STATEMENT OF DETROIT PUBLIC SCHOOLS CHIEF FINANCIAL OFFICER JOAN MCCRAY

NEWS from Detroit Public Schools
Office of Public Relations

For Immediate Release
Contact: Steve Wasko
313-873-4542; cell 313-212-5636
steven.wasko@detroitk12.org

Joan McCray, Chief Financial Officer, Detroit Public Schools, this morning issued the following statement:

“It has been the clear and ongoing commitment of General Superintendent Dr. Connie K. Calloway, this Administration, the Board of Education, and staff to demonstrate transparency and fiscal integrity in all of Detroit Public Schools operations. It is the job of Detroit Public Schools to continually educate our children, to educate our parents and our community stakeholders about all aspects of our school district. With this commitment, the Superintendent, the Board and district staff will continue to be transparent regarding the district’s finances.

Recently, this administration invited the Council of Great City Schools, which represents the nation’s largest urban school districts, to provide an independent review of Detroit Public Schools operations in the areas of curriculum, finance, information technology and facilities. During the Council’s finance outbrief, the administration was made aware of the use of an unbudgeted fallout account creating a projected general fund budget shortfall of $30-$60 million for Fiscal Year 2007-2008.

The budget development process entails creating a salary and fringe for each job position required in the district during the fiscal year and creating a control number for that position. This unbudgeted fallout account is an account used for the past several years in which excess filled job positions were placed pending the district’s reduction of staff and not accounted for with salary and fringes in the adopted budget.

As Dr. Calloway has reported on numerous occasions, this administration inherited the District’s FY 2007 – 2008 adopted budget and has uncovered a number of major expenditures that were not budgeted. Including this fallout account, we believe these unfunded expenditures exceed $102 million, of which some items include:

1) A $25 million reduction of state aid based on a revised enrollment projection.

2) Penalty of $5 million related to the non-compliant operation of Last Chance schools of which $1.7 million must be paid this fiscal year.

3) Expenditures of over $16 million for unbudgeted costs related to the previous year’s school closures and consolidations including $6 million for facilities support, $2 million Durant funds transfer for school closures, $2 million to sort and catalog textbooks moved from closed schools, and $6.8 million in increased transportation services.

4) Operational expenditures of over $5 million for unbudgeted expenditures such as $1 million for fingerprinting, $165,000 for contracted lobbying services, $3 million for computer lease agreements, and $180,000 for the Retain and Gain Enrollment Campaign.

Of this $102 million of unbudgeted expenditures, the District currently projects the shortfall to be approximately $45 million. The District has successfully reduced this shortfall by $57 million or 56%. This administration is working in collaboration with the Michigan Department of Education (MDE) to assure adequate use of all available resources. The District is also maximizing the use of all federal funds which will in turn minimize the impact of this shortfall.

The Finance Office has been working diligently to respond to these budget shortfalls to have minimal impact on the classroom. The good news is that the District continues to make payroll and continues to make progress in paying our vendors in a timely manner. Every year the District should see an improved financial situation as the District continues to eliminate past debt and develop sound policies and procedures.

As previously noted, the District has been in contact with MDE and this administration knows that anytime a district projects a budget deficit, the Deficit Elimination Plan must be revised to reflect the current situation. The Finance Office will be working with MDE and State financial officials to revise the District’s plan and address options. The Finance Office is also addressing the District’s future operational needs to assure the District is operating in a fully budgeted manner. This administration is working with our union on possible mutually agreeable contract language that would address teacher staffing issues.

There will be those parties looking for scapegoats to blame. However, the General Superintendent, the Board, administration and staff are a team working in tandem to resist the notion to blame. The District team is focused squarely on improving the operation of the district to assure that resources support effective instruction to children in the classroom.

I want to thank the media for attending and reporting accurately our efforts to be transparent with our finances. I also want to continue to thank the families of our 104,000 students who have entrusted their precious children’s education to DPS. Additionally, I want to thank our teachers and employees for their commitment to the children and their cooperation. Finally, I would like to thank our vendors and others who remain cooperative and patient as we work through our financial challenges. By continuing to be fiscally responsible as well as transparent, we will be meeting the ethic of the AAA School House model: Accountability + Added Value = Achievement.”

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SW5/15/08

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