A5207 2R

An Act concerning school district fiscal procedures, amending P.L.2007, c.63, and supplementing Title 18A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 53 of P.L.2007, c.63 (C.18A:7-11) is amended to read as follows:

53. a. The commissioner shall appoint, for each county based on the number of municipalities in the county, [an] executive county business [official] officials to serve in the office of the executive county superintendent of schools for a term of three years. An executive county business official appointed pursuant to this section shall not serve more than 50 municipalities. An executive county business official appointed shall hold an appropriate certificate issued by the State Board of Examiners and have experience in school finance, budget planning, and governmental accounting.

b. The executive county business official shall:

(1) assist the executive county superintendent in the performance of the superintendent's fiscal duties pursuant to N.J.S.18A:7-8 [,] and the school district’s fiscal management pursuant to section 10 of P.L.1975, c.212 (C.18A:7A-10);

(2) conduct fiscal reviews on a rolling basis pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(3) report any significant fiscal concerns within the fiscal reviews conducted pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) to the executive county superintendent and the commissioner;

(4) assist the executive county superintendent in monitoring the implementation of corrective action plans pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(5) provide support and technical assistance to school business administrators;

(6) identify school district fiscal and budgeting risks and recommend early intervention strategies;

(7) coordinate with districts on Statewide fiscal monitoring requirements and data collection;

(8) oversee school districts’ implementation of budgeting, auditing, and fiscal procedures within Title 18A of the New Jersey Statutes and regulations promulgated by the State Board of Education; and

(9) perform [such] any other fiscal duties as determined by the commissioner.

c. Based on criteria developed by the commissioner, the executive county business official shall be subject to a performance assessment at least once during the three-year term. The business official may be re-appointed on the basis of a satisfactory performance assessment.

(cf: P.L.2007, c.63, s.53)

2. (New section) a. The executive county business official appointed pursuant to section 53 of P.L.2007, c.63 (C.18A:7-11) shall conduct fiscal reviews of each school district under its purview on a rolling basis on a timeline established by the executive county superintendent. Each ¹[quarterly]¹ fiscal review shall include ¹an analysis of the two most recent audits conducted pursuant to N.J.S.18A:23-1 and may consider additional factors including¹, but not be limited to:

(1) an analysis of budget-to-actual expenditures;

(2) a review of salary and benefit expenditures for all school employees;

(3) the verification of payroll and position control systems;

(4) a review of accounts payable and outstanding liabilities;

(5) an assessment of cash flow and fund balance status; and

(6) the identification of any structural deficits or emerging fiscal risks.

b. A school district shall provide the executive county business official with any information necessary to conduct each ¹[quarterly]¹ fiscal review.

c. The executive county business official shall submit a copy of each fiscal review to the board of education of the school district, the superintendent of schools, the executive county superintendent, and the Commissioner of Education. The report shall include a summary of the executive county business official’s findings, an analysis of any areas of fiscal concern, and recommendations for corrective action.

d. In a year in which a school district is required to undergo a comprehensive review under the New Jersey Quality Single Accountability Continuum pursuant to section 11 of P.L.1975, c.212 (C.18A:7A-11), the executive county business official shall not conduct any fiscal review of the district.

e. The executive county superintendent may hire any additional staff as may be necessary to assist the executive county business official in effectuating the provisions of this section at the expense of the State.

3. (New section) a. If the executive county business official identifies significant fiscal concerns in two consecutive reviews conducted pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill), the executive county business official shall notify the executive county superintendent and the Commissioner of Education.

b. The executive county superintendent shall notify any district that was referred by the executive county business official for significant fiscal concerns in two consecutive reviews. The school district shall then submit a corrective action plan to the executive county superintendent. The corrective action plan shall be submitted within a timeframe established by the executive county superintendent. The corrective action plan shall include timelines for corrective action and responsibilities of the school district for implementation of the plan.

c. The executive county superintendent shall, in coordination with the executive county business official, monitor the district’s implementation of the plan. If a district fails to implement the corrective action plan, as determined by the executive county superintendent, the executive county superintendent may refer the school district to the commissioner for further remedial actions, which may include additional monitoring and intervention.

d. The commissioner shall have the authority to take any action necessary to correct continuous fiscal concerns in a district that fails to implement the corrective action plan.

4. (New section) a. The Commissioner of Education ¹, in consultation with the State Comptroller,¹ shall develop and administer a Comprehensive Statewide Fiscal Early Warning System. The system shall utilize fiscal information reported by school districts throughout the fiscal year to enable timely and structured intervention of districts that are at risk of financial distress.

b. The system shall monitor fiscal risk indicators in each school district throughout the fiscal year. The fiscal risk indicators shall include, but not be limited to:

(1) declining or insufficient fund balance levels;

(2) repeated or unresolved audit findings;

(3) increasing accounts payable or delayed vendor payments;

(4) a misalignment between budgeted and actual expenditures;

(5) reliance on one-time or non-recurring revenues to support operations;

(6) structural operating deficits; and

(7) inconsistencies in payroll and position control reporting.

c. To monitor a school district’s fiscal risk indicators, the commissioner shall utilize school district audits conducted pursuant to N.J.S.18A:23-1, comprehensive reviews conducted under the New Jersey Quality Single Accountability Continuum pursuant to section 11 of P.L.1975, c.212 (C.18A:7A-11), ¹[quarterly]¹ fiscal reviews conducted by the executive county business official pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature at this bill), and any additional information the commissioner deems necessary from a school district.

5. (New section) a. The Comprehensive Statewide Fiscal Early Warning System established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall establish a fiscal categorization system whereby each school district is annually categorized as being at low, moderate, or high fiscal risk pursuant to fiscal standards developed by the Commissioner of Education ¹, in consultation with the State Comptroller¹.

b. The commissioner shall provide notice to the school district and the executive county superintendent when any district is categorized as being at moderate or high fiscal risk.

c. ¹A district categorized as being at low fiscal risk shall not be required to complete additional paperwork or be subject to the evaluation or improvement plan requirements of this section.

d. (1) If a district is categorized as being at moderate or high fiscal risk, the board of education shall discuss the determination at a public meeting of the board of education no later than 30 days after receiving the notice provided pursuant to subsection b. of this section.

(2)¹ If a district is categorized as being at moderate or high fiscal risk, the commissioner shall require the district to develop an improvement plan to address the fiscal concerns identified by the commissioner. ¹The board of education shall adopt a resolution approving the improvement plan within 30 days of discussing the determination at a public meeting of the board of education as required pursuant to paragraph (1) of this subsection.¹ The improvement plan shall be submitted to and approved by the commissioner. In accordance with the improvement plan, the commissioner shall provide technical assistance to the district. If necessary, the commissioner may authorize an in-depth evaluation of the district to determine the causes for the district's fiscal concerns.

¹(3) The district shall post the determination and the improvement plan adopted by the board of education pursuant to this section in a prominent place on the Internet website of the district.

[d.] e.¹ The commissioner shall review the district's progress in implementing the improvement plan not less than once every six months. If the commissioner finds, based on those reviews, that after two years the district’s fiscal condition has not substantially improved in accordance with regulations established by the commissioner pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill), the commissioner may require the district to amend the improvement plan. The amended plan shall be submitted to the commissioner for approval. If after six months the district fails to take remedial action and address the fiscal concerns addressed in the amended plan, the commissioner shall issue the district a letter detailing the areas in which the district remains deficient.

¹[e.] f.¹ All improvement plans developed pursuant to this section shall be in coordination with any corrective action plans developed pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill). The executive county superintendent and the commissioner shall make a concerted effort to coordinate the remedial actions required of districts facing fiscal concerns.

¹[f.] g.¹ The Department of Education shall provide training to each school district on the Comprehensive Statewide Fiscal Early Warning System.

¹[g.] h.¹ The department may hire any additional staff as may be necessary to develop and administer the Comprehensive Statewide Fiscal Early Warning System established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

6. a. The Commissioner of Education shall promulgate rules and regulations pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the provisions of sections 4 and 5 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. The rules and regulations promulgated by the commissioner may:

(1) authorize the Department of Education to develop data systems necessary to support real-time fiscal monitoring of school districts; and

(2) allow for a phased implementation of the Comprehensive Statewide Fiscal Early Warning System.

7. This act shall take effect ²[immediately] in the first full school year following the date of enactment,² except that the Commissioner of Education may take any anticipatory administrative action in advance as necessary for the implementation of this act.