funds Because of T roosfers from the General Fund Fiscal Year I 982
Special Revenue Amount State Aid Included in Transfer Fund Transferred Percent Amount
Food Service 309,681 5,9% 182,711 Vocational Education 400,000 59% 236,000 Special Ed. Coop 2,000,000 59% I , 180,000 TOTAL $ 2,709,681 SI ,598,7 I I
Although transfers do significantly increase State support of these programs, it should be noted that they partially support the education of students in special education and vocational education programs that would otherwise be supported by the General Fund. In other words, if these students were regular students, money would have been spent directly out of the General Fund to educate them. For special education and vocational education programs, State categorical aid is intended to cover only the cost in excess of educating regular students.
25. A Long-Range Capital Outlay Plan is Needed
The auditors examined the Capital Outlay Fund in more detail than other special funds. Audits done by Legislative Post Audit last year indicated that the larger districts tend to build large balances in this fund to make large capital expenditures possible without bond elections.
Balances in the district's Capital Outlay Fund rose from $3.3 million in fiscal year 1978 to $10.5 million at the beginning of fiscal year 1983, an increase of 216 percent. The district levied between 2.9 mills and 3.5 mills for capital outlay during those years, reaching a peak in fiscal year 1981 and declining to 2.96 mills in fiscal year 1982. But the main reason for the increase in balances was that $9.5 million in interest moneys, or 93 percent of the district's total interest earnings, was deposited in the Fund. That portion of interest moneys earned on capital outlay balances must by law be placed in the Capital Outlay Fund. But the remainder, about 60 percent in fiscal year 1982, could by law have been placed in other special funds, including the funds that required General Fund transfers to remain solvent.
Major projects paid from the Capital Outlay Fund since July 1977 include S900,000 for an addition to the Washington High School kitchen, $400,000 to renovate the Sumner Academy, $160,000 for an addition to the transportation facility, and $3.7 million ($1.5 million of which was from a federal grant) for new vocational educational facilities. The district also spent $1.2 million from the Fund for new buses to transport students.
Balances in the Capital Outlay Fund have increased over the past five years without a written plan for using those moneys. However, the district's board has recently either approved preliminary studies or given final approval for the following projects:
--Replace John Fiske Elementary School $1.5 million --Major addition to Stony Point South Elementary School $2.5 million --New branch library $3.5 million --New computer system $2.5 million Total Cost of proposed projects $ 10 million
The branch library is included because the district is a joint school I 1 and library district, and is therefore allowed to use its Capital Outlay Fund f for either schools or libraries. School district officials said plans to build a $1 million addition to the Welborn Elementary School and a $100,000 improvement to the transportation facility are also being considered.
The "Changes in District Facilities" section of this report indicates as many as 10 elementary schools may need to be closed to fully utilize the remaining buildings. District officials agree that as many as four schools I should be closed in the next two years, but the plan to determine which schools to close is not complete. As a consequence, the district is planning
26. to replace or renovate several schools at a cost of $5 million, while at the same time making preliminary plans to close some buildings. Although it may be necessary to close some buildings and remodel others, this situation highlights the importance of long-range capital planning to avoid unneces sary spending.
Recommendation
To prevent the unnecessary buildup of capital outlay funds and to ensure they are not spent on projects that may not be the best use of those funds, the Kansas City school district should develop a long-term capital improvements plan. That plan should include a plan for school closings, a list of proposed capital projects, the need for each project, and the financing needs of each project.
The District Indirectly Subsidizes the Public Library Fund
The Kansas City school district board is also the board for the Kansas City Public Library. The district operates a separate Library Fund 'to pay the Library's expenses. The Library is primarily supported by a separate tax levy, which was 3.06 mills for fiscal year 1982. That year, the Library district had a total of $1.4 million in available resources, which consisted of $840,000 in local property taxes, $38,000 from State aid, $254,000 in beginning balances, $112,000 in county taxes, and $120,000 from miscellan eous sources. It spent a total of $1.1 million for books, facilities, and personnel. The Library District employs 39 persons and operates a main library and two branches. State law (K.S.A. 72-1623) allows library expenditures to be "p~J.d from the general, building, and ret.irement funds in like manner to school expenditures." This statute applies only to school districts in cities with populations between 120,000 and 200,000. Kansas City is the only city in this category. (Topeka, which has a population of 115,000, would become eligible if its population grew to at least 120,000.) Although the Generai Fund can be used for library expenditures in Kansas City, the auditors found all Library expenditures are made from the Library Fund. Also, administrative and maintenance services provided by the school district are charged to the Library Fund. There is, however, one way in which the school district will be subsidizing the Library through its Capital Outlay Fund. The district plans to spend ~3.5 million for a new branch library. That expenditure is in part possible because the district places large amounts of interest moneys in this Fund ($9.5 million in five years). About 60 percent of these funds could have been deposited instead in special funds that relied on transfers to remain solvent. In other words, the placement of interest revenues in the Capital Outlay Fund for use on libraries indirectly increases General
27. Fund expenditures by increasing necessary transfers. These transfers, in turn, increase the district's General Fund budget per pupil and State aid.
The statute allowing the Kansas City Library to use school district moneys (K.S.A. 72-1623) became law in 1957. The auditors could not determine the precise reason for the statute. But it appears that, because the Library had been part of the district since 1899, the statute was passed to legalize an existing situation. Nonetheless, the Legislature may want to reconsider whether the district should be allowed to continue subsidizing the Public Library for two primary reasons. First, State aid for schools has increased dramatically since 1957, rising from $32 million to $601 million ,this year. Second, the Kansas City school district is the only district in Kansas that can directly or indirectly use State aid to subsidize a public library. This creates an inequitable situation because other cities--like Topeka--must obtain electoral approval of a temporary mill levy to build new facilities.
Because the State's role in financing education has changed consider ably since 1957, the Legislature may want to reconsider whether it wants to continue to allow the Kansas City district to use district moneys to subsidize the Public Library.
Recommendation
Because of the inequitable situation created by K.S.A. 72- 1623, which allows only Kansas City to pay its library costs out of school district funds, the Legislature should consider amend ing that law to no longer allow the Kansas City Public Library to use school district moneys. If the Legislature removes the ability of the library to directly or indirectly use school district funds, it may be necessary to increase Kansas City's authority to levy taxes for capital improvements in a way similar to other cities.
Investment Management
One way a school district can generate additional reVenues is to invest funds that are not immediately needed for its operations. By wisely investing such funds, the district can directly reduce the amount of 10cal property tax support necessary to fund the district. The amount of interest earned from moneys invested by the Kansas City district rose from $837,568 in fiscal year 1978 to $3.6 million in fiscal year 1982, an increase of 331.7 percent. The increase was the result of higher interest rates, larger balances available for investment, and improved cash management.
Kansas law allows school districts to invest idle funds and places certain requirements on those investments to ensure that the funds are adequately protected and that the district receives reasonable rates of
28. return. Districts are allowed to invest funds in temporary notes issued by the district, time deposit open accounts or certificates of deposit, shares or savings deposits in savings and loan institutions, repurchase agreements, and,.if time deposit open accounts or certificates of deposit are not available, in U.S. Treasury Bills or Notes. Time deposit open accounts or certificates of deposit from commercial banks are probably the most frequently used investments. Preference must be given to banks or savings and loans with home offices located within the school district. If the rate of interest on these accounts is not at least equal to the average yield before taxes on 91-day Treasury Bills, the district may take its investment moneys elsewhere. During fiscal year 1982, the Kansas City school district invested an average of $26.3 million. Most of its investments were in certificates of deposit and repurchase agreements. The auditors reviewed the district's investments to ensure they were made in compliance with the law and were earning the maximum amount of interest possible. In addition, they reviewed the district's average uninvested cash balance to determine if it was excessive, and reviewed major receipts such as property tax collec tions and State aid payments to determine if the amounts received were invested as soon as possible. This review indicated several weaknesses in the district's compliance with laws and its investment practices. First, some deposits were not sufficiently secured as required by law. Second, the district could have earned a higher interest rate on some of its certificates of deposit. Third, the district failed to invest cash balances designated for federal programs, which could have earned as much as $107,184 in added interest revenue. Finally, the district did not convert its checking accounts to interest bearing accounts.
The District Failed to Ensure Deposits Were Properly Secured
K.S.A. 1981 Supp. 9-1402 requires school districts to obtain security in the amount of 70 percent of deposits in excess of any federal insurance coverage before depositing moneys in banks or savings and loan institu tions. To determine compliance with this requirement, the auditors reviewed the month-end balances for each bank account and the pledged secur ities for these accounts. They found 17 instances at four of the banks used by the district in which pledged securities were less than 70 percent of the uninsured deposits at the end of a month. By allowing such unsecured deposits, the district is violating State law.
Recommendation
To help ensure compliance with K.S.A. 1981 Supp. 9-1402, which requires that deposits be secured by banks pledging securities equal to 70 percent of all uninsured deposits, the Kansas City school district should ensure that banks pledge sufficient securities to cover its deposits.
29. The District Could Have Invested Some Funds To Receive a Higher Interest Rate
The auditors found that the district did not receive the 91-day U.S. Treasury Bill rate on all of its certificates of deposit when it could have. During fiscal year 1982, the district purchased 213 certificates of deposit. It received at least the 91-day rate on 198 of those certificates of deposit, but not on the remaining 15. If it had obtained at least the 9l-day U.S. Treasury Bill rate on those 15 certificates, the district could have received an additional $2,779 in interest from its investments. If the district is unable to obtain the 9l-day rate from local banks, State law allows it to invest moneys outside the district.
Recommendation
To increase earnings in its investments, the Kansas City school district should seek at least the 91-day U.S. Treasury Bill rate on all certificates of deposit. If the interest rate offered at a given bank is below the average yield before taxes on the 91- day rate, the district should invest moneys elsewhere as the law allows.
The District Failed To Invest Federal Program Moneys
The Kansas City school district maintains 19 checking accounts at 17 area banks. Of these, two are used for daily business. The remaining accounts, except for the petty cash account, are used primarily as temporary depositories for matured certificates of deposit and interest received from the certificates. Moneys from the various school cafeterias are also placed into these accounts. The auditors found that the principal amounts of maturing certificates are usually reinvested on the same date. However, large amounts of interest and cafeteria receipts often remain in these accounts for extended periods of time. The average low balance in these relatively inactive accounts was more than $800,000 during fiscal year 1982.
A district official explained that these were federal moneys for such programs as Title I reading for low-income students. The district's understanding was that, if invested, the interest earned from federal project moneys would have to be used for the same federal programs or returned to the federal government. The official further stated that the small amounts of interest involved were not worth the problems involved in accounting for such interest. The auditors determined that had these idle funds been invested at the 9l-day U.S. Treasury Bill rate, the district could have earned as much as $107,184 in added interest revenue. Although there has been some confusion about where interest earned on federal
30. , j funds must go, recent clarifications of federal regulations indicate the district could have retained the interest on the idle moneys in question. In any event, the money should have been invested even if the interest were retuFned to the federal government.
Recommendation
To increase its investment earnings, the Kansas City school district should begin investing all idle funds from special federal programs.
The District Also Failed To Obtain Interest on Checking Accounts
School districts have been eligible to receive interest on checking accounts since January 1981. However, the Kansas City district has not converted to such interest-bearing accounts. The auditors contacted six of the 17 banks that maintain the district's 19 checking accounts. Each bank said the district could receive interest on its checking accounts if it requested. School district officials indicated that interest-bearing check ing accounts had not been requested because serv ice charges on the accounts and charges for insufficient checks would offset the gain in interest. But officials at several of the commercial banks contacted by the auditors indicated that, depending on the balances maintained in these accounts by the district, the conversion to interest-bearing accounts would not result in any service charges. For this reason, the district should place funds that remain in checking accounts--after the federal money is invested elsewhere--in banks that offer such accounts.
Recommendation
The Kansas City school district should convert all of its checking accounts that generally have balances large enough to avoid service charges to interest-bearing checking accounts.
Purchasing Practices
State law (K.S.A. 1981 Supp. 75-3321 and K.S.A. 72-6760 as amended in 1982) requires school distr icts to do the follow ing: --Obtain competitive bids on all contracts for construction or the purchases of goods or materials that exceed $5,000. --Purchase items from Kansas Industries for the Blind or the Division of Vocational Rehabilitation of the Department of Social and Reha bilitation Services when such products are available. In reviewing the district's compliance with purchasing requirements, the auditors found that some practices appeared to circumvent competitive
31. bid requirements, and that changes were needed to make other practices more efficient. They also noted that the school distr ict could save substantial money if some State purchasing laws were amended. These findings are discussed in the following sections.
Multiple Purchase Orders Appear To Circumvent Competitive Bid Requirements
The auditors reviewed the district's purchasing procedures to ensure that it received two or more bids before making purchases exceeding $5,000. They noted several instances in which the district bought items costing more than $5,000 without using the competitive bid process, as required by law. Instead, the district used several vouchers totaling less than $5,000 each. The following examples illustrate the practice of mUltiple purchases, all of which were made within short time periods:
--Seven purchase orders totaling $6,582 for food preparation equipment and supplies were issued on the same day to the same vendor. --Three purchase orders totaling $9,089 were issued in a six-day period for scientific supplies. --Two purchase orders totaling $6,361 were issued on the same day for auto supplies.
Because none of these individual purchase orders was over $5,000, they technically do not violate the law. However, by using multiple purchase orders for supplies from the same vendor--often on the same day--the district circumvented the statutory requirement to obtain com petitive bids. Therefore, the district avoided the bidding process, which might have resulted in lower prices on these items.
Recommendation
The Kansas City school district should adhere to State law by obtaining competitive bids for all goods or materials that cost more than $5,000, and should ensure that multiple purchase orders are not used to circumvent this requirement.
The District's Purchasing Procedures Could Be More Efficient
The auditors found that the district does not always plan its pur chases to avoid making several small purchases when one large one would be possible, and that some petty cash funds used to buy small emergency items are not authorized by law.
32. Consolidating purchases would be more cost~ffective. There are several advantages to combining small purchases. First, quantity purchases generally result in less expensive costs per item. Second, purchase orders are expensive to process--$25 per purchase order according to a district official--and combining purchases can reduce the number of orders needed. In reviewing a sample of purchase orders, the auditors found a number of instances in which better planning could have allowed consolidation of two or more purchase orders. The following are some examples:
--Two purchase orders for transparency projection film were issued on the same day to the same vendor, totaling $4,588.
--Six purchase orders for science equipment over a four-month period, three of which were on the same day, were issued to the same vendor, totaling $5,627.
--Fourteen purchase orders for hardware over a two-month period were issued to the same vendor, totaling $6,001. Several of the ear lier purchase orders specified delivery near the end of this two-month period, indicating that these purchases were not urgent and that, with better planning, they could have been consolidated.
These examples offer evidence that better planning and coordination of various schools' and departments' needs for supplies and equipment could have reduced the number of purchase orders used.
Authorization is needed for petty cash funds. Another way to increase the efficiency of a purchasing program is to allow small purchases to be made outside the normal purchasing procedures. For example, when a district's maintenance department needs a part immediately to complete a job, it would be inefficient to require the department to submit a purchase request and complete the necessary paperwork before buying the needed part. To allow for such small purchases, the Kansas City school district has established a petty cash fund in each school building, in the central office, in the transportation department, and in the maintenance depart ment. District policy is that any purchase under $10 should be made from one of these petty cash funds. Periodically, the petty cash funds are reimbursed through a purchase order from the central office.
The problem with this procedure is that the petty cash funds in the transportation and maintenance departments are not authorized by law. K.S.A. 72-8208 authorizes petty cash funds for schools and the "central business office," but does not authorize petty cash funds in departments apart from the central office. The lack of such authorization is a problem primarily in large districts, where separate departments are often main tained apart from the central office. The auditors also noted that key
33. members of the district's business staff were not aware of the existence of these departmental petty cash funds, indicating an insufficient level of administrative control over the use of these funds.
To operate more efficiently, large districts such as Kansas City would need to be able to maintain certain petty cash funds apart from the central office. For this reason, the Legislature may want to consider amending the law to allow large districts to maintain petty cash funds apart from their central business offices.
Recommendations
To ensure greater efficiency in purchasing procedures:
1. The Kansas City school district should coordinate pur chases of supplies with its schools and departments and combine purchase orders as much as possible.
2. The Legislature should consider amending K.S.A. 72-8208 to allow large school districts to operate petty cash funds in departments apart from the central office. Until the law is changed, the Kansas City school district should discontinue the use of separate maintenance and transpor tation petty cash funds.
Changes in State Purchasing Laws Could Save the Distr ict Money
The auditors noted three areas that offer a potential for cost savings to the district if State purchasing laws are amended: requiring competitive bids for lease purchases and purchases of services, allowing districts to purchase items from regular vendors instead of special industries, and allowing them to purchase items on State contracts.
State law does not require bids for leases or maintenance contracts. The auditors reviewed a sample of 32 separate purchases over $5,000 during fiscal year 1982 and the first part of fiscal year 1983. All but two of these were bought after the receipt of competitive bids. One of those two was a lease of three cars at a cost of $13,209. The other was for maintenance contracts for refrigeration equipment totaling $44,038. Al though neither purchase was competitively bid, they are not in direct violation of the law because neither leased equipment nor services are specifically included in the statute requiring competitive bids. Bidding processes tend to increase competition, which in turn has the potential for decreasing costs and discouraging collusion. The statute specifies the
34. requirement only on purchases of goods or materials or for construction contracts. Given the size of these purchases, the Legislature may want to consider amending the statute to specify the inclusion of services and leased equipment.
Allowing exceptions to a State purchasing law could result in substantial savings. State law also requires that school districts purchase available items from the Kansas Industries for the Blind or the Division of Vocational Rehabilitation. In the first three quarters of fiscal year 1982, the. district bought $444 worth of supplies from other vendors that were available from the Kansas Industries for the Blind, in violation of State law. But by doing so, the district saved $414 because prices for these items from the Industries for the Blind were on the average 93 percent higher than the price charged by other vendors. The district did, on the other hand, purchase $2,532 worth of brooms and mop heads from the Industries for the Blind in fiscal year 1982.
Given the substantial savings to the district in not buying certain items from the special industries, the Legislature may want to amend State law to allow exceptions when a district can obtain a lower price (by a specified percent) by purchasing from regular vendors. Until the statute is amended, the district violates the law by purchasing from regular vendors when it could purchase those items from the special industries.
The district could save money if allowed to purchase items on State contracts. Kansas is one of only 10 states that do not allow school districts to purchase from State contracts. Since 1971, six bills have been introduced in the Kansas Legislature to allow school districts and other local governments to purchase from State contracts. None of these bills passed. To determine if the Kansas City district would benefit from being able to purchase from State contracts, the auditors compared prices for 11 items paid by the district and those paid by the State. The 11 items were chosen from items purchased frequently on State contracts by school districts in Missouri, Oklahoma, and Colorado.
As the table on the next page shows, of the 11 items compared, the district would have saved money by purchasing on State contracts for six of them. Those items were paper towels, toilet paper, writing pads, two types of envelopes, and fluorescent light bulbs. If the district had purchased these six items on State contracts during the first three quarters of fiscal year 1982, it would have saved $6,217. On an annual basis, this savings would have totaled $8,289. The district was able to match or beat the State contract price on the other five items sampled, primarily because it is able, as a large district, to purchase large volumes and store them in its warehouse.
The $8,289 savings was identified by sampling only 11 items. It is likely that a larger sample would identify further substantial savings.
35. Given the size of potential savings, the Legislature may want to consider amending State law to allow school districts to purchase items from State contracts if they can save money by doing so. The summary report of all school district audits conducted in 1982, which will be completed later, will explore this issue further.
Comparing Purchase Prices
To determine whether the Kansas City district could save money if allowed to purchase items on State contracts, the auditors reviewed a sample of II items purchased in 1982. They found:
The district would have .------saved $8,289 if it had bought these items on State contract.
------The district was able to match or beat the State contract price on these items.
This sample was small; the potential for savings if all supplies are included could be substantial.
Recommendations
Because of the potential for cost savings to the district, the Legislature should consider the follow ing:
1. Expanding the requirements for receiving competitive bids on purchases over $5,000 to specifically include leases and purchases of services.
2. Amending State law to allow school districts to purchase items from regular vendors instead of special industr ies when doing so can decrease their costs by a specified percentage. Prior to such a change in State law, the Kansas City school district should purchase all available items from the Kansas Industries for the Blind or the Division of Vocational Rehabilitation.
Management of School Activity Funds
Activity funds are financed through student fees and fund-raising events and are not accounted for in school distr icts' budgets. They are
36. controlled by school principals rather than local boards of education. The funds are used to pay for the expenses of student clubs and activities, such as athletics, student newspapers, and art clubs, and should be managed in acoordance with the Division of Accounts and Reports' Guidelines for School Activity Funds. The auditors examined activity funds in two of the district's five high schools (Washington and Sumner). Their funds were managed in compliance with all aspects of the DivisionIs guidelines regarding proper approval and no deficit balances. However, the auditors did find a potential for abuse that indicated the guidelines need clarifica tion. They also found one of the two schools could increase the amount of money it earns by investing idle activity funds. These findings are discussed below.
State Guidelines Need To Be Clarified To Prevent Potential Abuse of Activity Funds
Both high schools reviewed by the auditors operated candy stores that were open after lunch. The proceeds from these stores are placed in a special student activity fund that is not connected to any particular student group or activity. These funds have built up considerable balances ($25,697 at the lowest point in fiscal year 1982 at one school). State guidelines do not clearly address the proper use of these funds.
The money in these funds is generally used for purchases related to student activites, such as painting the school emblem on the gym floor. However, the auditors found several purchases from these funds that would normally be paid out of regular school district funds and cannot be considered part of student activities. They were as follows:
--Sumner Academy (high school) spent $174 on typewriter carts. The principal explained he used student funds for this purchase because the carts were needed, they benefitted the students, and he did not think the Board would pay for them.
--Sumner also spent $17 for postage to send a letter to parents explaining the State requirements for student inoculations.
--Washington High School spent $45 to type an application for accredi tation from the North Central Association.
Although the number and dollar amounts of questionable purchases are small, their presence indicates that the potential for abuse does exist. The potential is heightened by several factors. First, the balances in these funds are large. Second, school principals control these funds. Central administrators do not review each purchase. And third, central administra tors interviewed by the auditors disagreed over whether these purchases were questionable. The reason for this disagreement appears to be that
37. State guidelines do not clearly address this issue. As a result, changes to those guidelines may be needed to prevent future abuse.
Recommendation
To clarify the proper uses of student funds that are not associated with a particular activity or club, the Division of Accounts and Reports should revise its activity fund guidelines.
Investment of Activity Funds Can Be Improved
The auditors also found that Sumner Academy could have earned an additional $850 in interest if it had changed its investment practices in two areas. First, if Sumner had invested all idle activity fund moneys over a $5,000 checking account balance in one-month certificates of deposit in fiscal year 1982, it would have earned about $650 more on its investments. Washington High School followed this practice, while Sumner kept its low monthly checking account balances at an average of about $12,000.
Second, Sumner could have earned another $200 in interest in fiscal year 1981 if it had changed its activity fund checking accounts to interest bearing accounts. At the time of the audit, Sumner had not contacted its bank to determine if it could obtain interest on its checking account. Bank officials told the auditors that interest-bearing checking accounts with no service charges were available to the school with a $1,500 minimum balance.
Recommendation
To improve management of school activity funds, the Kansas City school district should ensure that all its schools reduce their checking account balances and move their remain ing checking account funds into interest-bearing accounts.
38. CHAPTER IV
MANAGING DISTRICT PERSONNEL AND EDUCATIONAL RESOURCES
To determine if the Kansas City school distr ict effectively manages its personnel to provide services to its students at a reasonable cost, the auditors reviewed the district's enrollment, personnel, and course offerings. The results of their review are presented in this chapter. In general, the auditors found few problems in these areas. District enrollments appear to be stabilizing, and increases in staffing for special education and transpor tation have been more than offset by decreases in the number of classroom teachers and food service personnel. The distr ict has more administrators than average, but it pays them less so administrative costs are lower than average. Principal and teacher salaries are also lower than similar districts, even though teaching loads are heavier. Each of these areas is discussed in greater detail in the sections that follow.
School District Enrollments Are Stabilizing After Declines
During the 1981-1982 schodl year, a total of 22,911 full-time equivalent students attended schools in the Kansas City district. As the table on the next page shows, 11,120.5 full-time equivalent students, or about half the district's enrollment, attended the 37 elementary schools. Another 1,464 students attended the two middle schools, 3,91} students attended the six junior high schools, and 5,633.5 students attended the five high schools. In addition, 782 students were classified as special education students on State reports.
Enrollment in Kansas school districts has been declining for a number of years, reflecting national and State trends of declining school-age populations. From 1970 to 1978, the total public school enrollment for the nation decreased by 7.2 percent. During that same period, the decline in Kansas was 15.4 percent, or tw ice as large.
In Kansas City, enrollments declined 18.5 percent from 1972 to 1978, and from 1978 to 1982 dropped another 14.2 percent, from 26,716.8 full time equivalent students to 22,911 students. Preliminary enrollment figures for the 1982-83 school year, which began shortly before this audit was underway, showed a drop of only .5 percent from the year before to 22,803 students. Thus, the decline in enrollment in Kansas City appears to have slowed, and elementary school enrollments are now projected to increase nearly 11 percent by 1986.
39. Overall Staff Level Enrollment Information by Grade Has Declined Kansas City School District Fiscal Year 1982 In fiscal year 1982, the dis F ull-Time Enrollments trict employed 2,545.8 full-time GRADE LEVEL No. of Students Primarl School equivalent personnel, including K 858.5 employees of the special educa I 1,772.0 tion cooperative run by the Kan 2 1,687.0 3 1,721.0 sas City district. The table on 4 1,787.0 the opposite page shows the num 5 1,764.0 Total Primary School 9!589.5 ber of personnel employed by the district. Teaching staff repre Secondarl School (a) 6 1,909.0 sented the largest single cate 7 1,818.0 gory--l,464 positions. Of those, 8 1,753.0 1,094.5 were classroom teachers, 9 1,760.0 10 2,028.0 249 were special education teach II 1,783.0 ers, and 120.5 were teachers' 12 I !488.5 aides. Total Secondary School 12!539.5 Total Special Education (b) 782.0 The distr ict had a staff of 129 Total All Students 22!911.0 administrators, including the Su (a) In fiscal year 1982, the district operated both perintendent, three assistant su junior high schools (grades 7-9) and middle schools perintendents, and 125 other ad (grades 6-8). This year the district has only middle ministrators including 37 princi schools. pals, 24 assistant principals, and (b) This is the number of Kansas City speci 01 educa- tion students who are provided special education 24 instructional specialists. The transportation. The actual total number of Kansas distr ict also had III non-teaching City students receiving at least part-time special certified personnel (librarians, education services is 2,789. That number, broken down by grade, was not available. counselors, nurses, social workers, and psychological staff). Support personnel totaled 841.8 posltlons, including 147.8 office and clerical staff positions, 243 custodians, 118 transportation staff positions, 196 food serv ices staff positions, and 137 other support staff. The total number of staff positions has declined in recent years, although not as much as the decline in enrollment. District statistics show that the total has decreased by 8.7 percent, or 241.7 positions, since fiscal year 1978. Enrollment declined 14.2 percent over the same period. The largest drop came in the number of food service workers, which decreased by 181 positions, or nearly half. This drop came about primarily in response to decreasing federal funds for food services, which prompted the district to review and cut its food services staffing levels. The number of classroom teachers has also decreased significantly- by 180.5 positions, or 14.2 percent, since fiscal year 1978. This is the same percentage decrease as the decrease in enrollment, which means there have been relatively constant pupil-teacher ratios. Other categories showing decreases include principals, secretarial and clerical staff, and various other support personnel categories.
40. Summary of Changes in Stoffing Kansas City School District Fiscal Years 1978 and 1982
Number (FTE) Number (FTE) Percent Position 1978 1982 Change
Admi'nistrotors Superintendent 1.0 1.0 0 Assistant Superintendent 3.0 3.0 0 Other Administrators (includes instructional specialists) 56.0 64.0 +14.3% Principals 40.0 37.0 -7.5 Assistant Principals 22.0 24.0 +9.1 Total Administrators 122.0 129.0 +5.7% I Teoching Stoff Classroom Teachers 1,275.0 1,094.5 -14.2 Special Education Teachers 178.0 249.0 +39.9 Teacher Aides 50.5 120.5 +138.6 Total Teaching Staff 1,503.5 1,464.0 -2.6% Certified Non-Teaching Personnel 111.0 111.0 0 Support Personnel Secretary/Clerical 155.0 147.8 -4.6% Custodians 228.0 243.0 +6.6 Maintenance 60.0 69.0 +15.0 Food Service 377.0 196.0 -48.0 Transportation 84.0 118.0 +40.5 Other 147.0 68.0 -53.7 Total Support Staff 1,051.0 841.8 -19.9% TOTAL EMPLOYEES 2,787.5 2,545.8 -8.7%
Large Increases Occurred in Staffing For Special Education and Transportation
Despite the overall drop in staffing levels, the number of special education teachers and teacher aides has increased greatly--from 228.5 to 369.5--prlmarlly in response to more mandated special education programs and federally funded Title I special reading and math programs. The transportation staff increased from 84 positions to 118 positions, or 40.5 percent, in response to the distr let's court-ordered desegregation plan. This plan was phased-in from 1977 to 1980. Moderate increases also occurred in the categories of custodians, maintenance workers, and other administra tors.
41. The District Has More Students Per Teacher Than Other Large Districts, But More Administrators For the Size of Its Teaching Staff
Looking at only regular students and teachers (excluding special education), the auditors found that the pupil-teacher ratio for the district is about 20 students per teacher. This ratio is 6.9 percent higher than the average for the four largest districts, and 25.5 percent higher than the Statewide average. This means that in comparison to other districts, Kansas City has fewer teachers for the size of its student population.
Staffing Ratios for the Kansas City School District Fiscal Year 1982 Average In Four Largest Sta tew ide Position Kansas City Districts Average
Pupil Teacher 20.2: 1 18.9:1 16.1:1 Teacher Certified Administrator 9.8: 1 11. 0: 1 11 .0: 1 Pupil Certified Administrator 197.6:1 207.2:1 177.1:1
The district's ratio of teachers to certified administrators was about 10 teachers per administrator, which was lower than the averages for the four largest districts and Statewide. This means that in comparison to other districts, Kansas City has more administrators for the size of its teaching staff.
Administrative Staff Costs Are Lower Than In Other Large Districts
Although Kansas City's administrative staff is larger than comparable districts, the auditors found its administrative costs were lower. For example, Kansas City's administrative costs were 2.9 percent of total General Fund expenditures in fiscal year 1982. This percentage was just under the three percent average for the four largest districts. In addition, per-pupil costs for administration in Kansas City were $42, compared with an average per-pupil cost of $52 for the four largest distr icts.
The primary reason for this apparent contradiction seems to be that the Kansas City distr ict has more instructional specialists on its adminis trative staff than other districts. Instructional specialists, who hold such positions as coordinators for each grade level and supervisors or directors for specific subject areas, such as music, English, math, and foreign languages, are paid less than other administrators like principals and assistant principals. The average salary for instructional specialists in Kansas City was $25,811, compared to $30,242 for the remaining adminis trative staff. These employees provide resources, support, and coordina tion to the district's regular classroom teachers, and are involved in curriculum development.
42. The following chart shows that Kansas City has almost tw ice as many instructional specialists as the next highest distr ict, Shawnee Mission. Further, about 21 percent of Kansas City's certified administrators are instructional specialists, compared with about 13 percent or less in the other three districts. Finally, the auditors found that Kansas City has tw ice as many instructional specialists as the average of all four large distr icts.
Comparison of Instructional Specialists Fiscal Year 1982
Total No. of Ratio of Certified Instructional Percent Specialists to District Administrators Specialists Specialists Teachers
Kansas City 112.0 24.0 21.2% 1:46 Shawnee Mission 127.5 13.5 10.6 I: 124 Wichita 187.6 II .0 5.9 1:186 Topeka 82.6 10.6 12.8 1:75 Average 127.4 14.8 11.6% 1:95
Although the auditors did not attempt to determine whether the number of instructional specialists was excessive, they did note that the distr ict's practice of maintaining a minimal number of central administra tors and a larger number of instructional specialists resulted in lower overall administrative costs. This emphasis on instructional specialists is intended to increase teacher support and guidance, and thus improve educational services.
Salaries and Employee Benefits
The auditors examined the district's salaries and employee benefits to determine if they are reasonable in comparison to other school distr icts in the State. This review showed that the district's salaries are generally lower than other large districts, and its employee benefits do not appear excessive.
Teacher and Principal Salaries Are Lower Than In Other Large Districts
Salaries for classroom teachers in fiscal year 1982 averaged $16,744. This amount was 6.8 percent less than the average of $17,964 for the four largest districts, and .2 percent higher than the Statewide average of $16,712. The average salary for teachers in Kansas City increased 32 percent between fiscal years 1978 and 1982. But as the table at the top of the next page shows, Kansas City ranked seventh lowest among the 10 largest districts in fiscal year 1982 in terms of average teacher salaries.
43. Salary Information for the Kansas City School District Fiscal Year 1982
Average Salaries for: Four Largest Statewide Position Kansas City Districts Average
Super intendent $59,040 $58,118 $36,887 Principals $27,257 $30,617 $26,884 Teachers $16,744 $17,964 $16,712
Ten Largest Avg. Teacher Salary Districts Fiscal Year 1982
Shawnee Miss ion $19,532 Wichita 18,511 Salina 18,224 Olathe 18,192 Lawrence 17,437 Manhattan 16,947 Kansas City 16,744 Hutchinson 16,324 Topeka 16,283 Junction City 15,372
Principals' salaries were 11 percent less than the average for the four largest districts, but 1.4 percent higher than the Statewide average. Their salaries increased 30.7 percent between fiscal years 1978 and 1982. The Superintendent, who has been in the district for 21 years, was paid a salary of $59,040, which was 1.6 percent higher than the average for the four largest distr icts. Over the past five years, his salary has increased by 23.6 percent.
Employee Benefits Do Not Seem Excessive, But Travel Stipends Need to Be Verified Periodically
All employees in the district working over 30 hours a week are part of the Kansas Public Employees Retirement System. In fiscal year 1982, district employees paid four percent of their earnings into the Retirement System, or $1,482,312, while the State's share was $1,740,466. District employees are also covered by Social Security, unemployment insurance, and workmen'S compensation. These other benefits cost the district $2,377,674 in fiscal year 1982. All district employees except the Superin tendent and licensed maintenance workers receive $55 per month towards insurance coverage. Licensed maintenance workers receive no insurance coverage, and the Superintendent receives a $1,920 insurance benefit.
44. Kansas City also provides various transportation benefits to its employees. Teachers who must travel from school to school receive a reimbursement of 19 cents per mile. The Superintendent and the three assistant superintendents receive the use of a leased car, with all normal car expenses being paid by the district. These leased cars cost the distr ict approximately $4,000 each per year. In addition, fifty administrators in the district--such as directors, coordinators, and two principals--receive in-district travel stipends ranging from $130 to $1,520, and averaging $808 per year. In all areas reviewed, the districts' fringe benefits appeared to be reasonable in comparison with other large districts. The auditors did note, however, that rather than require the administrative burden of reporting daily administrators' travel mileage, the district's Superintendent deter mines the amount of stipends based on mileage estimates. Given the size and variations of these stipends, it would appear that actual mileage records for the administrators who receive them should be collected at least one month each year to ensure the stipends are based on a reliable estimate of mileage.
Recommendation To ensure the size of administrative staff mileage stipends reflects actual travel, the Kansas City school district should require all administrators receiving such stipends to report their actual mileage for at least one month out of the year.
Course Offerings and Teaching Loads
The auditors found that all five high schools in the district met the State's minimum accreditation requirements by offering at least 30 units of credit during the school year. In addition, all five schools are considered to be "accredited comprehensive" high schools because they offer more than 50 credit units each. (Appendix B includes information on course offerings in each high school.) The auditors did find, however, that the district's graduation requirement are below State standards.
The District's Requirements for Graduation Are Below State Standards
The State also sets minimum requirements for graduation from an accredited Kansas high school. The auditors found that although the total units required for graduation in the district exceed the State requirement by one unit, the district's requirements for physical education are below the general requirements established by the State. However, the Department of Education has authorized these alternative graduation requirements for the Kansas City district. Also, the district's requirement for English is one unit below the State's standard. However, State law does allow a school principal to waive the requirement for that unit.
45. The district requires students to complete only three units of English compared with the State standard of four units. A Kansas City official explained that, in practice, the district's English requirements are really the same as the State's, with the exception that high school principals can waive the requirement when it is in the best interest of the student. This waiver is specifically allowed by State law. The official also explained the district wants to keep physical education courses as elective subjects; thus, it does not require students to complete one unit of physical education, as the State requires. The district plans to increase its graduation requirements in 1986, but it will still be below the State requirements by one unit in English. Both the State and the Kansas City school district graduation requirements are included in Appendix B.
Classes Are Larger Than In Other Large Districts, And Teaching Loads Are Heavier
During the 1982-1983 school year, the Kansas City school district employed a total of 1,015 regular teachers on a full-time equivalent basis, 329.4 of whom teach at the high schools. The normal teaching load for a full-time teacher is five class periods a day in four high schools and six at the Sumner Academy. In addition, the teachers are usually scheduled for one planning period. By multiplying the average number of class periods being taught at each high school by the average class size, the auditors determined that Kansas City high school teachers teach an average of 128.7 students each day.
Average Teaching Schedules and Course Enrollments Kansas City and Similar Districts
Teaching Schedule Kansas Citl Wichita Topeka
Average Class Size 25.84 21.89 23.40 Class Periods Taught 4.98 4.46 5.10 Number of Students Taught 128.68 97.68 119.34
Course Enrollments Kansas Citl Wichita Topeka II of Students: IIClasses %Total IIClasses %Total IIClasses %Total
1-10 45 2.8 123 6. I 117 10.6 11-15 81 4.9 214 10.6 96 8.7 16-25 629 38.3 896 44.2 421 38.2 Over 25 887 54.0 792 39. I 469 42.5 ------TOTAL 1,642 100.0% 2,025 100.0% lzl.Ql 100.0% ------
46. In the 1982 fall semester, the class size at the high schools averaged 25.8 students. On a district-wide basis, only 126 (7.7 percent) of the 1,642 classes had 15 or fewer students enrolled. Most of these were specialized classes in math, science, foreign languages, debate, or art. The majority of classes (946, or 57.6 percent of the total) had between 21 and 30 students enrolled. Appendix B includes more information on class sizes in each high school.
The auditors compared the district's teaching loads and class sizes with the data obtained from the 1981 audits of the Wichita and Topeka school districts. As the accompanying table shows, Kansas City teachers are teaching more students each day than are teachers from Wichita or Topeka. The reason appears to be because more students are enrolled in the average Kansas City class than are enrolled in either Wichita or Topeka classes.
47.
CHAPTER V
MANAGING FACll..ITIES AND SUPPORT SERVICES
The auditors reviewed the district's facilities and support services to determine if they are managed efficiently and effectively. In the area of facilities, they found the elementary schools are underutilized and as many as ten schools could be closed. In addition, maintenance costs for facilities were very high, primarily because the district has a large staff of licensed, highly paid maintenance workers. Transportation operations appear to be efficient, but overall costs are high because a large percentage of students are being transported. And in the food services area, the auditors found that cuts in federal aid were absorbed by cutting a large number of staff positions. Each of these findings is discussed in greater detail in this chapter.
School District Facilities Can Be Better Utilized
The Kansas City school district owns and operates 51 schools, including 37 elementary schools, eight middle schools, five high schools, and a vocational school. In addition, district students are taught in several other buildings. These include the Area Vocational-Technical School and the Career Learning Center, where high school dropouts and .potential dropouts are given academic and vocational training, the Merritt Vocational Center for trainable mentally retarded students, and a former supermarket building, which houses the Instructional Resource and Media Center and the Special Services Center for pregnant students or certain students in the personal and special adjustment program. The district leases this building; in fiscal year 1981, it spent 5158,439 for the lease, utilities, and custodial services.
In addition, special education students are served at several other facilities, including the Rainbow Mental Health Unit and the Kansas University Medical Center. The district also has several non-instructional facilities. A central administrative office is shared with the public library facility. A former elementary school serves as a curriculum center, in which many of the instructional specialists maintain offices. And the district owns facilities for the various support functions, including mainte nance, transportation, and food services.
Many Schools Have Been Closed Since 1965, But More Apparently Could Be Closed
From 1965 to 1978, the district closed 23 schools, built eight new schools, and made additions to several elementary schools. Some of these
49. changes came about as a result of the district's court-ordered desegrega tion plan, which required changes in attendance zones. Over the last few years, few major changes were made in the district's facilities, and no long-range facilities plan existed at the time of the audit field work. Since the 1977-1978 school year, overall enrollment in the district dropped by 10.5 percent, but enrollment in the secondary schools declined more rapidly than the elementary enrollments. To accommodate these shifting enrollments, the district completed a study of facilities usage in 1981, which was implemented in the beginning of fiscal year 1983. The major change was the shift of the sixth grade to middle schools and the ninth grade to high schools. This resulted in the elimination of all junior high schools (grades 7-9). (The one exception to this is Sumner Academy, a school for academically accelerated students in grades 8-12 that was created to comply with the desegregation order.) As a result of this shift, the high schools' utilization increased from an average of 79 percent of capacity in fiscal year 1982 to 104 percent of capacity in 1983. Another effect of this move was that the 37 elementary schools were subsequently less utilized, in several cases dropping to less than 50 percent of capacity. The auditors estimated that the total average utilization rate as of September 1982 was 66 percent. The district has acknowledged that school Closings may be necessary to prevent inefficient use of elementary school facilities. During the audit fieldwork, the Superintendent told the auditors he was in the initial stages of developing a plan to recommend the closing of an estimated four schools Projected Utilization of the District's Elementary Schools Fiscal Years 1983-1986
( 00 90 90 80 70 66 10 school 60 closings 50 4 school D closings 40 30 No school D closings 20 10 1984
The district's 37 elementary schools are now considerably underutilized because the si xth grade was shifted into middle schools. The district plans to recommend the closing of four schools, but the auditors estimated as many as 10 schools could be closed. For each school closed, the district can save about $100,000; by closing 10 schools, it could save as much as $1.0 million a year in maintenance, utilities, and staffi ng costs.
50. in the next two years. The schools the district is considering closing are older facilities that are also close to under-utilized schools. , In reviewing projected future enrollments for 1986 (an increase of 9.2 percent, based on actual birth rates in Wyandotte County), the auditors determined that the district's elementary schools' utilization rates would still be relatively low--about 80 percent of capacity by 1986--if only four schools are closed. To arrive at their own estimates of the number of schools that can be closed, the auditors considered the total number of rooms and the total number of regular and special education students (allowing extra rooms for special education classes), the average size of elementary schools, and projected enrollments. Based on these figures, they estimated a total of 10 schools could be closed. By 1986, the remaining 27 elementary schools would then be at almost 100 percent of capacity. The potential cost savings of closing underutilized schools is substan tial. As the accompanying chart shows, the estimated annual saving for each school closed is more than $100,000. If the district closes four schools, as it says it intends to, it could realize a savings of $400,000 a year. If 10 elementary schools are closed, as the auditors estimate is possible, the district could save as much as $1.0 million a year in maintenance, utilities, and staffing costs.
Estimated Savings From Closing One Elementary School Utilities $ 23,409 Maintenance 14,321 Custodial 25,840 Principals 17 ,950 Support Staff 18 ,955 Total $100,475
These estimated savings may be partially offset by increased trans portation costs. However, the auditors found that current elementary bus routes have enough excess capacity to transport an additional 4,000 students. If 10 schools were closed, the maximum additional number of students who would have to be bused (assuming none of them are now bused) would be 2,555. Therefore, it is unlikely that any new buses would be needed, and the added transportation costs would be small compared to the savings realized. Another benefit of closing underutilized schools is that the district could move the programs at its leased facility to one of the vacated elementary schools. That facility currently houses special education and vocational education offices and programs. Apparently, space needs would not be a problem; the leased facility has 32,075 square feet, while the average elementary school has 32,434-. If these vocational and special education programs were moved to a closed elementary school, the district would save an additional estimated $54,000 a year, which is the amount of
51. rent, utilities, and maintenance costs in excess of those costs in the average elementary school. It may, however, incur some one-time remodeling costs.
In analyzing potential school closings, the auditors did not examine each school or consider the unique problems that closing particular schools might present, such as transportation barriers or growth patterns in particular neighborhoods. The analysis also does not consider that any school closing may be blocked by the federal court if the court determines the closing violated the terms of its desegregation order. Obviously, the district would have to assess these factors for each school it contemplates closing, whether that number is four or 10. To make this assessment, and to ensure that elementary school buildings are more fully utilized, district officials will need to re-evaluate attendance zones throughout the district and develop a long-range plan that includes all possible alternatives for closing schools.-
Recommendation
Because substantial savings can be realized by closing underutilized schools, the Kansas City school district should develop a long-range plan for closing enough elementary schools so that the remaining buildings are fully used. The distr ict's short-term plan is to close only four elementary schools over the next two years, while the auditors' review showed as many as lO schools could potentially be closed.
Maintenance Costs Are Higher Than In Comparable Districts
In fiscal year 1981, the district's maintenance costs totaled $2.1 million. At $91 per pupil, these maintenance costs were about 38 percent higher than the average of $66 for districts with enrollments greater than 1,600, and 21 percent higher than the average of $75 per pupil for the four largest districts. In addition, as a percent of total budget in fiscal year 1981, Kansas City's maintenance expenditures were 44 percent higher than the average of the four largest districts.
The district's maintenance costs appear to be higher than in compar able districts because, unlike those districts, Kansas City employs a large number of highly paid licensed craftsmen--carpenters, painters, electri cians, plumbers, and the like. The district has a staff of 63 maintenance workers, 31 of whom are licensed craftsmen earning an average salary of $32,601. This amount is 10 percent higher than the average salary paid to district administrators. The accompanying table presents a breakdown of the different types of licensed craftsmen employed by the district and their annual salaries. The other 32 maintenance employees in the district
52. are laborers, truck drivers, mechanics, and repairmen who are paid between $15,000 and $18,000 a year.
Salaries of Certified Maintenance Workers Fiscal Year 1982 II of Average Total Labor Category Craftsmen Salar~ Cost Carpenter 9 $30,592 $ 275,331 Painter 6 29,560 177,361 Electrician 5 33,804 169,020 Pipefitter 5 36,525 182,624 Plumber 3 36, 109 108,327 Sheetmetal 1 33,550 33,550 Roofer 1 31,699 31,699 Brickmason I 32,718 32,718 Total 31 $32,601 $1,010,630
Salaries for these 31 licensed craftsmen are based on 86 percent of the prevailing union scale for building trades in the area. The district has no formal written agreement to pay this percentage, but has paid between 86 percent and 100 percent of hourly union wages for several decades. In Kansas City, this wage is applied to a 40-hour work week. But according to representatives of several local unions, union members rarely work consist ent 40-hour weeks, and during slow economic times may work as few as 20 hours a week. Thus, the district's salaries for licensed craftsmen may in effect be higher than they appear as a percent of union wages.
Other Districts Pay Lower Salaries for Similar Work
The auditors contacted other large school distr icts to deter mine the salaries they paid their maintenance employees for performing work similar to that done by licensed craftsmen in Kansas City. The Kansas City, Missouri, school district was included in this group in case there were factors specific to the Kansas City metropolitan area that might contrib ute to higher maintenance costs. In all of these districts, most mainte nance tasks except for major roofing repairs, asphalt work, building additions and construction, and other large jobs are done by district maintenance employees. The larger jobs are contracted.
The auditors could not get average salaries for all comparable employees in the other large distr icts, but they were able to make some comparisons for six of the eight categories of licensed craftsmen. As the accompanying table shows, licensed carpenters, painters, electricians, plumbers, roofers, and brickmasons in Kansas City, Kansas, are paid considerably more than their counterparts in the Shawnee Mission and
53. Kansas City, Missouri, school districts. For these positions, Kansas City's average salary of $32,414 is 73 percent higher than the average of $18,720 in Shawnee Mission, and 63 percent higher than the average of $19,911 in Kansas City, Missouri. Further, officials from the Wichita and Topeka school districts indicated to the auditors that the maximum salaries their maintenance workers can earn are approximately $16,640 and $20,800, respectively.
Comparing Average Salaries Paid to Maintenance Workers Who Perform Similar Jobs
School District Shawnee Kansas City, Kansas City, Categorl Mission Missouri Kansas Carpenter $18,096 $19,344 $30,592 Painter 16,744 na 29,560 Electrician 21,902 19,698 33,804 Plumber 18,970 21 ,278 36, 109 Roofer 18,304 19,323 31,699 Brickmason 18,304 na 32,718 Average $18,720 $19,911 $32,414
Apparently, the major reason why Kansas City's maintenance salaries are so much higher than in other districts is that Kansas City hires and uses only licensed craftsmen for maintenance jobs involving carpentry, painting, plumbing, and the like. Fourteen of its 31 craftsmen (plumbers, electri cians, pipefitters, and sheetmetal workers) are required to be licensed by the City of Kansas City to comply with City codes, but there are no such requirements for the other 17 craftsmen. None of the other large districts contacted said they use or hire licensed craftsmen exclusively for these tasks. In fact, most maintenance workers in these other districts are not licensed, even though they do similar work and the districts have similar maintenance policies regarding the type of work performed in-house and the type contracted. (Maintenance employees in the Missouri district are all members of a local union consisting only of district employees.) These distr icts are more apt to have one licensed craftsman super v ise several non-licensed workers. .
One Wichita official indicated he thought the cost savings of hiring unlicensed employees seemed to justify the slight increase in turnover if those employees later become licensed and leave the district for higher wages. Missouri school officials said they were able to attract and retain qualified maintenance workers at the wage scales they offer.
The auditors calculated the amount that could be saved if the Kansas City school district paid its craftsmen at rates similar to those in Shawnee
54. Mission and Kansas City, Missouri. The savings amounted to about $400,000 a year if the rates paid in either of the other distr icts are used. Because maintenance costs are paid out of the General Fund, and because about 59 percent of General Fund revenues in Kansas City is State aid, about $240,000 of this amount represents State aid.
Highly Paid Craftsmen Are Not Always Needed
A Kansas City school district official told the auditors the district recognizes its overall maintenance costs and salaries are high. The official said one benefit of paying high salaries is that the schools are very well maintained. The auditors noted that the buildings they visited did appear to be in good repair. However, in reviewing the work records of a number of licensed craftsmen, they found that much of the work performed did not appear to require a high level of skill or expertise. For example, many of the service orders for carpentry maintenance involved only minor repair work, such as replacing hinges, repairing a desk leg or chair, repairing floor tile, or similar "odd" jobs.
Examples of Carpentry Work Performed by The District's Licensed Carpenters
A review of carpentry service orders in February 1982 shows that a large number of jobs are done by licensed carpenters that do not appear to be of the size and complexity that would require a licensed carpenter. Following is a sample of the 68 service orders completed by carpenters that month. The descriptions come from copies of the service orders.
--replace hinge on cabinet door --replace broken sash chain --repair baseboards in library, repair table, door --repair desk, install chair guides --adjust door, install screw eyes and wire for pictures, re-hang clock --replace tissue holders --replace towel boxes --reglue drawer, anchor new lathe to floor --reinstall pencil sharpener --repair table leg and table top --repair side horse --provide shelf divider boards --repair floor and ceiling tile --secure wood trim around window --secure metal strips on rubber runners --install bulletin board, picture hanger
This list is representative of the 68 ser~ice orders in February. Although the carpenters did other work than the 68 orders, the list indicates that licensed carpenters do spend a considerable amount of time on projects that do not appear to require licensed craftsmen.
55. As the accompanying profile illustrates, many of these tasks would not appear to require the skills of a licensed carpenter--who is paid an average of $30,592 a year. It would appear they could be performed by • unlicensed laborers at considerably less salary cost to the district. The auditors' review of tasks performed by other skilled craftsmen revealed rela ted problems. For example, two of the six licensed painters hired by the district work full-time on repairing and replacing windows. The auditors also noted that many of the maintenance jobs involving extensive carpentry work were subcontracted to outside carpenters or firms, even though the district justified having a staff of licensed c~rpenters because of their ability to do large jobs themselves. These subcontracted jobs included replacing bleacher seats, reworking auditorium seating, and re placing roofs.
One additional benefit cited by the school district official of paying high salaries is to attract highly skilled workers who can respond quickly to emergencies and prevent school closings. However, officials in other large districts told the auditors they were able to handle emergencies without a staff of licensed craftsmen. One way the Kansas City district could alleviate its concern would be to annually seek bids for emergency repairs from licensed craftsmen not employed by the district.
As these examples and the examples from the profile seem to indicate, some licensed craftsmen in the Kansas City district spend all or at least a considerable amount of their time on maintenance projects that do not appear to require the skill--or to demand the salary--of a licensed craftsman. Given the high cost of Kansas City's maintenance program and the potential cost savings if the district paid its workers at rates similar to those paid in comparable districts, Legislative Post Audit concluded that the district should thoroughly review its maintenance staff and hiring policies. As part of this review, the district should consider reducing the number of licensed craftsmen and replacing them with unlicensed crafts men who are able to perform the kinds of maintenance projects required.
Recommendation
To reduce its maintenance costs to a level more compar able to other large districts, the Kansas City school district should review its maintenance staff and consider reducing the number of licensed craftsmen.
Transportation Services
The State provides transportation aid for every student transported over 2.5 miles. The amount of aid per pupil is based on actual per-pupil costs, unless that cost exceeds a standard cost per pupil for districts with similar student population density. As a result of these laws, the district's
56. transporta tion efficiency and the number of students it transports over 2.5 miles directly affects the amount of State transportation aid it receives. The number of students transported under 2.5 miles directly affects the amount of local funds needed for transportation.
The District Transports More Students Than Other Large Districts
In fiscal year 1982, the Kansas City school distr ict transported 11 ,~90 , regular students and ~83 special education students, or 50.~ percent of the students in the district. This percentage is significantly higher than in Topeka or Wichita. In 1981, Wichita transported about ~O percent of its students, while Topeka bused only .18 percent of its students.
The auditors found that more students are bused in Kansas City because the district must comply with a court-ordered desegregation program, and because it has chosen to provide transportation for many more students living closer than 2.5 miles from school.
A large percentage of students are bused for desegregation. A total of ~,215 students transported in the Kansas City school district lived more than 2.5 miles from the school they attended, so the distr ict received State aid for providing their transportation. The auditors found that 1,700 of these students, or 40 percent, were bused to achieve racial desegregation, and would not have been bused over 2.5 miles without the desegregation program. Busing for desegregation was ordered in 1977 by the U.S. District Court for Kansas. Because the State pays aid for all students bused more than 2.5 miles, the desegregation program cost the State more than $350,000 in additional aid in fiscal year 1982.
The district provides more transportation to students under 2.5 miles than other large districts. Although it is not required by law to provide transportation for students living within City limits, regardless of how far they live from school, the district offers transportation to all high school and middle school students living 1.5 miles or more from the school they attend. For elementary students, the district will bus students living nine tenths of a mile or more from their school. In all, 7,275 additional students are bused as a result of the distr ict's policy. In contrast, the Topeka school distr ict does not transport high school students, transports middle school students residing one and one-half miles from school, and transports elementary students living more than one mile from school. In Wichita, students living less than 2.5 miles from school are bused only if walking routes are considered hazardous.
From district records, the auditors determined that the district's po lides in this area cost it an additional $850,000 a year. No ca tegor ical Sta te aid is prov ided for transporting these students, and no transfers were made from the district's General Fund to its Transportation Fund in fiscal year 1982. Thus, no general State aid was used to support the transporta-
57. tion of these students. This cost was paid for by local taxes and beginning balances.
In 1973, the Kansas City school district requested and was granted authority by the State Board of Tax Appeals to continue levying a local tax to support the transportation of district pupils. The Board authorized the distr ict to levy up to $296,365 annually to provide transportation for non mandated students at a level equal to the 1972-1973 school year. In fiscal year 1982, this levy was set at 0.99 mills, and during that year the district received $294-,4-95 in local taxes to help fund its transportation program. Since more students living closer to schools are transported in this than in other large districts, this is an area that should be considered for reductions if mill levies in Kansas City are deemed excessive.
Transportation Costs Appear Low In Comparison With Other Districts
Total transportation costs for the distr ict have risen from $94-0,764- in fiscal year 1978 to $2.1 million in fiscal year 1982, an increase of about 125 percent. State aid increased by 230 percent. These increases are due largely to the increase in the number of regular students transport ed--from 8,958 to 1l,4-90--and to the increased cost of transporting special education students. These costs rose from $290,820 to $600,862. State aid also increased because of a change in the for mula in 1978.
On a per-student basis, the district's regular transportation costs (not including special education, vocational education, or field trips) rose from $101 in 1978 to $125 in 1982, or 24-.5 percent. The 1982 figure was considerably lower than the per-student cost of $169 for transporting students in the Shawnee Mission school distr ict, the only other distr ict with a population and density similar to the Kansas City distr ict.
The auditors noted two significant differences in these districts' pro grams that could explain the variance in per-student costs. First, Kansas City owns and operates its own bus fleet, while Shawnee Mission contracts with a private firm to meet its transportation requirements. Operating its own program allows Kansas City to be more efficient. For example, by staggering the starting times for elementary schools, the distr ict can operate buses on two elementary routes as well as a high school route and a middle school route. The same bus may carry kindergarten students between the morning and· afternoon runs and may be used for an activity run following the normal daily runs.
Second, only 36.7 percent of the students transported in the district live more than 2.5 miles from the schools they attend. In the Shawnee Mission district, nearly 96 percent of the students transported live more than 2.5 miles from their schools. Thus, although Kansas City may transport more students, these students live closer and the district uses less fuel and fewer buses that make more runs.
58. The District's Buses Appear to be Well Utilized Overall, the auditors found that the district's current fleet of 121 buses appeared to be well utilized. The average bus was operated on 3.3 routes daily, and only six buses were operated on routes that could have been served by a smaller bus. They also noted that the district's decision to convert many of its large buses from gasoline to propane offered the potential for substantial cost savings.
Conversion to propane should save money. During the past two years, the district has changed the primary fuel for 85 of its buses assigned to regular district routes from gasoline to propane. District reports reviewed by the auditors showed that the cost of these conversions, together with the costs for storage facilities and special handling equipment, totaled $145,200. But through September 1982, those reports showed that $107,521 of the conversion costs has been recovered through reduced operating costs. This savings appears to be continuing at a rate of about $22,000 a month, so total conversion costs should have been recovered by November 1982. The conversion of buses from gasoline to propane was phased-in over a two-year period. Had it been done at one time, the district would have recovered its investment through fuel savings in less than a year. If savings continue at $22,000 a month (excluding summer), the district will save up to $200,000 a year in fuel costs as a result of these conversions.
Food Service Program
In fiscal year 1982, the district served nearly 2.5 million lunches at a cost of $1.28 per lunch. Funds available to support the lunch program totaled $4.7 million. Those moneys came primarily from meal charges to students and adults (32 percent), federal aid for lunch programs (43 percent), and State aid (3 percent). The remaining 22 percent came from General Fund transfers, beginning balances, and other miscellaneous sources. The total cost of operating the food service program in 1982 was $3.7 million, an increase of just over one percent from 1978 costs.
During the 1981 school district audits, two areas of concern were raised regarding districts' food service programs. First, cuts in federal aid for lunch programs were forcing the audited districts to reduce program costs, increase lunch prices, or increase General Fund transfers to keep their programs solvent. Second, between nine and 20 percent of a sample of families in those districts whose children were receiving free or reduced-pr ice lunches had understated their income on the lunch applica tions. Because the districts were not verifying the incomes reported, children from those families became eligible for free or reduced-price meals when they should not have been. The auditors reviewed the Kansas City district's handling of its food service program in both areas, and found the distrIct absorbed federal cuts by reducing staff, and it should do more to verify incomes reported on lunch applications.
59. The District Absorbed Federal Cuts By Reducing Staff
The district received $2,631,314 in federal lunch aid in fiscal year '1981, but budget cuts reduced its aid for fiscal year 1982 to $2,004,148, or a decrease of $627,166. To make up this loss, the district slashed its food service staff from 346 positions in 1981 to 196 positions in 1982. Using an average labor cost per meal, the district had calculated the actual number of food workers needed in each building. Based on these calculations, it found that many buildings were overstaffed, in part because the number of meals had declined for many years without similar decreases in the number of food workers. As a result, 150 food service staff positions were eliminated, for an annual savings of $776,303.
In addition to decreasing its costs through staffing cuts, the district's food service funds from non-federal sources increased a total of $154,039 between fiscal years 1981 and 1982. Beginning balances and revenues from student and adult lunch charges increased, while revenues from transfers, interest, and State aid decreased. Charges for student lunches were increased from $.75 to $.95 for elementary students, and $.85 to $1.05 for secondary students.
Absorbing Cuts in Federal Aid for Lunch Programs . - (in Millions) $1.0
.9 Non-federal sources increased by $154,039 .8 (primarily from in creased lunch prices) .7
.6 n I 982, federa I By cutting 150 food aid for lunches service staff posi .5 was cut by tions, the district $627,166 • saved $776,303 . 4 .3 .2 .1
Federal How District Cut Made Up Loss
The net effect of a decrease in expenditures and an overall increase in non-federal revenues was that the district's Food Service Fund had an ending balance of $1,024,024 in fiscal year 1982, 42 percent more than the
60. fiscal year 1981 ending balance of $720,848. In sum, then, balances in the Fund remained adequate even after federal aid was reduced.
Frree and Reduced-Price Lunches Require More Scrutiny
Children from families whose annual income is at or below levels set by the federal government are eligible to receive lunches free or at reduced prices. For a family of four, the cut-off level for free meals is $12,090 a year and for reduced-price lunches is $17,210. In fiscal year 1982, the Kansas City district served 2.5 million lunches to students. Of these, 1.6 million, or 68 percent, were free or at a reduced price. By providing these meals, the district lost $1,513,989 in student fees. But it received an additional $1,481,781 in federal aid over and above the amount it would have received if these meals had been sold at regular prices. Thus, the district in essence "lost" only $32,208 by providing free and reduced-price lunches that year.
During last year's school district audits, Legislative Post Audit found that a significant number of families sampled in five school districts had understa ted their income on applications for free and reduced-price meals. Because of the high rate of falsified applications and the potentially large amounts of money involved, Legislative Post Audit recommended that the audited districts should either routinely or on a spot-check basis verify the income reported on lunch applications.
Many school districts argued that although they had authority under federal law to verify questionable applications, they had received no guidance on how to legally obtain such verification. During the Spring of 1982, the Department of Education redesigned the application form to request that each applicant provide documents such as wage stubs or copies of government benefit checks to verify the income reported on the application. However, the federal Food and Nutrition Service has delayed its approval of this new application until final regulations on the ver ifica tion process had been approved. As of December 1982, those regulations had not been issued, and the new application form has not been approved.
In the interim, the Department has sent a revised application form to all school districts that does not request applicants to provide documenta tion, but that does specify the types of income that must be reported, clarifies statements that information on the form may be verified, and clarifies the income that should be reported by self-employed persons.
Questionable applications are scrutinized in Kansas City, but more can be done to request documentation. The auditors reviewed the current application process for free and reduced-price lunches in the Kansas City school district. The district is using the newer "interim" application form provided by the Department. Principals have been instructed to accept information on those applications without question unless it is obviously
61. wrong. The auditors interviewed three principals to determine the extent to which applications are scrutinized. Two of them said they talked with parents who· submitted clearly unreasonable information--such as zero mcome. The third principal said he returned questionable applications to parents for clarification.
To determine if this process was working as described, the auditors reviewed 228 applications processed in the district at the beginning of the 1981-1982 school year. They found no instances in which the information reported was clearly questionable or wrong, and found some evidence that principals had returned many applications to seek additional information.
The auditors were not able to cross-check the incomes reported on a sample of these applications against individual income tax returns, as was done in the previous round of school district audits, because the Depart ment of Revenue did not give them access to those tax records for the 1982 audits. Therefore, no judgment could be made regarding a specific rate of abuse in the district. However, they did note that the district's approval process does not call for any documentation of the incomes reported.
Despite the lack of federal approval for a method of verifying information on applications for free or reduced-price meals, school dis tricts do have the authority to request that applicants provide copies of wage stubs or other documentation of income. Requesting documentation of at least a sample of applicants would likely discourage all applicants from understating their income. This request for documentation could be handled by central office personnel. Depending on the sample size, this request would not have to add noticeably to the district's administrative burden of processing those applications. Given the large number of applicants who understated their income during last year's check, it would seem both reasonable and desirable for the Kansas City distr ict to take this precaution against abuse of the free and reduced-price meals program.
Recommendation
The Kansas City school district should request documenta tion of income from at least a sample of applicants for free and reduced-price meals to discourage applicants from understating their income.
62. CHAPTER VI
ADMINISTERING SPECIAL EDUCA nON PROGRAMS
The Legislative Post Audit Committee directed Legislative Post Audit to focus particular attention on special education during this year's school district audits. Specifically, the Committee requested that the audits examine the excess cost funding method, determine if facilities and equipment purchased for special education are used by non-special-educa tion students, and determine if students are being placed in the proper program. The Committee asked that particular attention be paid to placement in the learning disability and personal and social adjustment areas. This chapter briefly summarizes the development and funding of special education in Kansas, and examines the three primary areas of interest raised by the Committee for the Wyandotte County Special Education Cooperative, which serves students from the Kansas City and surrounding school d istr icts.
The Development of Special Education in Kansas
School districts in Kansas are subject to requirements of State and federal laws to provide special education services for their students. The Kansas Legislature began providing school districts with partial funding for teaching mentally retarded and homebound students in 1951, and increased the level of funding several times dur ing the 1950s and 1960s. But special education programs were not required in Kansas until 1969, when the Legislature mandated that districts would have to provide special education services for all mentally retarded students by 1974-. To meet this goal, distr icts were allowed to enter into cooperative agreements. The 1971 and 1972 Legislatures expanded the mandated services to include students with other physical impairments and learning disabilities. The Special Education for Exceptional Children Act passed by the Legisla ture in 1974- required school distr icts to provide special education services to all exceptional children. These included the mentally retarded, those with speech, hearing, or orthopedic impairments, the visually handicapped, the learning disabled, and the gifted. By 1974, the federal government had established a national goal of providing full educational opportunities to exceptional children. And the federal Education for All Handicapped Children Act of 1975 specified that a free appropriate public education was to be provided to all handicapped children. School districts were required to have services for these children in place by July 1, 1980. To receive federal funding, states had to develop a plan for special education and provide individual education programs.
63. The Department of Education has overall responsibility for special education in Kansas, but its Special Education Administration Section is responsible for assisting districts in developing programs, monitoring and superv ising local programs, training instructional personnel, and analyzing data for evaluating special education programs.
Funding for Special Education
Current State law provides for partial State funding of special education. The State pays 80 percent of the following: travel allowances for special education teachers, the cost of transporting special education students, and the cost of maintaining a child away from his normal residence up to $600 per year. It also pays categorical aid based on the cost of providing special education services over and above the cost of educating non-special-education students. Districts may also transfer money from their General Fund to their Special Education Fund. They have not been allowed to levy a tax for special education since 1978.
Because of increases in the number and type of required special education programs, funding for special education has risen greatly since fiscal year 1975. Federal aid has grown 27 times its 1975 funding level to $11.1 million in fiscal year 1982, and State categorical aid for special educa tion has quadrupled its 1975 level to a total of $46.6 million. Combined, these two sources accounted for nearly 53 percent of the $109.4
Comparison of Special Education Funding for 1975 and 1982 (in millions)
Federal Transfers from Aid State Aid General Funds Other
,m_ ..·· . · · ·~L, •." $.6.0 ~. ;.~ ..•.11975 Total=
12%1.~~ ______' ~~~W8~~~~~~ ~~~~~~ __.~~~~, 24%' . $25.3 million I
1982 Total= $109.4 million
Between fiscal years 1975 and 1982, funding for special education in Kansas grew from $25.3 million to $109.4 million and shifted slightly so that State and federal aid now support a larger share of special education costs. Spending increased by 332 percent, primari Iy because expanded program requirements led to larger enro IIments and large staff increases.
64. million in special education moneys available to all school distr icts in 1982. Transfers from districts' General Funds contr ibuted about $37.7 million (34 percent of the total), $17.4 million of which represented general State aid moneys. As a percent of total funding, State aid increased from 38 percent to 43 percent and federal aid increased from two percent to 10 percent, while transfers dropped from 37 percent to 34- percent.
The districts' spending for spe Increases in Special Education cial education increased 332 percent Staffing and Enrollment between 1975 and 1982--from $25.3 million to $109.4- million. Most of Staffing Up from 2,033 the increase was for more staff. positions Special education teachers, parapro to 5,565 fessionals, and support staff in creased from 2,033 full-time equiv alent positions to 5,565 positions 160 over the seven-year per lod, or a to 140 tal of 180 percent. The need for staffing increases was brought about 120 180% by larger enrollments in special edu cation programs. Between fiscal 100 years 1978 and 1982, the number of Enrollment 80 up from special education students Sta te 33,137 to wide increased from 33,137 to 60 49,840 4-9,84-0, or about 50 percent. LJO Special Education Programs 20 50% Offered in Kansas Staffing Enrollment The State Plan specifies 12 spe- 1975-1982 1978-1982 cial education program areas for Kansas. These areas are listed in the accompanying chart by the year 10 which they became mandatory under State law.
Mandatory by 1974 Mandatory by 1979 Mandatory by 1980 I) Learning Disability 4) Deaf-Blind 12) Gifted 2) Sem i-Dependent 5) Hearing Impaired Mentally Retarded 6) Personal and Social 3) Semi-Independent Adjustment Mentally Retarded 7) Physically Impaired 8) Severely/Multiply Handicapped 9) Speech Impaired 10) Visually Impaired I I) Other Health Impaired
65. Of these 12 program areas, learning disabilities was the largest in fiscal year 1982, with nearly one-third of all special education students enrolled in this area. The next largest program area was speech impaired, • followed by gifted, semi-independent, and personal and social adjustment. The remaining seven programs had fewer than six percent of all special education students.
Statewide Special Education Enrollments by Program Area Fiscal Year 1982
,...---- Learning disabled (15,774, 32%)
-- Speech impaired (13,429, 27%)
--+-- Other programs (2,920, 6%) .-.;;:0...... ,.-1--- Personal & social adj. (3,244, 6%)
---"--~->'--- Gifted (9,073, 18%) --"¥---- Semi-independent (5,400, 11%)
Nearly three-fourths of the students enrolled in special education in Kansas are in one of three program areas: learning disabled, speech impaired, and gifted.
School districts have several options for providing special education services. These options include providing their own services, contracting with other districts or agencies to provide special education services, and enter ing into an agreement with other d istr icts to form a special education cooperative. Nearly every school district in the State is part of a cooperative. There are two types of cooperatives--sponsoring and inter local. Under the sponsoring arrangement, one district is designated as sponsoring and the others become participating. The sponsoring district's board of education is the cooperative's legal body responsible for opera tions and administrative services. Under an interlocal agreement, the coopera tive becomes a legal entity and the board of directors consists of at least one member from each distr ict's board.
Introduction to the Wyandotte County Special Education Cooperative
The Kansas City school distr ict is the sponsoring district of the Wyandotte County Special Education Cooperative, which serves students from the Kansas City, Bonner Springs, Piper, and Turner districts. As the sponsoring district, the Kansas City district's school board also serves as the Cooperative's governing board. The Cooperative's total enrollment
66. during fiscal year 1982 was 3,595. Of this total, 2,789 students, or 77 percent, were from the Kansas City distr ict. Most students do not attend special education classes full-time. As a result, the full-time equivalency ofl the number of students in the Cooperative is 1,218.9, or 34 percent of the headcount.
Most of the Cooperative's Funding Comes From State Sources
In fiscal year 1982, the Cooperative had $8.8 million available to spend. Most of those funds (61.8 percent of the total) came from the State through one of three mechanisms. First, the Cooperative received $2.8 million (32.1 percent) in State categorical aid for special education. Second, it received $574,792 (6.5 percent) in State aid for special education transportation. And third, transfers totaling $3.3 million from participat ing districts' General Funds to their Special Education Funds contributed just over $2.0 million (23.2 percent) of regular State equalization aid to the Cooperative's total revenues.
Other than State aid, the Cooperative's largest source of funds in fiscal year 1982 came from that portion of General Fund transfers which is primarily local revenues such as property taxes ($1.3 million, or 14.8 percent). The remaining funds for the Cooperative were federal aid ($978,481, or 11.1 percent), beginning balances ($870,483, or 10 percent) and miscellaneous sources ($198,586, or 2.3 percent).
Sources and Uses of Funds for the Wyandotte County Special Education Cooperative Fiscal Year I 982
(in mi Ilions)
$9
8 illion
7 Fed. aid ($978,481) Misc. ($1.2 mill.)
6 r ransportat ion ($626,556) Local support ($1.3 mi II.) 5 4
3 State support ($5.4 mill.) Salaries ($6.1 mill.) 2
Sources of Funds Uses of Funds
In fiscal year 1982, the Wyandotte County Cooperative had $8.8 mi Ilion in avai lable funds and spent a total of $7.9 million. As the bar graphs above show, most of its support for special education came from State and local sources, and most of its expenditures were for salaries.
67. The following table shows the amounts transferred to the Wyandotte County Cooperative from each participating district in fiscal year 1982. As the table shows, the Kansas City district made more than three-fourths 'of these contributions. Once the amount needed to fund the Cooperative is determined, each district must contribute the same percentage as the percentage of students it has compared with the total enrollment in all four distr icts.
District Contributions to Special Education Cooperatives Fiscal Year 1982
District Amount Percentage Kansas City $2,580,569 77% Turner 447,138 13 Bonner Springs'. 222,901 7 Piper 91 ! 232 3 Total $3 2341 1840 100%
Most of the Cooperative's Expenditures Are For Teacher Salaries
Nearly 78 percent of the Cooperative's fiscal year 1982 expenditures were for personnel ($6.1 million out of $7.9 million). Most of its employees (359 out of 437, using fiscal year 1983 data) are teachers or teacher aides. The rest include nine administrators, 11 janitors and secretaries, and 58 non-teaching professionals such as nurses, psycholo gists, social workers, and administrators.
The Cooperative's remaining expenditures were for transporting spe cial education students and teachers ($626,556, or 7.9 percent) and for buying teaching supplies and equipment, operation and maintenance of special education buildings, and miscellaneous expenditures ($1.2 million, or 14.7 percent).
The Majority of Students Are In Learning Disabled Or Speech Impaired Programs
In fiscal year 1982, a total of 3,595 students were enrolled either full- or part-time as special education students in the Wyandotte County Cooperative. As the accompanying chart shows, the largest number of students were in the learning disabled (1,343), speech impaired (949), educable mentally retarded (568) and gifted (415) categories. Together, these categories accounted for 91 percent of the Cooperative's total headcount enrollment. But looking at these students on a full-time equivalent basis, the auditors noted that the speech impaired and gifted categories were much smaller because those students spent only part of their days in special education classes. Full-time-equivalent students in the educable mentally retarded (568) and learning disabled (347.8) categor-
68. ies alone accounted for 75 percent of the Cooperative's full-time equiva lent students. These figures are based on the number of students in December 1981. The total number of students served throughout fiscal year 1982 was 4,896.
Wyandotte County Special Education Cooperative Special Education Students and 'Teachers for Fiscal Year 1982 (0)
Special Number Program Headcount F.T.E. Education of Students Area Enrollment Enrollment Teachers Per Teacher
Educable Mentally Handicapped 568 568.0 43 13.2 Trainable Mentally Handicapped 95 95.0 10 9.5 Severely/Multiply Handicapped 18 18.0 3 6.0 Learning Disability 1,343 347.8 76 4.6 Hearing Impaired 49 17.6 7 2.5 Physically Impaired and Other Heal th Impaired 63 21.2 3 7. I Personal & Social Adjustment 85 85.0 22 3.9 Visually Impaired 10 2.2 3 .7 Speech Impaired 949 20.9 29 .7 Gifted 415 43.2 20 2.2 TOTALS 3,595 1,218.9 216 5.6
(a) The students and teachers in the pregnant student program are not included. The teachers listed do not include physical and occupational therapists who work with students in all categories. These employees are shown as teachers in the summary of employees in Chapter IV.
Pupil/Teacher Ratios Are Much Smaller For Special Education
The Cooperative had 5.6 students for each special education teacher in fiscal year 1982. This ratio is significantly lower than for regular students (20 students per teacher). There is also a wide variation between special education categories, ranging from a high of 13.2 students per teacher for the educable mentally retarded category to a low .7 students per teacher in the visually impaired and speech impaired categories. This variance occurs because different types of special education students require varying levels of supervision and individual attention. In addition, some special education teachers must divide their time among students in different schools. Most visually and speech impaired students spend most of their day in the regular classroom.
69. Cooperative Students Are Taught In Both Regular Classrooms And Special Education Facilities
Most special education students attend classes located in regular school buildings. But the Cooperative does use five other separate facilities for special education. The Special Service Center provides . vocational education in a sheltered environment for students with severe personal and social adjustment problems. These students, aged 16-19, require constant supervision. Also housed in this facility is the school for pregnant students, who may choose to attend classes at this facility for the duration of their pregnancy. This program has been in operation for more than 16 years. There are approximately 50 pregnant students served at any one time by six teachers.
At the Merritt Vocational Center, training through work simulation and a sheltered workshop program is provided for the trainable mentally retarded. Students range in age from 16 to 21, and are trained by three full-time equivalent teachers. These students attend physical education classes and eat lunch at a middle school.
Special education services for the Wyandotte County Cooperative are also provided at the University of Kansas Medical Center for students who are hospitalized, the Rainbow Mental Health facility, and the Instructional Resource and Media Center, which serves primarily as an office for special education personnel who travel between schools.
Examining Selected Aspects of the Cooperative's Special Education Program
At the direction of the Legislative Post Audit Committee, the auditors examined three aspects of the Cooperative's special education program: the excess cost funding mechanism, expenditures for special education, and placement of special education students. The results of their review are presented in the following sections. The summary report of all school district audits conducted in 1982, which will be issued later, will discuss other aspects of the Department of Education's administration of special education in Kansas that do not specifically relate to the Wyandotte Cooperative.
Determining the Excess Costs of Special Education
The State provides two forms of aid for special education. First, Special Education Transportation Aid reimburses school districts for 80 percent of the cost of transporting special education students and teachers. Second, State categorical aid for special education is intended to cover all other costs of educating special education students over and above the cost of educating regular students. Federal aid is deducted from this amount
70. because it is also intended to fund the "excess cost" of special education. These costs would include such things as teacher salaries, administration costs, and supplies and equipment for special education. The formula for determining the amount of excess costs for special education can be illustrated as follows:
Cost of Regular Education for These Students
Total Statewide Special Sta te +Special Excess Cost Education Expenditures Education Transportation of Special Aid Education
Federal+. AId
The Department of Education estimates the overall Statewide cost of special education based on the previous year's actual costs and on a survey of all districts' expected special education costs for the coming year. The Department's figure is used in the formula for computing the excess cost of special education. Once this cost is determined, it is divided among all the districts and cooperatives based on their number of special education teachers. This formula resulted in the Wyandotte County Cooperative receiving a total of $2.8 million in categorical State aid for special education in fiscal year 1982.
The auditors discussed the assumptions used in deriving this formula and the method of applying it with Department of Education officials, and concluded the formula results in a reasonable estimate of the Sta tew ide cost of providing special education that exceeds the cost of educating non special-education students. However, in reviewing the distribution of this State aid to the Wyandotte County Cooperative, the auditors noted that the Cooperative included special education administrators in its count of special education teachers, a practice that is not specifically allowed in law.
The Cooperative Counts Special Education Administrators In the Distribution of Categorical Aid for Excess Costs
State law (K.S.A. 72-978) specifies that the State appropriation for the excess costs of special education (excluding transportation aid) shall be distributed based on the number of full-time equivalent "special teachers" employed by a district. K.S.A. 72-962 defines special teacher as either a "teacher qualified to instruct exceptional children" or "a paraprofessional qualified to assist certificated teachers in the instruction of exceptional children." The State Plan for special education expands the definition of special teacher to include support personnel such as psychologists, physical therapists, and nurses.
7l. The following table presents the number and type of personnel counted as special teachers by the Wyandotte Cooperative for determining its fiscal year 1982 share of State categorical aid for special education. • Because paraprofessionals each count as one-half teacher and because of other adjustments for part-time teachers, the Cooperative's reimbursement was based on 350 full-time equivalent special teachers. That year, the Cooperative was reimbursed at a rate of $8,060 per teacher.
"Special Teachers" Counted For State Aid
Number
Teachers 236 Occupational Therapists 4 Adaptive Physical Education Teachers 2 Social Workers 19 Psychologists 21 Nurses 2 Paraprofessi onals 121 Administrators 7 Other 7 Total 419
As the table shows, the Cooperative included seven special education administrators among its "special teachers" claimed for reimbursement. These administrators' costs are a legitimate part of total Statewide expenditures for special education and should be included in the Depart ment's computation of total Statewide costs. However, the auditors questioned whether the Legislature intended for administrators to be included in the count of special teachers for distr ibuting excess cost appropriations to districts and cooperatives. Nowhere in State law or the State Plan are special education administrators included in the definition of special teachers. Under a separate section of the State Plan, however, the Department of Education has stated that administrators and super visors shall be reimbursed under the formula the same as special education teachers. A Department of Education official told the auditors it is generally understood that "special teachers" include all certified support personnel, including administrators.
By including administrators as special teachers, the Wyandotte Coun ty Cooperative increased its share of the excess cost appropriation by $56,420. Because this practice allows districts or cooperatives with more special education administrators to receive a larger share of State categor ical aid for special education, Legislative Post Audit concluded the Legislature should review this area and specify its intent more clearly.
72. Recommenda tion
To clarify its intent regarding the distribution of State categorical aid for special education, the Legislature should more clearly specify what categories of employees can be counted as special teachers for the purpose of distributing that aid. If the Legislature decides it did not intend for special education administrators to be counted as special teachers, the Wyandotte County Cooperative should discontinue this practice and the Department of Education should revise the State Plan to exclude administrators. If the Legislature decides administra tors should be included in the count of special teachers, the Department should revise its definition of special teachers in the State Plan to reflect this intent.
Expenditures for Special Education
The second area of concern raised by the Committee was whether the facilities and equipment purchased for special education were being used exclusively for special education students, or whether they were also or only being used for non-special-education students. If expenditures that benefit regular students are made from special education funds, that practice would increase the total cost of special education used in the excess cost formula. That would in turn increase State aid for special education.
To address the Committee's concern, the auditors reviewed a sample of 20 purchases paid from the Special Education Fund. Fourteen of these purchases--which included such items as storage cabinets, a selectric typewriter, a sewing machine, bookcases, and chairs--went to buildings where only special education students are taught. Thus, they could not be used to benefit regular students.
The other six purchases in the sample went to regular schools. These included such items as a storage cabinet, study carrel, refrigerator, calculator, bookcases, and file cabinets. The auditors physically checked each of the items purchased to ensure they were in a room used only by special education students or personnel. They found that they were. Thus, it did not appear that any of the sample purchases were used other than for special education purposes.
The auditors also reviewed the teaching schedules of a sample of 20 teachers to ensure they did not spend part of their day teaching regular classes if they were counted by the Cooperative as full-time special education teachers. In all cases sampled, the teachers were counted as full-time special education teachers and spent their time teaching only
73. special education students. Thus, their salaries were paid only for the benefit of special education students.
Finally, during the course of their review of special education programs and expenditures, the auditors noted that the Cooperative places pregnant students who volunteer for it in a separate special education program. Their average stay in this program is five months each. The auditors did not question whether pregnant students should be segregated from other students. But they did question whether the program was, for the most part, inappropriately funded through the Special Education Fund.
The program for pregnant students may be a questionable use of State special education funds. The Wyandotte County Cooperative operates a special school for pregnant students in the separate facility it leases. In fiscal year 1982, this program served 126 students, who were in it an average of five months each. Total program costs that year were $139,024, which included $27,499 for rent and $111,525 for the salaries of six teachers and one paraprofessional. These costs were all paid from the Special Education Fund. Any expense paid from that Fund is automatically included in the calculation of Statewide excess costs and directly increases the total amount of State aid available to school districts.
The problem with the program for pregnant students is that only part of its costs can be legitimately considered as special education costs. The State Plan for special education does not include pregnancy as a special education classification. The Wyandotte Cooperative classifies the stu dents in the program as "physically impaired." But the State Plan specifies that students cannot be placed in the physically impaired category solely on the basis of physical impairment. There must be evidence of significant learning or social/emotional problems. Otherwise, the student must be placed in a regular classroom with whatever support services are neces sary.
In the Wyandotte Cooperative, pregnant students are referred to this program by counselors or parents, or can enter on a self-referral basis. Each student signs a form acknowledging voluntary participation. The Superintendent indicated he considers such voluntary placement in the maternity program as sufficient evidence of social and emotional problems. E-valuations by professionals to identify social, emotional, or learning problems were not present in any of the 69 student files reviewed by the auditors. This placement procedure contradicts the State Plan, which states, "No child shall be placed in special education prior to the completion of an individual evaluation of his/her special needs."
The State Director of Special Education agreed that the Coopera tive's placement process was inappropriate. Yet in February 1982, the Department completed a report based on an on-site visit at the Coopera tive that made no mention of this program as a problem.
74. Other than classifying pregnant students as physically impaired, the only other legitimate method of including the cost of teaching them in special education is by classifying them as "homebound." That is, special . education funds are legitimately available for students who are confined to the home or a hospital. In fact, four of the six teachers in the Cooperative's maternity program are classified as homebound teachers for State aid purposes. Yet most of their time is spent teaching pregnant students in a regular classroom setting. On average, only 20 percent of pregnant students' time is spent at home or in the hospital.
In sum, the only costs in this program that legitimately should be paid from the Special Education Fund are for teaching students who are either confined to the home or hospital, or have been individually evaluated and determined to have social, emotional, or learning problems that would prohibit them from staying in the regular classroom. Because the auditors found no evidence that pregnant students had been evaluated, and because these students spend an average of only one-fifth of their time in the program as "homebound," only 20 percent of the nearly $140,000 in program costs apparently met either of these criteria. Thus, about $112,000 was inappropriately funded through the Special Education Fund, and Statewide excess costs were increased by that amount.
Interestingly, the Department of Education did not allow the Cooper ative to count the two teachers without homebound certification for the distribution of these excess costs, even though they were certified as special education teachers. This action may be indicative that the Department did not consider costs incurred outside the "homebound" program as legitimate special education costs. However, it did include their salaries in the up-front computation of total Statewide special education costs.
The auditors also contacted the other three largest cooperatives in the State to determine if the Kansas City situation was an isolated example. They found each of those cooperatives had a similar program for pregnant students. One classifies its students as "other health impaired," and the other two simply report them as pregnant. None of the districts test students for social/emotional or learning problems before placing them in special education.
Recommendations
1. Because most of the costs of the Wyandotte County Cooperative's pregnant student program appear to be inappropri ately charged to the Special Education Fund, the following actions should be taken:
75~ a. The Cooperative should immediately obtain professional evaluations of all pregnant students who are currently being taught in separate special education facilities by special education teachers to determine which ones have social, emotional, or learning problems that justify their continuation in a program funded through the Special Education Fund. b. In the future, all students referred to the Cooperative's pregnant student program should be appropriately evalu ated before their. acceptance into or rejection from this program.
2. Because the question of whether separate maternity pro grams for students who are not hospitalized or homebound should be fully funded from special education moneys applies to other districts and cooperatives as well, the Department of Education should take the follow ing actions:
a. Review all such maternity programs to determine which program costs are appropriate special education costs and which are not. This review would have to include an assessment of whether students in those programs have been properly evaluated as called for in the State Plan.
b. Specify clearly the accepted criteria for placement in these programs and clarify the State Plan accordingly. c. Remove all inappropriate costs now being charged to special education from its future computation of total Statewide special education costs.
Placement of Special Education Students In the Wyandotte Cooperative
Proper placement of special education students is important for two reasons. First, improper placement of a student in special education or placement in the wrong special education program can severely handicap a student who receives inappropriate services as a result. Second, placement of a student in special education when the student does not need it unnecessarily increases State aid for special education.
The State Plan specifies a series of steps a cooperative must follow / ,/ to ensure proper placement. The key parts of that process are to:
--have screening procedures to identify students who may need help --conduct initial comprehensive evaluations to determine if a student needs special education services
76. - -obtain parental input and consent for placement --develop individualized educational programs for each special educa- tion student --develop statements of annual goals and short-term objectives --develop objective criteria and evaluation procedures for determining, at least every twelve weeks, whether short-term objectives are being achieved --conduct comprehensive re-evaluaiions every third year of placement in a special education program To determine whether the Cooperative was properly placing students in special education programs, the auditors did the following fieldwork. First, they reviewed 30 case files to ensure there was proper documenta tion of compliance with requirements for the placement process. Second, they reviewed a sample of files of students placed in the learning disabled, gifted, and personal and social adjustment categories to determine whether the Cooperative consistently applied the cr iter ia for placement in these categories. Finally, they interviewed a sample of 20 parents of students in these three categories to determine how satisfied they were with the placement process and the services provided to their children.
The cooperative complies with requirements of the State Plan. Based on their sample of 30 student files, the auditors determined that the Cooperative appeared to be in compliance with the major requirements of the State Plan relating to proper screening, evaluation, testing procedures, and parental approval of student placement. One exception was that one student had not received his required three-year comprehensive re-evalua tion on time. However, the delay was less than one year and there was no evidence the student's placement was inappropriate as a result of the delay. In addition, a Cooperative official explained that a new computer ized monitoring system should eliminate these types of delays in the future. Since the inception of its special education program, the district has received no complaints that resulted in a due process hearing.
Criteria for student placement appear to be consistently applied. Based on their review of files for students in the learning disabled, gifted, and personal and social adjustment categories, the auditors concluded the criteria for placement in these categories appeared to be consistently applied. Placement of learning disabled students. For students to be placed in the learning disabled category, there must be evidence of a severe discrepancy between the student's intelligence and achievement level. As part of the evaluation process, these students are given a variety of intelligence and achievement tests, such as the Wechsler Intelligence Scale for Children and the Wide Range Achievement Test. There must also be evidence that the student cannot be sufficiently helped in the regular classroom. The average amount of time a student receives learning disabled services is eight hours per week.
77. The auditors reviewed the files of a sample of 20 learning disabled students. These students were usually of average intelligence as measured by testing, but were seriously deficient in some area or areas, such as reading ability, written language, comprehension, or math skills.
Their review showed that, in all cases, the necessary tests and evaluations had been conducted. The auditors did note that for several students, between three and four years had elapsed between comprehensive evaluations, exceeding the three-year maximum. (These students were not in the group sampled for the purpose of ensuring compliance with the State Plan.) But none of these delays appeared to result in an inappropr ia te placement.
Placement of gifted students. The auditors' review of a sample of files for 20 students in the gifted program also revealed that the Coopera tive appeared to follow all required cr iter ia for placement in a consistent manner. No placements without appropriate testing were noted.
Gifted students are those who have the potential for outstanding performance because of their superior intellectual abilities. These include students with demonstrated achievement--as well as those with low per formance--who show a high potential in general intellectual ability, specif ic academic aptitude, or creative abilities. Although the Cooperative has written criteria for placing students in this program, flexibility is allowed to identify specific areas of achievement or potential which might not show up on standardized testing procedures. Gifted students spend an average of three hours a week in the program, and are in the regular classroom the remainder of the time. Most gifted students are referred to the program by their regular classroom teachers, as is the case for learning disabled students.
Gifted students in the auditors' sample usually showed intelligence measur ing in the very superior ranges, as well as excellent academic skills. Students who did not fall in this range possessed other traits, according to test scores and teacher observation, such as high levels of creativity or ev idence of leadership abilities.
Placement of personal and social adjustment students. Students in the personal and social adjustment program are re-evaluated each year to determine whether they should continue to be placed in the program. The auditors' review of a sample of student files revealed that, in all cases, the necessary tests and evaluations had been conducted within the proper time frames.
According to the files, all students in this sample exhibited severe behavioral problems. The majority were from troubled families. Several of the students possessed other learning problems, such as physical disabilities, speech/language problems, or low scores on intelligence tests,
78. which could have qualified them for other special education programs as well.
Parents appear to be generally satisfied with the Cooperative's special education program. To ensure that potential problem areas in the Cooperative's special education program and placement were not over looked, the auditors surveyed and interviewed 20 parents with children in the learning disabled, gifted, and personal and social adjustment programs. The survey included questions concerning satisfaction with the special education services, opinions on appropriateness of placements, and the Cooperative's performance in informing parents of their legal rights and involving them in developing their child's program.
Overall, the parents surveyed were satisfied with the special educa tion services their children were receiving. All parents with students in the learning disability or gifted program indicated that their children were benefitting from special education services and were appropriately placed, and that the Cooperative kept them adequately informed of the program.
The only indication of dissatisfaction came from parents with chil dren in the personal and social adjustment program. Two of the six parents contacted felt their child's academic progress had been impaired in this program; both wanted their children placed in learning disabled classes. Also, both parents acknowledged their children had emotional problems, although one said the child had improved to the point where he could function in a regular classroom. The Cooperative had conducted a comprehensive re-evaluation of this child in the Spring of 1982, and had determined he was still in need of personal and social adjustment services. Other problems noted by these two parents included an inadequate explana tion of their child's comprehensive evaluation results, and poor acceptance of their child by the teacher and other students.
Although the auditors did not attempt to determine the validity of these complaints, they did note from these students' files that the Cooperative had complied with all requirements for screening, testing, evaluating, and the like. In both cases, it had also attempted to work with the parents to alleviate their dissatisfaction with the program. Nonethe less, the dissatisfaction expressed by these parents highlights the need for the Wyandotte County Cooperative to improve its communication with parents to ensure they understand their child's program and are full participants in the special education process.
Evaluation of the Wyandotte County Cooperative's Special Education Programs
One way the Department of Education can ensure that school districts are complying with the requirements of the State Plan is through its on-site review process, which occurs once every three years, and its
79. review of local special education plans. The most recent on-site review of the Wyandotte Cooperative was completed in February 1982. The report no.ted that corrective action was required in the following areas: --Services provided to special education students attending parochial schools must be provided at a neutral site. --Observation reports for learning disabled students must be modified. --The procedure for notifying parents of the Cooperative's intent to evaluate a student must be improved . . --Comprehensive evaluations of visually impaired students must be improved. --Procedures to ensure the correct number of people attend confer ences to plan students' programs must be improved.
In a June 1982 letter to the Cooperative, Department officials . indicated that, except for the parochial school issue, each of these problems had been resolved to the Department's satisfaction. The Depart ment and the Cooperative were working together to solve the remaining problem. The summary report of all 1982 school distr ict audits will discuss other aspects of the Department's efforts to evaluate the effectiveness of special education programs that are not specific to the Wyandotte Cooper ative.
/
80. APPENDIX A
Kansas City School District Sources of Funds Fiscal Years 1978-1982
Fund/Source 1978 1979 1980 1981 1982
General Fund Beginning Balance $ 6,294,961 $ 7,338,311 $ 7,775,539 $ 9,734,692 $ 9,597,766 Local 10,231,530 10,587,055 10,086,245 8,958,029 9,622,326 County 768,732 -0- 23,102 355,809 1,496,761 State 19,926,301 23,140,181 25,788,391 27,805,398 29,762,171 Federal 1,897,995 2,181,815 2,707,825 2,681,904 2,367,667 Other 214 2586 -0- 351 33 123 Total S39 2 334! 105 S43,247,362 $46,381 2453 $49 2535,865 $52,846 2814
Vocational Education Beginning Balance $ 873,872 $ 1,071,873 $ 1,376,226 $ 781,308 $ 572,949 Local 496,587 -0- -0- -0- -0- State 1,151,827 1,249,466 1,454,375 1,424,842 1,818,710 Federal 588,471 586,196 582,930 696,676 491,498 Interest 10,268 -0- -0- 119,626 -O- Miscellaneou s 217,497 241,115 133,770 61,652 547,709 Transfers -0- 600 z000 350 z000 450 z000 4°°1°°0 Total $ 3 2338,522 $ 3,748,650 $ 3,897,301 $ 3,534,104 S 3,83° 2866 Adult Education Beginning Balance $ 2,091 $ 2,310 $ 2,551 $ 2,171 $ -o- Miscellaneou s 666 749 -0- -0- . -0- Total $ 2 2757 $ 3,059 $ 2 2551 $ 2! 171 $ -0-
Special Education Beginning Balance $ 34,205 $ 140,671 $ 250,671 $ 150,671 $ -0- Local 382,709 -0- -0- -0- -0- Interest -0- -0- -0- -0- 580,569 Transfers 1,34° 1°00 2 1 375 1 405 2 z227 1 707 2 z319 1 116 2 z000z000 Total S 1 2756 2914 S 2,516,076 $ 2,478,378 S 2,469 1787 $ 2,580,569
81. Fund/Source 1978 1979 1980 1981 1982
CooI2 Special Education Beginning Balance $ 465,873 $ 427,270 $ 740,382 $ 1,481,414 $ 870,483 State 1,274,218 1,505,951 2,134,566 2,649,930 3,395,873 Federal 265,518 56,716 668,282 3,602 978,481 Other Distr icts 443,031 623,363 663,536 727,215 760,365 Miscellaneous 120,822 108,680 157,353 182,485 198,586 Transfers 1 2628 2248 2 2265 2405 2 2327 2707 22469 2787 2 2580 2569 Total S 4 2197 2710 S 4 2987 2385 S 6 2691 2826 S 7 2514 2433 S 8 2784 2357 Driver Training Beginning Balance $ 72,120 $ 80,142 $ 86,962 $ 91,913 $ 101,251 State 35,401 36,490 26,694 20,191 17,642 Miscellaneous 32 2355 26 2040 18 2906 26 2234 18 2463 Total S 139 2856 S 142 2672 S 132 2562 S 138,338 S 137 2356 Food Service Beginning Balance $ 538,456 $ 699,071 $ 529,415 $ 307,250 $ 720,848 State 119,308 128,289 90,396 192,657 142,407 Federal 2,103,989 2,111,397 2,084,969 2,631,314 2,004,148 Interest -0- -0- -0- 48,428 -0- Receipts 1,199,816 1,277,604 1,322,501 1,338,824 1,519,382 Miscellaneous 17,351 14,838 17,917 19,663 13 ,042 Transfers 359 2327 432 2673 502 2097 644 2499 309 2681 Total S 4 2338 2247 S 42663 2872 S 4 2547 2295 S 5 2182 2635 S 4 2709 2508 Ca)2ital Outlay Beginning Balance $ 3,318,520 $ 2,814,885 $ 3,790,879 $ 4,384,403 $ 7,233,110 Local 886,123 910,799 938,249 971 ,215 924,396 County -0- -0- 2,146 33,201 149,164 Interest 827,300 1,126,404 2,076,952 2,451,472 3,024,461 Miscellaneous 36,823 38,141 30,697 72,619 83,860 Transfers -0- -0- -0- . 22171 -0- Total S 5 2068 2766 S 42890 2229 S 6 2838 2923 S 7 2915 2081 S11 z 414 z 991 T ransporta tion ... / ~ Beginning Balance $ 427,999 $ 514,834 $ 651,544 $ 690,814 $ 615,424 Local 291,278 292,760 298,175 293,395 294,495 County -0- -0- 682 10,541 46,313 State 255,391 507,882 552,330 731,820 842,365 Miscellaneous -0- 102,237 93,321 94,623 210,206 Transfers 230 2000 394 2000 -0- 176 2618 165 2155 Total S 12204 2668 $ 12811,713 $ 12596 2052 $ 1 2997 ,811 S 2,173,958
82. Fund/Source 1978 1979 1980 1981 1982
School Retirement Beginning Balance $ 67,569 $ 67,315 $ 70,654 $ 82,981 $ 56,474 Local 399,746 403,339 411,385 358,984 363,434 County -0- -0- 942 14~509 60~573 Total 5 467~315 5 470~654 5 482~981 5 456 2474 5 480,481 Bond and Interest Beginning Balance $ 652,081 $ 594,068 $ 620,597 $ 634,302 $ 533,961 Local 2,308,025 2,443,753 2,355,281 2,277,843 2,311,901 County -0- -0- 5 2687 85 z997 373 2511 Total 52 2 960 2 105 5 3 2037 2821 5 2 2981 2565 S 2 2998 2 142 S 3 1219 1373 Public Library Beginning Balance $ 109,928 $ 153,318 $ 196,765 $ 284,486 $ 254,366 Local 705,750 726,237 791,830 751,634 840,486 County -0- -0- 1,804 28,095 120,388 State 112,268 57,888 128,458 77,761 38,491 Miscellaneous 16 1671 91 2865 107 2328 86 2952 112 1°71 Total S 944 1617 5 1 1029 2308 S 1 ~ 226 2185 5 12228 2928 5 11365,802
Bilingual Education Beginning Balance $ -0- $ -0- $ -0- $ -0- $ 46,682 State -0- -0- -0- 68,390 47,005 Interest -0- -0- -0- -0- 1° 1 498 Total 5 -0- 5 -0- 5 -0- 5 68~390 5 104 1 185
Total All Sources $60 z 196 z008 $64 2481 2318 $71 2849 2561 $76 2979 2968 $86,192,855 (Excludes Transfers)
83.
Appendix B HIGH SCHOOL COURSE INFORMA nON Kansas City School District Fiscal Year 1983
1. Credit Units Offered State Minimum Sumner Harmon Schlagle Washington Wyandotte Reguirement Academy High School Iiigh School High School High School 30 101.0 139.0 139.5 228.5 177.0 2. Minimum Graduation Requirements Credit Units Offered District Sumner Sumner Harmon Schlagle Washington Wyandotte Area State High Schools Academy Academy High School High School High School High School
English 4 3.0 4.5 19.0 23.0 22.0 32.0 23.0 Social Studies 2 2.5 2.5 7.5 10.0 5.0 6.5 6.5 Science 1 1.5 3.0 9.0 7.0 7.0 6.0 6.0 Math 1 2.5 2.5 9.5 14.0 8.5 11.0 12.0 Physical Education 1 1.0 0.5 5.0 7.0 4.0 5.5 10.0 Electives 8 9.5 12.0 (a) 51.0 78.0 93.0 167.5 119.5 Total Units IT --20.0 25.0 101.0 139.0 139.5 228.5 177 .0 (a) Includes requirement for 2 Units Business and 3 Units Foreign Language 3. Teaching Schedules Sumner Harmon Schlagle Washington Wyandotte All High Academy High School High School High School High School Schools Avg. class size 22.53 25.20 28.10 25.52 26.94 25.84 Avg. class periods taught by each teacher per day 5.68 4.89 4.82 4.87 4.95 4.98 Avg. /I of students taught by each teacher per day 127.97 123.23 135.44 124.28 133.35 128.68 4. Course Enrollments Number Sumner Harmon Schlagel Washington Wyandotte District % of of Students Academy High School High School High School High School Total Total 1-10 19 classes 14 classes 3 classes 4 classes 5 classes 45 classes 2.8% 11-15 29 classes 15 classes 7 classes 19 classes 11 classes 81 classes 4.9% 16-20 41 classes 49 classes 22 classes 54 classes 51 classes 217 classes 13.2% 21-25 81 classes 72 classes 70 classes 101 classes 88 classes 412 classes 25.1% 26-30 40 classes 100 classes 114 classes 147 classes 133 classes 534 classes 32.5% more than 30 27 classes 70 classes 83 classes 60 classes 113 classes 353 classes 21.5% TOTAL 237 classes 320 classes 299 classes 385 classes 401 classes 100.0% I! 642 classes' --
85.
APPENDIXC Distr ict and Agency Responses
The draft audit report was sent to the President of the Kansas City school district's Board of Education for review and comment. The Department of Education and Division of Accounts and Reports received specific sections that pertained to them. This procedure is followed in the preparation of all audit reports. It gives audited organizations an oppor tunity to point out any errors of fact, to provide additional relevant information, and to respond to the recommendations. A copy of the report also was sent to the Superintendent of the district.
The President of the Board responded on behalf of the district, and the Department of Education and the Division of Accounts and Reports also submitted responses to the sections they received. Those responses are on the following pages. While the agencies indicated agreement with the recommendations submitted for their consideration, the distr ict's response included a number of comments and some disagreements with recom menda tions.
This Appendix also includes Legislative Post Audit's replies to certain statements and comments in the responses. Those replies have been placed within the organizations' responses and follow the respective comments. It should be noted that the organizations' responses are presented in their entirety.
87. PUBLIC SC HOOLS
625 MINNESOTA AVENUE LIBRARY BUILDING KANSAS-CITY, KANSAS 66101 lY~c~
ORVIN L. PLUCKER J4N 1 c.;;;IV~l; SUPERINTENDENT O/YI.!J/UIIJ 1 198J OFpa . 'STAUbll Subject: Response to Preliminary Draft of Performance Audit Report USD #500, Kansas City, Kansas Respondent: Gerald Hall, President, Board of Education Date: January 12, 1983
Subject draft report was received late on December 23, 1982 and schools were officially closed on December 24 through January 2, 1983. The demand
for written r~sponse by the President of the Board of Education on or before January 13, 1983 leaves only eight working days for a response to a detailed
84-page document. Such a demand is neither prope~ nor reasonable.
Legislative Post Audit response. Legislative Post Audit did not "demand" a response. The letter sent to the district stated, "We would appreciate receiving comments on the draft from you, as President of the school board, in writing, by January 13, 1983." This allowed the district almost three calendar weeks to respond, which extended the usual two week audit review period an additional week in recognition of the holiday season. Legislative Post Audit was not aware that district administrative staff would be away during the entire period that schools were closed.
Under th~ circumstances no effort is made to verify the accuracy of data presented in the report except where errors are obvious. Responses are largely limited to those areas which are of legislative concern. Only limited response is made in those matters which are primarily concerns of the local Board. Work in preparation of the following response has been completed by
USD #500 staff members and O. L. Plucker, Superintendent of Schools.
88. Response to Preliminary Draft of Performance Audit Report USD #500, Kansas City, Kansas Gerald Hall, President, Board of Education January 12, 1983 A "performance audit" of 12 of the 306 school districts of the state in a period of two years may be helpful to determine "whether programs are operated as intended by the Legislature .... ,,(1) They may be useful to legis- lators for guidance in the adoption of legislation for more effective govern- ance of schools and the most efficient use of tax funds in support of public education. The Board of Education of Kansas City, Kansas, is generally in agreement with auditors where such legislative recommendations are made. There are, however, several areas in which different conclusions might be reached by reasonable persons and these are noted in this response. An incidental outcome of the audit is a number of suggestions and recom- mendations to the Board of Education concerning various policies and practices relating to internal operation and management. Since these are primarily matters which must be resolved within the district, they will be given careful consideration by the Board and staff and, where appropriate and advantageous, adoption of new and revised procedures will be undertaken.
Organization of Response To facilitate an integrated review of the Report and this response, comments will be made on a "chapter-by-chapter" basis with specific sub . -...... headings and pages references where appropriate .
(1) Performance Audit Report, USD #500 89. Chapter I Introduction State Funding for School Districts - pg. 3 The report calls attention to the Kansas Constitutional requirement that . . the Legislature must "establish and maintain public schools and make suitable provi~ipn for financing those schools ... ", but it might also well point out that the same Constitution provides that "local public schools ... shall be maintained, developed and operated by locally elected boards.,,(2) Thus the effort to provide essential public education services is a shared effort with clearly established responsibilities at both the state and local levels. Current finance legislation represents a giant step forward in meeting state responsibility while allowing local boards the broad lctitude needed to meet local operating needs and concerns.
Chapter II Trends in District Financing Chapter II is largely a factual presentation containing no recommendations for either legislative or board actions. Therefore, no comments are made. A number of conclusions and opinions are expressed or implied and these are noted without response. Related recommendations made in later chapters will be discussed as they are made. Note: Error, line 1, pg. 8. The district operates 51 schools. Vocational school is omitted. Error, line 7, par. 2, pg. 14. The correct 1977-78 budget per pupil figure is $1287.
(2) Kansas Constitution, Art. 6, Sec. 5.
90. Legislative Post Audit response. The text has been adjusted to include the vocational school. The audit report's figure of $1,234 for the fiscal year 1978 budget per pupil is correct. That number is determined by dividing the budget of $32,969,890 by the full-time-equivalent enrollment of 26,716.8. This budget figure 'includes the amount budgeted for social security, workmen's compensation, and unemployment insurance. These -Were separate from the General Fund until fiscal year 1979. This adjustment to the fiscal year 1978 budget was made so that the budget per pupil would be more comparable to later years. Chapter III Improving the District1s Financial Management
Pg. 17-18. Comments on these pages are noted and will be considered by the Board in the light of such funding assurances as may be made by legislative action in
1983. Current events as related to the necessary 4% cut in state funding and the potential additional 3.55~ cut projected by the state would indicate the wisdom of con~ervative budgeting practices. However, the suggestions of the team will be given serious consideration. One comment is made by the audit team indicating some misunderstanding of the public library status in USD #500.
Budgeting Practices: General Fund - pp. 18-23 Note: Error, pg. 20, par. 2. Second sentence is in error. Grammatical references are incomplete. Much is made of year-end budget balances and there is indeed room for disagreement. No effort is made here to discredit the conclusions of auditors and the Board will be pleased to consider their suggestions. It is noted, however, that if the funding cuts projected by the Governor for the 1982-83 fiscal year were to be implemented fully, those cuts would exceed the claimed excess balance and the district would not be able to meet its financial obliga tions in 1983. The experiences of the state of Kansas with respect to reductions
91. in year-end budget balances are not viewed lightly. It is not the intent of the Board to resort to desperation financing or to endanger the fiscal soundness of the distr.ict by similar actions. Should the legislature choose to deal with this matter by consideration of specific legislation, we will be pleased to deal with the matter extensively.
Legislative Post; Audit re~onse. Legislative Post Audit does not agree that possible further cuts in State aid would make the district unable to meet its obligations in fiscal year 1983. The auditors estimated that the district will lose about $850,000 in fiscal year 1983 because of the expected four percent cut. If an additional 3.5 percent of State aid were cut, the district's loss would almost equal the $1.6 million balance found in fiscal year 1982 to exceed a minimum cushion needed to operate the district. Assuming that the district's balance in excess of operating needs in fiscal year 1983 is similar, an additional 3.5 percent cut in State aid will leave the district with enough funds to end fiscal year 1983 with a reasonable balance without reducing services. -Budgeting Practices: Special Revenue Funds Paragraphs 2 and 3 of page 23 appear to be more polemical, hortatory and political than normally expected in a professional audit.
Legislative Post Audit response. The intent of these two paragraphs was to point out that the decision to build up higher balances than needed is a decision that should be made by local electorates and the State LegiSlature. Therefore, Legislative Post Audit made no specific recom mendations in this area.
Several minor errors in this section should be corrected. (1) Pg. 24, par. 5, implies that an arbitrary equivalent of a tvJO mill tax rate is annually transferred to the Vocational Education Fund. In no year, since the legal mandate to do so was repealed, has the amount of transfer equalled the product of a two tnill rate. In some years there was essentially no transfer. Transfers are based on estimated annual needs.
92. Legislative Post Audit response. The auditors interviewed the dis trict's controller to determine how the district decides on the amounts to transfer out of the General Fund. The auditors were told the transfer to the Vocational Education Fund is intended to approximate the two-mill levy that was allowed for vocational education prior to fiscal year 1979. The district has transferred between $350,000 and $600,000 every year since the two-mill levy ended in fiscal year 1978. After reviewing the district's response, the auditors noted these amounts are less than the two mill levy amount (two mills would have raised about $602,000 in fiscal year 1982), and the audit text has been adjusted to reflect this. Nevertheless, the auditors determined that the fiscal year 1982 transfer was about $150,000 more than needed to maintain a one-month minimum reserve in that fund. As a result, the audit recommends that transfers to this and other funds should not exceed the amount needed to maintain a minimum balance.
(2) Pg. 25, par. 1, implies that the transfers made from the General Fund affect the amount of state equalization aid. Equalization 2id is based on a clear formula and is unaffected by transfers from the General Fund. Legislative Post Audit response. Transfers made from the General Fund have a direct effect on State aid. The ~ualization aid formula includes a number of factors, one of which is the district's General Fund budget. The need to transfer money out of the General Fund r~uires that the budget be higher, and State ~ualization aid increases when the budget increases.
(3) Pg. 25, par. 2, implies that state equalization aid was not intended to be used to support various special funds. The exact reverSE is true. At one time there were special levies for vocational education, special education, social security, etc. These were repealed and merged into the
equa 1 i za ti on aid formul a so as to Ilpower equal i zel! those funds. The amounts transferred became irrelevant insofar as the total equalization aid was concerned and boards of education were left to decide how best to utilize these funds to serve the various needs of the students.
Legislative Post Audit response. The audit does not intend to imply that State ~ualization aid was intended for use only for the General Fund.
93. However, Legislative Post Audit does not agree that the amounts trans ferred are irrelevant. Since State aid is included in those transfers, the size of those transfers and the use of that State money is a legitimate area of legislative. concern. Recommendations: pg. 25, 27 Several recomlendations are made to the local board relating to (1) transfers to the vocational education fund, and (2) capital outlay plans. These will be given careful consideration but are not of statewide legislative concern and no response is made here. Public Library Recommendation: pg. 28 In USD #500, the public library is totally a part of the district and has been since the turn of the century. It has a legal history dating back to about 1887. The district does not "indirectly" support or subsidize the library.
The district ~ the library and the library is an integral function and responsi- bility of the district. Not until 1965 was a special levy for library operation authorized. No district General Fund monies are now expended for the library. Howevel, the district's bonding powers and capital outlay expenditure authority simply encompass the library just as they do_any other facet of lawful district operation. Any effort to disrupt that authority would be a disaster for the library and library service. It must also be noted that not one cent of state school funds is involved in any aspect of library operation, capital expenditures or debt service. Thf first sentence on page 28, line 1-2 is grossly in error when it asserts that transfers of interest revenues from general fund investments to a Capital Outlay fund for use in construction of a branch library " ... increase the district's ... state aid." State aid is based on a specific formula and is
94. totally unaffected by any transfers. Moreover, the law now prohibits the placement .of interest back in the General Fund and requires the placement in special, e.g. Capital Outlay and other, funds! The recommendation for legislation to amend KSA 72-1623 would leave the public library without any authority for capital expenditures. Clearly there is no statewide effect flowing from the current finance and governance structure of the public library and state efforts to legislate in a complex local matter would in no way benefit state interests. The district strongly objects to the recommendation and would oppose any efforts to legislate it.
Legislative Post Audit response. Legislative Post Audit maintains that the school district indirectly subsidizes the Public Library with State school district equalization aid. The audit points out that the district must transfer money from the General Fund to several special funds to operate vocational education and special education programs in particular. Had the school district placed interest earnings in those special funds, rather than the Capital Outlay Fund which is expected to finance a $3.5 million branch library, transfers out of the General Fund and the General Fund budget itself could have been reduced. Reductions in the General Fund budget would have decreased State equalization aid. Legislative Post Audit did not intend to imply that the district should be left without any authority for capital expenditures, and the audit recommendation has been changed to clarify this point. If the Legislature removed the ability of the district
o to indirectly subsidize the library, it may be necessary to increase Kansas City's authority to levy taxes for capital improvements to the library in a way similar to other cities.
Investment Manaaement: pgs. 30-31 Suggestions in this area have been reviewed and all recommendations have been implemented. Purchasing Practices: pgs. 32-34 Suggestions for the local district have been reviewed and, where appropriate, modifications in procedure have been made.
95. The recommended change in KSA 72-8208 (pg. 34) is supported so as to permit practices which the audit team feels are advantageous but unauthcrized by 1aw. The recommended change in state law to require bids for leases and services is extremely complex (pg. 34) and would involve an almost impossible problem when such items as service contracts for maintenance of a specific manufacturer's equipment in data processing, air conditioning, etc., are considered. The problem becomes even more complex when employing consultant services of a profes- sional nature ranging from auditors, architects, and engineers to lawyers and psychologists. Questions of competence, experience, resources and a host of others are involved. It would seem'an overly simplistic proposal.
Legislative Post Audit response. Legislative Post Audit does not agree that the proposal to re£[uire bids for leases and services is unreason ably complex. State agencies are required by K.S.A. 1981 Supp. 75-3739 and Department of Administration procedures to obtain competitive bids on leases and services, including professional services. As an example, Legislative Post Audit contracts some financial audits to private firms based on a competitive bidding process. Service contracts for e£[uipment and professional services can be effectively bid by ensuring that bid specifications clearly delineate the capabilities required of the successful bidder.
Management of School Activities Funds: pg. 36 Suggestions and recommendations in this area have been reviewed and, where appropriate, have been implemented.
Chapter IV Managing District Personnel and Educa ti ona 1 Resources Material in this chapter has been reviewed and all special concerns and suggestions related to the district are being given careful consideration.
96. Regrettably, numbers used in the text and in the tables on pages 39 through 43 are not in agreement and are not reconcilable to any data on file in Board offices. ' Hence, no useful comment is possible. Specific comments relating to certain sections and pages follow. School District Enrollments Projections (pg. 39, par. 4, last line) are irrelevant, incompetent and erroneous and should be deleted.
Legislative Post Audit response. The auditors' projections were done by assuming that the percentage changes in Wyandotte County's births in recent years will be reflected in the percentage changes in enrollments in future years. The auditors assumed that migration in and out of the county would not affect enrollments. Projections of actual migration patterns were not available.
District Graduation Requirements: pg. 45
Auditors' con~ents regarding graduation requirements are in error and indicate some lack of understanding of the junior-senior high school credit requirements. On May 8, 1974 the State Board of Education approved alternative graduation requirements for USD #500. The alternative graduation requirements were developed for Kansas City, Kansas, to insure maximum educa ti ona 1 opportunity for Kansas City, Kansas, students. The State Board of Education in approving the requirements did not approve requirements below state standards, but an acceptable alternGtive to a set of quantitative standards. The alternative requirements differed from state standards by not requiring a unit of physical education. The expanded elective offering in physical education in 1974 in Kansas City, Kansas, resulted in an increase in physical education enrollment of approximately 250 per cent.
97. In the social studies and English areas, the auditors were evidently not aware that in 1981-82 and prior years, Kansas City, Kansas, students were required to'bring from the junior high school credits in social studies and English which are high school credit courses and have the effect of making the requirements in these areas equal to or ~ excess of minimum state require- ments. The district's movement to a four-year high school program in 1982-83 has resulted in the formal adoption of graduation requirements that are equal to or exceed the state requirement in all areas.
Legislative Post Audit response. The auditors were not aware that junior high school credits in social studies and English were required. Appropriate adjustments have been made to the report. The district's English requirement is still below the State standard by one unit, although State law does allow a school principal to waive the requirement for that unit.
Chapter V Managing Facilities and Support Services Materials in this chapter have been reviewed and all special concerns and suggestions relating to the district are being given careful consideration. Specific comments relating to certain sections and pages follow.
Declines in enrollment and the consoli~ation of schools are urgent con 2 cerns of this district and more than 20 schools have been closed in recent years. Those efforts continue so as to use efficiently funds secured for education of children. However, the enrollment projections of auditors (pg. 51, par. 2) are considered quite invalid. Clearly, even minimal cohort survival techniques of analysis were not employed. In arriving at conclusions relative to available space and potential school closings, auditors failed to
98. account for required space need for Title I remedial reading and math labs; special music, art and physical education programs; geographical distribution of pupils.. and buildings; topographical and logistical factors and numerous other elements. Thus the conclusion that 11 ••• a total of ten schools could be closed. 1I is at best naive and at worst a flagrant distortion of facts and circumstances calculated to reach pre-determined conclusions. Closing and consolidating uneconomical buildings within districts and the consolidation of districts where economically and educationally advantageous are matters that merit careful study and may have a high potential for savings and improvement. However, a clumsy and invalid approach to the subject can do little but create confusion, hamper constructive efforts and work mischief in the entire process.
Legislative Post Audit response. The auditors' analysis of consolida ting schools was intended to determine if there was excess capacity that would allow school closings to save money. That analysis showed that closing four schools, as the district has indicated it might, would still leave excess capacity and as many as six additional schools could be closed. Page 52 of the audit points out that the auditors' analysis was not detailed enough to determine precisely how many schools could be closed. Problems unique to closing particular schools were not studied. Nevertheless, the auditors' conclusion that closing 10 schools is a reasonable number and is based on sound analysis and conservative assumptions. Enrollment projec tions were based on the assumption that future enrollment will grow at the same rate as recent birth rates in Wyandotte County. Building capacity was based on 25 students per regular classroom (excluding gymnasiums, lunchrooms, and other special rooms), conservatively setting aside one classroom for every six special education students. The audit recommends that the district develop its own long-range plan for closing as many schools as necessary to fully utilize its buildings.
Maintenance staff recommendations (pg. 56) and the suggestion that use of licensed craftsmen such as carpenters, electricians, plumbers, etc., be discon- tinued will be considered by the Board. If auditors are proposing or suggesting
99. legislation in this area, it may be a matter of considerable interest to the various labor organizations affected. Legislative Post Audit response. The audit does not recommend legislation in this area. Rather, it recommends that the district take steps to mOdify its hiring policies so that licensed craftsmen are hired only when such high-level skills are needed for the job.
Comments relative to transportation and food service are noted and will be considered by the Board for such action as may be appropriate. In discussing free and reduced price lunches, it is observed that auditors rely heavily on data gathered i~ prior years from other districts, (pg. 59, par. 4; pg. 61, par. 3; pg. 62, par. 3) although they seemingly found no problem in Kansas City, Kansas. The recommendation (pg. 62) concerning "policing" of this item is well taken and it may be that the legislature would wish to entertain a recommendation for funding such activity.
Legislative Post Audit response. Legislative Post Audit does not envision that requesting documentation from a small sample of free and reduced lunch applicants would increase administrative costs to the extent that additional State funding would be necessary. The size of the sample of applications reviewed would depend in part on how many could be processed by existing administrative staff.
Chapter VI Administering Special Education Programs The Cooperative Counts Special Education Administrators In the Distribution of Categorical Aid for Excess Costs: Auditors are both inconsistent and incorrect with respect to discussions concerning counting of supervisory personnel for special education cost reimbursement. In the last sentence on page 71, auditors point out that liThe State Plan for special education expands the definition of special teacher to include support personnel such as psychologists, physical therapists, and
100. nurses. II Such expansion, by virtue of inclusion in the State Plan, is seemingly satisfactory to auditors. On page 72, auditors state, "Nowhere in State law or the State"Plan are special education administrators included in the definition of special teachers." vJe call attention to the State Plan for Fiscal Year 1983, Special Education. Page 50 contains the following paragraph: "The reimbursement schedule for administrators and supervisors of special education follows the same schedule as for all approved special education teachers. If the minimum requirements of train ing are met, the directors and supervisors shall be eligible for reimbursement providing they are employed one-half time or more in the director or supervisor/coordinator position. Reimburse ment for less than one-half time will not be approved. II
The "Recommendation" on page 73 is not clear in that no legislation is needed for inclusion of such personnel in the reimbursement authorization.- Of course, if it is the intent of Post-Audit to make legislative policy in this delicate area and to cripple programs for the handicapped by urging the legislature to withdraw support from such legislatively mandated programs, the recommendation is clearly one method of doing so. Legislative Post Audit response. The audit points out that the State Plan says that administrators and supervisors shall be reimbursed with State aid the same as teachers. That is not the same as defining "special teachers' to include administrators. State law specifies that only "special teachers' be counted to determine each cooperative's share of State aid. It is clear to Legislative Post Audit that psychologists, social workers, and therapists could be included under the definition of "special teachers" in the State law. However, it is not clear about whether administrators could be considered "special teachers."
The audit further pOints out that administrators are a legitimate part of special education costs and those costs should be included in the excess cost formula that determines Statewide aid. The number of "special teachers' in a cooperative determines the distribution of that State aid. It does not appear from the language of the statute that the Legislature intended to allow cooperatives to increase their share of State aid by increasing their number of administrators. The recommendation suggests legislative involvement in this issue because it is a legislative (State) statute that appears to be violated by the inclusion of administrators in the distribution formula.
101. Other suggestions and recommendations are directed toward district concerns. They have been taken into consideration by the Board and staff and have largely been implemented where considered appropriate. Statements on page 77 concerning use of the Wechsler Intelligence Scale for Children and the Wide Range Achievement Test as well as statements concerning computerized monitoring systems are in error, but are irrelevant to any conclusions and are, therefore, not discussed further.
102. Kans'as State Department of EdlJCation Kansas State Education Building 120 East 10th Street Topeka, Kansas 66612
January 10, 1983
Dr. Richard E. Brown Legislative Post Auditor Legislative Division of Post Audit Mills Building Topeka, Kansas 66612 RE: Special Education Audit
Dear Dr. Brown:
Your letter of December 22, 1983 addressed two basic recommendations:
1. To clarify the legislative intent regarding the distribution of State categorical aid for special education, the Legislature should more clearly specify what categories of employees can be counted as special teachers for the purpose of distributing that aid.
2. To insure the proper certification for pregnant students to be eligible for categorical aid.
I have reviewed these issues with my special education director and other appropriate staff. The following corrections, follow-up, and comments address each of the t\vO issues:
1. Local directors and supervisors of Special Education have received categorical reimbursement for several years. This practice has been revie,veCl by legislative committees including Rules and Regulations COIDfJittees, Interim Study Committees and the 1202 Commission that studied Special Education teacher shortages. All lists and print-outs of Special Education teachers, including directors of Special Education, teachers were presented to appropriate legislative study groups.
103.
An Equal Employment/Educational Opportunity Agency January 10, 1983 Dr. Richard E. Brown Page 2
The ~ules and Regulation Committee of the Legislature reviewed the Special Education Rules and Regulations on January 3, 1983. The three areas that pertained to special education administrators were discussed with the Committee. The present Special Education Rules and Regulations under consideration defines "Special Teacher" (91-12-22), including those under "special education related services" (91-12-22, x-3). Related Services (91-12-22, qq) is further defined to include special education administration and. supervision. It would appear that the definition of special teachers does include special education adminis trators. At the next regular State Plan review, these amendments could then be incorporated in the State Plan.
Legislative Post Audit response. Given the level of past legislative interest in the size of educational administrative staffs, continued legisla tive review of this issue seems warranted.
2. Relating to the matter of certifying pregnant students, all special education administrative units in the state were contacted to clarify the issue. The corrective action of the Wyandotte County Cooperative is reflected in their Local Comprehensive Special Education Plan change. The following action was taken by the Department:
Dr. Marguerite Thorsell, the Regional Special Education Compliance Monitor for the Wyandotte County area, contacted Dr. Lowell Alexander, the Wyandotte County Director of Special Education concerning their specific audit. The Wyandotte County Cooperative provided written assurances and documentation that eligibility and placement will be determined on the basis of:
1. Individual student comprehensive evaluations and staffings (which result in placement in a range of . least restrictive environments).
2. Documented procedures for comprehensive evaluations and staffings which result in the determination of eligibility/placements of teen-age mothers in special education services.
As a result of these requirements the Wyandotte County Special Education Cooperative amended sections of their Local Comprehensive Plan. Those amendments are attached. A follow-up compliance visit will also be made to this program to document that the written procedures are being followed.
104. January 10, 1983 Dr. Richard E. Brown Page 3
In addition, all districts/cooperatives in the State of Kansas which have students receiving homebound services because of pregnancy have been contacted to stress the need for appropriate eligibility and determination of Homebound/Hospital Services. Individualized Evaluation Programs (IEPs) are required as a standard procedure for all students receiving Homebound/Hospital Services. According to the Special Education records all districts/cooperatives now have an orderly and appropriate evaluation procedures.
We are hopeful that these two issues have been satisfactorily clarified or corrected. Our agency will await the receipt of the full report for further review and comments, if necessary.
Sincerely, C 7J(:~ .£.b~____
Merle Bolton Commissioner
Encl.
105. STATE OF KANSAS
DEPARTMENT OF ADMINISTRATION DIVISION OF ACCOUNTS AND REPORTS
JOHN CARLIN t State Office Building . Governor Topeka, Kansas 66612-1574 (913) 296-2311 JAMES R COBLER Director of Accounts and Reports January 10, 1983 ~~C21'v~D Richard E. Brown, Legislative Post Auditor JAN 121983 109 West 9th Street, Suite 301 Mills Building DIVISION OF p, Topeka, Kansas 66612 VST AUDIT
Dear Dr. Bro'Nn:
We agree that the "Guidelines for School Activity Funds" should be revised to more specifically address candy store proceeds.
It has been our practice to prepare these "Guidelines" in collaboration with the Department of Education. We have consulted with the Department about your draft recommendation. Research will be needed to harmonize federal requirements (e.g., National School Lunch Program) and K.S.A. 72-7062. Jointly we will revise the "Guidelines" for Group3- School Project Accounts to cover candy store proceeds. After this, we will publish the revised "Guidelines" in our "Municipal Accountants' BUlletin"--to get them promulgated as soon as possible--and then re-publish them as part of the next "Minimum Standard Audit Program" undate.
If you have any questions on this matter, please contact me.
Very truly yours, ~M James R. Cobler, Director Division of Accounts and Reports
JRC:WLE:cj
cc: Dale Dennis, Department of Education
106.