This chapter addresses the financial management functions of Dallas Independent School District (DISD) in the following sections:
- A. Budget Development and Monitoring
- B. Accounting Operations
- C. Internal/External Auditing
- D. Tax Collections
- E. Public Education Information Management System (PEIMS) Reporting
Financial management enables school districts to use cash, employees, land, buildings, equipment and supplies efficiently to support the educational process and ensures that adequate resources are available for educating the next generation. Effective financial management involves:
- designing organizational structures and hiring qualified employees to ensure that financial activity is properly recognized, managed, and reported;
- developing budgets to monitor spending, control costs, and establish accountability throughout a school district;
- employing manual and automated systems and controls to ensure that vendors and employees are paid accurately and timely and to ensure that financial transactions are properly recorded on a school district's books.
- accounting for funds in accordance with applicable laws, rules and regulations such as the Texas Education Agency's (TEA's) Financial Accountability System Resource Guide (FASRG); internal policies and procedures; Generally Accepted Accounting Principles (GAAP); and Governmental Accounting Standards Board (GASB) guidelines.
Allegations of financial impropriety and an absence of consistent leadership have marred DISD's past. The district has been rocked by the indictments of employees for overtime fraud; employees and contractors investigated for shoddy work and kickbacks; numerous FBI investigations into allegations of wrongdoing; and a superintendent fired and jailed for embezzlement. The district has had four chief financial officers in the last five years and five superintendents in the last four years.
DISD, Texas' second-largest school district, suffers from the lingering effects of its turbulent past. For example, the district needs funds for new schools and renovations. To pass a bond referendum, however, it must overcome the common public perception of a district out of control and rife with corruption. Meanwhile, FBI investigations of alleged wrongdoing and questionable business practices continue.
With the hiring of its new superintendent in October 2000, the district hopes to rebuild its image and reputation. In the November 6, 2000 issue of DISD's publication "This Week," the new superintendent outlined four top priorities for his administration, which are:
- improving student academic achievement,
- nurturing teachers and staff,
- improving the way the district handles its finances,
- passing a bond program.
Finances play a major role in district activities touching every aspect of its operations. Therefore, improving the district's finances will significantly influence the success of the other three priorities. In past efforts to improve business processes and strengthen financial controls, the district has undergone many reviews, assessments, and studies. More than 800 specific recommendations have been made to improve business processes and strengthen internal controls. In addition, DISD's Internal Audit Department has conducted various internal reviews throughout the years. Exhibit 7-1 presents a summary of reviews conducted by external auditors since 1992.
Exhibit 7-1Source: DISD Financial Operations Division and Audit Reports, where provided.
DISD Finance-related Audit Reports and Studies
Name of Report Auditor Date Purpose Recs. Cost Follow-up Done? Texas Comptroller of Public Accounts performance review Texas Comptroller June 1992 To recommend improvements to district operations and achieve cost savings that can be directed back into the classroom. 298 $395,000 No cost to the district Yes (By state comptroller) DISD Procurement Process Reengineering Initiative Arthur Andersen & Co. 1993 Reengineer the procurement process. District did not provide District did not provide No Human Resources Management System Position Control and Payroll Controls Documentation Arthur Andersen & Co. 1993 Review district's position control system and payroll internal controls. District did not provide District did not provide No Internal Audit Quality Review Arthur Andersen & Co. 1994 Assess internal audit organization and operations. 18 District did not provide Yes. In 1995, Internal Audit developed an initiative to implement recommendations in the report. TEA's Public Education Information Management System (PEIMS) review Arthur Andersen & Co. August 1994 To improve the quality and accuracy of PEIMS reporting. 16 District did not provide No Review of Security Elements of Delta Financial System KPMG May 1998 Review the security features of the Delta System. N/A $114,000 External auditors never released a final report Controls Assessment Reports KPMG September 1998 To identify opportunities to strengthen controls and improve procurement, service center, and custodial operations. 66 $230,000 Internal Audit scheduled to follow up in May 2001 Controls Assessment Reports KPMG November 1998 To identify opportunities to strengthen controls and improve personnel and payroll operations. 18 Included in total above. Yes. Internal Audit completed during fiscal 2001 Post-Implementation Review of Delta System KPMG November 1999 Review the implementation of the Delta System. 78 $154,000 Project was a follow-up to system implementation TEA's Public Education Information Management System (PEIMS) Moak, Casey & Associates December 1999 Recommend quality control improvements in reporting data to PEIMS. 12 $60,000 Internal Audit began follow-up in March 2001 Fraud Audit KPMG March 2000 To identify instances of financial fraud, waste, and mismanagement within the district. 30 $1,500,000 FBI is following up through its subpoena process Implementation Plan Follow-up KPMG May 2000 To track implementation status of internal control recommendations for treasury, payroll, construction, procurement, and maintenance operations. 166 Included in control assessment total This was a follow-up report to the control assessments Letters to Management on Internal Control KPMG August 1997, 1998 November 1999, 2000 To report internal control weaknesses noted during the year-end financial statement audit. 1997-37
Included in annual audit fees. Yes
Audit Committee Review KPMG August 2000 Review specified items from audit committee on a monthly basis. Monthly $152,500 Monthly follow- up reports are issued based on prior-month reports.
Although the district has made progress since TSPR's 1992 review, strong internal controls and effective business processes remain critical issues because the district has experienced significant growth. At the time of the 1992 review, the district operated 199 schools, served 137,772 students, had 15,418 employees, and had an annual budget of $630 million. During fiscal 2001, the district operated 221 schools, served 161,477 students and employed about 19,000.
DISD's fiscal 2001 budget is approximately $1.06 billion, a7 percent increase over the fiscal 2000 budget of $991 million.
DISD's budget grew by 15.5 percent during the three-year period ending August 31, 2001, which is largely attributable to increases in instruction. The percentage devoted to instruction increased as a percentage of total expenditures from 53.5 percent in 1998-99 to 54.5 percent in 2000-01. The percentage devoted to school leadership decreased from 5.8 percent in 1998-99 to 5.4 percent in 2000-01.
Exhibit 7-2 presents a three-year summary of budgeted expenditures for the district by functional area.
Exhibit 7-2Source: TEA's Academic Excellence Indicator System (AEIS) and Public Education Information Management System (PEIMS) for the years indicated.
DISD Budgeted Total Expenditures by Function
Fiscal Years 1999 through 2001
Function 1998-99 1998-99 Percent of Total 1999-2000 1999-2000 Percent of Total 2000-01 2000-01 Percent of Total Instruction $488,884,391 53.5% $533,838,355 53.8% $575,903,639 54.5% Instructional Related Services 27,164,420 3.0% 28,829,594 2.9% 34,673,393 3.3% Instructional Leadership 13,510,219 1.5% 15,842,033 1.6% 13,826,268 1.3% School Leadership 52,799,462 5.8% 55,560,012 5.6% 57,007,373 5.4% Support Services Students 38,861,447 4.3% 46,031,698 4.6% 45,857,866 4.3% Student Transportation 4,239,622 0.5% 3,982,084 0.4% 16,668,569 1.6% Food Services 51,674,776 5.7% 52,833,236 5.3% 52,230,603 4.9% Co curricular/
7,909,268 0.9% 9,349,609 0.9% 9,020,841 0.9% Central Administration 22,963,821 2.5% 27,064,394 2.7% 28,241,325 2.7% Plant Maintenance and Operations 104,260,436 11.4% 108,534,463 10.9% 112,761,160 10.7% Security and Monitoring Services 6,999,942 0.8% 7,783,290 0.8% 9,074,634 0.9% Data Processing Services 18,573,127 2.0% 19,133,122 1.9% 18,019,933 1.7% Other 76,300,829 8.3% 82,616,102 8.3% 82,486,029 7.8% Total Budgeted Expenditures $914,141,760 100.0% $991,397,992 100.0% $1,055,771,633 100.0%
Exhibit 7-3 compares DISD's budgeted 2001 cost per student to peer districts and state averages. DISD's expenditures are near the peer average of $6,018.
Exhibit 7-3Source: TEA PEIMS 2000-01.
Expenditures per Student: DISD, Peers, and State
El Paso $5,489 Fort Worth $5,785 State Average $5,924 Peer Average Excluding DISD $6,018 Dallas $6,020 San Antonio $6,030 Austin $6,370 Houston $6,416
Revenues to support district operations come from local, state, and federal sources. Local revenues, the largest component, consist primarily of local property taxes, which are based on local property values and the district's tax rate. Local revenues also include revenues from other local administrative units or political subdivisions, such as counties, municipalities, and utility districts.
State revenues are determined by complex funding formulas designed to equalize funding across the state after taking into consideration local property values and tax rates, student populations, average daily attendance and other factors. Federal revenues consist of funds from federal, state and local grants such as the Title I program.
During fiscal 2001, about 78 cents of every DISD dollar will come from local sources; 17 cents from state sources; and 5 cents from federal and other sources. Exhibit 7-4 presents the sources of DISD's budgeted fiscal 2001 general fund revenue.
Exhibit 7-4Source: TEA PEIMS 2000-01.
Source of General Fund Revenue-Fiscal 2001 Budget
Compared to its peers, DISD is second in funding received from local sources and above the state average of 53.1 percent. Conversely, DISD is second to last in funds received from the state and is below the state average of 43.6 percent. Funds received from federal sources are about equal to the peer districts and slightly above the state average. Exhibit 7-5 compares sources of revenue for DISD, the peers, and the state as a whole, based on budgeted 2001 funds.
Exhibit 7-5Source: Texas Education Agency, PEIMS 2000-01.
DISD, State and Peer Districts
Sources of Budgeted Revenue as a Percentage of Total Budgeted Revenue
State Federal Dallas 77.2% 0.8% 17.1% 4.9% Austin 89.0% 4.3% 4.0% 2.7% San Antonio 26.9% 7.6% 59.0% 6.5% Houston 65.8% 0.9% 28.9% 4.4% El Paso 35.6% 4.2% 54.6% 5.6% Fort Worth 41.3% 9.3% 45.5% 3.9% State Average 48.5% 4.6% 43.6% 3.4%
DISD's financial management functions, which consist of Finance and Accounting and Budget Development and Control, are budgeted for 95 positions, of which 11 are vacant at this writing. Exhibit 7-6 depicts the Financial Operations Division's organization. Only financial management functions are shown.
Exhibit 7-6Source: DISD Financial Operations Division.
DISD Financial Operations Division Organization
DISD's chief financial officer (CFO) is responsible for the day-to-day management of the district's finances and reports directly to the superintendent, who in turn reports to the local school board. As head of the Financial Operations Division, the CFO is responsible for seven areas: Finance and Accounting; Budget Development and Control; Risk Management; Quality Control; Financial Systems Technical Support; Purchasing; and Minority Women Business Enterprises.